UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~[X]~~☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, ~~2016~~2021

~~[ ]~~☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from __________ to ____________

Commission File No. 000-53285

IVEDA SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada		20-2222203
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

460 S. Greenfield Road ~~Suite~~, Ste. 5
Mesa, Arizona		85206
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:(480)307-8700

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes~~[X]~~☒ No~~[ ]~~☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes~~[X]~~☒ No~~[ ]~~☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one):

	Large accelerated filer~~[ ]~~☐		Accelerated filer~~[ ]~~☐

	Non-accelerated filer~~[ ]~~☐		Smaller reporting company~~[X]~~☒
	(Do not check if a smaller reporting company)		Emerging growth company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes~~[ ]~~☐No~~[X]~~☒

As of ~~August 10, 2016~~November 8, 2021 there were outstanding ~~31,301,080~~ 75,480,746 shares of the registrant’s common stock, $0.00001 par value.

TABLE OF CONTENTS

		Page

	PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
ITEM 1.2.	~~FINANCIAL STATEMENTS~~	3

~~ITEM 2.~~	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2024

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2431

ITEM 4.	CONTROLS AND PROCEDURES	2431

	PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	32
ITEM 1.1A.	~~LEGAL PROCEEDINGS~~RISK FACTORS	2532

ITEM ~~1A.~~2.	~~RISK FACTORS~~	25

~~ITEM 2.~~	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	2532

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	2532

ITEM 4.	MINE SAFETY DISCLOSURES	2532
ITEM 5.	OTHER INFORMATION	33
ITEM 5.6.	~~OTHER INFORMATION~~EXHIBITS	25

~~ITEM 6.~~	~~EXHIBITS~~	26
		33
SIGNATURES		2734

PART 1 – FINANCIAL INFORMATION

~~ITEM 1.~~

~~FINANCIAL STATEMENTS.~~

ITEM 1.FINANCIAL STATEMENTS.

IVEDA SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

~~JUNE~~SEPTEMBER 30, ~~2016~~2021 (Unaudited) AND DECEMBER 31, ~~2015~~2020

	September 30, 2021			December 31, 2020
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	1,231,434		$	249,521
Restricted Cash		224,354			165,145
Accounts Receivable, Net		76,063			226,614
Inventory, Net		458,636			221,868
Other Current Assets		450,187			122,101
Total Current Assets		2,440,674			985,249

PROPERTY AND EQUIPMENT, NET		28,897			22,027

OTHER ASSETS
Intangible Assets, Net		-			6,666
Other Assets		172,777			231,624
Total Other Assets		172,777			238,290

Total Assets	$	2,642,349		$	1,245,566

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts and Other Payables	$	3,353,174		$	3,157,810
Due to Related Parties		300,000			512,711
Short Term Debt		567,486			865,988
Current Portion of Long-Term Debt		47,944			-
Total Current Liabilities		4,268,604			4,536,509

LONG-TERM DEBT		67,921			-
LONG-TERM DIVIDENDS PAYABLE		-			415,625

STOCKHOLDERS’ EQUITY
Preferred Stock, $0.00001 par value; 100,000,000 shares authorized
Series B Preferred Stock, $0.00001 par value; 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; 74,070,292 and 52,671,395 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		741			527
Additional Paid-In Capital		38,576,077			34,768,615
Accumulated Comprehensive Loss		(132,508	)		(153,254	)
Accumulated Deficit		(40,138,485	)		(38,322,456	)
Total Stockholders’ Equity (Deficit)		(1,694,175	)		(3,706,568	)

Total Liabilities and Stockholders’ Equity	$	2,642,349		$	1,245,566

See accompanying Notes to Condensed Consolidated Financial Statements.

IVEDA SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

June 30, 2016 December 31, 2015
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 959,533 $ 206,925
Restricted Cash 211,603 294,066
Accounts Receivable, Net (including $166 and $27,512 from related party, respectively) 383,840 996,566
Inventory, Net 180,097 176,910
Other Current Assets 186,630 316,210
Total Current Assets 1,921,703 1,990,677

PROPERTY AND EQUIPMENT, NET 141,842 189,094

OTHER ASSETS
Intangible Assets, Net 96,666 106,666
Other Assets 234,574 162,381
Total Other Assets 331,240 269,047

Total Assets $ 2,394,785 $ 2,448,818

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts and Other Payables $ 2,619,889 $ 2,604,126
Due to Related Parties 440,000 714,820
Short Term Debt 409,200 53,025
Derivative Liability 54,229 53,152
Current Portion of Long-Term Debt 46,195 -
Total Current Liabilities 3,569,513 3,425,123

LONG TERM DEBT 27,921 -

LONG-TERM DIVIDENDS PAYABLE 836,655 653,242

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 39 40
Series B Preferred Stock, $0.00001 par value; 500 shares authorized, 302.5 outstanding as of June 30, 2016 and December 31, 2015, 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 302 279
Additional Paid-In Capital 31,307,562 30,325,402
Accumulated Comprehensive Loss (39,643 ) (41,970 )
Accumulated Deficit (33,307,564 ) (31,913,298 )
Total Stockholders’ Equity (Deficit) (2,039,304 ) (1,629,547 )

Total Liabilities and Stockholders’ Equity $ 2,394,785 $ 2,448,818

	For the Three Months ended September 30, 2021			For the Three Months ended September 30, 2020			For the Nine Months ended September 30, 2021			For the Nine Months ended September 30, 2020
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
REVENUE
Equipment Sales	$	300,756		$	132,315		$	1,079,861		$	912,822
Service Revenue		106,434			143,945			219,414			244,296
Other Revenue		4,262			1,978			5,450			7,522
TOTAL REVENUE		411,452			278,238			1,304,725			1,164,640

COST OF REVENUE		136,887			447,248			781,895			1,007,321

GROSS PROFIT		274,565			(169,010	)		522,830			157,319

OPERATING EXPENSES
General & Administrative		698,717			411,286			2,042,022			1,264,945
Total Operating Expenses		698,717			411,286			2,042,022			1,264,945

LOSS FROM OPERATIONS		(424,151	)		(580,296	)		(1,519,193	)		(1,107,626	)

OTHER INCOME (EXPENSE)
Miscellaneous Income (Expense)		-			12,225			(68	)		20,001
Interest Income		58			69			193			265
Interest Expense		(29,337	)		(32,125	)		(256,660	)		(98,133	)

Total Other Income (Expense)		(29,280	)		(19,831	)		(256,535	)		(77,867	)

LOSS BEFORE INCOME TAXES		(453,431	)		(600,127	)		(1,775,728	)		(1,185,493	)

BENEFIT (PROVISION) FOR INCOME TAXES		-			-			-			-

NET LOSS	$	(453,431	)	$	(600,127	)	$	(1,775,728	)	$	(1,185,493	)

BASIC AND DILUTED LOSS PER SHARE	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	(0.02	)

WEIGHTED AVERAGE SHARES		68,459,430			51,401,395			69,581,603			51,401,395

See accompanying Notes to Condensed Consolidated Financial Statements

IVEDA SOLUTIONS, INC.

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015~~STOCKHOLDERS’ EQUITY

Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

REVENUE
Equipment Sales $ 307,109 $ 726,695 $ 692,308 $ 1,141,218
Service Revenue 25,907 46,911 50,390 145,251
Other Revenue 5,608 1,955 8,443 14,915
TOTAL REVENUE 338,624 775,561 751,141 1,301,384

COST OF REVENUE 256,252 634,857 586,662 993,552

GROSS PROFIT 82,372 140,704 164,479 307,832

OPERATING EXPENSES 524,447 967,788 1,173,394 1,983,727

LOSS FROM OPERATIONS (442,075 ) (827,084 ) (1,008,915 ) (1,675,895 )

OTHER INCOME (EXPENSE)
Foreign Currency Gain - 4,683 - 9,126
Gain (Loss ) on Derivatives and Debt Conversion (4,272 ) 5,659 (1,077 ) 42,591
Gain (Loss) on Disposal of Assets 7,313 (29,454 ) 8,965 (29,454 )
Interest Income 183 7,594 204 13,677
Interest Expense (21,147 ) (28,894 ) (42,019 ) (66,925 )
Total Other Income (Expense) (17,923 ) (40,412 ) (33,927 ) (30,985 )

LOSS BEFORE INCOME TAXES (459,998 ) (867,496 ) (1,042,842 ) (1,706,880 )

(PROVISION) FOR INCOME TAXES (16,711 ) (12,853 ) (16,711 ) (12,853 )

NET LOSS $ (476,709 ) $ (880,349 ) $ (1,059,553 ) $ (1,719,733 )

BASIC AND DILUTED LOSS PER SHARE $ (0.02 ) $ (0.03 ) $ (0.04 ) $ (0.06 )

WEIGHTED AVERAGE SHARES 29,267,353 27,380,701 28,673,883 27,344,729

	Common Shares		Common Stock Amount		Preferred Shares			Preferred Shares	Additional Paid-in-Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (loss)			Total Stockholders’ Equity(Deficit)
	Common Shares		Common Stock Amount		Preferred Shares			Preferred Shares	Additional Paid-in-Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (loss)			Total Stockholders’ Equity(Deficit)
BALANCE AT December 31, 2019		51,401,395		514		247		-	$	34,052,704		$	(36,493,300	)		(195,287	)	$	(2,635,369	)

