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<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span> </p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 18pt"><b>UNITED
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_900_edei--EntityAddressCityOrTown_c20230101__20231231_z4a1G3SrCGh3"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000027" name="dei:EntityAddressCityOrTown">Shenzhen,
Guangdong</ix:nonNumeric></span> <span id="xdx_90F_edei--EntityAddressPostalZipCode_c20230101__20231231_zYcf1Gg2qUF8"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000028" name="dei:EntityAddressPostalZipCode">518040</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>People&#8217;s
Republic of <span id="xdx_903_edei--EntityAddressCountry_c20230101__20231231_zH1U7xVRh9B2"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt-sec:countrynameen" id="Fact000029" name="dei:EntityAddressCountry">China</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Address
of Principal Executive Offices)</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_903_edei--ContactPersonnelName_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_zCNhhdNWSF32"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000030" name="dei:ContactPersonnelName">Mr.
Jianghuai Lin, Chief Executive Officer</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_907_edei--EntityAddressAddressLine1_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_zKAGtGwKaH1"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000031" name="dei:EntityAddressAddressLine1">21st
Floor, Everbright Bank Building</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_90C_edei--EntityAddressAddressLine2_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_zBaaq4bsYpf9"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000032" name="dei:EntityAddressAddressLine2">Zhuzilin,
Futian District</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_90B_edei--EntityAddressCityOrTown_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_zry59iu6EdZ2"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000033" name="dei:EntityAddressCityOrTown">Shenzhen,
Guangdong</ix:nonNumeric></span> <span id="xdx_904_edei--EntityAddressPostalZipCode_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_z5K4roahsKHa"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000034" name="dei:EntityAddressPostalZipCode">518040</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>People&#8217;s
Republic of <span id="xdx_909_edei--EntityAddressCountry_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_zJXN62XOufI4"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" format="ixt-sec:countrynameen" id="Fact000035" name="dei:EntityAddressCountry">China</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Tel:
<span id="xdx_903_edei--CityAreaCode_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_zDRdhdhpXlOh"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000036" name="dei:CityAreaCode">+86</ix:nonNumeric></span>-<span id="xdx_90E_edei--LocalPhoneNumber_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_z3j3NPGtZaW"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000037" name="dei:LocalPhoneNumber">755-88319888</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Fax:
<span id="xdx_90C_edei--ContactPersonnelFaxNumber_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_ztN6V51Jlhb"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000038" name="dei:ContactPersonnelFaxNumber">+ 86-755-83709333</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
registered or to be registered pursuant to Section 12(b) of the Act:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center; width: 34%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Title
    of Each Class</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    Symbol(s)</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center; width: 44%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name
    of Each Exchange On Which Registered</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    Shares, no par value</ix:nonNumeric></span></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_90C_edei--TradingSymbol_c20230101__20231231_z46YXcXRGbxh"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000040" name="dei:TradingSymbol">TAOP</ix:nonNumeric></span></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_90A_edei--SecurityExchangeName_c20230101__20231231_z0nfAmTJkpmi"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt-sec:exchnameen" id="Fact000041" name="dei:SecurityExchangeName">NASDAQ</ix:nonNumeric></span>
    Capital Market</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
registered or to be registered pursuant to Section 12(g) of the Act.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">None</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Title
of Class)</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">None</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Title
of Class)</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
the number of outstanding shares of each of the issuer&#8217;s classes of capital or common stock as of the close of the period covered
by the annual report (December 31, 2023): <span id="xdx_90D_edei--EntityCommonStockSharesOutstanding_iI_pid_c20231231_zfhmTItCCGZd"><ix:nonFraction name="dei:EntityCommonStockSharesOutstanding" contextRef="AsOf2023-12-31" id="Fact000042" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">2,891,822</ix:nonFraction></span> ordinary shares, no par value</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes &#9744; <span id="xdx_90D_edei--EntityWellKnownSeasonedIssuer_c20230101__20231231_z07iVctoedM1"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000043" name="dei:EntityWellKnownSeasonedIssuer">No</ix:nonNumeric></span> &#9746;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. Yes &#9744; <span id="xdx_90E_edei--EntityVoluntaryFilers_c20230101__20231231_zPn7S50BKMAb"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000044" name="dei:EntityVoluntaryFilers">No</ix:nonNumeric></span> &#9746;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. <span id="xdx_90E_edei--EntityCurrentReportingStatus_c20230101__20231231_zYJGtmJrYjYj"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000045" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric></span> &#9746; No &#9744;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
<span id="xdx_905_edei--EntityInteractiveDataCurrent_c20230101__20231231_zC8SbGYblwO3"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000046" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric></span> &#9746; No &#9744;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See definition of &#8220;large accelerated filer, &#8220;accelerated filer,&#8221; and &#8220;emerging growth company&#8221;
in Rule 12b-2 of the Exchange Act.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="text-align: left; width: 5%">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: left; width: 25%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Large
    Accelerated Filer &#9744;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: left; width: 20%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accelerated
    Filer &#9744;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: left; width: 20%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_90F_edei--EntityFilerCategory_c20230101__20231231_zAahNyrn3Yz6"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt-sec:entityfilercategoryen" id="Fact000047" name="dei:EntityFilerCategory">Non-Accelerated
    Filer</ix:nonNumeric></span> &#9746;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: left; width: 30%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Emerging
    growth company <span id="xdx_90F_edei--EntityEmergingGrowthCompany_c20230101__20231231_zlw3dALHoyr4"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt:booleanfalse" id="Fact000048" name="dei:EntityEmergingGrowthCompany">&#9744;</ix:nonNumeric></span></span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. &#9744;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8224;
The term &#8220;new or revised financial accounting standard&#8221; refers to any update issued by the Financial Accounting Standards
Board to its Accounting Standards Codification after April 5, 2012.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant has filed a report on and attestation to its management&#8217;s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. <span id="xdx_90C_edei--IcfrAuditorAttestationFlag_c20230101__20231231_zPfGMr7XmSB4"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt:booleanfalse" id="Fact000049" name="dei:IcfrAuditorAttestationFlag">&#9744;</ix:nonNumeric></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. <span id="xdx_902_edei--DocumentFinStmtErrorCorrectionFlag_c20230101__20231231_ztiUDETEhepl"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt:booleanfalse" id="Fact000050" name="dei:DocumentFinStmtErrorCorrectionFlag">&#9744;</ix:nonNumeric></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant&#8217;s executive officers during the relevant recovery period pursuant to &#167;240.10D-1(b). &#9744;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 25%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_909_edei--DocumentAccountingStandard_c20230101__20231231_z8RLAFZvkTn7"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000051" name="dei:DocumentAccountingStandard">U.S. GAAP</ix:nonNumeric></span> &#9746;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 46%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">International
    Financial Reporting &#9744;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 25%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
    &#9744;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Standards
    as issued by the International</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accounting
    Standards Board</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
&#8220;Other&#8221; has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow. &#9744; Item 17 &#9744; Item 18</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes &#9744; No <span id="xdx_905_edei--EntityShellCompany_dbF_c20230101__20231231_zENAV6FCwnbg"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt:booleanfalse" id="Fact000052" name="dei:EntityShellCompany">&#9746;</ix:nonNumeric></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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    <div style="break-before: page; margin-top: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="width: 100%; text-align: center">&#160;</td></tr></table></div>
    <!-- Field: /Page -->

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Annual
Report on Form 20-F</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Year
Ended December 31, 2023 </b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span style="text-decoration: underline">TABLE
OF CONTENTS</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_001">PART I</a></span></td>
    <td style="text-align: right; width: 0.5in">3</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_002">ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</a></span></td>
    <td style="text-align: right">3</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_003">A. Directors and Senior Management</a></span></td>
    <td style="text-align: right">3</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_004">B. Advisers</a></span></td>
    <td style="text-align: right">3</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_005">C. Auditors</a></span></td>
    <td style="text-align: right">3</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_006">ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE</a></span></td>
    <td style="text-align: right">3</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_007">A. Offer Statistics</a></span></td>
    <td style="text-align: right">3</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_008">B. Method and Expected Timetable</a></span></td>
    <td style="text-align: right">3</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_009">ITEM 3. KEY INFORMATION</a></span></td>
    <td style="text-align: right">3</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_010">A. [Reserved]</a></span></td>
    <td style="text-align: right">12</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_011">B. Capitalization and Indebtedness</a></span></td>
    <td style="text-align: right">12</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_012">C. Reasons for the Offer and Use of Proceeds</a></span></td>
    <td style="text-align: right">12</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_013">D. Risk Factors</a></span></td>
    <td style="text-align: right">12</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_014">ITEM 4. INFORMATION ON THE COMPANY</a></span></td>
    <td style="text-align: right">39</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_015">A. History and Development of the Company</a></span></td>
    <td style="text-align: right">39</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_016">B. Business Overview</a></span></td>
    <td style="text-align: right">42</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_001">C. Organizational Structure</a></span></td>
    <td style="text-align: right">67</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_002">D. Property, Plant and Equipment</a></span></td>
    <td style="text-align: right">67</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_003">ITEM 4A. UNRESOLVED STAFF COMMENTS</a></span></td>
    <td style="text-align: right">67</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_004">ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</a></span></td>
    <td style="text-align: right">67</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_005">A. Operating Results</a></span></td>
    <td style="text-align: right">67</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_006">B. Liquidity and Capital Resources</a></span></td>
    <td style="text-align: right">74</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_007">C. Research and Development, Patents and Licenses, Etc.</a></span></td>
    <td style="text-align: right">78</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_008">D. Trend Information</a></span></td>
    <td style="text-align: right">78</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_009">E. Critical Accounting Estimates.</a></span></td>
    <td style="text-align: right">79</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_010">ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</a></span></td>
    <td style="text-align: right">83</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_011">A. Directors and Senior Management</a></span></td>
    <td style="text-align: right">83</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_012">B. Compensation</a></span></td>
    <td style="text-align: right">85</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_032">C. Board Practices</a></span></td>
    <td style="text-align: right">87</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_013">D. Employees</a></span></td>
    <td style="text-align: right">90</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_014">E. Share Ownership</a></span></td>
    <td style="text-align: right">90</td>
    </tr>
</table>

<p style="margin: 0">&#160;</p>

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    <!-- Field: /Page -->

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_015">ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</a></span></td>
    <td style="text-align: right; width: 0.5in">91</td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_016">A. Major Shareholders</a></span></td>
    <td style="text-align: right">91</td>
    </tr>

