| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation Effective
April 30, 2011, we completed our acquisition of Sole Vision Technologies (fka MEGAsys and dba Iveda Taiwan), a company based in Taiwan.
We consolidate our financial statements with the financial statements of Iveda Taiwan. All intercompany balances and transactions have
been eliminated in consolidation. We have non-controlling interests consolidated in the Company’s Unaudited Condensed Consolidated Financial Statements
represent the interest in subsidiaries held by our venture partners. The venture partners hold a 60 Impairment
of Long-Lived Assets We
have a significant amount of property and equipment, and an intangible asset consisting of Cerebro, our software
technology platform. 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 annually or whenever events or changes in circumstances indicate
that the carrying amount of an asset or asset group may not be recoverable. Recoverability of long-lived assets to be held and used
is measured by a comparison of the carrying amount of an asset to the undiscounted future net operating cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by
which the carrying value of the assets exceeds their fair value. We did no Basis
of Accounting Preparation 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 Unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United
States of America requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from these estimates. Revenue
and Expense Recognition The
Company applies the provisions of Accounting Standards Codification (ASC) 606-10, Revenue from Contracts with Customers The
Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the
customer. In situations where sales are to a distributor, the Company has 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 or completion of contracted scope of service, each of which is distinct, to be the identified
performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment
to determine the net consideration to which it expects to be entitled. As the Company’s standard payment terms are less than one
year, it has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.
The Company allocates the transaction price to each distinct product based on its relative standalone selling price. The product price
as specified on the purchase order is considered the standalone selling price as it is an observable input which depicts the price as
if sold to a similar customer in similar circumstances. Revenue is recognized when control of the product is transferred to the customer
( i.e. The
Company sells its products and services primarily to municipalities and commercial customers in the following manner:
● The
majority of Iveda Taiwan sales are project sales to Taiwan customers and are made direct to the end customer (typically a municipality
or a commercial customer) through its sales force, which is composed of its employees. Revenue is recorded when the equipment is
shipped to the end customer 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 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.
● Iveda
US hardware sales are made through independent distributors or integrators who purchase products from the Company at a wholesale
price and sell to the end user (typically municipalities or a commercial customer) at a retail price. The distributor retains the
margin as its compensation for its role in the transaction. The distributor or integrator generally maintains product inventory or
product is drop shipped from the manufacturer. Accordingly, upon application of steps one through five above, revenue is recorded
when the product is shipped to the distributor or as directed by the distributor consistent with the terms of the distribution agreement.
● Iveda
US also sells software that includes licensing fees that are paid either monthly or yearly. The revenues are recorded monthly, if
the license is paid yearly the revenue will be recorded as deferred revenue and amortized on a straight-line basis over the respective
time period. Comprehensive
Loss 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 Financial
instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents and trade
accounts receivable. Substantially
all cash is deposited in three financial institutions, two in the United States and one in Taiwan. At times, amounts on deposit in the
United States may be in excess of the FDIC insurance limit. Deposits in Taiwan financial institutions are insured by CDIC (Central Deposit
Insurance Corporation) with maximum coverage of NTD 3 Accounts
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. 85 38 34 13 50 Revenue
from four customers out of 70 total customers represented approximately 88 32 29 14 13 44 26 18 Revenue
from five customers out of 72 total customers represented approximately 76 19 16 15 14 13 57 30 27 No
other customers represented greater than 10 Cash
and Cash Equivalents We
consider all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Accounts
Receivable Accounts
receivable is recorded at the invoiced amount, net of allowance for expected credit losses. The Company’s primary allowance for
credit losses is the allowance for doubtful accounts. The allowance for doubtful accounts reduces the Account receivable balance to the
estimated net realizable value. The Company regularly reviews the adequacy of the allowance for credit losses based on a combination
of factors. In establishing any required allowance, management considers historical losses adjusted for current market conditions, the
Company’s customers financial condition, the amount of any receivables in dispute, the current receivables aging, current payment
terms and expectations of forward-looking loss estimates. All
provisions for the allowance for doubtful accounts are included as a component of general and administrative expenses on the accompanying
Unaudited Condensed consolidated statements of operations and comprehensive loss. Accounts receivable deemed uncollectable are charged against
the allowance for credit losses when identified. Subsequent recoveries of amounts previously written off are credited to earnings in
the period recovered. As of September 30, 2024 and December 31, 2023, respectively, an allowance for uncollectible accounts of $ 0 0 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 SCHEDULE
OF OTHER CURRENT ASSETS
September 30, 2024 December 31, 2023
Prepaid Expenses $ 235,820 $ 236,098
Advances to Suppliers 115,827 115,827
Tender Deposits 196,665 83,656
Other Current Assets $ 548,312 $ 435,581 Inventories We
do not manufacture product hence all of our inventory is finished goods to be sold or used in the installation process. We review