Common Stock Issued for Cash						-													-
Common Stock Issued for Cash, shares
Costs of Capital						-													-
Stock Based Compensation		-		-		-		-		165,167									165,167
Common Stock for Accounts Payable
Common Stock for Accounts Payable, shares
Common Stock for Costs of Financing
Common Stock for Costs of Financing, shares
Warrants for Services						-		-		11,475									11,475
Warrants for Interest Expense										136,110									136,110
Convertible Debenture Value										105,572									105,572
Preferred Stock - Series B																			-
Preferred Stock - Series B for Dividend						10				95,000									95,000
Preferred Stock - Series B Shares and Dividend Payable to Common Stock
Preferred Stock - Series B Shares and Dividend Payable to Common Stock, shares
Dividends - P/S Series B													(226,853	)					(226,853	)
Conversion of Debt & Interest to Common Stock
Conversion of Debt & Interest to Common Stock , shares
Conversion of Debt to stock																			-
Exercise of options and warrants		1,270,000		13						202,587									202,600
Payment on Stockholder Prom Note																			-
Net Loss													(1,602,303	)					(1,602,303	)
Comprehensive Loss													-			42,033			42,033

BALANCE AT December 31, 2020		52,671,395		527		257		-		34,768,615			(38,322,456	)		(153,254	)		(3,706,568	)

Common Stock Issued for Cash		5,355,238		54						2,112,946									2,113,000
Costs of Capital										(1,932,736	)								(1,932,736	)
Stock Based Compensation										88,000									88,000
Common Stock for Accounts Payable		223,164		2						99,787									99,789
Common Stock for Costs of Financing		5,030,000		50						1,932,686									1,932,736
Warrants for Services										122,966									122,966
Warrants for Interest Expense										69,729									69,729
Convertible Debenture Value										69,729									69,729
Preferred Stock - Series B for Dividend						2		-		23,750									23,750
Preferred Stock - Series B Shares and Dividend Payable to Common Stock		8,720,119		87		(259	)	-		432,089									432,176
Dividends - P/S Series B													(40,301	)					(40,301	)
Conversion of Debt & Interest to Common Stock		2,070,376		21						788,516									788,537
Exercise of options and warrants
Net Loss													(1,775,728	)					(1,775,728	)
Comprehensive Loss																20,746			20,746

BALANCE AT September 30, 2021 (Unaudited)		74,070,292		741		0		-	$	38,576,077		$	(40,138,485	)		(132,508	)	$	(1,694,175	)

See accompanying Notes to Condensed Consolidated Financial Statements

IVEDA SOLUTIONS, INC. CONSOLIDATED

CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE (LOSS)~~CASH FLOWS (UNAUDITED)

FOR THE ~~THREE~~NINE MONTHS ENDING SEPTEMBER 30, 2021 AND ~~SIX MONTHS ENDED JUNE 30, 2016 AND 2015~~2020

Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Net Loss $ (476,709 ) $ (880,349 ) $ (1,059,553 ) $ (1,719,733 )
Other Comprehensive Loss
Change in Equity Adjustment from Foreign Currency Translation, Net of Tax (769 ) 565 2,327 2,096

Comprehensive Loss $ (477,478 ) $ (879,784 ) $ (1,057,226 ) $ (1,717,637 )

	September 30, 2021 (Unaudited)			September 30, 2020 Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(1,775,728	)	$	(1,185,493	)
Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities
Depreciation and Amortization		17,148			10,000
Amortization of Deferred Financing Costs		-			-
Stock Option Compensation		88,000
Bad Debt Expense		-			-
Convertible Debt Value		69,729			-
Common Stock Warrants Issued for Services		122,966			-
Common Stock Warrants Issued for Interest		69,729			-
(Increase) Decrease in Operating Assets
Accounts Receivable		150,551			646,046
Inventory		(236,768	)		132,747
Other Current Assets		(328,086	)		(274,302	)
Other Assets		60,476			41,234
Increase (Decrease) in Accounts and Other Payables		582,310			535,074
Net Cash Used in Operating Activities		(1,179,673	)		(94,695	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment		(17,352	)		(35,305	)
Proceeds from Sale of Equipment		-			-
Net Cash Provided by (Used in) Investing Activities		(17,352	)		(35,305	)

CASH FLOWS FROM FINANCING ACTIVITIES
Changes in Restricted Cash		(59,209	)		(126,914	)
Proceeds from (Payments on) Short-Term Notes Payable/Debt		71,248			268,424
Proceeds from (Payments on) Long-Term Notes Payable/Debt		115,865			-
Proceeds from Exercise of Stock Options		-			-
Proceeds from (Payments to) Due to Related Parties		(82,711	)		(69,327	)
Deferred Finance Costs, Net		-			-
Common Stock Issued, Net of (Cost of Capital)		2,113,000			-

Net Cash Provided by Financing Activities		2,158,193			72,183

EFFECT OF EXCHANGE RATE CHANGES ON CASH		20,745			15,739

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		981,913			(42,078	)

Cash and Cash Equivalents- Beginning of Period		249,521			256,970

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	1,231,434		$	214,892

See accompanying Notes to Condensed Consolidation Financial Statements

IVEDA SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - CONTINUED

FOR THE NINE MONTHS ENDING SEPTEMBER 30, 2021 AND 2020

	September 30, 2021 (Unaudited)		September 30, 2020 (Unaudited)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid	$	2,096	$	1,806
Income Tax Paid	$	-	$	-

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Debenture Principal converted to Common Stock	$	499,750	$	-
Debenture Accrued Interest converted to Common Stock	$	288,787	$	-
Rent Accounts Payable to related Party converted to Common Stock	$	99,789	$	-
Common Stock issued for Consulting Agreements related to Cost of Capital	$	1,932,736	$	-
Accrued Dividends converted to Common Stock	$	455,926	$	-

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements.

IVEDA SOLUTIONS, INC.

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015~~

Six Months
Ended Six Months
Ended
June 30, 2016 June 30, 2015
(Unaudited) (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (1,059,553 ) $ (1,719,733 )
Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities
Depreciation and Amortization 58,278 109,302
(Gain) Loss on Derivatives 1,077 -
Stock Option Compensation 8,000 84,000
Bad Debt Expense - 3,085
Inventory Valuation Allowance - 1,000
Common Stock Warrants Issued for Interest 3,000 14,826
Gain on Derivatives and Debt Conversion - (42,591 )
Loss on Disposal of Assets - 29,454
(Increase) Decrease in Operating Assets and Liabilities
Accounts Receivable 623,961 (924,865 )
Inventory (1,147 ) (30,715 )
Other Current Assets 144,542 93,989
Other Assets (78,817 ) (7,869 )
Accounts and Other Payables (13,433 ) (46,905 )
Net Cash Used in Operating Activities (314,092 ) (2,437,022 )

CASH FLOWS FROM INVESTING ACTIVITIES
Sale (Purchase) of Property and Equipment (793 ) (5,055 )
Proceeds from Sale of Equipment - 5,353
Net Cash Provided by (Used in) Investing Activities (793 ) 298

CASH FLOWS FROM FINANCING ACTIVITIES
Changes in Restricted Cash 87,250 461,896
Proceeds from (Payments on) Short-Term Notes Payable/Debt 351,543 (68,406 )
Proceeds from Exercise of Stock Options 8,969 -
Proceeds from (Payments to) Due to Related Parties (274,820 ) (145,000 )
Proceeds from Long-Term Debt, Net of Payments 73,085 (35,270 )
Payments on Dividends - (2,956 )
Sale of Common Stock, Net of Cost of Capital 813,999 -
Series B Preferred Stock Issued, Net of Cost of Capital - 2,821,482
Net Cash Provided by Financing Activities 1,060,026 3,031,746

EFFECT OF EXCHANGE RATE CHANGES ON CASH 7,467 1,632

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 752,608 596,654

Cash and Cash Equivalents- Beginning of Period 206,925 87,900

CASH AND CASH EQUIVALENTS - END OF PERIOD $ 959,533 $ 684,554

~~See accompanying Notes to Condensed Consolidated Financial Statements~~

~~IVEDA SOLUTIONS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED~~

~~FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015~~

Six Months
Ended Six Months
Ended
June 30, 2016 June 30, 2015
(Unaudited) (Unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid $ 14,384 $ 37,422

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Common Stock Issued for Investor Relations $ - $ 7,500
Warrants Issued for Interest Expense $ 3,000 $ 7,327
Dividends Converted to Common Stock $ 148,211 $ -
Common Stock Issued for Finance Costs $ 15,000 $ -

~~See accompanying Notes to Condensed Consolidated Financial Statements~~

~~IVEDA SOLUTIONS, INC.~~

NOTES TO THE (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Iveda 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.

AI Functions

~~NOTE 1~~	~~BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~●	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

~~These statements should~~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 ~~read~~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 ~~conjunction~~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, care 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 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 manages all the components of our ~~consolidated financial statements~~smart power technology including statistics on energy consumption. Cerebro is a software platform designed to integrate multiple unconnected energy, security and ~~notes thereto included~~safety applications and devices and control them through one comprehensive user interface.

Cerebro’s 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.

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 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 marketing. 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 ~~Annual Report~~customer needs. We now have the capability to provide IP cameras and NVRs based on ~~Form 10-K~~customer specifications. We still utilize ONVIF (Open Network Video Interface Forum) cameras which is a global standard for the ~~year ended December 31, 2015.~~interface of IP-based physical security products.

In 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.

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. 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.

