TAOP Reports Financial Results for the Six Months Ended June 30, 2020


SHENZHEN, China, Sept. 30, 2020 (GLOBE NEWSWIRE) -- Taoping Inc. (NASDAQ: 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 unaudited financial results for the six months ended June 30, 2020.

Revenue was $3.7 million for the first six months of 2020, a decrease of $3.4 million, compared to $7.1 million for the same period last year. The decrease in sales is largely due to the impact of the COVID-19 pandemic and an unfavorable macro environment in China for the first half year of 2020.

The Company incurred a loss from operations of $7.5 million for the first six months of 2020, compared to a loss from operations of $2.2 million for the same period of last year. The increase in loss from operations in the first half of 2020 was mainly attributed to an increase of $5.8 million in allowance for credit losses.

Net loss attributable to the Company was $7.7 million for the first six months of 2020, compared to a net loss attributable to the Company of $1.8 million for the same period of last year. The net loss was mainly attributed to the loss from operations. Loss per share was $1.12 for the first six months of 2020, compared to loss per share of $0.24 for the same period of 2019. On July 30, 2020, the Company implemented a one-for-six reverse stock split of the Company’s ordinary shares. The basic and diluted loss per share were retroactively adjusted for all periods presented.

Net cash used in operating activities was $1.2 million for the first six months of 2020, compared to net cash used in operating activities of $0.8 million for the first six months of 2019. For the first six months of 2020, negative operating cash flow was mainly attributable to the increased net loss, increase in advances to suppliers and decrease in accounts payable.

Working capital deficit was $10.0 million as of June 30, 2020, compared to working capital deficit of $7.0 million as of December 31, 2019.

“In first half of 2020, the new-media industry of China experienced a slowdown attributed to the unfavorable macro environment and COVID-19. Recognizing various challenges during this period, we moved quickly to enhance liquidity by raising additional capital and extending bank loans, reduce expense base and cash outflows to further our commitment to building long-term shareholder value,” said Mr. Jianghuai Lin, CEO and Chairman of Taoping Inc.

Mr. Lin added, “We continued to advance our technology and platform to provide cost-effective digital advertising solutions to customers. In July, we upgraded the Taoping Smart Cloud Platform and optimized the performance of ad publishing, data monitoring, publication management, transaction system, and Application Programming Interface (API) docking. With Taoping Smart Cloud Platform, the Company will accelerate the integration of offline scenes and online Internet interaction channels, open connection to third-party Demand Side Platform (DSP) and Ad Exchange (ADX) Internet traffic platforms, and realize online and offline traffic interoperability through Real-Time Bidding (RTB) technology. During the third quarter, we are experiencing demand recovery. Looking ahead, we will seek opportunities to expand the product line based on our accumulated technological knowledge in the IT industry while continue to manage our financial position conservatively. We believe we are well-positioned to continue to expand and enhance our existing network and to create value well into the future.”

Operational Highlights

 Taoping Alliance has penetrated into the county-level market nationwide. As of August 19, 2020, Taoping Alliance has 211 domestic members operating in 211 cities across 26 provinces out of 34 provincial-level administrative units in China as well as three overseas members (Toronto, Asia, and Singapore).
   
 In August 2020, the Company released two new smart screen products—the 43-inch screen and the 55-inch screen to provide better scenario-based marketing service to advertisers.
   
 In July 2020, the Company has upgraded its Taoping Smart Cloud Platform and rolled out in operation. The upgraded Taoping Smart Cloud Platform has optimized the performance of ad publishing, data monitoring, publication management, transaction system, and API interface docking: On one hand, it further strengthens users’ operating experience in Internet advertising, online site selection, data monitoring, online transactions; On the other hand, Taoping Smart Cloud Platform provides a shared resource pool that can be flexibly assigned and expanded for all users.
   
