Iveda Solutions, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. IVEDA SOLUTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 2026 December 31, 2025 (UNAUDITED) ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 4,762,665 $ 5,156,252 Restricted Cash 63,001 63,694 Accounts Receivable, Net 303,450 256,699 Deferred Cost of Goods 1,026,864 116,951 Inventory, Net 242,605 235,958 Other Current Assets 269,360 326,005 Total Current Assets 6,667,945 6,155,559 Property and Equipment, Net 35,325 47,093 Right of Use Asset, Net 127,719 148,943 Other Assets 153,763 76,195 Total Assets $ 6,984,752 $ 6,427,790 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts and Other Payables $ 799,746 $ 938,560 Short Term Debt 314,535 159,500 Current Portion of Long-Term Debt 125,814 127,600 Current Portion of Lease Liability 44,056 41,632 Total Current Liabilities 1,284,151 1,267,292 Long Term Debt 199,204 265,832 Long Term Lease Liability, Net of Current Portion 94,442 114,904 Total Liabilities 1,577,797 1,648,028 STOCKHOLDERS’ EQUITY Preferred Stock, $ 0.00001 par value; 12,500,000 shares authorized, no preferred shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively - - Common Stock, $ 0.00001 par value; 300,000,000 shares authorized; 12,519,027 and 5,879,741 shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively 125 59 Additional Paid-In Capital 63,371,181 61,403,700 Accumulated Other Comprehensive Loss ( 263,222 ) ( 249,168 ) Accumulated Deficit ( 57,701,129 ) ( 56,374,829 ) Total Stockholders’ Equity 5,406,955 4,779,762 Total Liabilities and Stockholders’ Equity $ 6,984,752 $ 6,427,790 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 3 IVEDA SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Three Months ended June 30, 2026 For the Three Months ended June 30, 2025 For the Six Months ended June 30, 2026 For the Six Months ended June 30, 2025 REVENUE Equipment Sales $ 723,243 $ 1,448,998 $ 2,142,583 $ 2,857,730 Service Revenue 78,603 78,909 153,437 144,754 TOTAL REVENUE 801,846 1,527,907 2,296,020 3,002,484 COST OF REVENUE 363,284 1,083,138 1,362,250 2,269,503 GROSS PROFIT 438,562 444,769 933,770 732,981 OPERATING EXPENSES General & Administrative 1,050,916 925,629 2,081,826 2,016,399 Research & Development 97,769 51,500 127,769 84,500 Total Operating Expenses 1,148,685 977,129 2,209,595 2,100,899 LOSS FROM OPERATIONS ( 710,123 ) ( 532,360 ) ( 1,275,825 ) ( 1,367,918 ) OTHER INCOME (EXPENSE) Miscellaneous Income (Expense) 4,340 ( 275 ) 10,481 32,147 Interest Income 32,726 10,280 65,062 25,541 Interest Expense ( 6,316 ) ( 12,116 ) ( 11,922 ) ( 17,913 ) Total Other Income (Expense), Net 30,750 ( 2,111 ) 63,621 39,775 LOSS BEFORE INCOME TAXES $ ( 679,373 ) $ ( 534,471 ) $ ( 1,212,204 ) $ ( 1,328,143 ) PROVISION FOR INCOME TAXES ( 114,096 ) ( 29,778 ) ( 114,096 ) ( 29,778 ) NET LOSS $ ( 793,469 ) $ ( 564,249 ) $ ( 1,326,300 ) $ ( 1,357,921 ) BASIC AND DILUTED LOSS PER SHARE $ ( 0.07 ) $ ( 0.20 ) $ ( 0.13 ) $ ( 0.48 ) WEIGHTED AVERAGE SHARES 11,822,360 2,837,226 10,413,088 2,822,729 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 4 IVEDA SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) For the Three Months ended June 30, 2026 For the Three Months ended June 30, 2025 For the Six Months ended June 30, 2026 For the Six Months ended June 30, 2025 Net Loss $ ( 793,469 ) $ ( 564,249 ) $ ( 1,326,300 ) $ ( 1,357,921 ) Other Comprehensive Loss Change in Equity Adjustment from Foreign Currency Translation, Net of Tax 5,302 120,324 ) ( 14,054 ) 109,444 ) Comprehensive Loss $ ( 788,167 ) $ ( 443,925 ) $ ( 1,340,354 ) $ ( 1,248,477 ) See accompanying Notes to Unaudited Condensed Consolidated Financial Statements . 5 IVEDA SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) Accumulated Common Additional Other Total Common Stock Paid-in- Accumulated Comprehensive Stockholders’ Stock Amount Capital Deficit (Loss) Equity BALANCE AT December 31, 2024 2,808,071 $ 28 $ 55,962,337 $ ( 53,176,717 ) $ ( 280,209 ) $ 2,505,439 Net Loss - - - ( 793,672 ) - ( 793,672 ) Comprehensive Loss - - - - ( 10,880 ) ( 10,880 ) BALANCE AT March 31, 2025 2,808,071 28 55,962,337 ( 53,970,389 ) ( 291,089 ) 1,700,887 Sale of Common Stock 98,655 1 223,594 223,595 Net Loss ( 564,249 ) ( 564,249 ) Comprehensive Loss 120,324 120,324 BALANCE AT June 30, 2025 2,906,726 $ 29 $ 56,185,931 $ ( 54,534,638 ) $ ( 170,765 ) $ 1,480,557 BALANCE AT December 31, 2025 5,879,741 $ 59 $ 61,403,700 $ ( 56,374,829 ) $ ( 249,168 ) $ 4,779,762 Sale of Common Stock 5,714,286 57 1,624,627 1,624,684 Stock Option Compensation 12,000 12,000 Net Loss ( 532,831 ) ( 532,831 ) Comprehensive Loss ( 19,356 ) ( 19,356 ) BALANCE AT March 31, 2026 11,594,027 116 63,040,327 ( 56,907,660 ) ( 268,524 ) 5,864,259 Sale of Common Stock, warrant exercise 825,000 8 272,855 272,863 Common Stock for Services 100,000 1 57,999 58,000 Net Loss ( 793,469 ) ( 793,469 ) Comprehensive Loss 5,302 5,302 BALANCE AT June 30, 2026 12,519,027 $ 125 $ 63,371,181 $ ( 57,701,129 ) $ ( 263,222 ) $ 5,406,955 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements 6 IVEDA SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDING JUNE 30, 2026 AND 2025 (UNAUDITED) June 30, 2026 June 30, 2025 CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ ( 1,326,300 ) $ ( 1,357,921 ) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities Depreciation and Amortization 11,768 13,341 Stock Compensation Expense 12,000 - Stock Issued for Services 58,000 - Increase in allowance for uncollectible accounts 20,000 - Changes in operating assets and liabilities Accounts Receivable ( 66,751 ) ( 88,822 Inventory ( 6,647 ) ( 126,805 ) Deferred Cost of Goods ( 909,913 ) 18,905 Right of Use Asset 21,224 13,301 Other Current Assets 56,644 106,368 Other Assets ( 77,568 ) 6,233 Increase in Accounts and Other Payables ( 138,813 ) ( 38,080 ) Lease Liability ( 18,038 ) ( 4,594 ) Net Cash Used in Operating Activities ( 2,364,394 ) ( 1,458,074 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property and Equipment - ( 1,201 ) Net Cash Used in Investing Activities - ( 1,201 ) CASH FLOWS FROM FINANCING ACTIVITIES Payments on Short-Term Debt, net ( 153,249 ) 102,500 Proceeds from Short-Term Debt 306,498 ( 7,261 ) Proceeds from (Payments on) Long-Term Debt ( 66,628 ) 223,595 Common Stock Issued, Net of Cost of Financing 1,897,547 - Net Cash Provided by Financing Activities 1,984,168 318,834 EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 14,054 ) 108,575 NET DECREASE IN CASH, RESTRICTED CASH AND CASH EQUIVALENTS ( 394,280 ) ( 1,031,866 ) Cash, Restricted Cash and Cash Equivalents- Beginning of Period 5,219,946 2,658,300 CASH, RESTRICTED CASH AND CASH EQUIVALENTS - END OF PERIOD $ 4,825,666 $ 1,626,434 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 7 IVEDA SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED FOR THE SIX MONTHS ENDING JUNE 30, 2026 AND 2025 (UNAUDITED) June 30, 2026 June 30, 2025 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest Paid $ 11,922 $ 2,525 Income Tax Paid $ 21,569 $ - SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Present Value of Right of Use Asset and Lease Obligations on New Lease $ - $ 182,668 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 8 IVEDA SOLUTIONS, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDING JUNE 30, 2026 AND 2025 (UNAUDITED) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Iveda Solutions, Inc. (“Iveda”, or the “Company”) was incorporated in Nevada as Charmed Homes, Inc. in June 2006. On October 15, 2009, IntelaSight, d/b/a Iveda, a Washington corporation, became a wholly