In 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 ~~operating results and cash flows~~purpose of completing the SAFETY Act Designation application is for the ~~six-month period ended June 30, 2016 are not necessarily indicative~~seller of a technology, to explain to the ~~results~~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 ~~be achieved~~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 ~~full fiscal year ending December 31, 2015 or for future periods.~~SAFETY Act.

~~The accompanying condensed consolidated financial statements have been prepared~~A technology could not receive Certification status without ~~audit~~having first received Designation status and ~~reflect all adjustments, consisting of normal recurring adjustments, which are, in our opinion, necessary~~holding that status for ~~a fair statement of~~5 years. To receive SAFETY Act Certification, the ~~financial position and~~Department must conclude that 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 pursuanttechnology will perform as intended, conforms to the ~~rules~~seller’s specifications, and ~~regulations~~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 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 pursuantSafety Act. The sellers of QATTs that receive SAFETY Act Certification are entitled to ~~such SEC rules and regulations.~~

~~The 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~~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 ~~complete financial statements.~~Homeland Security.

~~Consolidation~~We 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.

Our 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

Effective 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.

Going Concern

The 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~~We generated accumulated losses of approximately $38 million from January 2005 through 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~~2020 and have ~~used approximately $0.3 million in~~insufficient working capital and cash flows to ~~fund operations through the six months ended June 30, 2016. As a result, a significant risk exists regarding~~support operations. These factors raise substantial doubt about 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.

Impairment of Long-Lived Assets

We ~~adopted~~have a ~~multi-step plan~~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 ~~enable~~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. We did 0t make any impairment for the nine months ended September 30, 2021 or the years ended December 31, 2020 and 2019.

Basis of Accounting

Our 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.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to ~~continue~~make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.

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 ~~operate~~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 ~~begin~~(5) recognize revenue when a performance obligation is satisfied.

The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to ~~report operating profits.~~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 ~~highlights~~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 ~~that plan are~~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 ~~follows:~~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:

●

~~We developed Sentir, our cloud-based video management platform,~~●

The majority of MEGAsys sales are project sales to Taiwan customers and ~~began executing on our strategy~~are made direct to ~~license~~the end customer (typically a municipality or a commercial customer) through its ~~use~~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.

Revenues 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.

Contract 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.

	●	The 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 ~~VSaaS offering to partners, as of March 2014, such as telecommunications companies, ISPs, data centers,~~wholesale price and ~~cable companies in order to gain access to their existing subscriber bases.~~

	●	We 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 devices. The Sentir-enabled cameras simplify service providers’ VSaaS offering to end users.

	●	~~We developed IvedaMobile® – a cloud-hosting service that turns any smartphone or tablet into a mobile, cloud video streaming device.~~

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

	●	~~We signed an exclusive reseller agreement in November 2015 with a local group in Vietnam that will~~ sell to the ~~Vietnam Telecom~~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 ~~Integrator market under~~all related risks and rewards of ownership. Accordingly, upon application of steps one through five above, revenue is recorded when the ~~name~~ product is shipped to the distributor or as directed by the distributor consistent with the terms of the distribution agreement.

	●	Iveda ~~Vietnam. Our initial shipment of ZEE cameras was sent in February 2016 for delivery to Vietnam Posts~~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 ~~Telecommunications (VNPT) for distribution to its customers.~~amortized on a straight-line basis over the respective time period.

~~IVEDA SOLUTIONS, INC.~~Comprehensive Loss

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

	●	We 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.

	●	We 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.

	●	~~We launched a new website highlighting our licensing business model, which focuses on telecommunications companies, data centers, ISPs, cable companies, and other similar organizations.~~

	●	We 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.

	●	In November 2013, we hired Bob Brilon as our Chief Financial Officer and Executive Vice President of Business Development. In February 2014, Mr. Brilon was appointed as our President. Mr. 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 our growth. Mr. Brilon has also been instrumental in restructuring the business model reducing the workforce and implementing relevant cost reductions in 2014, 2015 and 2016.

Comprehensive loss is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among 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. Our current component of other comprehensive income is the foreign currency translation adjustment.

~~Concentrations~~

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 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”)~~FDIC insurance limit. Deposits in Taiwan financial institutions are insured by ~~Central~~ CDIC (Central

Deposit Insurance ~~Corporation (“CDIC”)~~Corporation) with maximum coverage of NTD 3 million. At times, amounts on deposit in Taiwan may be in excess of the CDIC ~~insurance~~Insurance limit.

Accounts ~~receivable~~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~~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.

We had revenue from one ~~customers~~customer with greater than 10% of total revenues during the nine months ended September 30, 2021 that represented approximately ~~78%~~ 25% 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~~revenues. We had $219,222 revenues (25%) from Chunghwa Telecom.

We had revenue from two customers with greater than 10% of total revenues during 2020 that represented approximately ~~81%~~ 39% of total ~~revenue~~revenues. We had $414,415 revenues (28%) from Chunghwa Telecom and $159,048 revenues (11%) from Siemens .

No other customers represented greater than 10% of total revenues in nine months ended September 30, 2021 and 2020.

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.

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 are considered delinquent. For 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.

Deposits – Current

Our current deposits represent tender deposits placed with local governments and major customers in Taiwan during the bidding process for new proposed projects.

Other Current Assets

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

Inventories

We 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.

Property and Equipment

Property 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 ~~six~~nine months ended ~~June~~September 30, ~~2016,~~2021 and ~~four customers represented approximately 84% of total Taiwan-based segment accounts receivable at June~~September 30, ~~2016.~~2020 was $10,482 and $5,000, respectively.

~~IVEDA SOLUTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Intangible Assets

Intangible assets consist of trademarks and other intangible assets associated with the purchase price allocation of MEGAsys. Such assets are being amortized over their estimated useful lives ~~ranging from six~~of nine months to ten ~~years.~~years. Other intangible assets and trademarks are fully amortized at ~~June~~September 30, ~~2016. Future~~2021. Current year amortization of trademarks iswas as follows:

SCHEDULE OF FUTURE AMORTIZATION OF TRADEMARKS

2016 $ 10,000
2017 20,000
2018 20,000
2019 20,000
Thereafter 26,666
Total $ 96,666


2021	$	6,666
2022		-
Total	$	6,666

Deposits—Long-Term

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

Deferred 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. Temporary 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.

We are subject to U.S. federal income tax as well as state income tax.

Our U.S. income tax returns are subject to review and examination by federal, state, and local authorities. Our U.S. tax returns for the years 2016 to 2020 are open to examination by federal, local, and state authorities.

Our 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.

Restricted Cash

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

Accounts and Other Payables

SCHEDULE OF ACCOUNTS AND OTHER PAYABLES

	September 30, 2021		December 31, 2020
	(Unaudited)
Accounts Payable	$	473,977	$	405,819
Accrued Expenses		2,774,214		2,751,127
Deferred Revenue and Customer Deposits		104,983		864
Accounts and Other Payables	$	3,353,174	$	3,157,810

Deferred Revenue

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

Stock-Based Compensation

On 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 718. We recognize stock-based compensation expense on a straight-line basis over the requisite service period of the award. The fair 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, 2021.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to us as of ~~June~~September 30, ~~2016~~2021 and December 31, ~~2015.~~2020. The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accounts receivable, ~~accounts~~0 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 because they are receivable or payable on demand.

~~Derivative Financial Instruments~~

We 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.

Segment Information

We conduct operations in various geographic regions. The operations conducted and the customer bases located in the foreign countries are similar to the ~~operations~~business conducted and the customer bases located in the United States. The net ~~revenue~~revenues and net assets (liabilities) for other significant geographic regions are as ~~follows~~follows:

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

	June 30, 2016					September 30, 2021 (Unaudited)
	Net Revenue		Net Assets (Liabilities)			Net Revenue		Net Assets (Liabilities)
United States	$	247,621	$	(1,900,840	)	$	59,200	$	(2,404,401	)
Republic of China (Taiwan) MEGAsys	$	503,520	$	(138,464	)
Republic of China (Taiwan)						$	1,245,525	$	710,225

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.

~~IVEDA SOLUTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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.

