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TAOP Reports Fiscal Year 2019 Financial Results

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SHENZHEN, China, June 12, 2020 (GLOBE NEWSWIRE) -- Taoping Inc. (TAOP), a leading provider of internet-based smart display screens, and a new-media ecosystem that enables targeted advertising and online retail, today announced its financial results for the year ended December 31, 2019.

Fiscal Year 2019 Financial Highlights

  • Revenue was $13.8 million for the year ended December 31, 2019, compared to total revenue of $20.6 million for the year ended December 31, 2018.

  • For the year ended December 31, 2019, net loss attributable to the Company was $3.6 million, compared to net income of $1.7 million for the year ended December 31, 2018.

  • Gross profit as a percentage of revenue was 47.9% for the year ended December 31, 2019 and was 46.9% for the year ended December 31, 2018.

“In 2019, we expanded Taoping Network to approximately 200 cities, up from 100 cities at the beginning of 2019. We are glad not only that we achieved this expansion, but also that the majority of our city partners and Taoping Alliance Members achieved profitability and gained market share, which gives us confidence that we are on the right track to expand our network into the 3rd, 4th, and 5th tier cities where consumption growth is robust. Our sales decreased because smaller cities normally do not need as many Taoping display screens as big cities,” said Mr. Jianghuai Lin, CEO and Chairman of TAOP.

Mr. Lin continued, “On top of Taoping Apps for advertisers and display screen owners, we have enhanced our technology platform to integrate with third-party display screens, whether new or already installed, and through cloud connect with third party online advertising platforms (such as Baidu), thus not only increases the number of display screens in our network but also serve these display screens with various kinds of programs, e.g. traditional offline or outdoor advertising programs, online advertising programs, announcement boards, interactive advertising campaigns, etc. Currently, we are providing technical operations of Taoping Network and Taoping e-Stores for free. As part of our growth strategy, we expect to share advertisement revenues and transaction revenues with our city partners sometime in the future or to exercise our right to acquire our city partners, and to continue the expansion of our network to reach more low-tier cities. Though we experienced adverse impacts from the coronavirus pandemic, we are focusing our development efforts on intelligent connections with all major online advertising platforms in China. As China is opening for business, we are experiencing recovery of demands.”

Operational Highlights

  • Taoping Alliance has penetrated into the county-level market nationwide. The number of Taoping Alliance members has increased to approximately 200 from 100 at the beginning of 2019, with a coverage of twenty-six provinces out of thirty-four in China and three overseas members including Canada-based Capital Green Tech & Trade Corp. (CG), Asia Taoping Pte. Ltd. (Asia Taoping), and Singapore Taoping Pte. Ltd. (Singapore Taoping).

  • In January 2020, the Company officially launched Taoping Cloud Window, an innovative cross-platform App that integrates third-party screens to its resource sharing "Smart IoT Terminal - Taoping Net/App - Taoping Go (e-Store)" new media ecosystem. Taoping Cloud Window App is compatible with various models of digital screens (TV screens, LED screens, billboards, etc.) in the market. After installing the App, third-party display screens can be integrated into Taoping Network of smart display screens and can operate on Taoping smart cloud platform for ad publishing, payment processing and targeted advertising.

  • In March 2020, the Company announced its cooperation with Baidu Inc. (BIDU) and Beijing ZMT Network Technology Co., Ltd., for Taoping Smart Cloud API (“Application Programming Interface”) to integrate with the two companies’ advertising platforms, Baidu Juping and ZMT Smart Screen.


Financial Results for Fiscal Year 2019

Revenue

Revenue was $13.8 million for the year ended December 31, 2019, compared to total revenue of $20.6 million for the year ended December 31, 2018, a decrease of $6.8 million, or 33%. The decrease was primarily due to the unfavorable macro-economic environment and the slowdown of the out-of-home advertising market in China in 2019.

Gross Profit

Gross profit was $6.6 million for the year ended December 31, 2019, a decrease of $ 3.1 million compared to $9.7 million for the year ended December 31, 2018. Gross profit as a percentage of revenue was 47.9% for the year ended December 31, 2019 and was 46.9% for the year ended December 31, 2018.

