TAOP Reports Fiscal Year 2019 Financial Results

Friday, 12. June 2020 14:00

SHENZHEN, China, June 12, 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 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. (Nasdaq: 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.

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