<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_017">B. Related Party Transactions</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">92</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_018">C. Interests of Experts and Counsel</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">92</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_019">ITEM 8. FINANCIAL INFORMATION</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">93</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_020">A. Consolidated Statements and Other Financial Information</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">93</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_021">B. Significant Changes</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">93</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_022">ITEM 9. THE OFFER AND LISTING</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">93</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_023">A. Offer and Listing Details</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">93</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_024">B. Plan of Distribution</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">93</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_025">C. Markets</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">93</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_026">D. Selling Shareholders</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">93</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_027">E. Dilution</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">93</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_028">F. Expenses of the Issue</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">93</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_029">ITEM 10. ADDITIONAL INFORMATION</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">94</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_030">A. Share Capital</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">94</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_031">B. Memorandum and Articles of Association</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">94</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_017">C. Material Contracts</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">102</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_018">D. Exchange Controls</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">102</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_019">E. Taxation</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">104</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_020">F. Dividends and Paying Agents</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">109</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_021">G. Statement by Experts</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">109</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_022">H. Documents on Display</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">109</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_023">I. Subsidiary Information</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">109</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_024">ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">109</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_025">ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">110</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_026">A. Debt Securities</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">110</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_027">B. Warrants and Rights</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">110</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_028">C. Other Securities</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">110</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 20pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_029">D. American Depositary Shares</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">110</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_030">PART II</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">111</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_031">ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">111</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_032">ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF PROCEEDS</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">111</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_033">ITEM 15. CONTROLS AND PROCEDURES</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">111</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_034">ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">112<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_035">ITEM 16B. CODE OF ETHICS</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">112</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_036">ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">112</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_037">ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">113</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_038">ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">113</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_039">ITEM 16F. CHANGE IN REGISTRANT&#8217;S CERTIFYING ACCOUNTANT</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">113</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_040">ITEM 16G. CORPORATE GOVERNANCE</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">113</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_041">ITEM 16H. MINE SAFETY DISCLOSURE</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">114</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_042">ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">114</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_043">ITEM 16J. INSIDER TRADING POLICIES</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">114</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><a href="#am_044">ITEM 16K. CYBERSECURITY</a></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">114</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_045">PART III</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right">116</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_046">ITEM 17. FINANCIAL STATEMENTS</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">116</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_047">ITEM 18. FINANCIAL STATEMENTS</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">116</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: normal 10pt Times New Roman, Times, Serif; padding-left: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#am_048">ITEM 19. EXHIBITS</a></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">116</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INTRODUCTORY
NOTES</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Use
of Certain Defined Terms</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Except
as otherwise indicated by the context and for the purposes of this report only, references in this report to:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Taoping&#8221;
    or &#8220;the Company&#8221; are to Taoping Inc., a British Virgin Islands business company, which has no business operations of
    its own;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;SEC&#8221;
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Exchange
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Securities
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Renminbi&#8221;
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    dollars,&#8221; &#8220;dollars&#8221; and &#8220;$&#8221; are to the legal currency of the United States.</span></td></tr>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 31, 2023, we completed a share combination of Taoping&#8217;s ordinary shares at a ratio of one-for-ten. This share combination
did not change the maximum number of shares the Company is authorised to issue or the par value of the ordinary shares. Accordingly,
except as otherwise indicated, all share and per share information contained in this annual report has been restated to retroactively
show the effect of the share combination.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Forward-Looking
Information</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition to historical information, this annual report contains forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. We have attempted to identify forward-looking statements by terminology including &#8220;anticipates,&#8221;
&#8220;believes,&#8221; &#8220;can,&#8221; &#8220;continue,&#8221; &#8220;could,&#8221; &#8220;estimates,&#8221; &#8220;expects,&#8221;
&#8220;intends,&#8221; &#8220;may,&#8221; &#8220;plans,&#8221; &#8220;potential,&#8221; &#8220;predicts,&#8221; &#8220;should,&#8221;
or &#8220;will&#8221; or the negative of these terms or other comparable terminology. Such statements include, among others, those concerning
market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue,
margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; and any
statements regarding future economic conditions or performance, as well as all assumptions, expectations, predictions, intentions or
beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the
results of the Company to differ materially from those expressed or implied by such forward-looking statements. Potential risks and uncertainties
include, among other things, the effects of the global Covid-19 pandemic, the emergence of additional competing technologies, changes
in domestic and foreign laws, regulations and taxes, uncertainties related to China&#8217;s legal system and economic, political and
social events in China, the volatility of the securities markets; and other risks including, but not limited to, those that we discussed
or referred to in Item 3 &#8220;Key information-D. Risk Factors&#8221; and elsewhere in this annual report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Readers
are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These
reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of
operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation,
except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations
or future events.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_001"></span>PART
I</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">Taoping
is not an operating company but rather a holding company incorporated in the BVI. Because Taoping has no business operations of its own,
we conduct our business through Taoping&#8217;s operating subsidiaries, primarily in China. This structure involves unique risks to investors
and you may never directly hold equity interests in Taoping&#8217;s operating entities. You are specifically cautioned that there are
significant legal and operational risks associated with being based in or having the majority of operations in China, including that
changes in the legal, political and economic policies of the Chinese government, the relations between China and the United States, or
Chinese or United States regulations may materially and adversely affect our business, financial condition, results of operations and
the market price of Taoping&#8217;s securities. Moreover, the Chinese government may exercise significant oversight and discretion over
the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in
our operations and/or the value of Taoping&#8217;s securities or could significantly limit or completely hinder our ability to offer
or continue to offer Taoping securities to investors and cause the value of such securities to significantly decline or be worthless.
For a detailed description of risks related to the holding corporate structure, see Item 3 &#8220;Key Information-D. Risk Factors-Risks
Related to Doing Business in China&#8221;.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_002"></span>ITEM
1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_003"></span>A.
Directors and Senior Management</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_004"></span>B.
Advisers</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_005"></span>C.
Auditors</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_006"></span>ITEM
2. OFFER STATISTICS AND EXPECTED TIMETABLE</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_007"></span>A.
Offer Statistics</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_008"></span>B.
Method and Expected Timetable</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_009"></span>ITEM
3. KEY INFORMATION</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping
was incorporated in the BVI under the BVI Act on June 18, 2012. Taoping is not an operating company but rather a holding company conducting
its operations through Taoping&#8217;s operating subsidiaries, primarily in China. This structure involves unique risks to investors
and you may never directly hold equity interests in Taoping&#8217;s operating entities. Between July 2007 and September 2021, Taoping
employed a variable interest entity structure where the operating entities were controlled and consolidated based on contractual agreements,
rather than direct ownership, due to restrictions on foreign investment in value-added telecommunication business in China. Taoping dissolved
such variable interest entity structure in September 2021 and ceased the e-commerce and related businesses which had constituted an insignificant
portion of its consolidated revenue prior to such dissolution. See &#8220;Regulatory Permissions to Operate Business&#8221; below for
more information. Since then, Taoping has been owning all of the operating entities through one or more subsidiaries. While the variable
interest entity structure was in place, Taoping did not experience any difficulty in controlling the operating entities through contractual
arrangements and the terms of the contractual agreements relating to the variable interest entity structure had been complied with by
the parties of such agreements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
you are specifically cautioned that there are significant legal and operational risks associated with being based in or having the majority
of operations in China. Specifically, the PRC government recently initiated a series of regulatory actions and made a number of public
statements on the regulation of business operations in China, including cracking down on illegal activities in the securities market,
enhancing supervision over China-based companies listed overseas using a variable interest entity structure, adopting new measures to
extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement. We do not believe that our subsidiaries
in China are directly subject to these regulatory actions or statements, as we have not carried out any monopolistic behavior and our
business does not involve the collection of personal information or implicate national security. We also dissolved the variable interest
entity structure in 2021 as our business does not involve any type of restricted industry.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 17, 2023, the China Securities Regulatory Commission (the &#8220;CSRC&#8221;) promulgated the Trial Administrative Measures
of Overseas Securities Offering and Listing by Domestic Companies (the &#8220;Trial Measures&#8221;) and five supporting listing
guidelines (the &#8220;Listing Guidelines&#8221;), which came into effect on March 31, 2023. On February 24, 2023, the CSRC, together with several other governmental authorities jointly revised the Provisions on
Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing (the &#8220;Revised
Provisions&#8221;). The Revised Provisions came into effect on March 31, 2023 together with the Trial Measures. Given
the recent nature of the introduction of the above Trial Measures, the Listing Guidelines and Revised Provisions, there remains
significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas
securities offerings and other capital markets activities. Notwithstanding the foregoing, as of the date of this report, we are not
aware of any PRC laws or regulations in effect requiring that we obtain permission from any PRC authorities to issue securities to
foreign investors, other than the filing requirements under the Trial Measures, and we have not received any inquiry, notice,
warning, or sanction from the CSRC or any other PRC authorities that have jurisdiction over our operations. See &#8220;Regulatory
Permissions to Operate Business and for the Offering of Securities to Foreign Investors&#8221; below.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, pursuant to the Holding Foreign Companies Accountable Act (the &#8220;HFCA Act&#8221;) enacted in 2020, if the auditor of a
U.S. listed company&#8217;s financial statements is not subject to Public Company Accounting Oversight Board (the &#8220;PCAOB&#8221;)
inspections for three consecutive &#8220;non-inspection&#8221; years, the SEC is required to prohibit the securities of such issuer from
being traded on a U.S. national securities exchange, such as NYSE and Nasdaq, or in U.S. over-the-counter markets. On June 22, 2021,
the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, legislation entitled &#8220;Consolidated
Appropriations Act, 2023&#8221; (the &#8220;Consolidated Appropriations Act&#8221;) was signed into law, which contained, among other
things, an identical provision to the Accelerating Holding Foreign Companies Accountable Act and amended the HFCA Act by requiring the
SEC to prohibit an issuer&#8217;s securities from trading on any U.S. stock exchanges or over-the-counter markets if its auditor is not
subject to PCAOB inspections for two consecutive years instead of three. On December 16, 2021, the PCAOB issued a Determination Report
finding that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China
and Hong Kong because of a position taken by one or more authorities in such jurisdictions, and identified specific registered public
accounting firms subject to this determination. Our current registered public accounting firm, PKF Littlejohn LLP (&#8220;PKF&#8221;),
or our former registered public accounting firm, UHY LLP, is not headquartered in mainland China or Hong Kong and was not identified
in this report as a firm subject to the PCAOB&#8217;s determination. They both are subject to full inspection by the PCAOB and the PCAOB
is able to inspect the audit workpapers of our subsidiaries in China, as such workpapers are electronic files possessed by our registered
public accounting firms. On August 26, 2022, the CSRC, the Ministry of Finance of the PRC (the &#8220;MOFCOM&#8221;), and the PCAOB signed
a Statement of Protocol (the &#8220;Protocol&#8221;) governing inspections and investigations of accounting firms based in mainland China
and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms
headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB
shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer
information to the SEC. On December 15, 2022, the PCAOB made a statement announcing that it was able, in 2022, to inspect and investigate
completely issuer audit engagements of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong. However,
uncertainties still exist as to whether the PCAOB will have continued access for complete inspections and investigations in the future.
The PCAOB has indicated that it will act immediately to consider the need to issue new determinations under the HFCA Act if needed. If
the PCAOB determines in the future that it cannot inspect or fully investigate our auditor at such future time, trading in the Company&#8217;s
securities would be prohibited under the HFCA Act. See &#8220;Risk Factor-Risks Related to Doing Business in China-The recent joint statement
by the SEC, proposed rule changes submitted by Nasdaq, and the HFCA Act, all call for additional and more stringent criteria to be applied
to U.S.-listed companies with significant operations in China. These developments could add uncertainties to our continued listing, future
offerings, business operations share price and reputation.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Cash
is transferred through our organization in the following manner:</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">Our
    equity structure is a direct holding structure, that is, Taoping, the BVI entity listed in the U.S., controls its operating subsidiaries
    in China, through Taoping Holdings, a BVI subsidiary of Taoping. See Item 4. &#8220;Information of the Company-A. History and Development
    of the Company-Corporate Structure&#8221; for more details.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">As
    of the date of this report, neither Taoping nor any of its subsidiaries have paid dividends or made distributions to U.S. investors.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Within
    our direct holding structure, the cross-border transfer of funds from Taoping to its Chinese subsidiaries is legal and compliant
    with the laws and regulations of China. Taoping is permitted to provide funding to its subsidiaries in mainland China in the form
    of shareholder loans or capital contributions, subject to satisfaction of applicable government registration, approval and filing
    requirements of the respective jurisdiction. There are no quantity limits on Taoping&#8217;s ability to make capital contributions
    to its subsidiaries in mainland China under the PRC regulations. Historically, cash proceeds raised from overseas financing activities
    by Taoping have been first transferred to its BVI subsidiary, Taoping Holdings. Whenever we need to make capital contributions to
    either of our PRC subsidiaries by contributing any of such net proceeds, and convert the contributed proceeds into RMB, we will need
    to increase the PRC subsidiary&#8217;s registered capital by registering and/or filing the increase with the Ministry of Commerce
    or one of its local branches, the State Administration of Foreign Exchange (&#8220;SAFE&#8221;) or one of its local branches, or
    an authorized bank. If we transfer any of the proceeds to one of our PRC subsidiaries through loans, under current PRC law we will
    also need to register such loans with the SAFE or one of its local branches, and the amount that we may convert into RMB and loan
    to one of these entities will be limited by applicable SAFE regulations, in the case of a loan to one of our PRC subsidiaries, to
    the greater of (i) the difference between the subsidiary&#8217;s approved total investment and the subsidiary&#8217;s total registered
    capital and (ii) two times the PRC subsidiary&#8217;s net assets.</span></td></tr>