The increase in the overall gross margin primarily resulted from the cost advantages in new products and services offered to customers in the private sector.

Administrative, R&D and Selling Expenses

Administrative expenses increased by $2.3 million, or 54.8%, to $6.6 million for the year ended December 31, 2019, from $4.3 million for the year ended December 31, 2018. As a percentage of revenue, administrative expenses increased to 48.3% for 2019, from 20.9% for 2018. Such increase was primarily due to an increase of $2.8 million in provision of doubtful account receivable, as a result of the unfavorable macro-economic environment and the slowdown of the out-of-home advertising industry in China.

Research and development (“R&D”) expenses decreased by $1.2 million, or 24.5%, to $3.6 million for the year ended December 31, 2019, from $4.8 million for the year ended December 31, 2018. Such decrease was primarily due to the decrease of depreciation of R&D related hardware equipment and software. As a percentage of revenue, research and development expenses increased to 26.1% for 2019, from 23.1% in 2018.

Selling expenses increased by $0.1 million, or 21.9%, to $0.5 million for the year ended December 31, 2019, from $0.4 million for the year ended December 31, 2018. This increase was due to the headcount increase of the sales and marketing staff for expansion of nationwide Taoping network.

Net (loss) income attributable to Company

For the year ended December 31, 2019, net loss attributable to the Company was $3.6 million, compared to net income of $1.7 million for the year ended December 31, 2018.

Cash and Financial Position

As of December 31, 2019, the Company had cash and cash equivalents of $1.5 million, compared to $1.7 million as of December 31, 2018. Working capital deficiency was $7.0 million as of December 31, 2019, compared to a working capital of $4.9 million as of December 31, 2018.

Net cash used in operating activities was $1.7 million for the year ended December 31, 2019 and net cash provided by operating activities was $2.5 million for the year ended December 31, 2018.

About Taoping Inc.

Taoping Inc. (formerly known as China Information Technology, Inc.) (TAOP), is a leading provider of smart display terminals and solutions for targeted advertising and online retails. The Company provides the integrated end-to-end digital advertising solutions enabling customers to distribute and manage ads on cloud-based ad display screens. Connecting owners of Taoping screens, advertisers and consumers, it builds up a resource sharing "Smart IoT Screen Network- Taoping App - Taoping Go (e-Store)" media ecosystem to ultimately achieve the mission "our technology makes advertising and branding affordable and effective for everyone." To learn more, please visit http://www.taop.com/.

Safe Harbor Statement

This press release may contain certain “forward-looking statements” relating to the business of Taoping Inc. and its subsidiaries and other consolidated entities. All statements, other than statements of historical fact included herein, are “forward-looking statements” in nature within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, often identified by the use of forward-looking terminologies such as “believes”, “expects” or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company’s periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company and its subsidiaries and other consolidated entities or persons acting on their behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

For further information, please contact:

Taoping Inc.

