TAOP Reports Fiscal Year 2020 Financial Results and Provides Guidance for FY2021


SHENZHEN, China, April 30, 2021 (GLOBE NEWSWIRE) -- Taoping Inc. (NASDAQ: TAOP), a 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, 2020.

Revenue was $11.0 million for the year ended December 31, 2020, a decrease of $2.8 million, compared to $13.8 million for the year ended December 31, 2019. Revenue was $7.3 million for the second half year of 2020, an increase of $3.6 million or 96% from $3.7 million for the first half year of 2020, and an increase of $0.6 million or 9% from $6.7 million for the second half year of 2019. The decrease in revenue in 2020 from 2019 was primarily due to the negative impact of the COVID-19 pandemic and the slowdown of the out-of-home advertising market in China in 2020. The increase in the second half of 2020 from first half of 2020 was primarily due to recovery from COVID-19, while the increase in the second half of 2020 from second half of 2019 was primarily due to the growth in the sales of software and high-end data storage server.

The Company incurred a loss from operations of $17.4 million for the year ended December 31, 2020, compared to a loss from operations of $4.2 million for the year ended December 31, 2019. The increase in loss from operations was mainly attributed to an increase of $10.0 million in allowance for credit losses.

Net loss attributable to the Company was $17.7 million for the year ended December 31, 2020, compared to a net loss attributable to the Company of $3.6 million for the year ended December 31, 2019. The net loss was mainly attributed to the loss from operations. Loss per share was $2.49 for the year ended December 31, 2020, compared to loss per share of $0.54 for the year ended December 31, 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 $1.8 million for the year ended December 31, 2020 and net cash used in operating activities was $1.7 million for the year ended December 31, 2019.

Working capital deficit was $17.4 million as of December 31, 2020, compared to working capital deficit of $7.0 million as of December 31, 2019.

“Even though the pandemic has weakened the market environment for the new-media industry, we upgraded in the second half 2020 Taoping Smart Cloud Platform and optimized the performance of ad publishing, data monitoring, publication management, transaction system, and API interface docking, and we are happy to report sales recovery from first half of 2020 and a small growth from second half year of 2019. Following a strategic review of the Company’s core and non-core assets, in 2021 we decided to expand our business scope and tap into blockchain and cloud computing industries,” said Mr. Jianghuai Lin, CEO and Chairman of TAOP.

Mr. Lin added, “Starting from 2021, TAOP made a series of moves including the launch of three new business divisions, the integration of Taoping New Media, the acquisition of Render Lake, strategic collaborations in education and in cloud computing, and investments in cloud computing power. The acquisitions of Taoping New Media and Render Lake are expected to close in May 2021. We see 2021 as an exciting transformation year and a growth year for the Company. Our media and smart cloud business are showing growth momentum, and our new businesses have started ramping up. Based on business visibility we currently have, I’d like to provide the Company’s financial guidance for fiscal year of 2021. We expect 2021 revenue to be in the range from $40 million to $50 million, and 2021 operating income of $8 million to $10 million, including the contributions from Taoping New Media, Render Lake and new revenue streams developed in 2021.”

Operational Highlights

 On April 21, 2021, the Company established a wholly-owned Hong Kong subsidiary, Taoping Capital Limited (“Taoping Capital”), to provide capital support for the growth of TAOP’s blockchain and digital asset business and the Company’s cloud desktop, cloud rendering and cloud gaming businesses.
   
 On April 19, 2021, the Company launched “Taoping G Cloud Data Center” located in Dong-guan City, Guangdong Province, and planned to deploy a total of 3,000 of general-purpose servers suitable for Ethereum and cloud desktops in the data center in 2021.
   
 On April 15, 2021, the Company signed a Bitcoin mining machine purchase agreement with Bitmain Technologies Limited. Pursuant to the Purchase Agreement, TAOP will purchase Antminer S19j Pro Bitcoin mining machines with a total order value of about $24 million. Upon the completion of deliveries under the Purchase Agreement, TAOP is expected to own an additional hash rate of approximately 300,000 TH/s.
   
 On April 13, 2021, the Company entered into exclusive strategic cooperation and joint operation agreement with Ordos Blockchain Cloud Computing Technology Co., Ltd., a cloud service provider located in Ordos, Inner Mongolia, China, to jointly establish and operate a GPU cloud computing power trading platform.
   