<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
    a holding company, Taoping relies on dividends and other distributions on equity paid by its operating subsidiaries in China for
    cash requirements, including the funds necessary to pay dividends and other cash distributions to its shareholders or to any service
    expenses it may incur. For operating subsidiaries in mainland China, they will first transfer funds to Taoping Group in accordance
    with applicable laws and regulations of China, and then to Taoping through Taoping Holdings. Taoping will then distribute dividends
    to its shareholders in proportion to their respective shareholding, regardless of whether the shareholders are U.S. investors or
    investors in other countries or regions. As of the date of this report, none of our subsidiaries has made any transfers, dividends
    or other distributions to Taoping, the holding company. We intend to retain most, if not all, of our available funds and any future
    earnings to the development and growth of our business in China and do not expect to pay dividends in the foreseeable future.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
    ability of our subsidiaries in mainland China to distribute dividends is based upon their distributable earnings. Current PRC regulations
    permit these subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined
    in accordance with PRC accounting standards and regulations. In addition, each of our subsidiaries in mainland China is required
    to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50%
    of its registered capital. These reserves are not distributable as cash dividends. In addition, if any of our operating subsidiaries
    incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to Taoping.
    We believe, other than above, current PRC regulations do not prohibit or limit using cash generated from one subsidiary to fund another
    subsidiary&#8217;s operations. We currently do not have our own cash management policy and procedures that dictate how funds are
    transferred.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
table below presents the cash flows between our subsidiaries for the fiscal years ended December 31, 2023 and 2022.</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="6" style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif"><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Years
Ended December 31,</span></p></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Cash
    Flows Between Subsidiaries</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td colspan="2" style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2023</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td colspan="2" style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2022</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: #CCEEFF">
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 60%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Advances between
    subsidiaries<sup>(1)</sup></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 16%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1,281,636</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 16%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3,713,393</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Settlement of trade credits
    between subsidiaries<sup>(2)</sup></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: #CCEEFF">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Additional paid-in capital
    by immediate parent company</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">401,804</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2,200,000</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intercompany
    dividends or other distributions</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  </table>
<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)
Represent the sum of advances among offshore subsidiaries (including then-existing BVI subsidiary, Hong Kong subsidiaries and Kazakhstan
subsidiaries), and between such offshore subsidiaries and PRC subsidiaries in mainland China. These advances were made in the ordinary
course of business, payable on demand and interest free.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)
The trade credits extended between subsidiaries primarily related to provision of technical services, sales of products, and sublease
of office between PRC subsidiaries. For the years ended December 31, 2023 and 2022, the trade credits between subsidiaries amounted to
$1,140,536 and $1,287,328, respectively. The Company&#8217;s subsidiaries only record but do not settle the trade credits in cash between
them, which is allowed under the PRC laws.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Restrictions
on Cash Transfers</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
face various restrictions and limitations on foreign exchange, our ability to transfer cash between entities, across borders and to U.S.
investors, and our ability to distribute earnings from our subsidiaries to Taoping and holders of our ordinary shares. If our subsidiaries
incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.
In addition, our PRC subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in
accordance with PRC accounting standards and regulations. Pursuant to laws applicable to entities incorporated in the PRC, our subsidiaries
in the PRC must make appropriations from after-tax profit to non-distributable reserve funds. These reserve funds include one or more
of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund. Subject to certain
cumulative limits, the general reserve fund requires an annual appropriation of 10% of after-tax profit (as determined under accounting
principles generally accepted in the PRC at each year-end) until the accumulative amount of such reserve fund reaches 50% of its registered
capital; the other fund appropriations are at the subsidiaries&#8217; discretion. These reserve funds can only be used for the specific
purposes of enterprise expansion, staff bonus and welfare, and are not distributable as cash dividends. Also, due to restrictions on
the distribution of share capital from our PRC subsidiaries, the share capital of our PRC subsidiaries, is considered restricted.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Due
to various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we
may not be able to obtain the necessary government approvals or complete the necessary government registrations or other procedures on
a timely basis, or at all, with respect to future loans or capital contributions by us to our PRC subsidiaries. This may delay or prevent
us from using our offshore funds to make loans or capital contribution to our PRC subsidiaries, and thus may restrict our ability to
execute our business strategy, and materially and adversely affect our liquidity and our ability to fund and expand our business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furthermore,
due to restrictions on foreign exchange placed on our PRC subsidiaries by the PRC government under PRC laws and regulations, to the extent
cash is located in the PRC or within a PRC domiciled entity and may need to be used to fund our operations outside of the PRC, the funds
may not be available due to such limitations unless and until related approvals and registrations are obtained. Under regulations of
the SAFE of China, the Renminbi is not convertible into foreign currencies for capital account items, such as loans, repatriation of
investments and investments outside of China, unless the prior approval of the SAFE is obtained and prior registration with the SAFE
is made.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Regulatory
Permissions to Operate Business and for the Offering of Securities to Foreign Investors </b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
establishment, operation and management of corporate entities in mainland China are governed by the Company Law of the People&#8217;s
Republic of China, or the China Company Law, which was adopted by the Standing Committee of the National People&#8217;s Congress (&#8220;SCNPC&#8221;)
in December 1993, implemented in July 1994, and subsequently amended in December 1999, August 2004, October 2005, December 2013 and October
2018. Under the China Company Law, companies are generally classified into two categories: limited liability companies and companies
limited by shares. The China Company Law applies to both domestic and foreign-invested companies.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Investment
activities in mainland China by foreign investors are governed by the Guiding Foreign Investment Direction, which was promulgated by
the State Council on February 11, 2002, and came into effect on April 1, 2002, and the latest Special Administrative Measures (Negative
List) for Foreign Investment Access (2022), or the Negative List, which was promulgated by the MOFCOM and the National Development and
Reform Commission (&#8220;NDRC&#8221;) on March 12, 2022, and took effect on the same date. The Negative List sets out in a unified manner
the restrictive measures, such as the requirements on shareholding percentages and management, for the access of foreign investments,
and the industries that are prohibited for foreign investment. Any field not falling in the Negative List shall be administered under
the principle of equal treatment to domestic and foreign investment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8239;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Foreign Investment Law of the People&#8217;s Republic of China, or the Foreign Investment Law was promulgated by the NPC in March 2019
and become effective in January 2020. The investment activities of foreign natural persons, enterprises or other organizations (hereinafter
referred to as foreign investors) directly or indirectly within the territory of mainland China are governed by the Foreign Investment
Law, including: 1) establishing by foreign investors of foreign-invested enterprises in mainland China alone or jointly with other investors;
2) acquiring by foreign investors of shares, equity, property shares, or other similar interests of Chinese domestic enterprises; 3)
investing by foreign investors in new projects in mainland China alone or jointly with other investors; and 4) other forms of investment
prescribed by laws, administrative regulations or the State Council.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8239;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2019, the State Council issued the Regulations on Implementing the Foreign Investment Law, which came into effect in January
2020. After the Regulations on Implementing the Foreign Investment Law came into effect, the Regulation on Implementing the Law on Sino-foreign
Equity Joint Ventures, Provisional Regulations on the Duration of Sino-Foreign Equity Joint Ventures, the Regulations on Implementing
the Law on Wholly Foreign-Owned Enterprises and the Regulations on Implementing the Law on Sino-Foreign Cooperative Joint Ventures have
been repealed simultaneously.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8239;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2019, the MOFCOM and the State Administration for Market Regulation (&#8220;SAMR&#8221;) issued the Measures for the Reporting
of Foreign Investment Information, which came into effect in January 2020. After the Measures for the Reporting of Foreign Investment
Information came into effect, the Interim Measures on the Administration of Filing for Establishment and Change of Foreign Invested Enterprises
has been repealed simultaneously. Since January 1, 2020, for foreign investors carrying out investment activities directly or indirectly
in mainland China, the foreign investors or foreign-invested enterprises shall submit investment information to the relevant commerce
administrative authorities pursuant to these measures.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
light of the above restrictions and requirements, prior to the dissolution of our VIE structure in September 2021, we had conducted our
value-added telecommunications businesses through our then consolidated VIEs. As a result of the dissolution of our VIE structure, we
ceased the e-commerce and related businesses which had constituted a minor portion of our consolidated revenue. Based on the legal analysis
of the Company&#8217;s in-house legal counsel, who is a licensed attorney in the PRC, we believe that none of our PRC subsidiaries&#8217;
current business is stipulated on the Negative List.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result, according to the laws and regulations currently in effect, our PRC subsidiaries are able to conduct their business without
being subject to restrictions imposed by the foreign investment laws and regulations of the PRC and none of Taoping or our subsidiaries
is required to obtain additional licenses or permits beyond a regular business license for each PRC subsidiary&#8217;s operations. Each
of our PRC subsidiaries is required to obtain and has obtained such regular business license from the local branch of the SAMR. No application
for any such license has been denied.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
we cannot assure you that our PRC subsidiaries are always able to successfully update or renew the licenses or permits required for the
relevant business in a timely manner or that these licenses or permits are sufficient to conduct all of our present or future business.
If our PRC subsidiaries (i) do not receive or maintain required permissions or approvals, (ii) inadvertently conclude that such permissions
or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and our PRC subsidiaries are required
to obtain such permissions or approvals in the future, we could be subject to fines, legal sanctions or an order to suspend our PRC operating
subsidiaries&#8217; business, which may materially and adversely affect the business, financial condition and results of operations of
us. See &#8220;Risk Factors-Risks Related to Doing Business in China-Uncertainties exist with respect to the interpretation and implementation
of PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business
operations&#8221; on <span>page 27.</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
connection with our previous issuance of securities, under current PRC laws, regulations and regulatory rules, as of the date of this
annual report, we believe that we and our PRC subsidiaries, (i) are not required to obtain permissions from the CSRC, (ii) are not required
to go through cybersecurity review by the Cyberspace Administration of China (the &#8220;CAC&#8221;), and (iii) have not received or
were denied such requisite permissions by any PRC authority. We cannot guarantee that the regulators will agree with us. As of the date
hereof, we have not been involved in any investigations for cybersecurity review made by the CAC, and we have not received any inquiry,
notice, warning, or sanctions in such respect.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas
and/or foreign investment in China-based issuers. The CSRC published the Trial Measures and the Listing Guidelines on February 17,
2023, designed to regulate overseas securities offerings by PRC domestic companies. On February 24, 2023, the CSRC, together with
several other governmental authorities jointly enacted the Revised Provisions. The Revised Provisions were issued under the title the &#8220;Provisions on
Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,&#8221;
and came into effect on March 31, 2023 together with the Trial Measures. See &#8220;Risk Factor-Risks Related to Doing Business in
China-The PRC government has increasingly strengthened oversight in offerings conducted overseas or on foreign investment in
China-based issuers, which could result in a material change in our operations and our ordinary shares could decline in value or
become worthless.&#8221; on page 19.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Given
the recent nature of the introduction of the above Trial Measures, Listing Guidelines, and Revised Provisions, there remains significant
uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings
and other capital markets activities. Notwithstanding the foregoing, as of the date of this report, other than the filing requirements
mandated by the Trial Measures, we are not aware of any PRC laws or regulations in effect requiring that we obtain permission from any
PRC authorities to issue securities to foreign investors, and we have not received any inquiry, notice, warning, or sanction from the
CSRC, the CAC, or any other PRC authorities that have jurisdiction over our operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Enforceability
of Civil Liabilities</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>British
Virgin Islands</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
is no statutory enforcement in the BVI of judgments obtained in the U.S., however, the courts of the BVI will in certain circumstances
recognize such a foreign judgment and treat it as a cause of action in itself which may be sued upon as a debt at common law so that
no retrial of the issues would be necessary, provided that:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
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</table>

<p style="margin: 0">&#160;</p>

<p style="margin: 0"></p>

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<p style="margin: 0">&#160;</p>

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<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    or enforcement of the judgment in the BVI would not be contrary to public policy; and</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    proceedings pursuant to which judgment was obtained were not contrary to natural justice.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
BVI courts are unlikely:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">to
    recognise or enforce against the Company, judgments of courts of the U.S. predicated upon the civil liability provisions of the securities
    laws of the U.S.; and</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#9679;</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">to
    impose liabilities against the Company, predicated upon the certain civil liability provisions of the securities laws of the U.S.
    so far as the liabilities imposed by those provisions are penal in nature.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Substantially
all of our assets are located outside the United States. In addition, a majority of our directors and officers are nationals or residents
of jurisdictions other than the United States and all or a substantial portion of their assets are located outside the United States.
As a result, it may be difficult for investors to effect service of process within the United States upon us or these persons.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Hong
Kong</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; text-indent: 24pt; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently
judgment of U.S. courts will not be directly enforced in Hong Kong. There are currently no treaties or other arrangements providing for
reciprocal enforcement of foreign judgments between Hong Kong and the U.S. However, a judgment of a court in the U.S. predicated upon
U.S. federal or state securities laws may be enforced in Hong Kong at common law by bringing an action in a Hong Kong court on that judgment
for the amount due thereunder, and then seeking summary judgment on the strength of the foreign judgment, provided that the foreign judgment,
among other things, is (1) for a debt or a definite sum of money (not being taxes or similar charges to a foreign government taxing authority
or a fine or other penalty) and (2) final and conclusive on the merits of the claim, but not otherwise. Such a judgment may not, in any
event, be so enforced in Hong Kong if (a) it was obtained by fraud; (b) the proceedings in which the judgment was obtained were opposed
to natural justice; (c) its enforcement or recognition would be contrary to the public policy of Hong Kong; (d) the court of the United
States was not jurisdictionally competent; or (e) the judgment was in conflict with a prior Hong Kong judgment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>China</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
is uncertainty as to whether the courts of China would (1) recognize or enforce judgments of United States courts obtained against us
or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state
in the United States; or (2) entertain original actions brought in each respective jurisdiction against us or our directors or officers
predicated upon the securities laws of the United States or any state in the United States.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce
foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the
jurisdiction where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other
form of reciprocity with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition,
according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers
if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a
result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States. Under
the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law against us in the PRC for disputes if they
can establish sufficient nexus to the PRC for a PRC court to have jurisdiction, and meet other procedural requirements, including, among
others, the plaintiff must have a direct interest in the case, and there must be a concrete claim, a factual basis and a cause for the
suit.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Summary
of Risk Factors</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">There
are a number of risks that you should consider and understand before making an investment decision regarding our securities. </span><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
should carefully consider all of the information set forth in this report and, in particular, the specific factors set forth in the section
titled &#8220;Risk Factors&#8221; below. These risks include, but are not limited to:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
    of the date of this report, based on the legal analysis of the Company&#8217;s in-house legal counsel, who is a licensed attorney in
    the PRC, other than the filing requirements mandated by the Trial Measures, we believe that we are not required to obtain any
    approval or prior permission to offer securities to foreign investors from the CSRC or any other Chinese regulatory authority under
    the Chinese laws and regulations currently in effect. If a domestic company fails to complete required filing procedures or conceals
    any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative
    penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly
    in charge, and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. There
    remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to
    overseas securities offerings and other capital markets activities. The risks arising from the legal system in China include risks
    and uncertainties regarding the enforcement of laws and that rules and regulations in China can change quickly with little, if any,
    advance notice. As a result, there can be no assurance that we will not be subject to such requirements, approvals or permissions in
    the future. For additional information, see Item 3 &#8220;<i>Key Information-D. Risk Factors-Risks Relating to Doing Business in
    China</i>-<i>The PRC government has increasingly strengthened oversight in offerings conducted overseas or on foreign investment in
    China-based issuers, which could result in a material change in our operations and our ordinary shares could decline in value or
    become worthless.</i>&#8221; on pages 19 and &#8220;<i>Key Information-D. Risk Factors-Risks Related to Doing Business in
    China</i>-<i>The PRC government exerts substantial influence over the manner in which we conduct our business activities. Its
    oversight and discretion over our business could result in a material adverse change in our operations and the value of our ordinary
    shares. Changes in laws, regulations and policies in China and uncertainties with respect to the PRC legal system could materially
    and adversely affect us. In addition, rules and regulations in China can change quickly with little advance notice</i>.&#8221; on
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</table>

<p style="margin: 0">&#160;</p>

<p style="margin: 0"></p>

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<p style="margin: 0">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
    are significant legal and operational risks associated with having significant business operations in China, including those changes
    in the legal, political and economic policies of the Chinese government, the relations between China and the United States, or Chinese
    or United States regulations may materially and adversely affect our business, financial condition, results of operations and the
    value of the Company&#8217;s securities. Any such changes may take place quickly and with very little notice and as a result, could
    significantly limit or completely hinder our ability to offer or continue to offer Taoping&#8217;s securities to investors, and could
    cause the value of Taoping&#8217;s securities to significantly decline or become worthless. Recent statements made and regulatory
    actions undertaken by China&#8217;s government, such as those related to data security or anti-monopoly concerns and any other future
    laws and regulations may require us to incur significant expenses and could materially affect our ability to conduct our business
    or accept foreign investments. For additional information, see Item 3 &#8220;<i>Key Information-D. Risk Factors-Risks Related to
    Doing Business in China-Changes in U.S. and Chinese regulations or in relations between the United States and China may adversely
    impact our business, our operating results, our ability to raise capital and the value of the securities that we are registering.
    Any such changes may take place quickly and with very little notice</i>&#8221; on pages 21.</span></td></tr>

<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    increased regulatory scrutiny focusing on U.S.-listed companies with significant operations in China in the U.S. could add uncertainties
    to our business operations, share price and reputation. In recent years, as part of increased regulatory focus in the United States
    on access to audit information, the United States enacted the HFCA Act in December 2020. On June 22, 2021, the U.S. Senate passed
    the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, legislation entitled &#8220;Consolidated Appropriations
    Act, 2023&#8221; was signed into law, which contained an identical provision to the Accelerating Holding Foreign Companies Accountable
    Act and amended the HFCA Act by requiring the SEC to prohibit an issuer&#8217;s securities from trading on any U.S. stock exchange
    or over-the-counter markets if its auditor is not subject to PCAOB inspections for two consecutive years instead of three. On December
    16, 2021, the PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public
    accounting firms headquartered in mainland China and Hong Kong, because of positions taken by authorities in the jurisdictions, and
    the PCAOB included in the report of its determination a list of the accounting firms that are headquartered in mainland China or
    Hong Kong. Our current registered public accounting firm, PKF, or our former registered public accounting firm, UHY LLP, is not headquartered
    in mainland China or Hong Kong and was not identified in this report as a firm subject to the PCAOB&#8217;s determination. They both
    are subject to full inspection by the PCAOB and the PCAOB is able to inspect the audit workpapers of our subsidiaries in China, as
    such workpapers are electronic files possessed by our registered public accounting firms. On August 26, 2022, CSRC, the MOFCOM, and
    the PCAOB signed the Protocol, governing inspections and investigations of audit firms based in China and Hong Kong. The Protocol
    remains unpublished and is subject to further explanation and implementation. Pursuant to the fact sheet with respect to the Protocol
    disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and
    has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB made a statement announcing that it
    was able, in 2022, to inspect and investigate completely issuer audit engagements of PCAOB-registered public accounting firms headquartered
    in China and Hong Kong. However, uncertainties still exist as to whether the PCAOB will have continued access for complete inspections
    and investigations in the future. When the PCAOB reassesses its determinations in the future, it could still determine that it is
    unable to inspect and investigate completely accounting firms based in mainland China and Hong Kong. The PCAOB has also indicated
    that it will act immediately to consider the need to issue new determinations under the HFCA Act if needed. There can be no assurance
    that we will continue to be able to comply with requirements imposed by U.S. regulators if the PCAOB is not able to fully inspect
    any component of our auditor&#8217;s work papers in the future. Delisting of the Company&#8217;s ordinary shares would force holders
    to sell their shares. The market price of Taoping&#8217;s ordinary shares could be adversely affected as a result of anticipated
    negative impacts of these executive or legislative actions, regardless of whether these executive or legislative actions are implemented
    and regardless of our actual operating performance. See Item 3 &#8220;<i>Key Information-D. Risk Factors-Risks Related to Doing Business
    in China-The recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and the HFCA Act, all call for additional
    and more stringent criteria to be applied to U.S.-listed companies with significant operations in China. These developments could
    add uncertainties to our continued listing, future offerings, business operations share price and reputation</i>&#8221; on page 26.</span></td></tr>