owned subsidiary of the Company. In December 2010, IntelaSight merged with and into the Company and the Company became the surviving company. Iveda offered the first cloud hosting of streaming and recorded video from security cameras for its customers and real-time remote surveillance service utilizing intervention specialists to watch our customers’ cameras in real time, 24/7. Iveda offers smart city technologies globally, offering advanced AI-driven video surveillance solutions and a robust suite of Internet of Things (IoT) platforms that power digital transformation for cities and commercial clients worldwide. Consolidation Effective April 30, 2011, we completed our acquisition of Sole Vision Technologies (fka MEGAsys and dba Iveda Taiwan), a company based in Taiwan. We consolidate our financial statements with the financial statements of Iveda Taiwan. All intercompany balances and transactions have been eliminated in consolidation. Liquidity The Company recorded a net loss of $ 1.3 million and used cash in operations of $ 2.4 million during the period ended June 30, 2026. During 2025, and subsequently, the Company took significant steps to raise capital to fund operations, and to reduce its historical operating losses. In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company’s management has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the accompanying financial statements were issued. As of the issuance date of these financial statements, management expects that the Company’s cash of $ 4.8 million at June 30, 2026, will be sufficient to fund the Company’s current operating plan for at least twelve months from the date of issuance of these financial statements. Management’s assessment whether there is sufficient cash on hand, together with expected capital raises, to assure operations for a period of at least twelve months from the date these financial statements are issued, is based on conditions that are known and reasonably knowable to management, considering various scenarios, projections, and estimates and certain key assumptions. These assumptions include, among other factors, management’s ability to increase operating efficiencies, raise additional capital, and the expected timing and nature of the Company’s forecasted cash expenditures. Historically, the Company has financed its operations through public and private sales of common stock, credit lines from financial institutions, and cash generated from operations. As we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or at all. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry. Use of Estimates The 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. Accordingly, actual results could differ from those estimates. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, deferred cost of revenue, share-based compensation, deferred income taxes, provisions for losses, and inventory reserve, among other items. Revenue and Expense Recognition The 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. 9 The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the customer. 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 unless installation is required as with certain of our Taiwan sales – see below. 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. The Company sells its products and services primarily to municipalities and commercial customers in the following manner: ● The majority of Iveda Taiwan 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 unless the contract requires the inventory to be installed before it can be billed and charged for service when installation or maintenance work is performed. If inventory is shipped to the customer before it is installed, the inventory is reclassified to Deferred Cost of Goods. Revenue for product and software sales without installation is recorded when the product and/or software has been shipped to the customer. Revenue from fixed-price equipment installation contracts, if any, is recognized as the contracts allow for invoicing at various milestones. 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 revenue when their realization is deemed earned by the contract. ● Iveda US hardware sales are to domestic and international 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 Company will maintain product inventory and ship to the distributor or integrator or product is drop shipped from the manufacturer at the request of the Company to the distributor or integrator, and the Company at all times maintains the obligation to pay vendors and all related risks and rewards of ownership of customer receivables. 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. ● Iveda US also sells a one time software license to customers that allows them to activate software embedded in the purchased hardware. The software revenues are recorded as the license is delivered. ● Iveda US also sells hardware and software warranty and maintenance for an annual fee that is paid yearly. The revenues are recorded annually, if the revenue is a material amount it will be recorded as deferred revenue and amortized on a straight-line basis over the respective time period. The Company sells and installs video surveillance systems comprised of various components of hardware and software. The following table presents our net sales by revenue source and the period over period percentage change, for the period presented: SCHEDULE OF DISAGGREGATION OF REVENUE For the three months ended June 30, 2026 For the three months ended June 30, 2025 For the six months ended June 30, 2026 For the six months ended June 30, 2025 Net Sales Source Commercial Enterprises $ 707,502 $ 929,073 $ 1,210,932 $ 1,595,467 Distributors $ 71,566 $ 220,295 $ 95,048 $ 398,462 Municipalities $ 22,306 $ 45,263 $ 41,030 $ 63,394 Taiwan Government $ 472 $ 333,276 $ 949,010 $ 945,161 Net Sales Source $ 801,846 $ 1,527,907 $ 2,296,020 $ 3,002,484 The Company sells and installs video surveillance systems comprised of various components of hardware and software. 10 Concentrations Financial 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 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 3 million New Taiwan Dollar (NTD). At times, amounts on deposit in Taiwan may be in excess of the CDIC Insurance limit. Revenue from three customers out of approximately 74 total customers represented approximately 72 % of total revenue for the six months ended June 30, 2026. These specific customers were 1) National Chung Shan Institute of Science and Technology with 41 %, 2) Chunghwa Telecom with 17 % and Security Integration & Consultant Technology Co., LTD. with 14 % (all Taiwan companies). Revenue from two customers out of approximately 70 total customers represented approximately 52 % of total revenue for the six months ended June 30, 2025. These specific customers were 1) National Chung Shan Institute of Science and Technology with 31 % and 2) Taiwan Stock Exchange with 21 % (both Taiwan companies). No other customers represented greater than 10% of total revenues the six months ended June 30, 2026, and 2025. 