Chang Qiu

Email: chang_qiu@taoping.cn

or

Dragon Gate Investment Partners LLC

Tel: +1 (646)-801-2803

Email: taop@dgipl.com

TAOPING INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2019 AND 2018

December 31, 2019

December 31, 2018

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

1,519,666

$

1,653,260

Accounts receivable, net

4,926,081

7,995,931

Accounts receivable-related parties, net

8,733,263

9,545,453

Advances to suppliers

1,064,901

504,002

Inventories, net

302,938

693,677

Loan receivable

-

2,180,655

loan receivable - related party

397,041

-

Other current assets

2,087,946

6,304,722

TOTAL CURRENT ASSETS

19,031,836

28,877,700

Non-current accounts receivable, net

1,648,109

1,078,777

Non-current accounts receivable-related parties, net

3,793,949

-

Property, plant and equipment, net

11,835,516

11,599,416

Intangible assets, net

1,496

59,921

Other assets, non-current

4,304,640

-

TOTAL ASSETS

$

40,615,546

$

41,615,814

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Short-term bank loans

$

6,584,664

$

6,082,574

Accounts payable

12,586,696

11,700,763

Accounts payable-related parties

65,276

66,135

Advances from customers

421,700

304,021

Advances from customers-related parties

140,938

51,183

Amounts due to related parties

129,139

1,005,307

Accrued payroll and benefits

193,912

243,976

Other payables and accrued expenses

4,897,672

4,247,391

Income tax payable

70,653

310,537

Convertible note payable, net of debt discounts

916,511

-

TOTAL CURRENT LIABILITIES

26,007,161

24,011,887

EQUITY

Ordinary shares, 2019 and 2018: par $0; authorized capital 100,000,000 shares; shares issued and outstanding, 2019: 42,000,163 shares; 2018: 41,760,163 shares;

126,257,156

126,146,996

Additional paid-in capital

16,461,333

15,782,904

Reserve

14,044,269

14,044,269

Accumulated deficit

(174,517,769

)

(170,935,437

)

Accumulated other comprehensive income

23,022,845

23,218,159

Total equity of the Company

5,267,834

8,256,891

Non-controlling interest

9,340,551

9,347,036

TOTAL EQUITY

14,608,385

17,603,927

TOTAL LIABILITIES AND EQUITY

$

40,615,546

$

41,615,814

TAOPING INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

2019

2018

2017

Revenue – Products

$

3,116,145

$

6,546,016

$

4,312,048

Revenue - Products-related parties

7,352,236

9,373,272

9,103,222

Revenue – Software

2,246,497

3,037,912

3,441,582

Revenue – Software-related parties

-

45,400

-

Revenue – System integration

-

-

390,465

Revenue – Others

969,751

1,490,324

884,584

Revenue - Others-related parties

106,674

85,416

57,373

TOTAL REVENUE

13,791,303

20,578,340

18,189,274

Cost – Products

6,448,965

9,808,837

8,973,539

Cost – Software

525,473

783,702

733,617

Cost – System integration

57,911

227,677

135,224

Cost – Others

156,743

104,030

25,128

TOTAL COST

7,189,092

10,924,246

9,867,508

GROSS PROFIT

6,602,211

9,654,094

8,321,766

Administrative expenses

6,657,972

4,299,820

3,621,570

Research and development expenses

3,592,843

4,756,088

4,031,313

Selling expenses

523,557

429,362

1,119,586

(LOSS) INCOME FROM OPERATIONS

(4,172,161

)

168,824

(450,703

)

Subsidy income

431,555

556,187

476,517

Other income (loss), net

238,200

400,566

281,556

Interest income

133,517

36,381

7,900

Interest expense and debt discounts expense

(499,852

)

(484,403

)

(450,024

)

Change in fair value of warrant liability

-

-

3,720

(Loss) income before income taxes

(3,868,741

)

677,555

(131,034

)

Income tax benefit

274,480

1,201,231

1,070,343

NET (LOSS) INCOME

(3,594,261

)

1,878,786

939,309

Less: Net (loss) income attributable to
the non-controlling interest

11,929

(186,803

)

(80,704

)

NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY

$

(3,582,332

)

$

1,691,983

$

858,605

(Loss) earnings per share - Basic and Diluted

Basic

$

(0.09

)

$

0.04

$

0.02

Diluted

$

(0.09

)

$

0.04

$

0.02

(LOSS) EARNINGS PER SHARE ATTRIBUTABLE TO THE COMPANY

Basic

$

(0.09

)

$

0.04

$

0.02

Diluted

$

(0.09

)

$

0.04

$

0.02

TAOPING INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

2019

2018

2017

OPERATING ACTIVITIES

Net (loss) income

$

(3,594,261

)

$

1,878,786

$

939,309

Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:

Provision for losses on accounts receivable
and other current assets

3,628,544

830,266

422,388

Provision for obsolete inventories

115,191

30,403

176,570

Depreciation

2,842,787

2,940,387

2,036,438

Amortization of intangible assets

58,164

734,150

820,468

Amortization of convertible note discount

46,165

-

-

Loss (gain) on sale of property and equipment
and land use rights

4,243

(7,845

)