</table>

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<p style="margin: 0">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
    of the date of this report, based on the legal analysis of the Company&#8217;s in-house legal counsel, who is a licensed attorney
    in the PRC, we believe, according to the laws and regulations currently in effect, our PRC subsidiaries are able to conduct their
    business without being subject to restrictions imposed by the foreign investment laws and regulations of the PRC and none of Taoping
    or our subsidiaries is required to obtain additional licenses or permits beyond a regular business license for each PRC subsidiary&#8217;s
    operations. Each of our PRC subsidiaries is required to obtain and has obtained such regular business license. However, we cannot
    assure you that our PRC subsidiaries are always able to successfully update or renew the licenses or permits required for the relevant
    business in a timely manner or that these licenses or permits are sufficient to conduct all of our present or future business. If
    our PRC subsidiaries (i) do not receive or maintain required permissions or approvals, (ii) inadvertently conclude that such permissions
    or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and our PRC subsidiaries are required
    to obtain such permissions or approvals in the future, we could be subject to fines, legal sanctions or an order to suspend our PRC
    operating subsidiaries&#8217; business, which may materially and adversely affect the business, financial condition and results of
    operations of us. For additional information, see Item 3 &#8220;<i>Key Information-D. Risk Factors-Risks Related to Doing Business
    in China- Uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may
    impact the viability of our current corporate structure, corporate governance and business operations</i>&#8221; on pages 27.</span></td></tr>

<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
    are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations. For additional information. For
    additional information, see Item 3 &#8220;<i>Key Information-D. Risk Factors-Risks Related to Doing Business in China-There are uncertainties
    regarding the interpretation and enforcement of PRC laws, rules and regulations</i>&#8221; on pages 22.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    have a limited operating history of selling cloud-based products and services and may be unable to achieve or sustain profitability
    or reasonably predict our future results. For additional information, see Item 3 &#8220;<i>Key Information-D. Risk Factors-Risks
    Relating to Our Business-We have a limited operating history of selling cloud-based products and services and may be unable to achieve
    or sustain profitability or reasonably predict our future results&#8221; </i>on page 13.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
    independent registered auditors have expressed substantial doubt about our ability to continue as a going concern. For additional
    information, see Item 3 &#8220;<i>Key Information-D. Risk Factors-Risks Relating to Our Business-Our independent registered auditors
    have expressed substantial doubt about our ability to continue as a going concern&#8221; </i>on page 14.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
    we fail to comply with the continued listing requirements of NASDAQ, we would face possible delisting, which would result in a limited
    public market for our shares and make obtaining future debt or equity financing more difficult for us. For additional information,
    see Item 3 &#8220;<i>Key Information-D. Risk Factors-Risks Relating to Our Securities-If we fail to comply with the continued listing
    requirements of NASDAQ, we would face possible delisting, which would result in a limited public market for our shares and make obtaining
    future debt or equity financing more difficult for us&#8221; </i>on page 33.</span></td></tr>
</table>

<p style="margin: 0">&#160;</p>

<p style="margin: 0"></p>

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<p style="margin: 0">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
    trading price of Taoping&#8217;s ordinary shares has been and likely continue to be highly volatile, which could result in significant
    losses to holders of the ordinary shares. For additional information, see Item 3 &#8220;<i>Key Information-D. Risk Factors-Risks
    Relating to Our Securities-The trading price of the Company&#8217;s ordinary shares is highly volatile, leading to the possibility
    of their value being depressed at a time when you want to sell your holdings</i>&#8221; on pages 34-35.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
    we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of your shares for return on your
    investment. For additional information, see Item 3 &#8220;<i>Key Information-D. Risk Factors-Risks Relating to Our Securities-We
    do not intend to pay dividends for the foreseeable future</i>&#8221; on page 36.</span></td></tr>

<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
    may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because
    we are incorporated under BVI law and a significant majority of our current business operations are conducted in the PRC. For additional
    information, see Item 3 &#8220;<i>Key Information-D. Risk Factors-Risks Relating to Our Securities</i>-<i>You may have difficulty
    enforcing judgments obtained against us or our directors and officers</i>&#8221; on page 37 and &#8220;<i>Key Information-D. Risk
    Factors</i>-<i>Risks Relating to Our Securities</i>-<i>We are a BVI company and, because judicial precedent regarding the rights
of shareholders is more limited under BVI law than that under U.S. law, you may have less protection for your shareholder rights than
you would under U.S. law</i>&#8221;
    on pages 37.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping
    is a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
    applicable to U.S. domestic public companies. For additional information, see Item 3 &#8220;<i>Key Information-D. Risk Factors-Risks
    Relating to Our Securities</i>-<i>We are a &#8220;foreign private issuer&#8221; and have disclosure obligations that are different
    than those of U.S. domestic reporting companies. Therefore, you should not expect to receive the same information about us as a U.S.
    domestic reporting company may provide. Furthermore, if we lose our status as a foreign private issuer, we would be required to fully
    comply with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers and incur significant operational,
    administrative, legal, and accounting costs that we would not incur as a foreign private issuer</i>&#8221; on pages 36.</span></td></tr>

<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
                                            a foreign private issuer, Taoping is permitted to rely on exemptions from certain Nasdaq
                                            corporate governance standards applicable to domestic U.S. issuers. This may afford less
                                            protection to holders of Taoping&#8217;s securities. For additional information, see Item
                                            3 &#8220;<i>Key Information-D. Risk Factors-Risks Relating to Our Securities</i>-<i>As a
                                            foreign private issuer, we are permitted to rely on exemptions from certain NASDAQ corporate
                                            governance standards applicable to domestic U.S. issuers. This may afford less protection
                                            to holders of the Company&#8217;s securities&#8221; </i>on page 36.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_010"></span>A.
[Reserved]</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_011"></span>B.
Capitalization and Indebtedness</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_012"></span>C.
Reasons for the Offer and Use of Proceeds</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_013"></span>D.
Risk Factors</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white"><i>An
investment in the Company&#8217;s securities involves a high degree of risk. <b>INVESTORS PURCHASING OUR SECURITIES ARE PURCHASING SECURITIES
OF TAOPING INC., THE BVI HOLDING COMPANY RATHER THAN SECURITIES OF TAOPING INC.&#8217;S SUBSIDIARIES THAT HAVE SUBSTANTIVE BUSINESS OPERATIONS
IN CHINA AND OTHER COUNTRIES. </b>You should carefully consider the risks described below, together with all of the other information
included in this annual report, before making an investment decision. If any of the following risks actually occurs, our business, financial
condition or results of operations could suffer. In that case, the value of the Company&#8217;s securities could significantly decline
or be worthless and you may lose all or part of your investment.</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span style="text-decoration: underline">Risks
Relating to our Business</span></i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white"><b><i>A
sustained outbreak of the COVID-19 pandemic could have a material adverse impact on our business, operating results and financial condition.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
COVID-19 outbreak has led governments across the globe to impose a series of measures intended to contain its spread, including border
closures, travel bans, quarantine measures, social distancing, and restrictions on business operations and large gatherings. The outbreak
of COVID-19 has caused companies like us and our business partners to implement temporary adjustments to work schedules and travel plans,
mandating employees to work from home and collaborate remotely. As a result, we may have experienced lower efficiency and productivity,
internally and externally, which may adversely affect our service quality. Moreover, our business depends on our employees. If any of
our employees has contracted or is suspected of having contracted COVID-19, these employees will be required to be quarantined and they
could pass it to other of our employees, potentially resulting in severe disruption to our business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Most
of the restrictive measures previously adopted by the Chinese governments at various levels to control the spread of the COVID-19 virus
have been revoked or replaced with more flexible measures since December 2022. The revocation or replacement of the restrictive measures
to contain the COVID-19 pandemic could have a positive impact on our normal operations. However, the extent to which the COVID-19 pandemic
may continue to impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date
of this report, including the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge
concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Given the general
slowdown in economic conditions globally, volatility in the capital markets as well as the general negative impact of the COVID-19 outbreak
on the global market, we cannot assure you that we will be able to maintain the growth rate we have experienced or projected.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
have a limited operating history of selling cloud-based products and services and may be unable to achieve or sustain profitability or
reasonably predict our future results.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
early 2013, we made a strategic decision to transform our business from servicing the public sector to focusing on the private sector.
Leveraging our experience and expertise in handling large-scale IT projects for the public sector, we started investing in research and
development to develop software products for the private sector. In 2014, continuing our business transition from the public sector to
the private sector, we identified and provided cloud-based ecosystem solutions to four core markets including new media, healthcare,
education, and residential community management. Underpinning our ecosystems are our industry-specific integrated technology platform,
resource exchange, and big data services. In 2014, we predominately sold our cloud-based solutions to the Chinese new media industry.
Starting from 2015, we further expanded the customer base of cloud-based solutions to education, government, and residential community
management. In 2016, we expanded our business from the industry-specific integrated technology platform, resource exchange, and big data
services into the elevator IoT sectors. From May 2017, we have focused our business to provide products and services on Cloud-App-Terminal
(CAT) and IoT technology based digital advertising distribution networks and new media resource sharing platforms in the out-of-home
adverting market in China. As such, we have a limited operating history of selling our cloud-based products and professional services
to the private sector, which makes it difficult to evaluate our current business and future prospects and may increase the risk of your
investment. In 2023, 2022 and 2021, we generated approximately $38.4 million, $24.0 million and $18.8 million in revenue, respectively,
from our cloud-based technology (CBT) segment for customers in the education, new media, and out-of-home advertising market sectors.
We expect to have significant operating expenses in the future to further support and grow our business, including expanding the scope
of our customer base, expanding our direct and indirect selling capabilities, pursuing acquisitions of complementary businesses, investing
in our data storage and analysis infrastructure, and research and development, and increasing our international presence.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Our
independent registered auditors have expressed substantial doubt about our ability to continue as a going concern. </i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
independent auditors have added an explanatory paragraph to their audit opinion issued in connection with our financial statements included
in this report which states that the financial statements were prepared assuming that we would continue as a going concern.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Due
to the unfavorable macro-economic environment and the slowdown of the out-of-home advertising market in China, we incurred net loss of
approximately $9.9 million in 2021, $7.1 million in 2022 and $0.7 million in 2023. However, the Company will aggressively develop domestic
and international markets to develop new customers and new product offerings through potential acquisitions and strategic collaborations
with our business partners. There can be no assurance that we will be successful in achieving the goals set forth in our new business
strategy and business model.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Unfavorable
economic conditions may affect the level of the out-of-home advertising and information technology spending by our customers which could
cause the demand for our products and services to decline. </i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
revenue growth and profitability of our business rely on the overall demand by our customers for out-of-home digital advertising, display
technology products, and internet related services. Our business is sensitive to the overall economy in China and the economic and business
conditions within our respective product and service sectors. The growth rate of the Chinese economy has been slowing since 2010 and
the Chinese population began to decline in 2022. The Federal Reserve and other central banks outside of China have raised interest rates.
The Russia-Ukraine conflict, the Hamas-Israel conflict and the attacks on shipping in the Red Sea have heightened geopolitical tensions
across the world. The impact of the Russia-Ukraine conflict on Ukraine food exports has contributed to increases in food prices and thus
to inflation more generally. There have also been concerns about the relationship between China and other countries which may potentially
have economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China
with respect to a wide range of issues including trade policies, treaties, government regulations and tariffs. Economic conditions in
China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or
perceived overall economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economy could materially and
adversely affect our business, results of operations, and financial condition. Additionally, a reduction in out-of-home advertising and
information technology spending by our customers could harm our business in several ways, including longer sales cycles and lower prices
for our products and services. These events could have a material
effect on our future revenues and earnings.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Our
periodic operating results are difficult to predict and could fall below investors&#8217; expectations or estimates by securities research
analysts, which may cause the trading price of our ordinary shares to decline.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
revenues and operating results can vary significantly from a filing period to the next due to a number of factors, many of which are
beyond our control, such as public health pandemic, fluctuations in the volume of purchase by our customers as a result of changes in
their operations, their decisions to purchase our products and services, as well as currency fluctuations. Our revenues and operating
results could also be affected by delays or difficulties in expanding our geographical presence and infrastructure, changes to our pricing
strategies due to a competitive business environment and underestimates of resources and time required to complete ongoing projects.
Our first-quarter revenues may be relatively low compared to that of the other quarters due to the Chinese New Year holiday. Moreover,
our operating and financial results may fluctuate as a result of our dependency on our customers&#8217; budgets and spending patterns.
Therefore, we may not be able to accurately forecast the demand for our products and services beyond the current calendar year, which
could adversely affect our business, operating results, and financial condition. In addition, sales volumes from specific customers are
likely to vary from year to year, and a major customer in one year may not remain as a major customer in the subsequent years.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">These
fluctuations are likely to continue in the future and operating results for any period may not be indicative of our performance in any
future period. If our operating results for any filing period fall below investors&#8217; expectations or estimates by securities research
analysts, the trading price of our ordinary shares may decline.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
face risks associated with new businesses or assets acquired through mergers or acquisitions, and the acquired companies may not perform
to our expectations, which may adversely affect our results of operations.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
face risks when we acquire other businesses. These risks include:</span></p>