93 % of the total accounts receivable at June 30, 2026 was from four customers out of a total of 32 customer accounts receivable accounts. These specific customers included US customer Claro Enterprise Systems at 28 %, Taiwan customers; Chunghwa Telecom at 27 %, MiTAC Advance Technology Corp. at 20 % and HWACOM Systems Inc. at 17 %. Our 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 do not require collateral in exchange for our products and services provided on credit. These customers are longtime customers, and we don’t expect any problem with the collectability of these accounts receivable. Cash and Cash Equivalents For 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. The Company’s consolidated financial statements include the results of operations and financial position of its subsidiary located in Taiwan. The subsidiary’s functional currency is the Taiwan New Dollar (TWD). For consolidation purposes, the subsidiary’s financial statements are translated into US Dollars (USD) using the following methods: Assets and liabilities are translated using the exchange rate at the balance sheet date. Income statement items are translated using the average exchange rate for the period. Exchange rate fluctuations between TWD and USD result in gains or losses that are included in Other Comprehensive Income (Loss) until they are realized. The Company had approximately $ 1 million and $ 1.4 million of its cash and cash equivalents in Taiwan New Dollars at June 30, 2026, and December 31, 2025, respectively. Accounts Receivable We 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, if any, are considered delinquent. For our Taiwan-based segment, receivables over one year, if any, are considered delinquent. Delinquent receivables are written off based on individual credit valuation and specific circumstances of the customer. As of June 30, 2026, we had a reserve for doubtful collections of $ 20,000 and no reserve necessary at December 31, 2025. Warrant Instruments The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own Common Stock and whether the instrument holders could potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and, for liability-classified warrants, at each reporting period end date while the warrants are outstanding. Restricted Cash Restricted cash represents time deposits on account to secure short-term bank loans in our Taiwan-based segment. 11 Stock-Based Compensation The Company periodically issues stock, stock options and restricted stock awards to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. The fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods. We recognized $ 12,000 and $ 0 of stock-based compensation expense for the three months ended June 30, 2026 and 2025 and we recognized $ 12,000 and $ 0 of stock-based compensation expense for the six months ended June 30, 2026 and 2025, respectively, related to the amortization of stock options. Fair Value of Financial Instruments The Company uses various inputs in determining the fair value of its financial assets and liabilities and measures these assets on a recurring basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs used to measure their fair value. Accounting Standards Codification Section 820 defines the following levels of subjectivity associated with the inputs: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. Level 3—Unobservable inputs in which there is little or no market data for the asset or liability which requires the Company to develop its own assumptions. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to us as of June 30, 2026 and 2025. The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. 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 they are short-term in nature and their carrying amounts approximate their fair values or because they are receivable or payable on demand. The carrying values of financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates. New Accounting Standards In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses. The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation and amortization expense for each caption on the income statement where such expenses are included. The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. We are currently evaluating the provisions of this guidance and assessing the potential impact on our financial statement disclosures. Other recent accounting pronouncements and guidance issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements. 12 NOTE 2 Accounts and Other Payables ACCOUNTS AND OTHER PAYABLES SCHEDULE OF ACCOUNTS AND OTHER PAYABLES June 30, 2026 December 31, 2025 Accounts Payable $ 503,482 $ 459,308 Accrued Expenses 294,339 479,057 Deferred Revenue and Customer Deposits 1,925 195 Accounts and Other Payables $ 799,746 $ 938,560 NOTE 3 SHORT-TERM AND LONG-TERM DEBT The short-term debt balances were as follows: SCHEDULE OF SHORT-TERM DEBT June 30, 2026 December 31, 2025 Loan from ChangHwa Bank at 3.3% interest rate per annum. Due in Aug 2026. 157,267 Loan from ChangHwa Bank at 3.3 % interest rate per annum. Due in Aug 2026 . 157,267 - Revolving Loans from Shanghai Bank at 3.2 % interest rate per annum. Due in January, 2027 . (1) 157,268 - Term Loan from HuaNam Bank at 3.45 % interest rate per annum. Due in July 2026 . (2) - 159,500 Balance at end of period $ 314,535 $ 159,500 The Long-term debt balances were as follows: SCHEDULE OF LONG-TERM DEBT Loans from Shanghai Commercial Bank with interest rates 2.1% per annum due January 2029 (1) $ 325,018 $ 393,432 Loans from Shanghai Commercial Bank with interest rates 2.1 % per annum due January 2029 (1) $ 325,018 $ 393,432 Current Portion of Long-term debt ( 125,814 ) ( 127,600 ) Balance at end of period $ 199,204 $ 265,832 (1) On January 24, 2024, the Company received a facility notice from Shanghai Commercial Bank, granting a revolving loan facility totaling up to TWD 10,000,000 (approximately $ 300,000 USD) and term loan facility amounting of TWD 20,000,000 (approximately ($ 600,000 USD). The term for the revolving loan is 1 year and for the term loan is 5 years. The 5 year term loan requires monthly payments including interest and principal, and the revolving loan requires a full principal repayment at the maturity date. The guarantors of this loan are Mr. Siu and Mr. Cheung, who are both part of Iveda Taiwan’s management team. As of June 30, 2026, and December 31, 2025, there was $ 63,001 and $ 63,694 , respectively, of restricted cash pledged as security for the Shanghai Commercial Bank long term loan. (2) The Company repaid the outstanding loan balance during the period ended June 30, 2026, and there are no further obligations due to this bank. NOTE 4 PREFERRED STOCK We are currently authorized to issue up to 12,500,000 shares of preferred stock, par value $ 0.00001 per share, 1,250,000 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. 13 NOTE 5 EQUITY Common Stock We are authorized to issue up to 300,000,000 shares of common stock, par value $ 0.00001 per share. We effectuated a reverse stock split on September 17, 2024 of 1 for 8 shares of common stock. All share values within this report have been retroactively adjusted to the post reverse split values. 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. 