GlobeNewswire Inc | Sep 30, 2020 08:30AM EDT

September 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 Companys 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 Companys 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 Companys 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 SHEETSJUNE 30, 2020 AND DECEMBER 31, 2019

June 30, December 31, 2020 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 6,683,510 8,733,263 parties, netAdvances 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, 994,376 1,648,109 netNon-current accounts 1,844,839 3,793,949 receivable-related parties, netProperty, 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 157,404 140,938 partiesAmounts 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 2,247,185 916,511 debt discountsTOTAL LIABILITIES 24,673,246 26,007,161 EQUITY Ordinary shares, 2020 and 2019: par$0; authorized capital 100,000,000shares; shares issued and 127,019,156 126,257,156 outstanding, June 30, 2020:7,332,434 shares; December 31,2019: 7,000,053 shares*;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 22,907,323 23,022,845 incomeTotal (deficit) equity of the (1,476,680 ) 5,267,834 CompanyNon-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 Companys 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 Six Months Ended 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- 264,047 6,749 controlling interestNET 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 Companys 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 Six Months Ended 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 5,875,044 1,667,306 receivable and other current assets(Reversal of) Provision for obsolete (15,255 ) 284 inventoriesDepreciation 1,603,722 1,428,424 Amortization of intangible assets 1,479 53,076 Loss (gain) on sale of property and 601 (136 )equipmentLoss on disposal of inventories 49,827 63,849 Stock-based payments for consulting 204,443 33,884 servicesAmortization of convertible note 163,833 - discountStock-based compensation 92,308 289,912 Changes in operating assets and liabilities:Accounts receivable (1,225,284 ) (116,565 )Accounts receivable from related party 803,982 (2,473,234 )and its affiliatesInventories 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 18,491 61,122 party and its affiliatesAmounts 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 - 136 equipmentPurchases 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 1,344,000 - issuance cost and debt discountIssuance of common stock, net of 576,000 - issuance costNet cash provided by financing 252,992 1,147,892 activities Effect of exchange rate changes on cash (4,092 ) (3,988 )and cash equivalents NET DECREASE IN CASH, CASH EQUIVALENTS (1,034,802 ) (269,238 )AND RESTRICTED CASHCASH, CASH EQUIVALENTS AND RESTRICTED 1,519,666 1,653,260 CASH, BEGINNINGCASH, CASH EQUIVALENTS AND RESTRICTED $ 484,864 $ 1,384,022 CASH, ENDING Supplemental disclosure of cash flow information:Cash paid during the year Income taxes $ - $ - Interest $ 346,042 $ 214,002

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