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<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">difficulties
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    or hidden liabilities,</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">relevant
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<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Acquired
companies may not perform to our expectations for various reasons, including the departure of key personnel and loss of customers. Therefore,
we may not realize the benefits we have previously anticipated. If we fail to integrate acquired businesses or realize expected benefits,
we may not gain anticipated economic returns on investments in these mergers and acquisitions and incur substantial transaction costs,
causing our operating results to be materially and adversely affected.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>If
we are unable to secure additional financing or identify suitable merger or acquisition targets, we may be unable to implement our long-term
business plan, develop or enhance our products and services, take advantage of future opportunities, or respond to competitive pressures
on a timely manner.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
long-term business plan includes the identification of suitable targets for horizontal or vertical mergers or acquisitions, so as to
enhance overall productivity and to benefit from economies of scale. Due to the recent uncertainties in the global economic outlook and
financial market stability, we may not be able to secure an adequate level of additional financing, whether through equity financing,
debt financing or other sources. To raise additional capital, we may need to issue new securities, which could result in further dilution
to our shareholders and significant dilution to our earnings per share. Issuance of new securities with registration rights or covenants
through additional financings may be superior to the current ones that would restrict our operations and strategies. If we are unable
to raise additional financing, we may be unable to implement our long-term business plan, develop or enhance our products and services,
take advantage of future opportunities, or respond to competitive pressures on a timely basis, if at all. In addition, lack of additional
capital could force us to substantially curtail or even cease operations.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
also may not be able to identify merger or acquisition targets. We may not be able to successfully integrate the targeted business or
operations with ours after a merger or acquisition. Such failure to execute our long-term business plan likely will negatively impact
results of our operations.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
generally do not have exclusive agreements with our customers and we may lose their contracts if they are not satisfied with our products
and services or for other reasons.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
generally do not have exclusive agreements with our customers. As a result, we must rely on the quality of our products and services,
our reputation in the industry, and favorable pricing terms to attract and retain customers. There is no assurance that we will be able
to maintain and retain our relationships with current and or future customers. Our customers may choose to terminate their relationships
with us if they are not satisfied with our services or the prices of our competitors&#8217; offerings are lower. If a substantial number
of our customers choose not to continue to purchase products and services from us, it would materially and adversely affect our business
and results of operations.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
markets for out-of-home digital advertising and digital security systems in China are highly competitive. If we are unable to develop
and offer competitive new products and services, our future operations could be adversely affected.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
markets for out-of-home digital advertising and digital security information systems in China are intensely competitive and are characterized
by frequent technological changes, evolving industry standards, and changing in customer demands. We face competition from multiple domestic
competitors in each segment and increased competition may result in price reductions, reduced margins, and inability to gain or hold
market share.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
future revenue stream, to a large degree, depends on our ability to capitalize on our technology strength and capabilities to offer new
software applications and services to a broader client base. We must make investments in research and development to continue developing
and offering new software applications and internet related products and services, and to enhance our existing software applications
and internet related services to maintain market acceptance of our products and services. We may encounter challenges in innovation and
introduction of new products and services. Our software applications under development may not be successfully completed or, if developed,
may not achieve significant customer acceptance. If we are unable to successfully define, develop, introduce competitive new software
applications, and enhance the existing ones, our future operating results would be adversely affected. The timeline for software developments
is difficult to predict. Timely launch of new applications and their acceptance by customers are important to our future success. A delay
in the development or introduction of new applications could have a significantly adverse impact on our results of operations.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Our
software applications may contain defects or errors, which could decrease sales, damage our reputation, or delay deliveries of our products.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
software products are complex and must meet the stringent technical requirements requested by our customers. In order to keep pace with
the current technologies and the rapid changes in the industry standards, we must accelerate new product developments and enhancements
for our existing products. Because of the complex designs and the expeditious development cycles, we cannot assure that our software
products are free of errors, especially for the newly released software applications and the updates for the existing software products.
If our software is not free of errors, this could potentially result in litigation, declining sales, increasing product returns, product
warranty costs, and damage to our reputation, which would adversely affect our business.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Our
technology may become obsolete, which could materially adversely affect our ability to sell our products and services.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white">Our
industry is known for rapid changes in technology, frequent introductions of new applications, quick evolution of industry
standards, and changes in customer demands. <span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If our
technology, products and services become obsolete, our business operations would be materially and adversely affected. These market
characteristics can cause the existing products to be obsolete and unmarketable. Our future success depends upon our ability to
timely address the increasingly sophisticated requests from our customers to support the existing and new hardware, software,
database, and networking platforms. Failure to achieve market acceptance of our existing products and services or to launch new
products could materially and adversely affect our business and results of operations. As a result, we have to invest in research
and development in order to succeed in this competitive industry and timely satisfy market demands. Our research and development
expenses from continuing operations were approximately $3.0 million, $3.6 million and $4.5 million for the years ended December 31,
2023, 2022, and 2021, respectively.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
face the risk of systems interruptions and capacity constraints, possibly resulting in adverse publicity, revenue loss and erosion of
customer trust.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
satisfactory performance, reliability, and availability of our network infrastructure are critical to our reputation and our ability
to attract and retain customers and to maintain adequate customer service levels. We may experience temporary service interruptions for
a variety of reasons, including telecommunications or power failures, fire, water damage, vandalism, computer bugs, or viruses or hardware
failures. We may not be able to correct a problem in a timely manner. Any service interruption that results in the unavailability of
our system or reduces its capacity could result in real or perceived public safety issues that may affect customer confidence in our
services and afflict negative publicity that could cause us to lose customer accounts or fail to obtain new accounts. Any inability to
scale our systems may cause unanticipated system disruptions, slower response times, degradation in quality of customer service, or impaired
performance and speed of transaction processing. We are not certain that we will be able to project the rate or timing of increases,
if any, in the use of our services to permit us to upgrade and expand our systems effectively or to efficiently integrate any newly developed
or purchased modules with our existing systems.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
have a limited history with our pricing models for our CBT products and services and, as a result, we may be forced to change the prices
we charge for our applications or the pricing models upon which they are based.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have limited experience with respect to determining the optimal prices and pricing models for certain of our CBT products and services
and certain geographic markets. As the markets for our applications mature, or as competitors introduce products or services that compete
with ours, including bundling competing offerings with additional products or services, we may be unable to attract new customers at
the same price or based on the same pricing models as we have used historically. As a result, in the future we may be required to reduce
our prices, which could adversely affect our financial performance. In addition, we may offer volume price discounts based on the number
of products or services purchased by a customer or the number of our applications purchased by a customer, which would effectively reduce
the prices we charge for our products and services. Also, we may be unable to renew existing customer agreements or enter into new customer
agreements at the same prices or upon the same terms that we have historically, which could have a material and adverse effect on our
financial position.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Security
breaches may harm our business.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
cloud-based applications involve the storage and transmission of our customers&#8217; proprietary and confidential information. Any security
breaches, unauthorized access, unauthorized usage, virus or similar breach or disruption could result in loss of confidential information,
damage to our reputation, early termination of our contracts, litigation, regulatory investigations, indemnity obligations, or other
liabilities. If our security measures are breached as a result of third-party action, employee error, malfeasance or otherwise and, as
a result, someone obtains unauthorized access to customer data, our reputation will be damaged, our business may suffer and we could
incur significant liability. Because the techniques used to obtain unauthorized access or sabotage computer systems change frequently,
and generally are not identified until they are launched against a target, we may be unable to anticipate these hacking techniques or
implement adequate preventative measures. Any or all of these concerns could negatively affect our ability to attract new customers and
cause existing customers to elect not to renew or upgrade their subscriptions, or subject us to third-party lawsuits, regulatory fines,
or other action or liability, which could adversely affect our operating results.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>If
we are not able to adequately secure and protect our patents, trademarks and other proprietary rights, our business may be materially
affected.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
protect our intellectual properties, we rely on a combination of copyright, trademark, and trade secret laws. We also rely on non-disclosure
agreements and other confidentiality procedures and contractual provisions to protect our intellectual property rights. Some of these
technologies are critical to our business but are not protected by copyrights or patents. It may be possible for unauthorized third parties
to copy or reverse engineer our products, or otherwise obtain and use information that we regard as proprietary. Further, third parties
could challenge the scope or enforceability of our copyrights. In certain other jurisdictions, including China where we operate, the
laws do not protect our proprietary rights to the same extent as the laws of the United States. Any misappropriation of our intellectual
property could have a material and adverse effect on our business and results of operations. We cannot assure you that the measures we
take to protect our proprietary rights are adequate.</span></p>

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that we infringe the proprietary rights of third parties could result in significant expenses or restrictions on our ability to sell
our products and services.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Third
parties may claim that our products or services infringe their proprietary rights. Any infringement claim, with or without merit, would
be time-consuming and expensive to litigate or settle and could divert our management&#8217;s attention from our core business. In the
event of a successful infringement claim against us, we may have to pay significant damages, incur substantial legal fees, develop costly
non-infringing technology, or enter into license agreements that require us to pay substantial royalties that may not be available on
terms acceptable to us, if at all.</span></p>

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significant portion of our sales are derived from a limited number of customers or related parties, and results from operations could
be adversely affected and shareholder value harmed if we lose any of these customers.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Historically,
a significant portion of our revenues have been derived from a limited number of customers or related parties. For the year ended December
31, 2023, we generated about $0.2 million of revenue from related parties. For the years ended December 31, 2023, 2022 and 2021, approximately
30%, 24% and 29%, respectively, of our revenues of continuing operations were derived from our five largest customers, including related
parties. The loss of any of these significant customers and related parties would adversely affect our revenues and shareholder value.</span></p>