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. On February 11, 2026, Iveda Solutions, Inc., a Delaware corporation (the “Company”) consummated a public offering (the “Offering”) for aggregate gross proceeds of approximately $ 2 million before deducting placement agent fees and other offering expenses payable by the Company. Net proceeds to the Company after the payment of all costs was $ 1.6 Million. The Offering included (i) 5,259,999 shares (the “Shares”) of the Company’s common stock, par value $ 0.00001 per share (“Common Stock”) at an offering price of $ 0.35 per share of Common Stock, and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 454,287 shares of Common Stock, at an offering price of $ 0.3499 per Pre-Funded Warrant and (iii) accompanying Series X warrants (the “Series X Warrants”) to purchase up to 11,428,572 shares of Common Stock and accompanying Series X Warrant. The Pre-Funded Warrants are immediately exercisable subject to certain ownership limitations, have an exercise price of $ 0.0001 per share, and may be exercised at any time until all of the Pre-Funded Warrants have been exercised in full. The Series X Warrants are exercisable at a price of $ 0.35 per share, are exercisable from and after the date of their issuance and expire on the second (2)-year anniversary of the original issuance date. All of the pre-funded warrants were exercised during the period ended March 31, 2026 resulting in an aggregate issuance of 5,714,286 shares of common stock from the offering. In addition, the Company issued two year placement agent warrants to purchase 400,000 shares of common stock at an exercise price of $ 0.4375 per share. The Company issued 100,000 shares of common stock for services values at $ 58,000 during the six months ended June 30, 2026. On June 16, 2026, warrant holders exercised 825,000 of the series X warrants at $ 0.35 per warrant resulting in net proceeds to the Company of $ 272,863 . 14 NOTE 6 STOCK OPTION PLANS Stock Options On 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 15,625 shares of common stock to directors, officers, key employees, and service providers of our company. In 2011, the 2010 Option Plan was amended to increase the number of shares issuable under the 2010 Option Plan to 375,000 shares. In 2012, 2010 Option Plan was again amended to increase the number of shares issuable under the 2010 Option Plan to 203,125 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 (No. 333-175143), and December 4, 2013 (No. 333-192655). The 2010 Option Plan expired on January 18, 2020 . As of June 30, 2026 there were 14,308 options outstanding under the 2010 Option Plan and as of December 31, 2025 there were 14,778 options outstanding under the 2010 Option Plan. On December 15, 2020, we adopted the Iveda Solutions, Inc. 2020 Plan (the “2020 Plan”). The 2020 Plan had a maximum of 156,250 shares authorized with similar terms and conditions to the 2010 Option Plan. The shares issuable pursuant to the 2020 Option Plan are registered with the SEC under Forms S-8 filed on October 7, 2022 (No. 333- 267792). In 2025 and 2024, the 2020 Option Plan was amended to increase the number of shares issuable under the 2020 Option Plan to 1,156,250 and 656,250 shares, respectively. As of June 30, 2026 there were 716,584 options outstanding under the 2020 Option Plan. As of December 31, 2025 there were 720,959 options outstanding under the 2020 Option Plan. As of June 30, 2026 and December 31, 2025, there were 730,892 and 735,737 options outstanding, respectively, under all the option plans. Stock 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. Incentive stock option plan awards of restricted stock are intended to qualify as deductible performance-based compensation under Section 162(m) of the Code. Incentive Stock Option awards of unrestricted stock are not designed to be deductible to us under Section 162(m). Under the plans, stock options will terminate on the tenth anniversary date of the grant or earlier if provided in the grant. We 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. Standard vested options may be exercised up to three months following date of termination of the relationship unless alternate terms are specified at grant. 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.. During the six months ended June 30, 2026, the Company repriced 535,000 which resulted in an incremental compensation cost of $ 12,000 that was recorded during the period. Stock option transactions during six months ended June 30, 2026 were as follows: SCHEDULE OF STOCK OPTION TRANSACTIONS June 30, 2026 Shares Weighted-Average Exercise Price Outstanding at Beginning of Period 735,737 5.50 Granted - - Exercised - - Forfeited or Cancelled ( 4,845 ) 6.90 Outstanding at End of Period 730,892 5.12 Options Exercisable at Period-End 730,892 $ 5.12 During the six months ended June 30, 2026 and 2025 the Company recognized $ 12,000 and $ 0 of compensation cost relating to the vesting of options. SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE Options Outstanding Options Exercisable Range of Exercise Prices Number Outstanding at June 30, 2026 Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price Number Exercisable at June 30, 2026 Weighted- Average Exercise Price $ 0.29 - 142.08 730,892 8.7 $ 5.12 730,892 $ 5.12 15 The Black-Scholes option pricing model, used to estimate fair value of the option awards, requires the use of the following assumptions: ● Fair value of common stock. The fair value of the common stock is the Company’s closing price per share on the NASDAQ listing at the grant date. ● Expected Term. The expected term of options granted represents the period of time that the options are expected to be outstanding. Due to the lack of historical exercise history, the expected term of the Company’s stock options has been determined by calculating the midpoint of the contractual term of the options and the weighted-average vesting period. ● Expected Volatility. The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company did not have any trading history for the common stock. The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical data for the common stock becomes available. ● Risk-Free Interest Rate. The risk-free interest rate assumption is based on the U.S. Treasury instrument whose term was consistent with the expected term of the Company’s stock options. ● Dividends. The Company has not paid any cash dividends on common stock since inception and does not anticipate paying any dividends in the foreseeable future. Consequently, an expected dividend yield of zero was used. The fair value of options granted was estimated using the Black-Scholes valuation model using the following assumptions for the six months ended June 30, 2026: SCHEDULE OF WEIGHTED-AVERAGE ASSUMPTIONS Six months ended June 30, 2026 Expected volatility 136 % Expected dividend yield — % Expected term (in years) 4.92 Risk-free interest rate 4.0 % There was no intrinsic value of the outstanding options at June 30, 2026. NOTE 7 WARRANTS Warrants Warrant transactions during the six months ended June 30, 2026 were as follows: SCHEDULE OF WARRANT TRANSACTIONS For the Six Months ended June 30, 2026 Shares Weighted-Average Exercise Price Outstanding at Beginning of Period 1,863,069 $ 9.13 Granted 11,828,572 0.35 Exercised ( 825,000 ) 0.35 Forfeited or Cancelled - - Outstanding at End of Period 12,866,641 1.62 Warrant Exercisable at Period-End 12,866,641 1.62 Weighted-Average Fair Value of Warrants Granted During the Period $ 0.18 Information with respect to warrants outstanding and exercisable at June 30, 2026 is as follows: SUMMARY OF WARRANTS OUTSTANDING AND EXERCISABLE Warrants Outstanding Warrants Exercisable Range of Exercise Prices Number Outstanding at June 30, 2026 Weighted-Average Remaining Contractual Life Weighted-Average Exercise Price Number Exercisable at June 30, 2026 Weighted-Average Exercise Price $ 0.35 -$ 34.00 12,866,641 1.7 $ 1.62 12,866,641 $ 1.62 There was no intrinsic value of the outstanding warrants at June 30, 2026. 