 Effective on July 30, 2020, the Company implemented a one (1)-for-six (6) reverse stock split of issued and outstanding ordinary shares, no par value. The reverse stock split was intended to increase the per share trading price of the Company’s ordinary shares to satisfy the $1.00 minimum bid price requirement for continued listing on the NASDAQ Stock Market. The reverse stock split did not affect the number of total authorized ordinary shares of the Company.
   
 On August 20, 2020, the Company receive a letter from the NASDAQ Listing Qualifications staff notifying the Company that it has regained compliance with NASDAQ’s minimum bid price requirements for continued listing on the Nasdaq Capital Market, as a result of the closing bid price of the Company’s ordinary shares having been at $1.00 per share or greater for the last 15 consecutive business days, from July 30 through August 19, 2020.

Financial Results for the First Six Months of 2020

Revenue

Revenue was $3.7 million for the first six months of 2020, compared to $7.1 million for the same period of last year, a decrease of $3.4 million, or 47.2%. The decrease was primarily due to the impact of the COVID-19 pandemic and the unfavorable macro environment in China for the first half year of 2020.

Gross Profit

Gross profit was $1.5 million for the first six months of 2020, a decrease of $ 1.6 million compared to $3.1 million for the first six months of 2019. Gross profit as a percentage of revenue was 39.3% for the first six months of 2020, decreased from 44.0% for the same period of last year.

The decrease in the overall gross profits primarily resulted from the decrease of product revenue from cloud-based display terminals, which have a comparatively higher gross profit margin and the increase of lower margin revenue from high-end data storage servers. The Company expects that the gross margin for the remaining of 2020 would be consistent with the first half of the year.

Administrative, R&D and Selling Expenses

Administrative expenses increased by $4.0 million, or 125%, to $7.1 million for the first six months of 2020, from $3.1 million for the same period of 2019. Such increase was a result of an increase of $5.8 million in allowance for credit losses, offset by the decrease in amortization of intangible assets and payrolls. The Company considered the Covid-19 impact and expected future credit losses in the determination of credit loss reserves as of June 30, 2020. As a result, the Company made credit loss reserves on uncollected accounts receivable from prior years of $5.8 million in first half of 2020 due to the deterioration of certain customers’ financial conditions. As a percentage of revenue, administrative expenses increased to 189% for the first six months of 2020, from 44.3% for the same period of 2019.

Research and development (“R&D”) expenses decreased by $0.1 million, or 5.4%, to $1.8 million for the first six months of 2020, from $1.9 million for the first six months of 2019. Such decrease was primarily due to decrease in payroll and benefits for R&D staff as a result of the decrease in headcount, and the decrease of depreciation of software purchased. As a percentage of revenue, R&D expenses increased to 48.2% for the first six months of 2020, from 26.9% for the same period of last year. R&D expenses for the remaining of 2020 are expected to be consistent with the first half of the year.

Selling expenses decreased by $0.2 million, or 52.2%, to $0.1 million for the first six months of 2020, from $0.3 million for the first six months of 2019. This decrease was primarily due to the decreased headcount of sales and marketing staff. Selling expenses for the remaining of 2020 is expected to be consistent with the first half of the year.

Net loss attributable to Company

As a result of the cumulative effect of the foregoing factors, for the first six months of 2020, net loss attributable to the Company was $7.7 million, compared to a net loss attributable to the Company of $1.8 million for the same period of last year.

Cash and Financial Position

As of June 30, 2020, the Company had cash and cash equivalents of $0.3 million and restricted cash of $0.2 million, compared to $1.5 million of cash and cash equivalents as of December 31, 2019. Working capital deficit was $10.0 million as of June 30, 2020, compared to working capital deficit of $7.0 million as of December 31, 2019.

Net cash used in operating activities was $1.2 million for the first six months of 2020, compared to net cash used in operating activities of $0.8 million for the first six months of 2019.

About Taoping Inc.