our inventories for excess or obsolete products 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 0 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 seven years 8,000 23,806 11,122 18,313 Intangible
Asset Intangible
Asset – Cerebro Software Platform is our software technology platform contract developed during 2023 and 2024 and is expected to
be deployed at the beginning of 2025. Cerebro is a software technology platform that integrates a multitude of disparate systems for
central access and management of applications, subsystems, and devices throughout an entire environment. It is system agnostic and will
support cross-platform interoperability. Cerebro’s roadmap includes a dashboard for all of Iveda’s platforms for central
management of all devices. It provides remote access to a Dashboard for a single user interface, providing convenient anywhere, anytime
access and analysis of relevant information in a timely manner for managing an entire organization or city. Cerebro links city systems
and subsystems inseparably to each other. This integration and unification of all subsystems enable acquisition and analysis of all information
on one central entity allowing comprehensive, effective and overall management and protection of a city. Our intangible assets are stated
at cost and will be amortized using a straight-line method over estimated useful lives to be determined once it is deployed and put into service. Other
Assets Other
assets consist of long-term deposits related to the leases of Iveda Taiwan’ 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 basis 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 the nine months ended September 30, 2024 and nine months ended September 30, 2023, we reevaluated the valuation
allowance for deferred tax assets and determined that no current benefits should be recognized for the nine months ended September 30,
2024 and for the nine months ended September 30, 2023. 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 2020 to 2023 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 2020
to 2023 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, 2024 December 31, 2023
Accounts Payable $ 1,985,221 $ 179,949
Accrued Expenses 666,049 900,928
Deferred Revenue, Customer Deposits, & Taxes Payable 50,157 29,210
Accounts and Other Payables Total $ 2,701,427 $ 1,110,087 Deferred
Revenue Advance
payments received from customers on future installation projects are recorded as deferred revenue. Non-Controlling
Interests Non-controlling
interests in the Company’s Unaudited Condensed Consolidated Financial Statements represent the interest in subsidiaries held by our venture
partners. The venture partners hold a 60% noncontrolling interest in the Company’s consolidated subsidiary Iveda Phils, Inc. located
in the Philippines. Since the Company consolidates the financial statements of all wholly-owned and controlled subsidiaries, the noncontrolling
owners’ share of each subsidiaries’ results of operations are deducted from net income or loss in the Unaudited Condensed Consolidated
Statements of Operations. Stock-Based
Compensation We
record stock-based compensation 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 September 30, 2024 and 2023, were estimated using the “minimum value method” as prescribed by original provisions
of ASC 718, “Accounting for Stock-Based Compensation.” We recognized $ 0 25,600 no Cost
of Financing Cost
of Financing consists of legal and accounting charges related to finance offerings as an offset to additional paid in capital. Fair
Value of Financial Instruments Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to us as of September
30, 2024 and December 31, 2023. The respective carrying values of certain on-balance-sheet financial instruments approximate their fair
values. These financial instruments include cash, accounts receivable, accounts payable, accrued expenses, and bank loans. Fair values
were assumed to approximate carrying values for these financial instruments because they are short-term in nature or because they are
receivable or payable on demand. 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 business conducted and the customer bases located in the United States. The net revenues for other significant geographic regions are as follows: SCHEDULE
OF NET REVENUE AND NET ASSETS (LIABILITIES) FOR OTHER SIGNIFICANT GEOGRAPHIC REGIONS
Net Revenue Net Revenue
United States $ 629,028 $ 799,356
Republic of China (Taiwan) $ 3,649,955 $ 4,670,337 Furthermore,
due to operations in various geographic locations, we are susceptible to changes in national, regional, and local economic conditions,
demographic trends, consumer confidence in the economy, and discretionary spending priorities that may have a material adverse effect
on our future operations and results. We
are required to collect certain taxes and fees from customers on behalf of government agencies and remit them back to the applicable
governmental agencies on a periodic basis. The taxes and fees are legal assessments to the customer, for which we have a legal obligation
to act as a collection agent. Because we do not retain the taxes and fees, we do not include such amounts in revenue. We record a liability
when the amounts are collected and relieve the liability when payments are made to the applicable governmental agencies. Reclassification Certain
amounts in 2023 have been reclassified to conform to the 2024 presentation. New
Accounting Standards Financial
Instruments - Credit Losses The
Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses Measurement of Credit losses on financial instruments Under
ASC 326, Accounts receivable is recorded at the invoiced amount, net of allowance for expected credit losses. The Company’s primary
allowance for credit losses is the allowance for doubtful accounts. The allowance for doubtful accounts reduces the Account receivable
balance to the estimated net realizable value. The Company regularly reviews the adequacy of the allowance for credit losses based on
a combination of factors. In establishing any required allowance, management considers historical losses adjusted for current market
conditions, the Company’s customers financial condition, the amount of any receivables in dispute, the current receivables aging,
current payment terms and expectations of forward-looking loss estimates. All
provisions for the allowance for doubtful accounts are included as a component of general and administrative expenses on the accompanying
Unaudited Condensed consolidated statements of operations and comprehensive loss. Accounts receivable deemed uncollectable are charged against
the allowance for credit losses when identified. Subsequent recoveries of amounts previously written off are credited to earnings in
the period recovered. |