16 NOTE 8 EARNINGS (LOSS) PER SHARE Basic 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 three months ended June 30, 2026 and 2025 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 June 30, 2026 and 2025. SCHEDULE OF EARNINGS PER SHARE BASIC AND DILUTED For the three months ended June 30, 2026 For the three months ended June 30, 2025 For the six months ended June 30, 2026 For the six months ended June 30, 2025 Basic EPS Net Loss $ ( 793,469 ) $ ( 564,249 ) $ ( 1,326,300 ) $ ( 1,357,921 ) Weighted Average Shares 11,822,360 2,837,226 $ 10,413,088 2,822,729 Basic Loss Per Share $ ( 0.07 ) $ ( 0.20 ) $ ( 0.13 ) $ ( 0.48 ) For the six months ended June 30, 2026 and 2025, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have had an anti-dilutive effect. The potentially dilutive securities consisted of the following: SCHEDULE OF BASIC AND DILUTED LOSS PER SHARES SECURITIES June 30, 2026 June 30, 2025 Warrants 12,866,641 1,863,069 Options 730,892 214,819 Total 13,597,533 2,077,888 NOTE 9 COMMITMENTS AND CONTINGENCIES The Company may be involved in certain legal proceedings that arise from time to time in the ordinary course of our business. Except for income tax contingencies, we record accruals for contingencies to the extent that our management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Management believes the accompanying financial statements include all provisions, of any, for any potential losses. Legal expenses associated with the contingency are expensed as incurred. Pursuant to certain contracts with Chicony Power Technology Co., Ltd., Shihlin Electric & Engineering Corporation, National Chung Shan Institute of Science and Technology and Chung-Hsin Electric and Machinery Manufacturing Corp., Iveda Taiwan is required to provide after-project services. If Iveda Taiwan fails to provide these after-project services in the future, other parties of the related contract would have recourse. The financial exposure to Iveda Taiwan in the event of failure to provide after- project services in the future as of June 30, 2026, is $ 349,621 . NOTE 10 SEGMENT INFORMATION The Company operates and manages its business as two reportable and operating segments. The Company’s CODM reviews financial information presented and decides how to allocate resources based on net income (loss). Net income (loss) is used for evaluating financial performance. Significant segment expenses include salaries and payroll, marketing, public company expenses, audit and accounting, consulting, research and development, travel and entertainment, software subscription and other administrative expenses for the US and salaries and payroll, rent, travel and entertainment, and other administrative expenses. The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM. SCHEDULE OF SEGMENT INFORMATION Consolidated US Taiwan Consolidated US Taiwan Three Months Ended June 30, 2026 Three Months Ended June 30, 2025 Revenues $ 801,846 $ 71,566 $ 730,280 $ 1,527,907 $ 381,677 $ 1,146,230 Cost of Goods Sold 363,284 11,210 352,074 1,083,138 277,684 805,454 Gross Profit 438,562 60,356 378,206 444,769 103,993 340,776 55 % 84 % 52 % 29 % 27 % 30 % Operating Expenses Salaries and Payroll Expenses 385,981 278,639 107,342 379,270 274,079 105,191 Travel and Entertainment 72,685 59,127 13,558 122,629 107,979 14,650 Marketing 89,347 89,347 - 92,843 92,843 - Public Company expenses 162,993 162,993 - 3,215 3,215 - Audit and Accounting 60,759 60,759 - 107,776 107,776 - Research and Development 97,769 97,769 - 51,500 51,500 - Rent 39,666 28,518 11,148 42,706 31,599 11,107 Other operating expenses 239,484 153,812 85,672 177,190 159,575 17,615 Total Operating Expenses 1,148,685 930,964 217,721 977,129 828,566 148,563 Income (Loss) from Operations ( 710,123 ) ( 870,608 ) 160,485 ( 532,360 ) ( 724,573 ) 192,213 Interest Income and Other (Expenses), net 30,750 25,719 5,031 ( 2,111 ) ( 1,539 ) ( 572 ) Net Income (Loss) before Income Tax ( 679,373 ) ( 844,889 ) 165,516 ( 534,471 ) ( 726,112 ) 191,641 Income Tax Expense ( 114,096 ) - ( 114,096 ) ( 29,778 ) - ( 29,778 Net Income (Loss) $ ( 793,469 ) $ ( 844,889 ) $ 51,420 $ ( 564,249 ) $ ( 726,112 ) $ 161,863 17 Consolidated US Taiwan Consolidated US Taiwan Six Months Ended June 30, 2026 Six Months Ended June 30, 2025 Revenues $ 2,296,020 $ 95,048 $ 2,200,972 $ 3,002,484 $ 620,104 $ 2,382,380 Cost of Goods Sold 1,362,250 35,396 1,326,854 2,269,503 461,312 1,808,191 Gross Profit 933,770 59,652 874,118 732,981 158,792 574,189 41 % 63 % 40 % 24 % 26 % 24 % Operating Expenses Salaries and Payroll Expenses 746,435 524,829 221,606 723,480 528,044 195,436 Travel and Entertainment 138,128 113,791 24,337 265,207 237,943 27,264 Stock Compensation - 12,000 - - - - Marketing 195,823 195,823 - 169,098 169,098 - Public Company expenses 224,698 224,698 - 60,291 60,291 - Audit and Accounting 150,846 150,846 - 275,659 275,659 - Research and Development 127,769 127,769 - 84,500 84,500 - Rent 76,922 52,824 24,098 77,712 54,514 23,198 Other operating expenses 536,973 387,586 149,388 444,952 360,330 84,622 Total Operating Expenses 2,209,595 1,790,166 419,429 2,100,899 1,770,379 330,520 Income (Loss) from Operations ( 1,275,825 ) ( 1,730,514 ) 454,689 ( 1,367,918 ) ( 1,611,587 ) 243,669 Interest Income and Other (Expenses), net 63,621 52,700 10,921 39,775 37,602 2,173 Net Income (Loss) before Income Tax ( 1,212,204 ) ( 1,677,814 ) 465,610 ( 1,328,143 ) ( 1,573,985 ) 245,842 Income Tax Expense ( 114,096 ) - ( 114,096 ) ( 29,778 ) - ( 29,778 ) Net Income (Loss) $ ( 1,326,300 ) $ ( 1,677,814 ) $ 351,514 $ ( 1,357,921 ) $ ( 1,573,985 ) $ 216,064 Furthermore, 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. We 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. 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 agencies. The Net Revenues for our significant geographic regions are as follows: SCHEDULE OF REVENUES BY GEOGRAPHIC REGIONS For the Six Months ended For the Six Months ended Net Revenues For the Six Months ended For the Six Months ended June 30, 2026 June 30, 2025 United States $ 95,048 $ 620,104 Republic of China (Taiwan) $ 2,200,972 $ 2,382,380 Total Consolidated $ 2,296,020 $ 3,002,484 The net assets (liabilities) for our significant geographic regions are as follows: SCHEDULE OF NET ASSETS LIABILITIES BY GEOGRAPHIC REGIONS As of As of Net Assets (Liabilities) As of As of June 30, 2026 December 31, 2025 United States $ 4,208,703 $ 3,918,970 Republic of China (Taiwan) $ 1,198,252 $ 860,792 Republic of China (Taiwan) [Member] Total Consolidated $ 5,406,955 $ 4,779,762 NOTE 11 SUBSEQUENT EVENTS The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements are available to be issued. Any material events that occur between the balance sheet date and the date that the financial statements were available for issuance are disclosed as subsequent events, while the financial statements are adjusted to reflect any conditions that existed at the balance sheet date. 18 Item 2. Financial Information. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The 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. Note Regarding Forward-Looking Information This 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 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 consolidated financial statements for the year ended December 31, 2025, 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. Overview Iveda offers smart city technologies globally, offering advanced AI-driven video surveillance solutions and a robust suite of Internet of Things (IoT) platforms that power digital transformation for cities and commercial clients worldwide. The smart cities market, as well as the AI and IoT segments, are poised for significant growth in the coming years. A new report from Verified Market Research projects that the global smart city platforms market size will grow at a CAGR of 9% from 2026 to 2032, increasing from USD 208.8 billion to USD 416.1 billion. Meanwhile, Fortune Business Insights reports that the global IoT market—valued at USD 308.97 billion in 2020—expanded by 23.1% that year, substantially outpacing the average annual growth rate from 2017 to 2019. Looking ahead, IoT is expected to surge from USD 381.30 billion in 2021 to USD 1,854.76 billion in 2028. Additionally, the International Data Corporation (IDC) projects that global spending on artificial intelligence will double from USD 50.1 billion in 2020 to over USD 110 billion in 2024. These trends underscore the rising demand for connected solutions and highlight the promising future of innovative technologies that enhance the safety and efficiency of urban environments. With its cutting-edge products and global reach, Iveda is uniquely positioned to lead this transformation, providing the advanced solutions that cities need to move forward smartly and securely. Technology / Products Iveda offers AI intelligent video search, smart utility, smart sensors, gateways, and trackers, and IoT platforms (Products). IvedaAI IvedaAI 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. IvedaAI 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. AI Functions ● Object Search ● Face Search (No Database Required) ● Face Recognition (from a Database) ● License Plate Recognition (100+ Countries), includes make and model ● Intrusion Detection ● Weapon Detection ● Fire Detection ● People Counting ● Vehicle Counting ● Temperature Detection ● Public Health Analytics (Facemask Detection) ● QR and Barcode Detection 19 Key Features ● Live Camera View ● Live Tracking ● Abnormality Detection – Vehicle/Person wrong direction detection ● Vehicle/Person Loitering Detection ● Fall Detection ● Illegal Parking Detection ● Heatmap Generation IvedaAI 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. IvedaAI 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. Iveda 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, a care wrist watch and tracking devices. We also offer smart power technology for office buildings, schools, shopping centers, hotels, hospitals, and smart city projects. Our smart power hardware is equipped with an RS485 communication interface allowing the meters to be connected to various third-party SCADA (supervisory control and data acquisition) software for monitoring and control purposes. This line of product includes smart power, water meter, smart lighting controls systems, and smart payment system. Iveda’s Cerebro is a software technology platform that integrates a multitude of disparate systems for central access and management of applications, subsystems, and devices throughout an entire environment. It is system agnostic and will support cross-platform interoperability. Cerebro’s roadmap includes a dashboard for all of Iveda’s platforms for central management of all devices. It provides remote access to a Dashboard for a single user interface, providing convenient anywhere, anytime access and analysis of relevant information in a timely manner for managing an entire organization or city. Cerebro links city systems and subsystems inseparably to each other. This integration and unification of all subsystems enable acquisition and analysis of all information on one central entity allowing comprehensive, effective and overall management and protection of a city. IvedaSPS is our smart power solution, utilizing our Cerebro IoT platform. This completes our digital transformation solution crucial in smart city deployments as well as in large organizations. We offer smart power technology for office buildings, schools, shopping centers, hotels, hospitals, and smart city projects. This product includes smart power, water meter, smart lighting controls systems, and smart payment system. In 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 have necessitated this 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. 20 Utilus is our smart pole solution, utilizing our Cerebro IoT platform. This completes our digital transformation solution crucial in smart city deployments as well as in large organizations. Iveda leverages infrastructure already available in most modern cities – Light poles with power We equip existing poles with Utilus. Utilus consists of power and Internet, establishing a communication network for access and management of sensors and devices that the city requires to keep its citizens safe and secure and to effectively manage utility consumption. Our smart pole offering is also ideal for: ● Government or large-scale city deployments ● Supporting and Improving City Services ● Reducing Emergency Response Times ● Crime& Hazard Protection ● Monitoring and Improving Air Quality ● Sound Detection ● Traffic Monitoring and Mobility as a Service ● Data Analytics and Monetization Opportunities vumastAR is an AI vision software that uses video taken on IP cameras, AR glasses, Androids, and tablets to analyze and process data in real-time. vumastAR is fully customizable to the user’s needs, with one short video the AI can be trained in as little as two hours. Deployable in multiple industries for uses such as: ● Quality and Maintenance Exams: vumastAR has the power to assist with critical measuring of carcinogenic chemical compound levels, electrical wiring, and welding inspections. ● Factory and Line Work: Fast and accurate machine recognition enables itemized counting, inventory audits, and assembly kitting. ● Pharma: Accurately identify and quantify medication, greatly reducing the manual labor of counting pills while eliminating human error. ● Supply Chain: Detect defects and anomalies for improved accuracy, increasing the bottom line by actively reducing lost revenue incurred from manual mistakes. ● Manufacturing: Digitalize meter and gauge reading and monitoring, as well as part number identification, with the ability to turn analog information into digital data ● Transportation: Enhance safety and security for operations including loading and unloading tanker trucks, protecting both personnel and products/equipment. ● Retail: Ensure correct item identification and organization, providing increased accuracy for retail checkout and product categorization, ultimately impacting revenue streams. vumastAR is sold as a license per device with a monthly subscription requirement for cloud access to trained AI models. IvedaXpress is a system that enables users to use pre-existing IP cameras and apply AI analytics without the need for large servers or a dedicated IT department. Designed to be plug-and-play IvedaXpress provides a hassle free set up process with no maintenance required for hardware. Each IP camera is hosted from a local computer or smartphone for live viewing and playback. Video may be stored on that local computer or stored remotely using free storage from Amazon or Dropbox. Iveda Smart UVC is a Commercial-grade, AI-driven Ultraviolet Germicidal Irradiation (UVGI). Iveda Smart UVC adds UV lights to standard HVAC vents for quick, easy, and inexpensive deployment to homes and commercial buildings. Leveraging the existing air circulation system, Iveda Smart UVC vents disinfect the air by irradiating UV light on the passing air. Eliminating the need to manually disinfect offices, meeting rooms, and other workspaces. Iveda Smart UVC can be Integrated with Iveda SPS (smart power management) and sensors to efficiently and effectively operate the light source upon detected movement. 