 On March 31, 2021, the Company entered into a share purchase agreement with Genie Global Limited. (“Genie Global”) to acquire 51% equity interest in Genie Global’s wholly owned subsidiary, Render Lake Tech Ltd. (“Render Lake”), a cloud infrastructure service provider.
   
 On March 29, 2021, the Company entered into a strategic cooperation framework agreement with Shanghai Guanghua Education Investment Management Co., Ltd. (“Shanghai Guanghua Education”) and Wuhu Sasan Education Management Co., Ltd. (“Wuhu Sasan”), a majority-owned subsidiary of Shanghai Guanghua Education for a term of three years. TAOP and Wuhu Sasan intend to form a joint venture company in Wuhu city, China to develop online education and cloud rendering business.
   
 On March 22, 2021, the Company entered into a strategic cooperation agreement with BitFuFu.com (“BitFuFu”). TAOP will purchase blockchain cloud computing service with a total value of $10 million from BitFuFu within three years.
   
 On March 19, 2021, the Company entered into a share purchase agreement to acquire 100% equity interest in Taoping New Media Co., Ltd. (“Taoping New Media”). After the closing of the transaction, Taoping New Media will become a wholly owned subsidiary of Biznest Internet Technology Co., Ltd., a variable interest entity of TAOP.
   
 In March 2021, the Company launched three new divisions- Blockchain Business Division, Digital Culture Business Division and NFT Division for better business development.
   
 On January 26, 2021, the Company entered into a strategic partnership agreement with Ivy International Education Technology Co., Ltd. to develop and market new learning programs for quality education.
   
 On December 7, 2020, the Company entered into a strategic cooperation agreement with Guangke Digital Technology Co., Ltd. (“Guangke Digital”) for the application of Taoping Smart Cloud Platform to enable cloud operations of Guangke Digital’s projection equipment.

Financial Results for Fiscal Year 2020

Revenue

Revenue was $11.0 million for the year ended December 31, 2020, compared to $13.8 million for the year ended December 31, 2019, a decrease of $2.8 million, or 20%. The decrease was primarily due to the negative impact of COVID-19 pandemic and the slowdown of the out-of-home advertising market in China in 2020. Revenue was $7.3 million for the second half year of 2020, an increase of $3.6 million or 96% from $3.7 million for the first half year of 2020, and an increase of $0.6 million or 9% from $6.7 million for the second half year of 2019.

Gross Profit

Gross profit was $3.9 million for the year ended December 31, 2020, a decrease of $ 2.7 million compared to $6.6 million for the year ended December 31, 2019. Gross profit as a percentage of revenue was 35.7% for the year ended December 31, 2020, decreased from 47.9% for the year ended December 31, 2019. The decrease in the overall gross margin was primarily resulted from lower margin product sales.

Administrative, R&D and Selling Expenses

Administrative expenses increased by $10.0 million, or 150.9%, to $16.7 million for the year ended December 31, 2020, from $6.6 million for the year ended December 31, 2019. Such increase was primarily due to an increase of $10.0 million in allowance for credit losses, as a result of negative COVID-19 impacts to Company’s customers. The Company intends to control administrative expenses with more efforts in the collection of accounts receivable. As a percentage of revenue, administrative expenses increased to 151.0% for the year ended December 31, 2020, from 48.3% for the year ended December 31, 2019.

Research and development (“R&D”) expenses increased by $0.3 million, or 8.3%, to $3.9 million for the year ended December 31, 2020, from $3.6 million for the year ended December 31, 2019. Such increase was primarily due to the increase of depreciation of R&D related hardware equipment and software. As a percentage of revenue, research and development expenses increased to 35.2% for 2020, from 26.1% in 2019.

Selling expenses increased by $0.2 million, or 36.4%, to $0.7 million for the year ended December 31, 2020, from $0.5 million for the year ended December 31, 2019. This increase was due to the increase of the marketing expense for expansion of our nationwide Taoping network.

Net loss attributable to Company

As a result of the cumulative effect of the foregoing factors, net loss attributable to the Company was $17.7 million for the year ended December 31, 2020, compared to a net loss attributable to the Company of $3.6 million for the year ended December 31, 2019.

Cash and Financial Position

As of December 31, 2020, the Company had cash and cash equivalents of $0.9 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 $17.4 million as of December 31, 2020, compared to working capital deficit of $7.0 million as of December 31, 2019.

Net cash used in operating activities was $1.8 million for the year ended December 31, 2020, compared to net cash used in operating activities was $1.7 million for the year ended December 31, 2019.