Loss from disposal of inventories

62,732

189,861

138,316

Stock-based payments for consulting services

86,326

43,788

96,313

Stock-based compensation

494,316

584,629

487,407

Gain from write-off of long aged payables

-

(278,099

)

(678,012

)

Impairment of long-term investments

-

45,400

-

Change in fair value of warrants liability

-

-

(3,720

)

Changes in operating assets and liabilities:

Accounts receivable

923,873

(5,156,120

)

(2,145,097

)

Accounts receivable from related parties

(5,262,357

)

(5,137,222

)

(4,694,068

)

Inventories

207,233

(320,267

)

652,921

Increase in other non-current assets

(4,343,311

)

Other receivables and prepaid expenses

4,385,133

2,497,105

6,962,862

Advances to suppliers

(598,082

)

1,123,765

(1,423,441

)

Amounts due to/from related parties

(870,859

)

(118,771

)

-

Other payables and accrued expenses

663,584

652,149

1,497,312

Advances from customers

122,720

38,951

(1,442,928

)

Advances from customers from related parties

91,233

(939,957

)

2,111,157

Accounts payable and bills payable

(503,267

)

3,963,341

(239,628

)

Accounts payable from related party

-

68,845

-

Income tax payable

(237,968

)

(1,201,831

)

(1,166,473

)

Net cash (used in) provided by operating activities

(1,682,104

)

2,473,802

4,540,249

INVESTING ACTIVITIES

Proceeds from sale of property and equipment

133

577

7,845

Purchases of property and equipment

(1,619,325

)

(1,797,510

)

(3,783,064

)

Disbursement of loan receivable - related party

(400,608

)

Proceeds(disbursement) of Loan receivable

2,171,655

(2,270,006

)

-

Net cash provided by (used in) investing activities

151,855

(4,066,939

)

(3,775,219

)

FINANCING ACTIVITIES

Proceeds from borrowings under short-term loans

7,817,959

6,810,017

8,880,840

Proceeds from exercise of consultants stock options

-

44,843

-

Proceeds from issuance of convertible note,
net of debt issuance costs

1,000,000

-

-

Proceeds from issuance of ordinary shares
in connection with private placement

-

1,500,000

-

Repayment of short-term loans

(7,231,612

)

(8,178,074

)

(9,366,326

)

Net cash provided by (used in) financing activities

1,586,347

176,786

(485,486

)

Effect of exchange rate changes on cash and
cash equivalents

(189,692

)

(191,197

)

(771,111

)

NET DECREASE IN CASH AND
CASH EQUIVALENTS

(133,594

)

(1,607,548

)

(491,567

)

CASH AND CASH EQUIVALENTS, BEGINNING

1,653,260

3,260,808

3,752,375

CASH AND CASH EQUIVALENTS, ENDING

$

1,519,666

$

1,653,260

$

3,260,808

Supplemental disclosure of cash flow information:

Cash paid during the year

Income taxes

$

-

$

600

$

3,057

Interest

$

445,582

$

484,403

$

450,024

Supplemental disclosure of significant non-cash transactions:

In 2018, the Company issued 479,004 ordinary shares in an amount of approximately $626,000, as a result of cashless exercise of stock options granted to the Company’s employees under its 2016 equity Incentive Plan.

In 2018, purchase of software in an amount of approximately $1.5 million was made by an increase in accounts payable.

In 2019, the Company issued 240,000 ordinary shares as compensation of approximately $110,000 to a consultant’s service.

In 2019, the Company issued an individual investor warrant to purchase 160,000 ordinary shares of the Company in connection with the issuance of a convertible promissory note with the principle amount of $1.04 million.

In 2019, the Company issued warrant to purchase 150,000 shares of the Company’s ordinary shares as compensation of approximately $58,000 for a consultant’s service.

In 2019, purchase of software and equipment in an amount of approximately $1.6 million was made by an increase in accounts payable.