We 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.Reclassification

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

Three Months Three Months
Ended
June 30, 2016 Ended
June 30, 2016 Condensed
Consolidated
Iveda Solutions, Inc. MEGAsys Total

Revenue $ 120,053 $ 218,571 $ 338,624
Cost of Revenue 84,612 171,640 256,252
Gross Profit 35,441 46,931 82,372
Depreciation and Amortization 26,531 - 26,531
General and Administrative 426,681 71,235 497,916
Gain (Loss) from Operations (417,771 ) (24,304 ) (442,075 )
Foreign Currency Gain - - -
Gain on Derivatives (4,272 ) - (4,272 )
Gain on Disposal of Asses, Net 7,313 - 7,313
Interest Income - 183 183
Interest Expense (19,131 ) (2,016 ) (21,147 )
Gain (Loss) Before Income Taxes (433,861 ) (26,137 ) (459,998 )
Benefit (Provision) for Income Taxes - (16,711 ) (16,711 )
Net Income (Loss) $ (433,861 ) $ (42,848 ) $ (476,709 )

Six Months Six Months
Ended
June 30, 2016 Ended
June 30, 2016 Condensed
Consolidated
Iveda MEGAsys Total

Revenue $ 247,621 $ 503,520 $ 751,141
Cost of Revenue 191,932 394,730 586,662
Gross Profit 55,689 108,790 164,479
Depreciation and Amortization 52,758 - 52,758
General and Administrative 952,190 168,446 1,120,636
Gain (Loss) from Operations (949,259 ) (59,656 ) (1,008,915 )
Foreign Currency Gain - - -
Gain on Derivatives (1,077 ) - (1,077 )
Loss on Disposal of Assets, Net 8,965 - 8,965
Interest Income - 204 204
Interest Expense (38,675 ) (3,344 ) (42,019 )
Gain (Loss) Before Income Taxes (980,046 ) (62,796 ) (1,042,842 )
Provision for Income Taxes - (16,711 ) (16,711 )
Net Income (Loss) $ (980,046 ) $ (79,507 ) $ (1,059,553 )

~~IVEDA SOLUTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Revenue as shown below represents sales to external customers for each segment. Intercompany revenue is immaterial and has been eliminated.~~

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

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

Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Revenue
United States $ 120,053 $ 48,912 $ 247,621 $ 148,235
Republic of China (Taiwan) 218,571 726,649 503,520 1,153,149
$ 338,624 $ 775,561 $ 751,141 $ 1,301,384

Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Operating Earnings (Loss)
United States $ (417,771 ) $ (845,216 ) $ (949,259 ) $ (1,740,396 )
Republic of China (Taiwan) (24,304 ) 18,132 (59,656 ) 64,501
$ (442,075 ) $ (827,084 ) $ (1,008,915 ) $ (1,675,895 )

Six Months Ended
June 30,
2016 2015
Property and Equipment, Net
United States $ 131,721 $ 354,218
Republic of China (Taiwan) 10,121 11,475
$ 141,842 $ 365,693

Six Months Ended
June 30,
2016 2015
Additions (Disposals) to Long-Lived Assets
United States $ - $ (3,883 )
Republic of China (Taiwan) (793 ) (1,172 )
$ (793 ) $ (5,055 )

~~IVEDA SOLUTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Six Months Ended
June 30,
2016 2015
Inventory, Net
United States $ 67,289 $ 262,880
Republic of China (Taiwan) 112,808 157,943
$ 180,097 $ 420,823

Six Months Ended
June 30,
2016 2015
Total Assets
United States $ 814,458 $ 1,659,937
Republic of China (Taiwan) 1,580,327 2,542,083
$ 2,394,785 $ 4,202,020

~~Reclassification~~

Certain amounts in ~~2015 may~~2020 have been reclassified to conform to the ~~2016~~2021 presentation.

New Accounting Standards

~~There were no~~No new relevant accounting standards ~~recently issued which would have an impact on our operations or disclosures.~~

~~NOTE 2~~

~~SHORT-TERM DEBT~~15

NOTE 2 RELATED PARTIES

SCHEDULE OF RELATED PARTY TRANSACTIONS

	September 30, 2021			December 31, 2020
	(Unaudited)
During 2020 one of the three MEGAsys directors loaned money to MEGAsys at no interest.		-			37,711

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.		-			45,534

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		-			30,000	*

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 31, 2015. 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 per share. *No longer a Director		-			100,000	*

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. Mr. Omi is currently the CTO of the company.		200,000			200,000

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.	$	100,000		$	100,000

Total Due to Related Parties $ 300,000	$	300,000			512,711
Less Current Portion		(300,000	)		(512,711	)
Less: Debt Discount		-			-
Total Long-Term	$	-		$	-

NOTE 3 SHORT-TERM AND LONG-TERM DEBT

The ~~short term~~short-term debt balances were as follows:

SCHEDULE OF SHORT-TERM DEBT

June 30, 2016 December 31, 2015
Loan from Bank SinoPac at 2.95% interest rate per annum. Due at June 2016 - December 2016. $ 154,600 $ -

Loan from Hua Nan Bank at 2.88% interest rate per annum. Due at February 2016 - August 2016. $ 154,600 $ -
3
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. $ 100,000 $ -

Loan from Shanghai Bank at 3.24% interest rate per annum. Due at July 2015 - March 2016. $ - $ 53,025

Balance at end of period $ 409,200 $ 53,025

	September 30, 2021		December 31, 2020
	(Unaudited)
	$	-	$	100,000
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.	$	-	$	100,000

Note Payable to Siemens due December 31, 2021 at 0% interest.		82,486

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				71,238

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.		210,000		346,250

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.		275,000		313,500

Short-term three month loan at 0% interest from a shareholder in June 2020, was due September 2020.		-		35,000

Balance at end of period	$	567,486	$	865,988

~~IVEDA SOLUTIONS, INC.~~The Long-term debt balances were as follows:

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~SCHEDULE OF LONG-TERM DEBT


		115,865		-
Loans from Shanghai Bank with interest rates 1.00% per annum due February 2024		115,865		-

Current Portion of Long-term debt		(47,944	)	-

Balance at end of period	$	67,921		-

~~NOTE 3~~

~~EQUITY~~

NOTE 4 PREFERRED STOCK

~~Preferred Stock~~

We are currently authorized to issue up to 100,000,000 shares of preferred stock, par value ~~$0.00001~~$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.

Series A Preferred Stock

We are authorized to issue up to 10,000,000 shares of Series A Preferred Stock. Each share of Series A Preferred Stock accrues cumulative dividends at a rate of 9.5% per annum onof the original issue price of ~~$1.00~~$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.

Each 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~~initial conversion price of ~~$0.97~~$1.00 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~~converted into shares of our common stock at the then-applicable conversion price.

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The 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. 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. 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.

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

Series B Preferred Stock

We 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 onof the original issue price of ~~$10,000~~$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. 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.

~~IVEDA SOLUTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

In 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 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~~$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.

The 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.

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

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 B Preferred Stock will be appropriately decreased to protect the Series B Preferred ~~Stock holders~~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.

~~During the six months ended June~~ As of September 30, ~~2016,~~2021, we ~~issued 362,473~~have no outstanding shares of ~~common stock in payment of dividends to~~ Series B ~~preferred stockholders.~~Preferred Stock.

NOTE 5 EQUITY

Common Stock

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

~~During~~The Company raised $2,113,000 during the ~~six~~nine months ended ~~June~~September 30, ~~2016, we issued 362,473~~2021 issuing 5,355,238 shares of common stock ~~in payment of dividends to Series B preferred stockholders.~~

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

~~During the six months ended June 30, 2016, we issued 1,088,570 shares of common stock for exercised~~and warrants to purchase common ~~stock.~~shares with a Fair Market Value of approximately $900,000.

~~IVEDA SOLUTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~NOTE 6 STOCK OPTION PLAN AND WARRANTS

~~During~~Stock Options

On October 15, 2009, we adopted the ~~six months ended June 30, 2016, we issued 72,204~~2009 Stock Option Plan (the “2009 Option Plan”), with an aggregate number of 1,500,000 shares of common stock ~~for conversion~~issuable under the plan. The purpose of ~~Series A preferred shares.~~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.

~~During~~On January 18, 2010, we adopted the ~~six months ended June 30, 2016, we issued 11,000~~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 ~~for origination fees for~~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 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 (No. 333-175143), and December 4, 2013 (No. 333-192655). The 2010 Option Plan expired on January 18, 2020.

We adopted a ~~$100,000 short term loan.~~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.

~~During the six months ended June 30, 2016, we issued 628,571 shares of common~~Stock options may be granted as either incentive stock ~~(with 800,000 warrants at $0.35 exercise price) for $500,000 strategic investment.~~

~~During the six months ended June 30, 2016, we issued 60,000 shares of common stock for the referral~~options intended to qualify under Section 422 of the ~~$500,000 strategic investment.~~

~~Notes Receivable from Stockholder~~

~~In September 2014, an advisor/stockholder~~Internal Revenue Code of ~~our company exercised warrants to purchase 200,000 and 300,000 shares~~1986, as amended (the “Code”), or as options not qualified under Section 422 of ~~common stock, granted at~~the Code. All options are issued with an exercise price at or above the fair market value of ~~$1.02 and $1.00 per share, respectively, in exchange for 5% promissory notes totaling $504,000 due at~~ the ~~extended maturity~~common stock on the date of ~~June 30, 2017. Early payments~~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 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.

~~NOTE 4~~

~~STOCK OPTIONS AND WARRANTS~~

~~Stock Options~~

~~We have~~also granted non-qualified stock options to employees ~~contractors,~~ and ~~directors as equity compensation and to debenture holders for the extension of debenture maturity dates.~~contractors. 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~~to others ~~vesting~~that ratably vest over a period of time up to four years. Standard 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 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 0 unrecognized stock- based compensation.