About Taoping Inc.

Taoping 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. Such forward-looking statements may relate to, among other things, statements regarding our expected growth and financial performance, our strategy to drive growth, anticipated effects of the ongoing COVID-19 pandemic, expectations regarding our new businesses, anticipated benefits of the Company’s acquisitions, and our guidance for the full year ending December 31, 2021, 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, 2020 AND 2019

  December 31,
2020
  December 31,
2019
 
ASSETS        
         
CURRENT ASSETS        
Cash and cash equivalents $882,770  $1,519,666 
Restricted cash  214,144   - 
Accounts receivable, net  4,264,257   4,926,081 
Accounts receivable-related parties, net  2,919,215   8,733,263 
Advances to suppliers  3,202,313   1,064,901 
Inventories, net  254,678   302,938 
loan receivable - related party  519,331   397,041 
Other current assets  173,026   2,087,946 
TOTAL CURRENT ASSETS  12,429,734   19,031,836 
         
Non-current accounts receivable, net  1,839,230   1,648,109 
Non-current accounts receivable-related parties, net  1,323,196   3,793,949 
Property, equipment and software, net  10,851,899   11,835,516 
Intangible assets, net  -   1,496 
Long-term investments  30,592   - 
Other assets, non-current net  4,302,000   4,304,640 
TOTAL ASSETS $30,776,651  $40,615,546 
         
LIABILITIES AND EQUITY        
         
CURRENT LIABILITIES        
Short-term bank loans $6,210,176  $6,584,664 
Accounts payable  14,857,436   12,586,696 
Accounts payable-related parties  69,585   65,276 
Advances from customers  315,924   421,700 
Advances from customers-related parties  161,063   140,938 
Amounts due to related party  137,664   129,139 
Accrued payroll and benefits  231,598   193,912 
Other payables and accrued expenses  6,636,097   4,897,672 
Income tax payable  -   70,653 
Convertible note payable, net of debt discounts  1,180,908   916,511 
TOTAL CURRENT LIABILITIES  29,800,451   26,007,161 
EQUITY        
Ordinary shares, 2020 and 2019: par $0; authorized capital 100,000,000 shares; shares issued and outstanding, 2020: 8,486,956 shares; 2019: 7,000,027 shares*;  131,247,787   126,257,156 
Additional paid-in capital  15,643,404   16,461,333 
Reserve  14,044,269   14,044,269 
Accumulated deficit  (192,212,544)  (174,517,769)
Accumulated other comprehensive income  23,612,413   23,022,845 
Total equity of the Company  (7,664,671)  5,267,834 
Non-controlling interest  8,640,871   9,340,551 
TOTAL EQUITY  976,200   14,608,385 
         
TOTAL LIABILITIES AND EQUITY $30,776,651  $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
YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018

  2020  2019  2018 
Revenue – Products $6,591,132  $3,116,145  $6,546,016 
Revenue - Products-related parties  375,736   7,352,236   9,373,272 
Revenue – Software  3,080,152   2,246,497   3,037,912 
Revenue – Software-related parties  -   -   45,400 
Revenue – Others  869,635   969,751   1,490,324 
Revenue - Others-related parties  146,120   106,674   85,416 
TOTAL REVENUE  11,062,775   13,791,303   20,578,340 
             
Cost – Products  6,211,647   6,448,965   9,808,837 
Cost – Software  572,054   525,473   783,702 
Cost – System integration  -   57,911   227,677 
Cost – Others  335,424   156,743   104,030 
TOTAL COST  7,119,125   7,189,092   10,924,246 
             
GROSS PROFIT  3,943,650   6,602,211   9,654,094 
             
Administrative expenses  16,707,106   6,657,972   4,299,820 
Research and development expenses  3,889,126   3,592,843   4,756,088 
Selling expenses  714,147   523,557   429,362 
(LOSS) INCOME FROM OPERATIONS  (17,366,729)  (4,172,161)  168,824 
             
Subsidy income  556,186   431,555   556,187 
Other (loss) income, net  (578,766)  238,200   400,566 
Interest income  4,798   133,517   36,381 
Interest expense and debt discounts expense  (1,018,013)  (499,852)  (484,403)
             
(Loss) income before income taxes  (18,402,524)  (3,868,741)  677,555 
             
Income tax benefit  71,316   274,480   1,201,231 
NET (LOSS) INCOME  (18,331,208)  (3,594,261)  1,878,786 
Less: net loss (income) attributable to the non-controlling interest  636,433   11,929   (186,803)
NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY $(17,694,775) $(3,582,332) $1,691,983 
             