Taoping Inc. (formerly known as China Information Technology, Inc.) (TAOP), is a leading provider of smart display terminals for targeted advertising and online retail. The Company provides integrated end-to-end digital advertising solutions enabling customers to distribute and manage advertisements on advertisement display terminals. Connecting cloud-based advertisement terminal owners, advertisers and consumers, it builds up a resource sharing “Smart IoT Terminal - Taoping Net/ 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
JUNE 30, 2020 AND DECEMBER 31, 2019

  June 30,
2020
  December 31,
2019
 
   (Unaudited)     
ASSETS        
         
CURRENT ASSETS        
Cash and cash equivalents $286,795  $1,519,666 
Restricted cash  198,069   - 
Accounts receivable, net  3,928,244   4,926,081 
Accounts receivable-related parties, net  6,683,510   8,733,263 
Advances to suppliers  2,675,061   1,064,901 
Inventories, net  236,533   302,938 
Loan receivable - related party  347,893   397,041 
Other current assets  257,386   2,087,946 
TOTAL CURRENT ASSETS  14,613,491   19,031,836 
         
Non-current accounts receivable, net  994,376   1,648,109 
Non-current accounts receivable-related parties, net  1,844,839   3,793,949 
Property, plant and equipment, net  10,929,829   11,835,516 
Intangible assets, net  -   1,496 
Other assets, non-current  3,903,021   4,304,640 
TOTAL ASSETS $32,285,556  $40,615,546 
         
LIABILITIES AND EQUITY        
         
CURRENT LIABILITIES        
Short-term bank loans $4,830,062  $6,584,664 
Accounts payable  11,548,461   12,586,696 
Accounts payable-related parties  64,361   65,276 
Advances from customers  367,610   421,700 
Advances from customers-related parties  157,404   140,938 
Amounts due to related parties  127,330   129,139 
Accrued payroll and benefit  297,721   193,912 
Other payables and accrued expenses  5,033,112   4,897,672 
Income tax payable  -   70,653 
Convertible note payable, net of debt discounts  2,247,185   916,511 
TOTAL LIABILITIES  24,673,246   26,007,161 
         
EQUITY        
Ordinary shares, 2020 and 2019: par $0; authorized capital 100,000,000 shares; shares issued and outstanding, June 30, 2020: 7,332,434 shares; December 31, 2019: 7,000,053 shares*;  127,019,156   126,257,156 
Additional paid-in capital  16,746,986   16,461,333 
Statutory reserve  14,044,269   14,044,269 
Accumulated deficit  (182,194,414)  (174,517,769)
Accumulated other comprehensive income  22,907,323   23,022,845 
Total (deficit) equity of the Company  (1,476,680)  5,267,834 
Non-controlling interest  9,088,990   9,340,551 
TOTAL EQUITY  7,612,310   14,608,385 
         
TOTAL LIABILITIES AND EQUITY $32,285,556  $40,615,546 

*On July 30, 2020, the Company implemented a one-for-six reverse stock split of the Company’s issued and outstanding ordinary shares. Except for shares authorized, all references to number of shares, and to per share information in the consolidated financial statements have been retroactively adjusted.

TAOPING INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

  Six Months
Ended
  Six Months
Ended
 
  June 30, 2020  June 30, 2019 
   (Unaudited)   (Unaudited) 
Revenue – Products $2,056,805  $1,955,545 
Revenue – Products-related parties  217,813   3,810,126 
Revenue – Software  1,049,377   903,978 
Revenue – Other  371,381   362,818 
Revenue – Other-related parties  41,974   49,750 
TOTAL REVENUE  3,737,350   7,082,217 
         
Cost – Products  1,970,154   3,552,454 
Cost – Software  296,190   308,701 
Cost – Other  4,001   105,391 
TOTAL COST  2,270,345   3,966,546 
         
GROSS PROFIT  1,467,005   3,115,671 
         
Administrative expenses  7,064,286   3,138,340 
Research and development expenses  1,802,747   1,907,116 
Selling expenses  143,816   301,028 
LOSS FROM OPERATIONS  (7,543,844)  (2,230,813)
         