Stock option transactions during ~~the six months ended June 30, 2016~~2020 and 2019 were as follows:

SCHEDULE OF STOCK OPTION TRANSACTIONS

	Six months ended June 30, 2016					2020					2019
	Shares			Weighted-Average Exercise Price		Shares			Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price

Outstanding at Beginning of Year		6,037,754		$	0.96		6,741,200		$	0.78		6,046,200	$	0.83
Granted		30,000			0.65		2,500,000			0.37		695,000		0.28
Exercised		(89,690	)		0.10		(1,270,000	)		0.16		-		-
Forfeited or Canceled		(158,500	)		0.94		(355,000	)		1.12		-		-
Outstanding at End of Period		5,819,564			0.97
Outstanding at End of Year							7,616,200			0.73		6,741,200		0.78

Options Exercisable at End of Period		5,767,439		$	0.98
Options Exercisable at Year-End							7,616,200			0.73		6,741,200		0.78

Weighted-Average Fair Value of Options Granted During the Period	$	0.14
Weighted-Average Fair Value of Options Granted During the Year						$	0.25				$	0.20

~~IVEDA SOLUTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Information with respect to stock options outstanding and exercisable ~~as of June 30, 2016~~at December 31, 2020 is as follows:

SCHEDULE OF STOCK OPTIONS OUTSTANDING AND EXERCISABLE

Options Outstanding Options Exercisable
Range of
Exercise
Prices Number
Outstanding at
June 30, 2016 Weighted-
Average
Remaining
Contractual
Life Weighted-
Average
Exercise
Price Number
Exercisable at
June 30, 2016 Weighted-
Average
Exercise
Price
$ 0.10 - $1.75 5,819,564 6.5 $ 0.97 5,767,439 $ 0.98

	Options Outstanding						Options Exercisable
Range of Exericse Prices	Number Outstanding at December 31, 2020		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price		Number Exercisable at December 31, 2020		Weighted- Average Exercise Price
$0.04 - $1.75		7,616,200		5.7	$	0.73		7,616,200	$	0.73

The 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:~~granted.

SCHEDULE OF BLACK-SCHOLES OPTION-PRICING MODEL

	~~2016~~
~~Expected Life~~		~~6.25 yrs~~
~~Dividend Yield~~		0	%
~~Expected Volatility~~		~~18.07~~	%
~~Risk-Free Interest Rate~~		~~2.18~~	%

	2020			2019
Expected Life		5 yrs			5 yrs
Dividend Yield		0	%		0	%
Expected Volatility		90	%		90	%
Risk-Free Interest Rate		0.18	%		1.67	%

Expected 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 on the U.S. 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.

~~Warrants~~

We 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.

As 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.

Warrant transactions during ~~the six months ended June 30, 2016~~2020 and 2019 were as follows:

SCHEDULE OF WARRANT TRANSACTIONS

	2020					2019
	Shares			Weighted- Average Exercise Price		Shares			Weighted- Average Exercise Price

Outstanding at Beginning of Year		5,563,509		$	0.38		4,796,876		$	0.40
Granted		989,856			0.35		1,335,178			0.35
Exercised							-
Forfeited or Canceled		(2,203,331	)		0.36		(568,545	)		0.45
Outstanding at End of Year		4,350,034			0.38		5,563,509			0.38

Warrant Exercisable at Year-End		4,350,034			0.38		5,563,509			0.38

Weighted-Average Fair Value of Warrants Granted During the Year		$0.10 - $0.26					$0.00 - $0.22

~~Outstanding at December 31, 2015~~	~~7,417,302~~
~~Granted~~	~~1,484,999~~
~~Exercised~~	~~(624,286~~	)
~~Forfeited or Canceled~~	~~(824,999~~	)
~~Warrants Redeemable at June 30, 2016~~	~~7,453,016~~

Information 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
Range of Exericse Prices	Number Outstanding at December 31, 2020		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price		Number Exercisable at December 31, 2020		Weighted- Average Exercise Price
$0.35 - $1.65		4,350,034		1.0	$	0.38		4,350,034	$	0.38

The 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

	2020			2019
Expected Life		1.5 yrs			1.5 yrs
Dividend Yield		0	%		0	%
Expected Volatility		90	%		90	%
Risk-Free Interest Rate		0.19 - 1.59%			1.74 -2.47%

NOTE 7 INCOME TAXES

U.S. Federal Corporate Income Tax

Temporary 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

	2020			2019
Tax Operating Loss Carryforward - USA	$	9,800,000		$	9,600,000
Other		-			-
Valuation Allowance - USA		(9,800,000	)		(9,600,000	)
Deferred Tax Assets, Net	$	-		$	-

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

As 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 only.

SUMMARY OF OPERATING LOSS CARRYFORWARDS

Year Ending	Net Operating		Year of
December 31,	Loss:		Expiration

2020	$	590,000		2040
2019		260,000		2039
2018		160,000		2038
2017		140,000		2037
2016		1,640,000		2036
2015		3,400,000		2035
2014		5,230,000		2034
2013		5,600,000		2033
2012		2,850,000		2032
2011		2,427,000		2031
2010		1,799,000		2030
2009		1,750,000		2029
2008		1,308,000		2028
2007		429,000		2027
2006		476,000		2026
2005		414,000		2025

Taiwan (Republic of China) Corporate Tax

Sole-Vision 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.

~~IVEDA SOLUTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE 5~~

~~RELATED PARTY TRANSACTIONS~~

June 30, 2016

During June 2015 MEGAsys entered into an unsecured loan agreement with two of its directors, Mr. 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. Mr. Gillen 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. 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. 30,000

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 31, 2015. 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. 100,000

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. Omi options 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. 200,000

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 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. 100,000

On April 1, 2016, we entered into a debenture agreement with Mr. Joe 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. $ 10,000

Total Due to Related Parties $ 440,000
Less Current Portion (440,000 )
Less: Debt Discount -
Total Long-Term $ -

~~IVEDA SOLUTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Related Party Transactions –~~

During 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 salesAccording to the Taiwan corporate income tax (“TCIT”) reporting system, ~~integrator for~~ the ~~six-month period ended June 30, 2016 was $168,654, at June 30, 2016 there was accounts receivable balance~~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 ~~$166.~~

~~In May 2016 we abandoned our prior lease at 1201 S Alma School Road, Suite 8500, Mesa, Arizona and subleased~~Finance (“MOF”) on a ~~month~~bi-monthly basis. 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 ~~month~~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, ~~approximately 2,500 square feet of office space at 460 S. Greenfield, Suite 5, Mesa, Arizona~~the sales cut-off TCIT timing difference which derived from ~~Farnsworth Realty & Management Company for $3,000 per month. One of our directors, Joe Farnworth,~~the VAT reporting system will create a temporary sales cut-off timing difference and this difference is ~~70% stakeholder~~reflected in ~~Farnsworth Realty & Management Company.~~the deferred tax assets or liabilities calculations.

~~NOTE 6~~

~~EARNINGS (LOSS) PER SHARE~~

NOTE 8 EARNINGS (LOSS) PER SHARE

The 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.”

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 years ended December 31, ~~2015~~2020 and ~~2014~~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 ~~quarters~~periods ended ~~June~~September 30, ~~2016~~2021 and ~~2015~~2020.

SCHEDULE OF EARNINGS PER SHARE BASIC AND DILUTED

	September 30, 2021			September 30, 2020
	(Unaudited)			(Unaudited)
Basic EPS
Net Loss	$	(1,775,728	)	$	(1,185,493	)
Weighted Average Shares		69,581,603			51,401,395
Basic Loss Per Share	$	(0.03	)	$	(0.02	)

NOTE 9 CONTINGENT LIABILITIES—TAIWAN

Pursuant to certain contracts with Siemens, Chung-Hsin Electric and ~~six months ended June~~Machinery Manufacturing Corp, MEGAsys is required to provide after-project services. 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, ~~2016~~2021 is $61,435.

NOTE 10 SUBSEQUENT EVENTS

From October 1, 2021 to November 8, 2021, short-term debenture holders converted $110,000 principal and ~~2015. Total~~$22,809 accrued interest into 384,454 shares of common stock, ~~equivalents that could be convertible into~~we sold 756,000 shares of unregistered restricted common stock ~~were 26,499,901~~at $0.75 for $567,000 of proceeds and ~~22,127,032~~a warrant to purchase 270,000 shares of common stock at $0.35 was exercised for ~~June 30, 2016 and 2015, respectively.~~$94,500.

Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
Basic EPS June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
Net Loss $ (476,709 ) $ (880,349 ) $ (1,059,553 ) $ (1,719,733 )
Weighted Average Shares 29,267,353 27,380,701 28,673,883 27,344,729
Basic and Diluted Loss Per Share $ (0.02 ) $ (0.03 ) $ (0.04 ) $ (0.06 )

~~NOTE 7~~

~~SUBSEQUENT EVENTS~~23

We 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.Item 2. Financial Information.

~~ITEM 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.~~

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 ~~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.~~2020 included in this Form 10-Q Quarterly Report.

Note Regarding Forward-Looking Information

This ~~Quarterly~~ 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, ~~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,~~investment, or elsewhere in this ~~Quarterly~~ Report on Form 10-Q Quarterly Report or discussed in our ~~Annual Report on Form 10-K~~audited consolidated financial statements for the year ended December 31, ~~2015,~~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.

You 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.

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 ~~Item 7, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” of~~ our ~~Annual Report on Form 10-K~~audited consolidated financial statements for the year ended December 31, ~~2015.~~2020. Such policies are unchanged.

Overview

~~We developed Sentir®, a~~Iveda 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 ~~platform~~systems (VMS). IvedaAI comes with ~~big~~an appliance or server, preconfigured with multiple AI functions based on the end user requirements.

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

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.

We also offer smart power technology for ~~flexible~~office buildings, schools, shopping centers, hotels, hospitals, and ~~scalable distribution~~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 software for monitoring and control purposes. This line of ~~hosted~~product includes smart power, water meter, smart lighting controls systems, and smart payment system.

Iveda’s 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.

In 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 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,systems, and ~~cable companies with an existing physical infrastructure that are looking to add video surveillance services to their customer offerings. Sentir allows scalability, flexibility,~~smart power.

We license our platform 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 and alerts. Our expertise allows us to enable large service providers to offer cloud-based plug-and-play video surveillance using our Sentir platform.