21 Iveda’s Smart Drones are flown to perform certain functions from an aerial view without the need for a pilot onboard. Smart Drones utilize AI-based software for autonomous operation and navigation from taking off, returning to base, carrying out mission-critical tasks or simply doing an aerial patrol, without the need of human intervention. Unlike typical drones, Iveda Smart Drones are cloud-based and can be part of a network of drones for central management. They are equipped with Iveda’s Sentir Video Surveillance System and IvedaAI Intelligent Video Search Technology. Iveda Smart Drone product offering is robust and expansive for a multitude of industrial, commercial, and military applications. Key Features of Iveda’s Smart Drone: Fully Autonomous Scheduled autonomous take-off, flight mission execution, monitoring, landing and recharging Easy operation and 24-7 flight mission Intelligent Computing Live video streaming - real-time object recognition and tracking Onboard (edged) AI and data analysis Safety Design Multiply redundant and fail-safe systems Weather resistant industrial grade systems (IP54) Designed and made in Taiwan (MIT) Skywatch Planning and editing real-time/timed missions User/Group permission control & flight data management Failsafe alarm and FPV gimbal control Insight Automated orthorectified service of imagery (2D/3D) AI technology for inspecting natural disaster, vehicle & pedestrian tracking, and energy facilities inspection. Visualizing geographic data and analysis report ● Propellers: 8 (multiply redundant) ● Diagonal Footprint: 29.76″ / 756 mm ● Weight: 14.1lbs / 6.4 Kg ● Hover time: 30 mins ● Wind tolerance: Beaufort scale – 6 ● IP rating: IP54 ● Camera sensor: Dual RGB, IR/thermal ● Network: 5G/4G LTE and 2.4G Wi-Fi The Smart Utility Cabinet gives end users a convenient tool to monitor their daily energy consumption, to pinpoint electrical leaks, and to prevent power line overload and potential fire. It utilizes IoT sensors to detect abnormalities in consumption, temperature and tampering. Iveda Smart Utility Cabinet has an internal environment control design, housed in a durable industrial-grade cabinet. It includes a smart edge computing gateway with multi-RF communication protocols such as 4G, Z-Wave and WiFi and tampering sensor for unauthorized access. Smart water meter and gas meter may be added to the Cabinet. Vemo Body Camera streams live video, using 4G, to headquarters and doubles as a walkie talkie with a push-to-talk feature. With its multi-mode audio, it can also be used for broadcasting and hands-free audio conferencing for group talk. Vemo has WiFi capability which is ideal for city-wide deployments. Vemo transmits live streaming video instantaneously to the cloud without additional software or hardware. Vemo’s cloud management platform can centrally manage an unlimited number of devices and video can be accessed on a PC, Android, and iOS client. Moreover, Vemo can stream directly into the IvedaAI platform for real-time video analytics to search for faces, objects or license plates in real time. IvedaCare , launched in November 2022, is a simple, easy to use suite of wireless health and wellness devices intended to help you monitor the health and activities of your loved ones, even when you can’t be there yourself. Our mission is to help ensure your loved one’s safety and independence. Stay connected to your elderly loved ones with our advanced IoT devices for real-time monitoring, fall detection, medication reminders and more. With IvedaCare, you not only can monitor your home and loved ones from afar but can potentially make life-saving decisions using the app. Cloud-based, wireless sensors collect real-time data shared with the entire family circle within the app. Customers may add a subscription service for Pro Monitoring. If the Trusted Circle is unavailable, our emergency call center will dispatch emergency services quickly. 22 LevelNOW is an advanced IoT-based solution that transforms the way liquid levels are monitored and managed. With two unique IoT sensors—a standard cap valve sensor designed for 200-liter drums and a patent- pending external sensor that fits various container sizes—LevelNOW provides real-time data to ensure efficiency, safety, and cost savings. Its user-friendly AI-backed platform optimizes operations for industries that rely on large fluid containers, such as oil, gas, and industrial storage. Know exactly when customers are running low and deploy fleets in real time to refill your liquids. Customers Our business model in the US is to primarily sell hardware and license our software to organizations already providing services to an existing customer base and facilitating hardware acquisition through third party partners. This business model provides dual revenue streams – one from surveillance camera and analytics hardware sales to the service providers and the other from software licensing fees. Iveda Taiwan continues to service its enterprise and government clients on a per-project basis. Some of its customers include Chunghwa Telecom, the Taiwan Stock Exchange, New Taipei City Police Department, Chicony Power Technology Co, Ltd. and Taiwan Energy Systems. Critical 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 our consolidated financial statements for the year ended December 31, 2025. Such policies are unchanged. New Accounting Standards There were no new standards recently issued which would have an impact on our operations or disclosures. Results of Operations for the Three Months Ended June 30, 2026 Compared with the Three Months Ended June 30, 2025 The table below sets forth the Net Revenue, Cost of Goods Sold, Operating Expenses, Other Income and Expenses, Tax Expense and Net Income by segment for each of the respective periods and a comparison period over period. Three Months Ended June 30, 2026 Three Months Ended June 30, 2026 Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2025 Consolidated US Taiwan Consolidated US Taiwan Consolidated US Taiwan Revenues 801,846 $ 71,566 730,280 1,527,907 381,677 1,146,230 (726,061 ) (48 )% (310,111 ) (81 )% (415,950 ) (36 )% Cost of Goods Sold 363,284 11,210 352,074 1,083,138 277,684 805,454 (719,854 ) (66 )% (266,474 ) (96 )% (453,380 ) (56 )% Gross Profit 438,562 60,356 378,206 444,769 103,993 340,776 (6,207 ) (1 )% (43,637 ) (42 )% 37,430 11 % 55 % 84 % 52 % 29 % 27 % 30 % 26 % 90 % 57 % 211 % 22 % 73 % Operating Expenses 1,148,685 930,964 217,721 977,129 828,565 148,563 229,556 23 % 102,399 12 % 69,158 47 % Income (Loss) from Operations (710,123 ) (870,608 ) 160,485 (532,360 ) (724,572 ) 192,213 (177,763 ) 33 % (146,036 ) 20 % (31,728 ) (17 )% Interest Income and Other (Expenses), net 30,750 25,719 5,031 (2,111 ) (1,539 ) (572 ) 32,861 1557 % 27,258 1771 % 5,603 980 % Net Income (Loss) before Income Tax (679,373 ) (844,889 ) 165,516 (534,471 ) (726,111 ) 191,641 (144,902 ) 27 % (118,778 ) 16 % (26,125 ) (14 )% Income Tax Expense (114,096 ) - (114,096 ) (29,778 ) - (29,778 ) 84,318 283 % - - (84,318 ) 283 % Net Income (Loss) (793,469 ) (844,889 ) 51,420 (564,249 ) (726,111 ) 161,863 (229,220 ) 41 % (118,778 ) 16 % (110,443) (68 )% The decrease in revenue for the three months ended June 30, 2026 compared with the same period in 2025 is attributable primarily to decreased equipment sales from Iveda Taiwan as a result of delivery timing related to long-term government contracts. 