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have limited insurance coverage for our operations in China.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
insurance industry in China is still in the early stage of development. Insurance companies in China offer limited insurance products.
We have determined that the risks of disruption or liability from our business, the loss or damage to our property, including our facilities,
equipment and office furniture, the cost of insuring these risks, and the difficulties associated with acquiring such insurance on commercially
reasonable terms make it impractical for us to have such insurance. As a result, we do not have any business liability, disruption, litigation
or property insurance coverage for our operations in China, except for insurance on some company owned vehicles. Any occurrence of uninsured
loss or damage to property, or litigation, or business disruption may result in substantial costs and diversion of resources, which could
have an adverse effect on our operating results.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
do not have insurance coverage against damages or losses of our products. Defects in our products could result in a loss of customers
and decrease in revenue, unexpected expenses and a loss of market share.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have not purchased product liability insurance to provide against any claims against us based on our product quality. As a result, defects
in our products could result in a loss of customers and decrease in revenue, unexpected expenses and a loss of market share, and any
of our products are found to have reliability, quality or compatibility problems, we will be required to accept returns, provide replacements,
provide refunds, or pay damages. We may be required to incur substantial amounts to indemnify our customers in respect of their product
quality claims against us, which would materially and adversely affect the results of our operations and severely damage our reputation.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
depend heavily on key personnel, and turnover of key employees and senior management could harm our business.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
future business and results of operations significantly depend upon continuous contributions by key technical and senior management personnel,
including Jianghuai Lin, Chairman and Chief Executive Officer, Zhiqiang Zhao, President and Director, Liqiong (Iris) Yan, the Chief Financial
Officer, Zhixiong Huang, Chief Operating Officer and Guangzeng Chen, Chief Technology Officer. The success of our business also depends
in significant part upon our ability to attract and retain additional qualified management, technical, marketing, sales, and support
personnel for our operations. If we lose a key employee, or if we are not able to attract and retain skilled employees as needed, our
business could suffer. Significant turnover in our senior management could largely deplete our institutional knowledge held by our existing
senior management team. We depend on the skills and abilities of these key employees in managing technical, marketing, and sales aspects
of our business, any part of which could be harmed by future turnover.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
may be exposed to potential risks relating to our internal controls over financial reporting.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Companies
that file reports with the SEC, including us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX
404. SOX 404 requires management to establish and maintain a system of internal control over financial reporting, and annual reports
on Form 10-K or Form 20-F filed under the Exchange Act are required to contain a report by management assessing the effectiveness of
a company&#8217;s internal control over financial reporting. Separately, under SOX 404, as amended by the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010, public companies that are large accelerated or accelerated filers, other than emerging growth companies
or smaller reporting companies, must include in their annual reports on Form 10-K or Form 20-F an attestation report of their auditors&#8217;
attesting to and reporting on the management&#8217;s assessment of internal control over financial reporting. Non-accelerated filers
and emerging growth companies are not required to include an attestation report of their auditors in the annual reports.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
report of our management is included under Item 15 &#8220;Controls and Procedures&#8221; of this report. We are a non-accelerated filer
and not required to include an attestation report of our auditor in this annual report. Management believes that our internal control
over financial reporting has continued to improve in 2023 to minimize material weaknesses identified in Item 15 of this report. Although
we have made improvements to overcome such concern, we can provide no assurance that these material weaknesses will be entirely remediated
in a timely manner. As a result, investors and others may lose confidence in the reliability of our financial statements.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
face risks associated with maintaining and expanding our international operations, including unfavorable and uncertain regulatory, political,
economic, tax and labor conditions.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are subject to legal and regulatory requirements, political uncertainty and social, environmental and economic conditions in multiple
jurisdictions, over which we have little control and which are inherently unpredictable. Our operations in such jurisdictions, particularly
as a company based in the PRC, create risks relating to, among others, compliance; organizing local operating entities; establishing,
staffing and managing foreign business locations; navigating foreign government taxes, regulations and permit requirements; enforceability
of our contractual rights; trade restrictions or exchange controls. Such conditions may increase our costs, impact our operations and
business plans and require significant management attention, and may harm our business if we unable to manage them effectively.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span style="text-decoration: underline">Risks
Relating to Doing Business in China</span></i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
PRC government exerts substantial influence over the manner in which we conduct our business activities. Its oversight and discretion
over our business could result in a material adverse change in our operations and the value of our ordinary shares. Changes in laws,
regulations and policies in China and uncertainties with respect to the PRC legal system could materially and adversely affect us. In
addition, rules and regulations in China can change quickly with little advance notice.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
substantial portion of our operations are conducted in the PRC. Accordingly, our financial condition and results of operations are affected
to a significant extent by the economic, political and legal developments in the PRC. The PRC economy differs from the economies of most
developed countries in many respects, including the extent of government involvement, level of development, growth rate, and control
of foreign exchange and allocation of resources. The PRC government has implemented various measures to encourage economic growth and
to guide the allocation of resources. Some of these measures may benefit the overall PRC economy but may also have a negative effect
on us. Our financial condition and results of operations could be materially and adversely affected by government control over capital
investments or changes in tax regulations that are applicable to us.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Chinese government recently has published new policies that significantly affected certain industries such as the education and internet
industries, and we cannot rule out the possibility that it will not in the future release regulations or policies regarding our industry
that could require us or our PRC subsidiaries to seek permission from Chinese authorities to continue to operate our business in China,
which may adversely affect our business, financial condition and results of operations. Furthermore, recent statements made by the Chinese
government have indicated an intent to increase the government&#8217;s oversight and control over offerings of companies with significant
operations in China that are to be conducted in foreign markets, as well as foreign investment in China-based issuers like us. Any such
action, once taken by the Chinese government, could significantly limit or completely hinder our ability to offer our securities, and
could cause the value of such securities to significantly decline or become worthless.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
example, in July 2021, the Chinese government provided new guidance on China-based companies raising capital outside of China, including
through arrangements via VIEs. In light of such developments, the SEC has imposed enhanced disclosure requirements on China-based companies
seeking to register securities with the SEC. Although we dissolved the VIE structure in September 2021 and our business in China currently
does not involve any type of restricted industry under Chinese regulations, any future Chinese, U.S. or other rules and regulations that
place restrictions on capital raising or other activities by companies with extensive operations in China could adversely affect our
business. If the business environment in China deteriorates from the perspective of domestic or international investment, or if relations
between China and the United States or other governments deteriorate, the Chinese government may intervene with our operations, and our
business in China, as well as the value of our securities, may also be adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
PRC government has increasingly strengthened oversight in offerings conducted overseas or on foreign investment in China-based issuers,
which could result in a material change in our operations and our ordinary shares could decline in value or become worthless.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC government has recently indicated an intent to take actions to exert more oversight and control over offerings that are conducted
overseas and/or foreign investment in China-based issuers. For example, on July 6, 2021, the relevant PRC government authorities made
public the Opinions on Strictly Scrutinizing Illegal Securities Activities in Accordance with the Law, or the Opinions. These Opinions
emphasized the need to strengthen the administration over illegal securities activities and the supervision of overseas listings by China-based
companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the
risks and incidents faced by China-based over-seas-listed companies.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 24, 2021, the CSRC issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing
by Domestic Companies (Draft for Comments) and the Administrative Measures for the Filing of Overseas Securities Offering and Listing
by Domestic Companies (Draft for Comments), collectively the Draft Overseas Listing Regulations, for public comment until January 23,
2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Following
issuance of the Draft Overseas Listing Regulations, on February 17, 2023, the CSRC issued the Notice on Filing Arrangements for Overseas
Securities Offering and Listing by Domestic Companies (the &#8220;CSRC Filing Notice&#8221;), stating that the CSRC has published the
Trial Measures, and Listing Guidelines, collectively the Trial Measures and Listing Guidelines. Among others, the Trial Measures and
Listing Guidelines provide that overseas offerings and listings by PRC domestic companies shall:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">require
    submission of relevant materials that contain a filing report and a legal opinion, providing truthful, accurate and complete information
    on matters including but not limited to the shareholders of the issuer. Where the filing documents are complete and in compliance
    with stipulated requirements, the CSRC shall, within 20 working days after receipt of filing documents, conclude the filing procedure
    and publish filing results on the CSRC website. Where filing documents are incomplete or do not conform to stipulated requirements,
    the CSRC shall request supplementation and amendment thereto within five working days after receipt of the filing documents. The
    issuer should then complete supplementation and amendment within 30 working days;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">abide
    by laws, administrative regulations and relevant state rules concerning foreign investment in China, state-owned asset administration,
    industry regulation and outbound investment, and shall not disrupt the PRC domestic market order, harm state or public interests
    or undermine the lawful rights and interests of PRC domestic investors;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">abide
    by national secrecy laws and relevant provisions. Necessary measures shall be taken to fulfill confidentiality obligations. Divulgence
    of state secrets or working secrets of government agencies is strictly prohibited. Provision of personal information and important
    data, etc., to overseas parties in relation to overseas offering and listing of PRC domestic companies shall be in compliance with
    applicable laws, administrative regulations and relevant state rules; and</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">be
    made in strict compliance with relevant laws, administrative regulations and rules concerning national security in the spheres of
    foreign investment, cybersecurity, data security, etc., and issuers shall duly fulfill their obligations to protect national security.
    If the intended overseas offering and listing necessitates a national security review, relevant security review procedures shall
    be completed according to the law before the application for such offering and listing is sub-mitted to any overseas parties such
    as securities regulatory agencies and trading venues;</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trial Measures came into effect on March 31, 2023. PRC domestic companies seeking to offer and list securities (which, for the purposes
of the Trial Measures, are defined thereunder as equity shares, depository receipts, corporate bonds convertible to equity shares, and
other equity securities that are offered and listed overseas, either directly or indirectly, by PRC domestic companies) in overseas markets,
either via direct or indirect means, must file with the CSRC within three working days after their application for an overseas listing
is submitted.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trial Measures provide that where a PRC domestic company seeks to indirectly offer and list securities in overseas markets, the issuer
shall designate a major domestic operating entity, which shall, as the domestic entity responsible, file with the CSRC. The Trial Measures
stipulate that an overseas listing will be determined as &#8220;indirect&#8221; if the issuer meets both of the following conditions:
(1) 50% or more of any of the issuer&#8217;s operating revenue, total profit, total assets or net assets as documented in its audited
consolidated financial statements for the most recent accounting year are accounted for by PRC domestic companies (Condition I), and
(2) the main parts of the issuer&#8217;s business activities are conducted in the PRC, or its main places of business are located in
the PRC, or the senior managers in charge of its business operations and management are mostly Chinese citizens or domiciled in the PRC
(Condition II); whether Chinese citizens from Taiwan, Hong Kong, and Macau are included in the foregoing specification is not specified.
The determination as to whether or not an overseas offering and listing by PRC domestic companies is indirect shall be made on a &#8220;substance
over form&#8221; basis; the Listing Guidelines further stipulate that if an issuer not satisfying Condition I submits an application
for issuance and listing in overseas markets in accordance with relevant non-PRC issuance regulations requiring such issuer to disclose
risk factors mainly related to the PRC, the securities firm(s) and the issuer&#8217;s PRC counsel should follow the principle of &#8220;substance
over form&#8221; in order to identify and argue whether the issuer should complete a filing under the Trial Measures. Subsequent securities
offerings of an issuer in (i) the same overseas market where it has previously offered and listed securities, and (ii) an overseas market
other than one where the issuer has previously offered and listed securities shall be filed with the CSRC within three working days after
offerings are completed. Additionally, the Trial Measures stipulate that after an issuer has offered and listed securities in an overseas
market, the issuer shall submit a report to the CSRC within three working days after the occurrence and public disclosure of (i) a change
of control thereof, (ii) investigations of or sanctions imposed on the issuer by overseas securities regulators or relevant competent
authorities, (iii) changes of listing status or transfers of listing segment, and (iv) a voluntary or mandatory delisting.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
CSRC Filing Notice states that, beginning from March 31, 2023, PRC domestic enterprises which have already issued and listed securities
overseas and fall within the scope of filing under the Trial Measures shall be considered &#8220;existing enterprises&#8221; (&#8220;Existing
Listed Enterprises&#8221;). Existing Listed Enterprises are not required to complete filings immediately; rather, Existing Listed Enterprises
should complete filings if they are subsequently involved in matters require filings, such as follow-on financing activities, in accordance
with the Trial Measures.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
is a possibility that we may be deemed as an Existing Listed Enterprise as defined under the CSRC Filing Notice, and that future offerings
of listed securities or listings outside China by us may be subject to CSRC filing requirements in accordance with the Trial Measures.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 24, 2023, the CSRC, together with several other governmental authorities jointly enacted the Revised Provisions. The Revised Provisions were issued under the title the &#8220;Provisions
on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,&#8221;
and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding
their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require
that, among other things, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly
disclose or provide to relevant individuals or entities, including securities companies, securities service providers, and overseas regulators,
any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent
authorities according to law, and file with the secrecy administrative department at the same level; and (b) a domestic company that
plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and
entities, including securities companies, securities service providers, and overseas regulators, any other documents and materials that,
if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable
national regulations. Any failure or perceived failure by our Company, or our PRC subsidiaries to comply with the above confidentiality
and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities
being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected
of committing a crime.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Given
that the Trial Measures, Listing Guidelines and Revised Provisions have been introduced recently, and that there remain substantial uncertainties
surrounding the enforcement thereof, we cannot assure you that, if required, we would be able to complete the filings and fully comply
with the relevant new rules on a timely basis, if at all. Further, as of the date of this report, the aforementioned Provisions of the
State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) issued on
December 24, 2021 remain in draft form and final and effective versions are yet to be published.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Changes
in U.S. and Chinese regulations or in relations between the United States and China may adversely impact our business, our operating
results, our ability to raise capital and the value of the securities that we are registering. Any such changes may take place quickly
and with very little notice.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
U.S. government, including the SEC, has made statements and taken certain actions that led to changes to United States and international
relations, and will impact companies with connections to the United States or China. The SEC has issued statements primarily focused
on companies with significant China-based operations, such as us. For example, on July 30, 2021, Gary Gensler, Chairman of the SEC, issued
a Statement on Investor Protection Related to Recent Developments in China, pursuant to which Chairman Gensler stated that he has asked
the SEC staff to engage in targeted additional reviews of filings for companies with significant China-based operations. The statement
also addressed risks inherent in companies with VIE structures. We have dissolved our VIE structure and are not in any industry that
is subject to foreign ownership limitations by China. However, it is possible that the Company&#8217;s filings with the SEC may be subject
to enhanced review by the SEC and this additional scrutiny could affect our ability to effectively raise capital in the United States.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
response to the SEC&#8217;s July 30, 2021 statement, the CSRC announced on August 1, 2021, that &#8220;it is our belief that Chinese
and U.S. regulators shall continue to enhance communication with the principle of mutual respect and cooperation, and properly address
the issues related to the supervision of China-based companies listed in the U.S. so as to form stable policy expectations and create
benign rules framework for the market.&#8221; While the CSRC will continue to collaborate &#8220;closely with different stakeholders
including investors, companies, and relevant authorities to further promote transparency and certainty of policies and implementing measures,&#8221;
it emphasized that it &#8220;has always been open to companies&#8217; choices to list their securities on international or domestic markets
in compliance with relevant laws and regulations.&#8221; If any new legislation, executive orders, laws and/or regulations are implemented,
if the U.S. or Chinese governments take retaliatory actions due to the recent U.S.-China tension or if the Chinese government exerts
more oversight and control over securities offerings that are conducted in the United States, such changes could have an adverse effect
on our business, financial condition and results of operations, our ability to raise capital and the value of the securities that we
are registering.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
August 2023, an executive order was issued by the Biden administration to restrict U.S. investments in sensitive technologies in the
Chinese mainland, Hong Kong, and Macau, such as advanced computing chips, quantum technology, and artificial intelligence. As of the
date of this annual report, the final rules implementing the order have not become effective yet, and the scope of the review program
may be materially different from what is currently contemplated by the advance notice. Therefore, there are substantial uncertainties
on whether the outbound foreign direct investment review program will have a material impact on our business, results of operations,
financial condition, and prospects.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>There
are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
significant portion of our operations are conducted in the PRC, and are governed by PRC laws, rules and regulations. Our PRC subsidiaries
are subject to laws, rules and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based
on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.
In 1979, the PRC government began to promulgate a comprehensive system of laws, rules and regulations governing economic matters in general.
The overall effect of legislation over the past four decades has significantly enhanced the protections afforded to various forms of
foreign investment in China. However, China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations
may not sufficiently cover all aspects of economic activities in China or may be subject to significant degrees of interpretation by
PRC regulatory agencies. In particular, because these laws, rules and regulations, especially those relating to the internet, are relatively
new, and because of the limited number of published decisions and the nonbinding nature of such decisions, and because the laws, rules
and regulations often give the relevant regulator significant discretion in how to enforce them, the interpretation and enforcement of
these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable. In addition, the PRC legal system
is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, and may have
a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the
violation. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources
and management attention.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Our
business is subject to complex and evolving laws and regulations regarding privacy and data protection. Compliance with China&#8217;s
new Data Security Law, Cybersecurity Review Measures, Personal Information Protection Law, Regulations on Network Data Security (draft
for public comments), as well as additional laws, regulations and guidelines that the Chinese government promulgates in the future may
entail significant expenses and could materially affect our business.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Regulatory
authorities in China have implemented and are considering further legislative and regulatory proposals concerning data protection. China&#8217;s
new Data Security Law went into effect on September 1, 2021. The Data Security Law provides that the data processing activities must
be conducted based on &#8220;data classification and hierarchical protection system&#8221; for the purpose of data protection and prohibits
entities in China from transferring data stored in China to foreign law enforcement agencies or judicial authorities without prior approval
by the Chinese government. The Data Security Law sets forth the legal liabilities of entities and individuals found to be in violation
of their data protection obligations, including rectification order, warning, fines of up to RMB5 million, suspension of relevant business,
and revocation of business permits or licenses. On July 7, 2022, CAC promulgated the Security Assessment Measures for Outbound Data Transfers,
or the &#8220;Measures,&#8221; which became effective on September 1, 2022. The Measures applies to the security assessment of critical
data and personal information collected and generated by a data processor in its operation in the PRC, which are to be provided abroad.
Article 4 of the Measures stipulates that a data processor shall declare security assessment for its outbound data transfer to the CAC
through the local cyberspace administration at the provincial level if the data processor provide data abroad under any of the following
circumstances: (i) where a data processor provides critical data abroad; (ii) where a critical information infrastructure operator or
a data processor processing the personal information of more than one million people provides personal information abroad; (iii) where
a data processor has provided personal information of 100,000 people or sensitive personal information of 10,000 people in total abroad
since January 1 of the previous year; and (iv) other circumstances prescribed by the CAC for which declaration for security assessment
for outbound data transfers is required.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
November 7, 2016, the SCNPC promulgated the Cybersecurity Law of the PRC which came into effect on June 1, 2017 and applies to the construction,
operation, maintenance and use of networks as well as the supervision and administration of cybersecurity in China. The PRC Cybersecurity
Law defines &#8220;network operators&#8221; as owners and administrators of networks and network service providers, are subject to various
security protection-related obligations, including: (i) complying with security protection obligations under graded system for cybersecurity
protection requirements, which include formulating internal security management rules and operating instructions, appointing cybersecurity
responsible personnel and their duties, adopting technical measures to prevent computer viruses, cyber-attack, cyber-intrusion and other
activities endangering cybersecurity, adopting technical measures to monitor and record network operation status and cybersecurity events;
(ii) formulating a emergency plan and promptly responding and handling security risks, initiating the emergency plans, taking appropriate
remedial measures and reporting to regulatory authorities in the event comprising cybersecurity threats; and (iii) providing technical
assistance and support to public security and national security authorities for protection of national security and criminal investigations
in accordance with the law.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 10, 2021, the CAC issued the Cybersecurity Review Measures (revised draft for public comments), which took effect on February 15,
2022. The revised Cybersecurity Review Measures authorize the CAC to conduct cybersecurity review on a range of activities that affect
or may affect national security. The PRC National Security Law defines various types of national security, including technology security
and information security. The revised Cybersecurity Review Measures expands the cybersecurity review to data processing operators in
possession of personal information of over 1 million users if the operators intend to list their securities in a foreign country. Under
the revised Cybersecurity Review Measures, the scope of entities required to undergo cybersecurity review to assess national security
risks that arise from data processing activities would be expanded to include all critical information infrastructure operators who purchase
network products and services and all data processors carrying out data processing activities that affect or may affect national security.
In addition, the revised Cybersecurity Review Measures provide that all such entities that maintain or store the personal information
of more than 1 million users and undertake a public listing of securities in a foreign country would be required to pass cybersecurity
review, which would focus on the potential risk of core data, important data, or a large amount of personal information being stolen,
leaked, destroyed, illegally used or exported out of China, or critical information infrastructure being affected, controlled or maliciously
used by foreign governments after such a listing. An operator that violates these Measures shall be dealt with in accordance with the
provisions of the PRC Cybersecurity Law and the PRC Data Security Law.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
November 14, 2021, the CAC released the Regulations on Network Data Security (draft for public comments) and accepted public comments
until December 13, 2021. The draft Regulations on Network Data Security provide more detailed guidance on how to implement the general
legal requirements under legislations such as the Cybersecurity Law, Data Security Law and the Personal Information Protection Law. The
draft Regulations on Network Data Security follow the principle that the state will regulate based on a data classification and multi-level
protection scheme, under which data is largely classified into three categories: general data, important data and core data. Personal