~~In 2014, we shifted our revenue model from direct project-based sales to licensing Sentir and selling Sentir-enabled plug-and-play cloud cameras~~sell IoT hardware to service providers such as telecommunications companies, ~~ISPs, data centers,~~integrators and ~~cable companies~~other technology resellers already providing services to an existing customer base. Partnering with service providers that have an existing loyal ~~subscriber~~customer base allows us to focus on servicing just a handful of our ~~customers, the service~~partners and concentrating on our technology offering. Service providers ~~and~~ leverage their end-user infrastructure to sell, bill, and provide customer service for ~~the Sentir cloud video surveillance~~Iveda’s product offering. This business model provides dual revenue streams – one from ~~camera~~hardware sales ~~to the service providers~~ and the other from monthly ~~Sentir~~ licensing ~~fees~~fees.

In 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.

A 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.

We 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. We intend to communicate the results of this process to investors through a ~~per-camera activation basis.~~press release distributed via a news wire service and will be posted on our website.

Our 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 by the U.S. 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.

In April, 2011, we completed our acquisition of ~~MEGAsys®~~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.

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

●

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

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

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

	●
	●	Enhancements to the global distribution potential for our products and services.

In 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.”

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

~~In 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.

In 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.

In 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.

New Accounting Standards

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

Results of Operations

Net Revenue.We recorded net consolidated revenue of ~~$338,624~~$411,452 for the three months ended ~~June~~September 30, ~~2016,~~2021, compared to ~~$775,561~~$278,238 for the three months ended ~~June~~September 30, ~~2015, a decrease~~2020, an increase of ~~($436,937),~~$133,214, or ~~(56%)~~48%. In the three months ended ~~June~~September 30, ~~2016,~~2021, our recurring service revenue was ~~$25,907,~~$106,434, or 8%26% of net consolidated revenue, and our equipment sales and installation revenue was ~~$307,109,~~$300,756, or ~~91%~~73% of net consolidated revenue, compared to recurring service revenue of ~~$46,911,~~$143,945, or 6%52% of net consolidated revenue, and equipment sales and installation revenue of ~~$726,695,~~$132,315, or ~~94%~~48% of net consolidated revenue, for the same period in ~~2015.~~2020. Our U.S.-based segment saw an increase of ~~$71,141~~$11,748, or 42% in net consolidated revenue during the three months ended ~~June~~September 30, ~~2016,~~2021, while our Taiwan-based segment revenue ~~decreased~~increased by ~~($508,078)~~$121,466, or 49% during the same period. The minimal increase in U.S.-based segment revenue was due to limited sales of equipment ~~sales~~ to our ~~Vietnam Reseller, of Sentir-enabled plug-and-play cloud cameras.~~customers during our transition to IvedaAI products. The ~~decrease~~increase in Taiwan-based segment revenue was primarily due to ~~delays on~~additional long-term contracts awarded and started during ~~2015.~~the three months ended September 30, 2021. See COVID-19 effects discussion below in Liquidity and Capital Resources.

We recorded net consolidated revenue of ~~$751,141~~$1,304,725 for the ~~six~~nine months ended ~~June~~September 30, ~~2016,~~2021, compared to ~~$1,301,384~~$1,164,640 for the ~~six~~nine months ended ~~June~~September 30, ~~2015, a decrease~~2020, an increase of ~~($550,243)~~140,084 or ~~(42%)~~12%. For the nine months ended September 30, 2021 MEGAsys operations accounted for 95% of the total revenue. In the ~~six~~nine months ended ~~June~~September 30, ~~2016,~~2021, our recurring service revenue was ~~$50,390~~$219,414 or 7%17% of revenue, and our equipment sales and installation revenue was ~~$692,308~~$1,079,861 or ~~92%~~83% of revenue, compared to recurring service revenue of ~~$145,251~~$244,296 or ~~11%~~21% of revenue, and equipment sales and installation revenue of ~~$1,141,218~~$912,822 or ~~88%~~78% of revenue for the same period in ~~2015.~~2020. The ~~decrease~~increase in consolidated net revenue was ~~due~~primarily related to ~~delays in significant~~ long-term contracts that were awarded ~~and began~~starting in ~~2015~~the second quarter of 2021 in ~~Taiwan.. The increase in~~Taiwan but the U.S.-based segment revenue decrease of ($376,306) was due to limited sales of equipment ~~sales~~ to our ~~Resellers of Sentir-enabled plug-and-play cloud cameras.~~customers during our transition to IvedaAI products. See also COVID-19 effects discussion below in Liquidity and Capital Resources.

Cost of Revenue. Total cost of revenue was ~~$256,252 (76%~~$136,887 (33% of revenue, representing a gross margin of ~~24%~~67%) for the three months ended ~~June~~September 30, ~~2016,~~2021, compared to ~~$634,857 (82%~~$447,248 (161% of revenue; representing a gross margin of ~~18%~~(61%) for same period in ~~2015,~~2020, a decrease of ~~($378,605),~~$310,361, or ~~(60%)~~69%. The U.S.-based segment ~~increase~~decrease in cost of revenue corresponds with ~~increased sales through our Vietnam reseller.The~~decreased equipment sales. The Taiwan-based segment ~~decreased~~significant decrease in cost of revenue ~~and~~ were primarily due to ~~reduced revenues caused by~~cost reductions related to COVID-19 delays from the ~~delay on significant long-term contracts awarded and began~~same period in ~~2015.~~2020.

Total cost of revenue was ~~$586,662 (78%~~$781,895 (60% of revenues; gross margin of ~~22%~~40%) for the ~~six~~nine months ended ~~June~~September 30, ~~2016,~~2021, compared to ~~$993,552 (76%~~$1,007,321 (86% of revenues; representing a gross margin of ~~24%~~14%) for the ~~six~~nine months ended ~~June~~September 30, ~~2015,~~2020, a decrease of ~~($406,809)~~$225,426 or ~~(41%)~~22%. The decrease of cost of revenue was primarily related to the reduction of low margin equipment sales in the U.S.-based segment and ~~decrease~~resulted in an increased of gross ~~margin was primarily due to~~margin. The Taiwan based segment has seen positive momentum coming out of COVID-19 delays in large project revenues in ~~Taiwan~~2020 during the ~~six~~nine months ended June 30, ~~2016.~~2021.

Operating Expenses. Operating expenses were ~~$524,447~~$698,717 for the three months ended ~~June~~September 30, ~~2016,~~2021, compared to ~~$967,788~~$411,286 for the same period in ~~2015, a decrease~~2020, an increase of ~~($443,341),~~$287,431, or ~~(46%)~~70%. The ~~decrease~~increase in operating expenses was primarily related to a ~~continued decrease~~ramp up in personnel in the US based administrative, sales and technical support personnel ~~project-based marketing and sales expenses that has been shifted to our resellers, consulting, and~~as well as research and development ~~expenses.~~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.

Operating expenses were ~~$1.2 million~~$2,042,022 for the ~~six~~nine months ended ~~June~~September 30, ~~2016,~~2021, compared to ~~$2.0 million~~$1,264,945 for the ~~six~~nine months ended ~~June~~September 30, ~~2015, a decrease~~2020, an increase of ~~($810,333)~~$777,077 or ~~(41%)~~66%. The ~~decrease~~increase in operating expenses ~~in 2016 over 2015~~ was primarily related to a ~~continued decrease~~ramp up in ~~salaried~~ personnel ~~direct project-based marketing~~in the US based administrative, sales and ~~sales expenses, consulting, and~~technical support personnel as well as research and development ~~expenses.~~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.

Loss from Operations. As a result of ~~the decrease~~Taiwan based segment increase in ~~operating expenses,~~revenues and gross margins, loss from operations decreased to ($~~442,075)~~424,151) for the three months ended ~~June~~September 30, ~~2016,~~2021, compared to ($~~827,084)~~580,296) for the same period in ~~2015,~~2020, a decrease in loss of ~~($385,009),~~$156,145, or ~~(47%~~27%).

Primarily as a result of the ~~decrease~~increase in operating expenses the loss from operations ~~decreased~~increased to ~~$1.0 million,~~($1,519,193) for the ~~six~~nine months ended ~~June~~September 30, ~~2016,~~2021, compared to ~~$1.7 million~~($1,107,626) for the ~~six~~nine months ended ~~June 30, 2015, a decrease~~September 2020, an increase in loss of ($~~666,980)~~411,567) or ~~(40%~~(37%).

Other Expense-Net. Other expense-net was ~~$17,923~~($29,280) for the three months ended ~~June~~September 30, ~~2016,~~2021, compared to ~~$40,412~~($19,831) for the same period in ~~2015, a decrease~~2020, an increase of ($~~22,489)~~9,449), or ~~(56%~~(48%). The change is primarily due to the ~~decrease~~increase in interest ~~expense.~~expense related to US based debentures issued starting in 2019 to February 2021.

Other expense-net was ~~$33,927~~($256,535) for the ~~six~~nine months ended ~~June~~September 30, ~~2016,~~2021, compared to ~~$30,985~~($77,867) for the ~~six~~nine months ended ~~June~~September 30, ~~2015,~~2020, an increase of ~~$2,942~~($178,668) or 9%(229%) primarily related to the ~~decrease~~increase in ~~gain on derivatives and~~interest expense from the ~~decreased loss on disposal~~US based debentures issued starting in 2019 to February 2021. A significant non-cash interest expense has been recorded for the value of ~~assets..~~convertible features of debentures issued as well as the warrants issued as incentives for the convertible debentures.