(Loss) earnings per share - Basic and Diluted*            
Basic $(2.49) $(0.54) $0.24 
Diluted $(2.49) $(0.54) $0.24 
(LOSS) EARNINGS PER SHARE ATTRIBUTABLE TO THE COMPANY            
Basic $(2.40) $(0.54) $0.24 
Diluted* $(2.40) $(0.54) $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. Except 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 CASH FLOWS
YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018

  2020  2019  2018 
OPERATING ACTIVITIES            
Net (loss) income $(18,331,208) $(3,594,261) $1,878,786 
Adjustments to reconcile net (loss) (income) to net cash (used in) provided by operating activities:            
Provision for losses on accounts receivable and other current assets  13,521,182   3,628,544   830,266 
Provision for obsolete inventories  5,629   115,191   30,403 
Depreciation  3,206,568   2,842,787   2,940,387 
Amortization of intangible assets and other assets  273,076   58,164   734,150 
Amortization of convertible note discount  558,690   46,165   - 
Loss (gain) on sale of property and equipment  435,767   -   4,243 
Loss from disposal of inventories  128,983   62,732   189,861 
Stock-based payments for consulting services  445,749   86,326   43,788 
Stock-based compensation  298,091   494,316   584,629 
Gain from write-off of long aged payables  -   -   (278,099)
Impairment of long-term investments  -   -   45,400 
Changes in operating assets and liabilities:            
Accounts receivable  (3,033,406)  923,873   (5,156,120)
Accounts receivable from related parties  (292,230)  (5,262,357)  (5,137,222)
Inventories  59,002   207,233   (320,267)
Increase in other non-current assets  -   (4,343,311)  - 
Other receivables and prepaid expenses  2,054,954   4,385,133   2,497,105 
Advances to suppliers  (2,643,860)  (598,082)  1,123,765 
Amounts due to/from related parties  -   (870,859)  (118,771)
Other payables and accrued expenses  691,846   663,584   652,149 
Advances from customers  (126,515)  122,720   38,951 
Advances from customers from related parties  10,247   91,233   (939,957)
Accounts payable  1,025,912   (503,267)  3,963,341 
Accounts payable from related party  -   -   68,845 
Income tax payable  (71,316)  (237,968)  (1,201,831)
             
Net cash (used in) provided by operating activities  (1,782,839)  (1,682,104)  2,473,802 
             
INVESTING ACTIVITIES            
Proceeds from sale of property and equipment  25,697   133   577 
Purchases of property, equipment and software  (1,668,363)  (1,619,325)  (1,797,510)
Disbursement of loan receivable - related party  (90,977)  (400,608)  - 
Disbursement of loan receivable  -   -   (2,270,006)
Proceeds of loan receivable  -   2,171,655   - 
Net cash (used in) provided by
investing activities
  (1,733,643)  151,855   (4,066,939)
             
FINANCING ACTIVITIES            
             
Proceeds from borrowings under short-term loans  6,285,837   7,817,959   6,810,017 
Repayment of short-term loans  (7,052,014)  (7,231,612)  (8,178,074)
Proceeds from exercise of consultants’ stock options  -   -   44,843 
Proceeds from issuance of convertible note, net of debt issuance costs  2,687,387   1,000,000   - 
Proceeds from issuance of ordinary shares in connection with Private placement net of offering costs  1,151,738   -   1,500,000 
Net cash provided by financing activities  3,072,948   1,586,347   176,786 
             
Effect of exchange rate changes on cash and cash equivalents  20,782   (189,692)  (191,197)
             
NET DECREASE IN CASH AND CASH EQUIVALENTS  (422,752)  (133,594)  (1,607,548)
             
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING  1,519,666   1,653,260   3,260,808 
CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH, ENDING $1,096,914  $1,519,666  $1,653,260 
             
Supplemental disclosure of cash flow information:            
Cash paid during the year            
Income taxes $-  $-  $600 
Interest $357,092  $445,582  $484,403 


  December 31,
2020
  December 31,
2019
 
Reconciliation to amounts on consolidated balance sheets        
Cash and cash equivalents $882,770  $1,519,666 
Restricted cash  214,144   - 
Total cash, cash equivalents, and restricted cash $1,096,914  $1,519,666