Subsidy income  223,391   339,604 
Other loss, net  (302,336)  (55,430)
Interest income  3,470   67,871 
Interest expense and debt discounts expense  (391,231)  (214,002)
Loss before income taxes  (8,010,550)  (2,092,770)
         
Income tax benefit  69,858   270,747 
         
NET LOSS  (7,940,692)  (1,822,023)
Less: Net loss attributable to the non- controlling interest  264,047   6,749 
NET LOSS ATTRIBUTABLE TO THE COMPANY $(7,676,645) $(1,815,274)
         
Loss per share - Basic and Diluted*        
Basic $(1.12) $(0.24)
Diluted $(1.12) $(0.24)
         
NET LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY*        
Basic $(1.08) $(0.24)
Diluted $(1.08) $(0.24)

*On July 30, 2020, the Company implemented a one-for-six reverse stock split of the Company’s issued and outstanding ordinary shares. The computation of basic and diluted EPS was retroactively adjusted for all periods presented.

TAOPING INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

  Six Months Ended  Six Months Ended 
  June 30, 2020  June 30, 2019 
  (Unaudited)  (Unaudited) 
OPERATING ACTIVITIES        
Net loss $(7,940,692) $(1,822,023)
Adjustments to reconcile net loss to net cash used in operating activities:        
Provision for credit losses on accounts receivable and other current assets  5,875,044   1,667,306 
(Reversal of) Provision for obsolete inventories  (15,255)  284 
Depreciation  1,603,722   1,428,424 
Amortization of intangible assets  1,479   53,076 
Loss (gain) on sale of property and equipment  601   (136)
Loss on disposal of inventories  49,827   63,849 
Stock-based payments for consulting services  204,443   33,884 
Amortization of convertible note discount  163,833   - 
Stock-based compensation  92,308   289,912 
Changes in operating assets and liabilities:        
Accounts receivable  (1,225,284)  (116,565)
Accounts receivable from related party and its affiliates  803,982   (2,473,234)
Inventories  27,762   150,513 
Other non-current assets  342,269   - 
Other receivables and prepaid expenses  1,601,902   (315,436)
Advances to suppliers  (1,685,458)  (917,088)
Other payables and accrued expenses  305,903   292,672 
Advances from customers  (48,317)  32,278 
Advances from customers from related party and its affiliates  18,491   61,122 
Amounts due to related parties  -   (1,018,982)
Accounts payable  (1,283,642)  2,057,767 
Income tax payable  (69,858)  (233,584)
Net cash used in operating activities  (1,176,940)  (765,961)
         
INVESTING ACTIVITIES        
Proceeds from sale of property and equipment  -   136 
Purchases of property and equipment  (150,470)  (647,317)
Loan receivable-related party  43,708   - 
Net cash used in investing activities  (106,762)  (647,181)
         
FINANCING ACTIVITIES        
Borrowings under short-term loans  4,029,193   2,505,027 
Repayment of short-term loans  (5,696,201)  (1,357,135)
Issuance of convertible notes, net of issuance cost and debt discount  1,344,000   - 
Issuance of common stock, net of issuance cost  576,000   - 
Net cash provided by financing activities  252,992   1,147,892 
         
Effect of exchange rate changes on cash and cash equivalents  (4,092)  (3,988)
         
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH  (1,034,802)  (269,238)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING  1,519,666   1,653,260 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING $484,864  $1,384,022 
         
Supplemental disclosure of cash flow information:        
Cash paid during the year        
         
Income taxes $-  $- 
Interest $346,042  $214,002 


  Six Months
Ended
June 30, 2020
  Six Months
Ended
June 30, 2019
 
Reconciliation to amounts on consolidated balance sheets        
Cash and cash equivalents $286,795  $1,279,189 
Restricted cash  198,069   104,833 
Total cash, cash equivalents, and restricted cash $484,864  $1,384,022