Net Loss. Net loss was ($~~476,709)~~453,411) for the three months ended ~~June~~September 30, ~~2016,~~2021, compared to ($~~880,349)~~600,127) for the same period in ~~2015.~~2020. The decrease of ~~($403,640),~~$146,695, or ~~(46%)~~24%, was primarily due to ~~a decrease~~the Taiwan based segment increase in revenues and gross margins offsetting the increase in operating expenses which was primarily related to a ~~continued decrease~~ramp up in personnel in the US based administrative, sales and technical support personnel ~~project-based marketing~~as well as research and ~~sales~~development expenses ~~that has~~for IvedaAI. Additional professional expenses have been ~~shifted~~incurred during this period with an effort to ~~our resellers, consulting,~~get financial information filed with the OTC Markets and ~~research development expenses.~~filing of the Form 10-12g registration statement.

The ~~decrease~~Net loss was ($1,775,328) for the nine months ended September 30, 2021, compared to ($1,185,493) for the nine months ended September 30, 2020. The increase of ($~~660,179)~~590,235) or ~~(38%~~(50%) 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~~the increase in operating ~~expenses.~~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 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.

Liquidity and Capital Resources

As of ~~June~~September 30, ~~2016,~~2021, we had cash and cash equivalents of ~~$463,917~~$939,399 in our U.S.-based segment and ~~$495,616~~$292,035 in our Taiwan-based segment, compared to ~~$115,568~~$32,574 in our U.S.-based segment and ~~$91,357~~$216,947 in our Taiwan-based segment as of December 31, ~~2015.~~2020. This increase in our cash and cash equivalents is primarily a result of the ~~$380.000 Warrant Exercise to Common Stock and the~~$2.1 million sale ~~of $500,000~~ of Common Stock with Warrants during the ~~quarter~~nine months ended ~~June~~September 30, ~~2016.~~2021. There are no legal or economic factors that materially impact our ability to transfer funds between our U.S.-based and Taiwan-based segments.

Net cash used in operating activities during the ~~six~~nine months ended ~~June~~September 30, ~~2016~~2021 was ~~$0.3~~$1.2 million compared to ~~$2.4~~$0.1 million net cash used during the ~~six~~nine months ended ~~June~~September 30, ~~2015.~~2020. Net cash used in operating activities for the ~~six~~nine months ended ~~June~~September 30, ~~2016~~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 ~~$624,000~~$0.6 million in ~~collection of accounts receivable.~~additional accrued expenses. Cash used in operating activities for the ~~six~~nine months ended ~~June~~September 30, ~~2015~~2020 consisted primarily of the net loss and ~~approximately $925,000 increase in accounts receivable~~ offset by ~~approximately $84,000~~$0.6 million in ~~non-cash stock option compensation.~~additional accrued expenses as well as $0.6 million collection of accounts receivable.

Net cash used in investing activities for the ~~six~~nine months ended ~~June~~September 30, ~~2016~~2021 was ~~$793.~~$17,352. Net cash ~~provided~~used by investing activities during the ~~six~~nine months ended ~~June~~September 30, ~~2015~~2020 was ~~$298.~~$35,305.

Net cash provided by financing activities for the ~~six~~nine months ended ~~June~~September 30, ~~2016~~2021 was ~~$1.1~~$2.2 million compared with ~~$3.0~~$0.1 million provided during the ~~six~~nine months ended ~~June~~September 30, ~~2015.~~2020. Net cash provided by financing activities in ~~2016~~2021 is primarily a result of the ~~$380.000 Warrant Exercise to Common Stock and the~~$2.1 million sale ~~of $500,000~~ of Common Stock with Warrants during the ~~quarter~~nine months ended ~~June~~September 30, ~~2016.~~2021. Net cash provided by financing activities in ~~2015~~2020 consisted primarily of ~~proceeds from the sale of Series B Preferred Stock,~~an increase in short-term debt ~~proceeds,~~balances at the U.S based operations.

As 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 ~~party short-term debt proceeds.~~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.

We have experienced significant operating losses since our inception. At ~~June 30, 2016,~~December 31, 2020, we had approximately ~~$26~~$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.~~2021 or 2020. We also had approximately ~~$18.0~~$2.8 million in state net operating loss carryforwards, which ~~began to~~ expire ~~in 2014.~~after five years.

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 ~~two~~three financial institutions, ~~one~~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.

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. 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%~~74% of total revenue for the quarter ended ~~June~~September 30, ~~2016,~~2021, and ~~Taiwan-based segment~~ accounts receivable from two customers represented approximately ~~51%~~59% of total ~~Taiwan-based segment~~ accounts receivable at ~~June~~September 30, ~~2016.~~2021. No other customers represented greater than 10% of total revenue in the quarter ended ~~June~~September 30, ~~2016.~~2021.

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 ~~our ZEE cameras~~most products before they are shipped and monthly ~~Sentir licensing~~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 ~~34% of~~minimal gross accounts receivables aged over 180 days at ~~June~~September 30, ~~2016,~~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 ~~set up~~had no doubtful accounts receivable allowances ~~of $0 and $2,736~~ for the quarters ended ~~June~~September 30, ~~2016~~2021 and ~~2015,~~2020, respectively. For our Taiwan-based segment, we set up doubtful accounts receivable allowances of ~~$351,192~~approximately $3,000 and ~~$468,030~~$3,000 for the quarters ended ~~June~~September 30, ~~2016~~2021 and ~~2015,~~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.

The 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.

Like most businesses, the COVID-19 pandemic and efforts to mitigate the same began to have impacts on our business in March 2020. By that 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.

Given 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.

The 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 items.

To 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.

Like 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.

The 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.

The Company currently believes revenue for the year ending December 31, 2021 will still be impacted due to the conditions noted. Based on 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. The Company will continue to actively monitor this situation and will implement actions necessary to maintain business continuity.

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 MEGAsys.

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.

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.~~

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES.~~

ITEM 4.CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer, as of ~~June~~September 30, ~~2016,~~2015, concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act was recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

In December 2013, we hired a new Chief Financial Officer who has experience in SEC reporting and disclosures. We now have two employees knowledgeable in SEC accounting and reporting. We have plans to hire additional financial personnel and to implement additional controls and processes involving both of our financial personnel in order to ensure all transactions are accounted for and disclosed in an accurate and timely manner. There have not been any ~~other~~ changes in our internal control over financial reporting identified by management’s evaluation pursuant to Rule 13a-15(d) or 15d-15(d) of the Exchange Act during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, misstatements, errors, and instances of fraud, if any, within our company have been or will be prevented or detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or Board override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

~~Identified Material Weakness~~

As of June 30, 2016, we need to hire additional employees at MEGAsys that are knowledgeable in SEC accounting and reporting. Increased staffing at the subsidiary level will provide daily oversight of MEGAsys’s operations and minimize the likelihood of any material error in reporting the subsidiary’s results. Action plans are in place to address this staffing need during 2016 as resources permit.

~~Management’s Remediation Initiatives~~

As our resources allow, we plan to add financial personnel at the subsidiary level to properly provide accurate and timely financial reporting and in the interim we have a GAAP knowledgeable independent local contractor in Taiwan that reports to U.S. headquarters and performs review and analysis as requested.

~~Segregation of Duties~~

As of June 30, 2016, we had two employees knowledgeable in SEC accounting and reporting. Our management has put in place policies and procedures designed, to the extent possible, to segregate the duties of initiating transactions, maintaining custody over assets, and recording transactions. Due to our size and limited resources, segregation of all conflicting duties may not always be possible and may not be economically feasible.

PART II – OTHER INFORMATION

~~ITEM 1.~~

~~LEGAL PROCEEDINGS.~~

ITEM 1.LEGAL PROCEEDINGS.

We may be subject to legal proceedings in the ordinary course of business. As of the date of this Quarterly Report on Form 10-Q, we are not aware of any legal proceedings to which we are a party that we believe could have a material adverse effect on us.

~~ITEM 1A.~~

~~RISK FACTORS.~~

ITEM 1A.RISK FACTORS.

~~Not applicable.~~As a smaller reporting company, we are not required to provide the information required by this Item.

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.~~

~~During~~ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Set forth below are the ~~reporting period,~~sales of all securities by the Company ~~issued 6,000 common shares to a shareholder for origination points for $100,000 short term loan.~~

~~During~~during the ~~reporting period,~~quarter ended September 30, 2021, which were not registered under the Securities Act. The Company ~~issued 628,571 unregistered common shares and 800,000 warrants to purchase common shares at $0.35 to a shareholder for a $500,000 strategic investment.~~

~~During the reporting period, the Company issued 60,000 unregistered common shares to our independent contractor in Vietnam for referring the $500,000 strategic investor.~~

~~The~~believes that each of such issuances ~~were effected pursuant to an exemption~~was exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act and/or Regulation S under the Securities Act.

During September 2021 the company sold 1,000,000 shares of ~~1933, as amended.~~common stock and 500,000 warrants exercisable at $0.40 per common share for $500,000 to one shareholder. Also, in September 2021 the company sold a combined 210,000 shares for $105,000 to two shareholders.

~~ITEM 3.~~

~~DEFAULT UPON SENIOR SECURITIES.~~

~~None.~~ITEM 3.DEFAULT UPON SENIOR SECURITIES.

None.