data and important data will be subject to &#8220;key&#8221; protection and core data to &#8220;strict&#8221; protection. We believe
that the data we access falls within the category of &#8220;general data,&#8221; because such data is data of our member merchants, does
not involve personal information and is not large in volume. Further, when we conduct advertising data collection and analysis, such
data is only related to the placement and delivery of ads, which does not involve any personal information. However, we may constitute
an online platform operator under the draft Regulations on Network Data Security, which is defined as a platform that provides information
publishing, social network, online transaction, online payment and online audio/video services, because our PRC subsidiary Biznest is
operating a smart cloud platform that publishes commercial ads of our advertiser clients. Online platform operator under the draft Regulations
will be required, among other things, to disclose terms and privacy policies and the algorithms they use. Where there are any changes
that would result in significant impacts on users&#8217; rights and interests, online platform operators will be required to seek public
comments for at least 30 business days and publish how the public comments have been considered and incorporated into the final versions
and why other comments are rejected. The draft Regulations also set forth procedures for reporting data breach incidents. In the event
that a data breach incident has caused harm to any individuals or organizations, a data processor should notify the relevant individuals
and organizations within 3 business days, unless such notices are not required under applicable laws or regulations. Additionally, if
we are deemed as a data processor listed overseas under the draft Regulations, we will be required to carry out an annual data security
assessment on our own or by engaging a third party data security services institution and submit a data security assessment report for
the prior year to the local cyberspace affairs administration department before January 31 of each year. The Regulations on Network Data
Security (draft for public comments) were released for public comments and subject to further changes.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 20, 2021, the SCNPC promulgated the Personal Information Protection Law which became effective on November 1, 2021. The Personal
Information Protection Law provides a comprehensive set of data privacy and protection requirements that apply to the processing of personal
information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations
and individuals in China, and the processing of personal information of persons in China outside of China if such processing is for purposes
of providing products and services to, or analyzing and evaluating the behavior of, persons in China. The Personal Information Protection
Law also provides that critical information infrastructure operators and personal information processing entities who process personal
information meeting a volume threshold to be set by Chinese cyberspace regulators are also required to store in China personal information
generated or collected in China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such
personal information. Lastly, the Personal Information Protection Law contains proposals for significant fines for serious violations
of up to RMB 50 million or 5% of annual revenues from the prior year and may also be ordered to suspend any related activity by competent
authorities.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
our smart cloud platform is engaged in the advertising business, the advertising industry is not subject to any foreign investment restrictions
and our smart cloud platform does not collect any personal information, we believe that we will be able to comply with the requirements
of the PRC Cybersecurity Law, the PRC Data Security Law and related implementing regulations. However, interpretation, application and
enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation,
amendments to existing legislation or changes in enforcement. Compliance with the PRC Cybersecurity Law and the PRC Data Security Law
could increase the cost to us in providing our services, require changes to our operations or may prevent us from providing certain services.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 25, 2023, the SAMR released the Administrative Measures for Internet Advertising, which came into effect on May 1, 2023 and
replaced Interim Measures for the Administration of Internet Advertising. The Administrative Measures for Internet Advertising further
strengthen the responsibilities of Internet platform operators and enhance their review obligation in Internet advertising activities.
Any failure to comply with the Administrative Measures for Internet Advertising may result in administrative liabilities, including warnings,
public denouncement, fines, enforcement orders requiring us to correct, suspension of business or even criminal liabilities, all of which
may materially and adversely affect our business and results of operations. Our smart cloud platform, currently engaged in the advertising
business, complies with the requirements of the Administrative Measures for Internet Advertising.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>PRC
laws and regulations establish complex procedures in connection with certain acquisitions of China-based companies by foreign investors,
which could make it more difficult for us to pursue growth through acquisitions or mergers in China.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State-Owned Assets Supervision and Administration Commission,
the State Administration of Taxation, the State Administration for Industry and Commerce, the CSRC, and the SAFE, jointly adopted the
Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&amp;A Rules, which came into effect on
September 8, 2006 and were amended on June 22, 2009. The M&amp;A Rules include, among other things, provisions that purport to require
that an offshore special purpose vehicle formed for the purpose of an overseas listing of securities of a PRC company obtain the approval
of the CSRC prior to the listing and trading of such special purpose vehicle&#8217;s securities on an overseas stock exchange. On September
21, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings through special purpose vehicles.
However, substantial uncertainty remains regarding the scope and applicability of the M&amp;A Rules to offshore special purpose vehicles.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
regulations also established additional procedures and requirements that are expected to make merger and acquisition activities in China
by foreign investors more time consuming and complex, including requirements in some instances that the MOFCOM be notified in advance
of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, or that the approval from
the MOFCOM be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire affiliated
domestic companies.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Moreover,
according to the Anti-Monopoly Law of the People&#8217;s Republic of China promulgated on August 30, 2007 and the Provisions on Thresholds
for Reporting of Concentrations of Undertakings (the &#8220;Prior Reporting Rules&#8221;) issued by the State Council in August 2008
and amended in September 2018, the concentration of business undertakings by way of mergers, acquisitions or contractual arrangements
that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance
to the anti-monopoly enforcement agency of the State Council when the applicable threshold is crossed and such concentration shall not
be implemented without the clearance of prior reporting. In addition, the Regulations on Implementation of Security Review System for
the Merger and Acquisition of Domestic Enterprise by Foreign Investors (the &#8220;Security Review Rules&#8221;) issued by the MOFCOM
that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise &#8220;national defense
and security&#8221; concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic
enterprises that raise &#8220;national security&#8221; concerns are subject to strict review by the MOFCOM, and the rules prohibit any
activities attempting to bypass a security review by structuring the transaction through, among other things, trusts, entrustment or
contractual control arrangements.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may grow our business in part by acquiring other companies operating in our industry. Compliance with the requirements of the regulations
to complete such transactions could be time-consuming, and any required approval processes, including approval from the MOFCOM, may delay
or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>PRC
regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion
may restrict or prevent Taoping from making additional capital contributions or loans to its PRC subsidiaries.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping,
as an offshore holding company, is permitted under PRC laws and regulations to provide funding to its PRC subsidiaries through loans
or capital contributions. However, loans by Taoping to its PRC subsidiaries to finance their activities cannot exceed statutory limits
i.e., the difference between its total amount of investment and its registered capital, or certain amount calculated based on elements
including capital or net assets, the cross-border financing leverage ratio and the macro prudential coefficient (&#8220;Macro-prudential
Management Mode&#8221;) and must be registered with the local counterpart of the SAFE and capital contributions to its PRC subsidiaries
are subject to the requirement of making necessary filings in the Foreign Investment Comprehensive Management Information System, and
registration with other governmental authorities in China. According to the Circular of the People&#8217;s Bank of China and the State
Administration of Foreign Exchange on Upregulating the Macro-prudent Adjustment Parameter for Cross-border Financing issued on July 20,
2023, the limit for the total amount of foreign debt under the Macro-prudential Management Mode is adjusted to three times of their respective
net assets.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement
of Capital of Foreign-invested Enterprises, or Circular 19, effective on June 1, 2015, in replacement of the Circular on the Relevant
Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-
Invested Enterprises, the Notice from the State Administration of Foreign Exchange on Relevant Issues Concerning Strengthening the Administration
of Foreign Exchange Businesses, and the Circular on Further Clarification and Regulation of the Issues Concerning the Administration
of Certain Capital Account Foreign Exchange Businesses. According to Circular 19, the flow and use of the RMB capital converted from
foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital may not be used for
the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of bank loans that have been transferred
to a third party. Although Circular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested
enterprise to be used for equity investments within the PRC, it also reiterates the principle that RMB converted from the foreign currency-denominated
capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear
whether the SAFE will permit such capital to be used for equity investments in the PRC in actual practice. The SAFE promulgated the Notice
of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital
Account, or Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in Circular 19, but changes the prohibition
against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted
loans to a prohibition against using such capital to grant loans to non-associated enterprises. Violations of Circular 19 and Circular
16 could result in administrative penalties. Circular 19 and Circular 16 may significantly limit our ability to transfer any foreign
currency Taoping holds to its PRC subsidiaries, which may adversely affect our liquidity and our ability to fund and expand our business
in the PRC.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding
companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government
approvals on a timely basis, if at all, with respect to future loans or future capital contributions by us to our PRC subsidiaries. As
a result, uncertainties exist as to our ability to provide prompt financial support to our PRC subsidiaries when needed. If we fail to
complete such registrations or obtain such approvals, our ability to use foreign currency and to capitalize or otherwise fund our PRC
operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our
business.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and the HFCA Act, all call for additional and more stringent
criteria to be applied to U.S.-listed companies with significant operations in China. These developments could add uncertainties to our
continued listing, future offerings, business operations share price and reputation.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">U.S.
public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative
publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative
publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial
accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting the continued challenges faced by the U.S. regulators in
their oversight of financial statement audits of U.S.-listed companies with significant operations in HK SAR. On April 21, 2020, SEC
Chairman Jay Clayton and former PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting
the risks associated with investing in companies based in or have substantial operations in emerging markets including HK SAR, reiterating
past SEC and PCAOB statements on matters including the difficulty associated with inspecting accounting firms and audit work papers in
HK SAR and higher risks of fraud in emerging markets and the difficulty of bringing and enforcing SEC, Department of Justice and other
U.S. regulatory actions, including in instances of fraud, in emerging markets generally.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
May 20, 2020, the U.S. Senate passed the HFCA Act requiring a foreign company to certify it is not owned or controlled by a foreign government
if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. In addition,
if the PCAOB is unable to inspect the company&#8217;s auditors for three consecutive years, the issuer&#8217;s securities are prohibited
to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCA Act and it was signed into
law on December 18, 2020.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
May 21, 2021, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating
in a &#8220;Restrictive Market&#8221;, (ii) prohibit Restrictive Market companies from directly listing on Nasdaq Capital Market, and
only permit them to list on Nasdaq Global Select or Nasdaq Global Market in connection with a direct listing and (iii) apply additional
and more stringent criteria to an applicant or listed company based on the qualifications of the company&#8217;s auditors.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, legislation
entitled &#8220;Consolidated Appropriations Act, 2023&#8221; was signed into law, which contained, among other things, an identical provision
to the Accelerating Holding Foreign Companies Accountable Act and amended the HFCA Act by requiring the SEC to prohibit an issuer&#8217;s
securities from trading on any U.S. stock exchanges or over-the-counter markets if its auditor is not subject to PCAOB inspections for
two consecutive years instead of three.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining,
as contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms
located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act.
The rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public
accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate (&#8220;Commission-Identified
Issuers&#8221;). The final amendments require Commission-Identified Issuers to submit documentation to the SEC establishing that, if
true, it is not owned or controlled by a governmental entity in the public accounting firm&#8217;s foreign jurisdiction. The amendments
also require that a Commission-Identified Issuer that is a &#8220;foreign issuer,&#8221; as defined in Exchange Act Rule 3b-4, provide
certain additional disclosures in its annual report for itself and any of its consolidated foreign operating entities. A Commission-Identified
Issuer will be required to comply with the submission and disclosure requirements in the annual report for each year in which it was
identified.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 16, 2021, pursuant to the HFCA Act, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect
or investigate completely registered public accounting firms headquartered in mainland China of the People&#8217;s Republic of China
and Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in such
jurisdictions. In addition, the PCAOB&#8217;s report identified specific registered public accounting firms which are subject to these
determinations. Our current registered public accounting firm, PKF, or our former registered public accounting firm, UHY LLP, is not
headquartered in mainland China or Hong Kong and was not identified in this report as a firm subject to the PCAOB&#8217;s determination.
Our current auditor, PKF, is a UK-based accounting firm that is registered with the PCAOB and can be inspected by the PCAOB. We have
no current intention of engaging any auditor not subject to regular inspection by the PCAOB. Furthermore, the PCAOB is able to inspect
the audit workpapers of our PRC subsidiaries, as such workpapers are electronic files possessed by our registered public accounting firms.
However, if the PCAOB determines in the future that it cannot inspect or fully investigate our auditor at such future time, trading in
our securities would be prohibited under the HFCA Act.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 26, 2022, CSRC, the MOFCOM, and the PCAOB signed the Protocol, governing inspections and investigations of audit firms based in
China and Hong Kong. The Protocol remains unpublished and is subject to further explanation and implementation. Pursuant to the fact
sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for
inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB made a
statement announcing that it was able, in 2022, to inspect and investigate completely issuer audit engagements of PCAOB-registered public
accounting firms headquartered in China and Hong Kong. However, uncertainties still exist as to whether the PCAOB will have continued
access for complete inspections and investigations in the future. When the PCAOB reassesses its determinations in the future, it could
still determine that it is unable to inspect and investigate completely accounting firms based in mainland China and Hong Kong. The PCAOB
has also indicated that it will act immediately to consider the need to issue new determinations under the HFCA Act if needed. There
can be no assurance that we will continue to be able to comply with requirements imposed by U.S. regulators if the PCAOB is not able
to fully inspect any component of our auditor&#8217;s work papers in the future. Delisting of the Company&#8217;s ordinary shares would
force holders to sell their shares. The market price of Taoping&#8217;s ordinary shares could be adversely affected as a result of anticipated
negative impacts of these executive or legislative actions, regardless of whether these executive or legislative actions are implemented
and regardless of our actual operating performance.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Uncertainties
exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact the viability of our
current corporate structure, corporate governance and business operations.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
March 15, 2019, the SCNPC approved the Foreign Investment Law, which took effect on January 1, 2020. The Foreign Investment Law embodies
an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice
and the legislative efforts to unify the corporate legal requirements for both foreign and domestic invested enterprises in China. The
Foreign Investment Law establishes the basic framework for the access to, and the promotion, protection and administration of foreign
investments in view of investment protection and fair competition.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to the Foreign Investment Law, the State Council will publish or approve to publish a &#8220;negative list&#8221; for special administrative
measures concerning foreign investment. The latest Negative List, which was promulgated by the MOFCOM and the NDRC on March 12, 2022,
and took effect on the same date. The Negative List set out in a unified manner the restrictive measures, such as the requirements on
shareholding percentages and management, for the access of foreign investments, and the industries that are prohibited for foreign investment.
Any field not falling in the Negative List shall be administered under the principle of equal treatment to domestic and foreign investment.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Based
on the legal analysis of the Company&#8217;s in-house legal counsel, who is a licensed attorney in the PRC, we believe that none of our
PRC subsidiaries&#8217; current business is stipulated on the Negative List. As a result, according to the laws and regulations currently
in effect, our PRC subsidiaries are able to conduct their business without being subject to restrictions imposed by the foreign investment
laws and regulations of the PRC and none of Taoping or our subsidiaries is required to obtain additional licenses or permits beyond a
regular business license for each PRC subsidiary&#8217;s operations. Each of our PRC subsidiaries is required to obtain and has obtained
such regular business license from the local branch of the SAMR. No application for any such license has been denied.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
we cannot assure you that our current operations or any newly-developed business in the future will still deemed to be &#8220;permitted&#8221;
in the &#8220;negative list&#8221;, which may be promulgated or be amended from time to time by the MOFCOM and the NDRC. As a result,
we cannot assure you that our PRC subsidiaries are always able to successfully update or renew the licenses or permits required for the
relevant business in a timely manner or that these licenses or permits are sufficient to conduct all of our present or future business.
If our PRC subsidiaries (i) do not receive or maintain required permissions or approvals, (ii) inadvertently conclude that such permissions
or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and our PRC subsidiaries are required
to obtain such permissions or approvals in the future, we could be subject to fines, legal sanctions or an order to suspend our PRC operating
subsidiaries&#8217; business, which may materially and adversely affect the business, financial condition and results of operations of
us.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Restrictions
on currency exchange may limit our ability to receive and use our income effectively.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
majority of our sales will be settled in RMB, and any future restrictions on currency exchanges may limit our ability to use revenue
generated in RMB to fund any future business activities outside of China or to make dividend or other payments in U.S. dollars. Although
the conversion of RMB into foreign currency for current account transactions, such as interest payments, profit distributions, and trade
or service related transactions, can be made without prior governmental approval, significant restrictions still remain, including primarily
the restriction that FIEs may only buy, sell, or remit foreign currencies after providing valid commercial documents to certain banks
in China authorized to conduct foreign exchange business. In addition, conversion of RMB for capital account items, including direct
investment and loans, are subject to governmental approval in China, and requires companies to open and maintain separate foreign exchange
accounts for capital account items. We cannot be certain that the Chinese regulatory authorities will not impose more stringent restrictions
on the convertibility of the RMB.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><b><i>Failure to make adequate contributions to
various employee benefit plans as required by PRC regulations may subject us to penalties.</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white">Companies operating in China are required to participate
in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment
obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our
employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The
requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels
of economic development in different locations. The government authorities may examine whether an employer has made adequate payments
of the requisite employee benefit payments, and employers who fail to make adequate payments may be subject to late payment fees, fines
and/or other penalties. Although we believe all of our PRC subsidiaries are in material compliance with relevant laws and regulations,
we cannot assure you that we are able to make adequate contribution in a timely manner at all time. If we are subject to late fees or
fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.</p>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Fluctuations
in exchange rates could adversely affect our business and the value of our securities.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
value of our ordinary shares will be indirectly affected by the foreign exchange rate between the U.S. dollar and RMB, and between the
two currencies and other currencies in which our sales may be denominated. Appreciation or depreciation in the value of RMB relative
to the U.S. dollar would affect our financial results reported in U.S. dollar without giving effect to any underlying change in our business
or results of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue that will be
exchanged into U.S. dollars, as well as earnings from any U.S. dollar-denominated investments we make in the future.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
July 2005, the RMB has no longer been pegged to the U.S. dollar. Although the People&#8217;s Bank of China regularly intervenes in the
foreign exchange market to prevent significant short-term fluctuations in the exchange rate, RMB may appreciate or depreciate significantly
in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions
on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Very
limited hedging transactions are available in China to reduce our exposure to the exchange rate fluctuations. To date, we have not entered
into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these
transactions may be limited. We may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange
losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Restrictions
under PRC law on our PRC subsidiaries&#8217; ability to make dividends and other distributions could materially and adversely affect
our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct
our business.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Substantially
all of our revenues are earned by our PRC subsidiaries. However, PRC regulations restrict the ability of our PRC subsidiaries to make
dividends and other payments to their offshore parent companies. PRC legal restrictions permit payments of dividends by our PRC subsidiaries
only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our
PRC subsidiaries are also required under PRC laws and regulations to allocate at least 10% of their annual after-tax profits determined
in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said reserve fund reach 50% of the company&#8217;s
registered capital. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us
in the form of loans, advances, or cash dividends. Any limitations on the ability of our PRC subsidiaries to transfer funds to us could
materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends
and otherwise fund and conduct our business.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>PRC
regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRC
subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary or limit our PRC subsidiary&#8217;s
ability to increase their registered capital or distribute profits.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents&#8217; Offshore Investment
and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the former
circular commonly known as &#8220;SAFE Circular 75&#8221; promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents
to register with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore entity,
for the purpose of overseas investment and financing, with such PRC residents&#8217; legally owned assets or equity interests in domestic
enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a &#8220;special purpose vehicle.&#8221; SAFE Circular
37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle,
such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material
event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration,
the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from
carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to
contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described
above could result in liability under PRC law for evasion of foreign exchange controls. According to the Notice on Further Simplifying
and Improving Policies for the Foreign Exchange Administration of Direct Investment released on February 13, 2015 by SAFE, local banks
will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration
and amendment registration, under SAFE Circular 37 from June 1, 2015.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to SAFE Circular 37, our shareholders or beneficial owners, who are PRC residents, are subject to SAFE Circular 37 or other foreign exchange
administrative regulations in respect of their investment in our company. We have notified substantial beneficial owners of ordinary
shares who we know are PRC residents of their filing obligations. Nevertheless, we may not be aware of the identities of all of our beneficial
owners who are PRC residents. We do not have control over our beneficial owners and there can be no assurance that all of our PRC-resident
beneficial owners will comply with SAFE Circular 37 and subsequent implementation rules, and there is no assurance that the registration
under SAFE Circular 37 and any amendment will be completed in a timely manner, or will be completed at all. The failure of our beneficial
owners who are PRC residents to register or amend their foreign exchange registrations in a timely manner pursuant to SAFE Circular 37
and subsequent implementation rules, or the failure of future beneficial owners of our company who are PRC residents to comply with the
registration procedures set forth in SAFE Circular 37 and subsequent implementation rules, may subject such beneficial owners or our
PRC subsidiaries to fines and legal sanctions. Such failure to register or comply with relevant requirements may also limit our ability
to contribute additional capital to our PRC subsidiaries and limit our PRC subsidiaries&#8217; ability to distribute dividends to us.
These risks may have a material adverse effect on our business, financial condition and results of operations.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furthermore,
it is uncertain how SAFE Circular 37, and any future regulation concerning offshore or cross-border transactions, will be interpreted,
amended and implemented by the relevant PRC government authorities, and we cannot predict how these regulations will affect our business
operations or future strategy. Failure to register or comply with relevant requirements may also limit our ability to contribute additional
capital to our PRC subsidiaries and limit our PRC subsidiaries&#8217; ability to distribute dividends to us. These risks could in the
future have a material adverse effect on our business, financial condition and results of operations.</span></p>