23 The increase in overall gross margin was primarily attributed to the higher margin contract sales in Taiwan and US. The net increase in operating expenses in the three months ended June 30, 2026, compared with the same period in 2025 is due primarily to investor relations activities in the US based operations during this period. A majority of the increase in loss from operations was primarily due to a slight increase in operating expenses. The increase in net loss was primarily due to a slight increase in operating expenses for the three months ended June 30, 2026 compared to the same period in 2025. Results of Operations for the Six Months Ended June 30, 2026 Compared with the Six Months Ended June 30, 2025 The table below sets forth the Net Revenue, Cost of Goods Sold, Operating Expenses, Other Income and Expenses, Tax Expense and Net Income by segment for each of the respective periods and a comparison period over period. Six Months Ended June 30, 2026 Six Months Ended June 30, 2026 Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2025 Consolidated US Taiwan Consolidated US Taiwan Consolidated US Taiwan Revenues 2,296,020 95,048 2,200,972 3,002,484 620,104 2,382,380 (706,464 ) (24 )% (525,056 ) (85 )% (181,408 ) (8 )% Cost of Goods Sold 1,362,250 35,396 1,326,854 2,269,503 461,312 1,808,191 (907,253 ) (40 )% (425,916 ) (92 )% (481,337 ) (27 )% Gross Profit 933,770 59,652 874,118 732,981 158,792 574,189 200,789 27 % (99,140 ) (62 )% 299,929 52 % 41 % 63 % 40 % 24 % 26 % 24 % 17 % 71 % 37 % 142 % 16 % 67 % Operating Expenses 2,209,595 1,790,166 419,429 2,100,899 1,770,379 330,520 108,696 5 % 19,787 1 % 88,909 27 % Income (Loss) from Operations (1,275,825 ) (1,730,514 ) 454,689 (1,367,918 ) (1,611,587 ) 243,669 92,093 7 % (118,927 ) (7 )% 211,020 87 % Interest Income and Other (Expenses), net 63,621 52,700 10,921 39,775 37,602 2,173 23,846 60 % 15,098 40 % 8,748 403 % Net income (loss) before Income Tax (1,212,204 ) (1,677,814 ) 465,610 (1,328,143 ) (1,573,985 ) 245,842 115,939 9 % (103,829 ) (7 )% 219,768 89 % Income Tax Expense (114,096 ) - (114,096 ) (29,778 ) - (29,778 ) (84,318 ) 283 % - - 84,318 283 % Net Income (Loss) (1,326,300 ) (1,677,814 ) 351,514 (1,357,921 ) (1,573,985 ) 216,064 31,621 2 % (103,829 ) (7 )% 135,450 63 % The decrease in revenue for the six months ended June 30, 2026, compared with the same period in 2025 is attributable primarily to decreased equipment sales from the US from a reduction in sales to distributors and Iveda Taiwan as a result of delivery timing related to long-term government contracts. The increase in overall gross margin was primarily attributed to the higher margin contract sales in Taiwan and US. The slight net increase in operating expenses in the six months ended June 30, 2026, compared with the same period in 2025 is due primarily to investor relations activities in the US based operations during this period. A majority of the decrease in loss from operations was primarily due to increased gross profits and just a slight increase in operating expenses. The decrease in net loss was primarily due to increased gross profits and just a slight increase in operating expenses. for the six months ended June 30, 2026, compared to the same period in 2025. Liquidity and Capital Resources As of June 30, 2026, we had cash and cash equivalents of $4.8 million compared to $5.2 million as of December 31, 2025. This decrease in our cash and cash equivalents for the six months ended June 30, 2026 is related to the sale of common stock offset by the operating losses during the six months ended June 30, 2026. There are no legal or economic factors that materially impact our ability to transfer funds between our U.S.-based and Taiwan-based segments. 24 Net cash used in operating activities during the six months ended June 30, 2026 was ($2.4) million compared to ($1.5) million net cash used during the six months ended June 30, 2025. Net cash used in operating activities for the six months ended June 30, 2026 consisted primarily of the net loss of ($1.3) million and increase in deferred cost of goods sold of $0.9 million, related to government entity sales in Taiwan. Net cash used by operating activities for the six months ended June 30, 2025 consisted primarily of the net loss of ($1.4) million. Net cash used in investing activities for the six months ended June 30, 2026 and 2025 were negligible. Net cash provided by financing activities for the six months ended June 30, 2026 was $1.9 million compared with $0.3 million provided during the six months ended June 30, 2025. Net cash provided by financing activities in 2026 included $1.6 million from the sale of stock in a direct offering in February 2026 managed by H.C.Wainwright and $0.3 million from the exercise of warrants during June 2026. We have experienced significant operating losses since our inception. At December 31, 2025, we had approximately $38 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 2025 or 2024. We also had approximately $12.0 million in state net operating loss carryforwards, which expire after five years. Pursuant to the Internal Revenue Code of 1986, as amended (“IRC”), specifically Sections 382 and 383, the Company’s ability to use tax attribute carryforwards to offset future taxable income is limited if the Company experiences a cumulative change in ownership of more than 50% within a three-year testing period. The Company has not completed an ownership change analysis pursuant to IRC Section 382 therefore the ability to offset taxable income in the future may be impacted by ownership changes occurring prior to December 31, 2025. If ownership changes within the meaning of IRC Section 382 occur in the future, the amount of remaining tax attribute carryforwards available to offset future taxable income and income tax expense in future years may be significantly restricted or eliminated. Further, the Company’s deferred tax assets associated with such tax attributes could be significantly reduced or eliminated upon realization of an ownership change within the meaning of IRC Section 382. If eliminated, the related asset would be removed from the deferred tax asset schedule, with a corresponding reduction in the valuation allowance. Additionally, limitations on the utilization of the Company’s tax attribute carryforwards can increase the amount of taxable income and current income tax expense recognized. Due to the existence of the valuation allowance, ownership change limitations that are not significant may not impact the Company’s effective tax rate. We 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 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 New Taiwan Dollar (NTD) $3 million. At times, amounts on deposit in Taiwan may be in excess of the CDIC insurance limit. 25 Our 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. We 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 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. For our U.S.-based segment, we had a reserve for doubtful collections of $20,000 of accounts receivable for the six months ended June 30, 2026 and no reserve for the year ended December 31, 2025. For our Taiwan-based segment, we set up no doubtful accounts receivable allowances for the six months ended June 30, 2026 and year ended December 31, 2025. 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. Effects of Inflation For 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 Iveda Taiwan. Off Balance Sheet Arrangements We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements 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. 26 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We are a smaller reporting company as defined by 17 C.F.R. 229 (10)(f)(i) and are not required to provide information under this item.