~~ITEM 4.~~

~~MINE SAFETY DISCLOSURES.~~

ITEM 4.MINE SAFETY DISCLOSURES.

Not applicable.

~~ITEM 5.~~

~~OTHER INFORMATION.~~

~~None.~~ITEM 5.OTHER INFORMATION.

Not applicable.

~~ITEM 6.~~

~~EXHIBITS.~~

ITEM 6.EXHIBITS.

	Exhibit		Description

	31.1		~~Certificate of Principal Executive Officer Pursuant to Exchange Act Rule 15d-14(a)~~
	~~31.2~~		Certificate of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule 15d-14(a)
	~~32.1~~31.2		Certificate of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule 15d-14(a)
32.1		Certificate of Principal Executive Officer Pursuant to Section 1350
	32.2		Certificate of Principal Financial Officer Pursuant to Section 1350
	101.INS		XBRL Instance Document
	101.SCH		XBRL Taxonomy Extension Schema Document
	101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
	101.LAB		XBRL Taxonomy Extension Label Linkbase Document
	101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	IVEDA SOLUTIONS, INC.

Date: ~~August 16, 2016~~November 15, 2021	/s/ David Ly
	David Ly
	Chief Executive Officer and Chairman (Principal Executive Officer)

	/s/ Robert J. Brilon
	Robert J. Brilon
	~~President and~~ Chief Financial Officer (Principal Financial and Accounting Officer)

	June 30, 2016			December 31, 2015
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	959,533		$	206,925
Restricted Cash		211,603			294,066
Accounts Receivable, Net (including $166 and $27,512 from related party, respectively)		383,840			996,566
Inventory, Net		180,097			176,910
Other Current Assets		186,630			316,210
Total Current Assets		1,921,703			1,990,677

PROPERTY AND EQUIPMENT, NET		141,842			189,094

OTHER ASSETS
Intangible Assets, Net		96,666			106,666
Other Assets		234,574			162,381
Total Other Assets		331,240			269,047

Total Assets	$	2,394,785		$	2,448,818

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts and Other Payables	$	2,619,889		$	2,604,126
Due to Related Parties		440,000			714,820
Short Term Debt		409,200			53,025
Derivative Liability		54,229			53,152
Current Portion of Long-Term Debt		46,195			-
Total Current Liabilities		3,569,513			3,425,123

LONG TERM DEBT		27,921			-

LONG-TERM DIVIDENDS PAYABLE		836,655			653,242

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		39			40
Series B Preferred Stock, $0.00001 par value; 500 shares authorized, 302.5 outstanding as of June 30, 2016 and December 31, 2015, 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		302			279
Additional Paid-In Capital		31,307,562			30,325,402
Accumulated Comprehensive Loss		(39,643	)		(41,970	)
Accumulated Deficit		(33,307,564	)		(31,913,298	)
Total Stockholders’ Equity (Deficit)		(2,039,304	)		(1,629,547	)

Total Liabilities and Stockholders’ Equity	$	2,394,785		$	2,448,818

	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

REVENUE
Equipment Sales	$	307,109		$	726,695		$	692,308		$	1,141,218
Service Revenue		25,907			46,911			50,390			145,251
Other Revenue		5,608			1,955			8,443			14,915
TOTAL REVENUE		338,624			775,561			751,141			1,301,384

COST OF REVENUE		256,252			634,857			586,662			993,552

GROSS PROFIT		82,372			140,704			164,479			307,832

OPERATING EXPENSES		524,447			967,788			1,173,394			1,983,727

LOSS FROM OPERATIONS		(442,075	)		(827,084	)		(1,008,915	)		(1,675,895	)

OTHER INCOME (EXPENSE)
Foreign Currency Gain		-			4,683			-			9,126
Gain (Loss ) on Derivatives and Debt Conversion		(4,272	)		5,659			(1,077	)		42,591
Gain (Loss) on Disposal of Assets		7,313			(29,454	)		8,965			(29,454	)
Interest Income		183			7,594			204			13,677
Interest Expense		(21,147	)		(28,894	)		(42,019	)		(66,925	)
Total Other Income (Expense)		(17,923	)		(40,412	)		(33,927	)		(30,985	)

LOSS BEFORE INCOME TAXES		(459,998	)		(867,496	)		(1,042,842	)		(1,706,880	)

(PROVISION) FOR INCOME TAXES		(16,711	)		(12,853	)		(16,711	)		(12,853	)

NET LOSS	$	(476,709	)	$	(880,349	)	$	(1,059,553	)	$	(1,719,733	)

BASIC AND DILUTED LOSS PER SHARE	$	(0.02	)	$	(0.03	)	$	(0.04	)	$	(0.06	)

WEIGHTED AVERAGE SHARES		29,267,353			27,380,701			28,673,883			27,344,729

	Six Months Ended			Six Months Ended
	June 30, 2016			June 30, 2015
	(Unaudited)			(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(1,059,553	)	$	(1,719,733	)
Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities
Depreciation and Amortization		58,278			109,302
(Gain) Loss on Derivatives		1,077			-
Stock Option Compensation		8,000			84,000
Bad Debt Expense		-			3,085
Inventory Valuation Allowance		-			1,000
Common Stock Warrants Issued for Interest		3,000			14,826
Gain on Derivatives and Debt Conversion		-			(42,591	)
Loss on Disposal of Assets		-			29,454
(Increase) Decrease in Operating Assets and Liabilities
Accounts Receivable		623,961			(924,865	)
Inventory		(1,147	)		(30,715	)
Other Current Assets		144,542			93,989
Other Assets		(78,817	)		(7,869	)
Accounts and Other Payables		(13,433	)		(46,905	)
Net Cash Used in Operating Activities		(314,092	)		(2,437,022	)

CASH FLOWS FROM INVESTING ACTIVITIES
Sale (Purchase) of Property and Equipment		(793	)		(5,055	)
Proceeds from Sale of Equipment		-			5,353
Net Cash Provided by (Used in) Investing Activities		(793	)		298

CASH FLOWS FROM FINANCING ACTIVITIES
Changes in Restricted Cash		87,250			461,896
Proceeds from (Payments on) Short-Term Notes Payable/Debt		351,543			(68,406	)
Proceeds from Exercise of Stock Options		8,969			-
Proceeds from (Payments to) Due to Related Parties		(274,820	)		(145,000	)
Proceeds from Long-Term Debt, Net of Payments		73,085			(35,270	)
Payments on Dividends		-			(2,956	)
Sale of Common Stock, Net of Cost of Capital		813,999			-
Series B Preferred Stock Issued, Net of Cost of Capital		-			2,821,482
Net Cash Provided by Financing Activities		1,060,026			3,031,746

EFFECT OF EXCHANGE RATE CHANGES ON CASH		7,467			1,632

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		752,608			596,654

Cash and Cash Equivalents- Beginning of Period		206,925			87,900

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	959,533		$	684,554

	Three Months			Three Months
	Ended June 30, 2016			Ended June 30, 2016			Condensed Consolidated
	Iveda Solutions, Inc.			MEGAsys			Total

Revenue	$	120,053		$	218,571		$	338,624
Cost of Revenue		84,612			171,640			256,252
Gross Profit		35,441			46,931			82,372
Depreciation and Amortization		26,531			-			26,531
General and Administrative		426,681			71,235			497,916
Gain (Loss) from Operations		(417,771	)		(24,304	)		(442,075	)
Foreign Currency Gain		-			-			-
Gain on Derivatives		(4,272	)		-			(4,272	)
Gain on Disposal of Asses, Net		7,313			-			7,313
Interest Income		-			183			183
Interest Expense		(19,131	)		(2,016	)		(21,147	)
Gain (Loss) Before Income Taxes		(433,861	)		(26,137	)		(459,998	)
Benefit (Provision) for Income Taxes		-			(16,711	)		(16,711	)
Net Income (Loss)	$	(433,861	)	$	(42,848	)	$	(476,709	)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Revenue
United States	$	120,053	$	48,912	$	247,621	$	148,235
Republic of China (Taiwan)		218,571		726,649		503,520		1,153,149
	$	338,624	$	775,561	$	751,141	$	1,301,384

	June 30, 2016		December 31, 2015
Loan from Bank SinoPac at 2.95% interest rate per annum. Due at June 2016 - December 2016.	$	154,600	$	-

Loan from Hua Nan Bank at 2.88% interest rate per annum. Due at February 2016 - August 2016.	$	154,600	$	-
			3
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.	$	100,000	$	-

Loan from Shanghai Bank at 3.24% interest rate per annum. Due at July 2015 - March 2016.	$	-	$	53,025

Balance at end of period	$	409,200	$	53,025

		Options Outstanding						Options Exercisable
Range of Exercise Prices		Number Outstanding at June 30, 2016		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price		Number Exercisable at June 30, 2016		Weighted- Average Exercise Price
$	0.10 - $1.75		5,819,564		6.5	$	0.97		5,767,439	$	0.98

	June 30, 2016

During June 2015 MEGAsys entered into an unsecured loan agreement with two of its directors, Mr. 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. Mr. Gillen 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. 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.		30,000

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 31, 2015. 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.		100,000

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. Omi options 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.		200,000

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 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.		100,000

On April 1, 2016, we entered into a debenture agreement with Mr. Joe 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.	$	10,000

Total Due to Related Parties	$	440,000
Less Current Portion		(440,000	)
Less: Debt Discount		-
Total Long-Term	$	-