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failure to comply with PRC regulations regarding employee share incentive plans may subject the PRC plan participants or us to fines
and other legal or administrative sanctions.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may submit applications
to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies. In the meantime,
directors, executive officers and other employees who are PRC citizens or who are non-PRC residents residing in the PRC for a continuous
period of not less than one year, subject to limited exceptions, and who have been granted restricted shares, options or restricted share
units, or RSUs may follow the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating
in Stock Incentive Plan of Overseas Publicly Listed Company, issued by SAFE in February 2012, to apply for the foreign exchange registration.
According to those regulations, employees, directors and other management members participating in any stock incentive plan of an overseas
publicly listed company who are PRC citizens or who are non-PRC citizens residing in China for a continuous period of not less than one
year, subject to limited exceptions, are required to register with SAFE through a domestic qualified agent, which may be a PRC subsidiary
of the overseas listed company, and complete certain other procedures. Failure to complete the SAFE registrations may subject them to
fines and legal sanctions and may also limit their ability to make payment under the relevant equity incentive plans or receive dividends
or sales proceeds related thereto in foreign currencies, or our ability to contribute additional capital into our subsidiaries in China
and limit our PRC subsidiaries&#8217; ability to distribute dividends to us. We also face regulatory uncertainties under PRC law that
could restrict our ability to adopt additional equity incentive plans for our directors, officers and employees who are PRC citizens
or who are non-PRC residents residing in the PRC for a continuous period of not less than one year, subject to limited exceptions.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, the State Administration of Taxation has issued circulars concerning employee share options, restricted shares or RSUs. Under
these circulars, employees working in the PRC who exercise share options, or whose restricted shares or RSUs vest, will be subject to
PRC individual income tax. The PRC subsidiaries of an overseas listed company have obligations to file documents related to employee
share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees related to
their share options, restricted shares or RSUs. Although we currently withhold income tax from our PRC employees in connection with their
exercise of options and the vesting of their restricted shares and RSUs, if the employees fail to pay, or the PRC subsidiaries fail to
withhold, their income taxes according to relevant laws, rules and regulations, the PRC subsidiaries may face sanctions imposed by the
tax authorities.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Under
the Enterprise Income Tax Law, we may be classified as a &#8220;resident enterprise&#8221; of China. Such classification will likely
result in unfavorable tax consequences to us and our non-PRC shareholders.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
March 16, 2007, the SCNPC passed a new Enterprise Income Tax Law, or the EIT Law. On November 28, 2007, the State Council of China passed
its implementing rules, which took effect on January 1, 2008. Under the EIT Law, an enterprise established outside of China with &#8220;de
facto management bodies&#8221; within China is considered a &#8220;resident enterprise,&#8221; meaning that it can be treated in a manner
similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto management
as &#8220;substantial and overall management and control over the production and operations, personnel, accounting, and properties&#8221;
of the enterprise.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
April 22, 2009, the State Administration of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment
Controlled Enterprises Incorporated Offshore as Resident Enterprises, or the Notice, also referred to as SAT Circular 82. The Notice
further interprets the application of the EIT Law and its implementation rules to non-Chinese enterprise or group controlled offshore
entities. Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group
will be classified as a &#8220;non-domestically incorporated resident enterprise&#8221; if (i) its senior management in charge of daily
operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or
persons in China; (iii) its substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept
in China; and (iv) at least half of its directors with voting rights or senior management habitually reside in China. A resident enterprise
would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10%, when
paying dividends to its non-PRC shareholders. However, it remains unclear as to whether the Notice is applicable to an offshore enterprise
controlled by Chinese natural persons. It is unclear how tax authorities will determine tax residency based on the facts of each case.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may be deemed to be a resident enterprise by Chinese tax authorities. If the PRC tax authorities determine that we are a &#8220;resident
enterprise&#8221; for the PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may
be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting
obligations, which would materially reduce our net income. Second, although, under the EIT Law and its implementing rules, dividends
paid to us from our PRC subsidiaries would qualify as &#8220;tax-exempt income,&#8221; we cannot guarantee that such dividends will not
be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet
issued a guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for the
PRC enterprise income tax purposes. It is possible that future guidance issued with respect to the new &#8220;resident enterprise&#8221;
classification could result in a situation, where a 10% withholding tax is imposed on dividends we pay to our shareholders that are non-resident
enterprises and with respect to gains derived by said shareholders from transferring our shares. Finally, if we are deemed a PRC resident
enterprise, dividends paid to our non-PRC individual shareholders and any gain realized on the transfer of our shares by such shareholders
may be subject to PRC tax at a rate of 20%, if such income is deemed to be from PRC sources.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we were treated as a &#8220;resident enterprise&#8221; by the PRC tax authorities, we would be subject to taxation in both the U.S. and
China, and we may not be able to claim our PRC tax as a credit to reduce our U.S. tax.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises or other assets
attributed to a Chinese establishment of a non-Chinese company, or immovable properties located in China owned by non-Chinese companies.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
October 2017, the State Administration of Taxation issued the Bulletin on Issues Concerning the Withholding of Non-PRC Resident Enterprise
Income Tax at Source, or Bulletin 37, which replaced the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers
by Non-PRC Resident Enterprises issued by the State Administration of Taxation on December 10, 2009, and partially replaced and supplemented
rules under the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or Bulletin
7, issued by the State Administration of Taxation on February 3, 2015. Pursuant to Bulletin 7, an &#8220;indirect transfer&#8221; of
PRC assets, including a transfer of equity interests in an unlisted non-PRC holding company of a PRC resident enterprise, by non-PRC
resident enterprises may be re-characterized and treated as a direct transfer of the underlying PRC assets, if such arrangement does
not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result,
gains derived from such indirect transfer may be subject to PRC enterprise income tax. According to Bulletin 7, &#8220;PRC taxable assets&#8221;
include assets attributed to an establishment in China, immoveable properties located in China, and equity investments in PRC resident
enterprises and any gains from the transfer of such asset by a direct holder, who is a non-PRC resident enterprise, would be subject
to PRC enterprise income taxes. When determining whether there is a &#8220;reasonable commercial purpose&#8221; of the transaction arrangement,
factors to be taken into consideration include: whether the main value of the equity interest of the relevant offshore enterprise derives
from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China
or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable
assets have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the business
model and organizational structure; the replicability of the transaction by direct transfer of PRC taxable assets; and the tax situation
of such indirect transfer and applicable tax treaties or similar arrangements. In the case of an indirect offshore transfer of assets
of a PRC establishment, the resulting gain is to be included with the enterprise income tax filing of the PRC establishment or place
of business being transferred, and may consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer
relates to immoveable properties located in China or to equity investments in a PRC resident enterprise, which is not related to a PRC
establishment or place of business of a non-resident enterprise, a PRC enterprise income tax of 10% would apply, subject to available
preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer
payments has the withholding obligation. Pursuant to Bulletin 37, the withholding agent shall declare and pay the withheld tax to the
competent tax authority in the place where such withholding agent is located within 7 days from the date of occurrence of the withholding
obligation, while the transferor is required to declare and pay such tax to the competent tax authority within the statutory time limit
according to Bulletin 7. Late payment of applicable tax will subject the transferor to default interest charges. Both Bulletin 37 and
Bulletin 7 do not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired
from a transaction through a public stock exchange.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
is uncertainty as to the application of Bulletin 37 or previous rules under Bulletin 7. We face uncertainties as to the reporting and
other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale
of the shares in our offshore subsidiaries or investments. Our company may be subject to filing obligations or taxes if our company is
transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under
Bulletin 37 and Bulletin 7. For transfer of shares in our company by investors that are non-PRC resident enterprises, our PRC subsidiary
may be requested to assist in the filing under Bulletin 37 and Bulletin 7. As a result, we may be required to expend valuable resources
to comply with Bulletin 37 and Bulletin 7 or to request the relevant transferors from whom we purchase taxable assets to comply with
these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect
on our financial condition and results of operations.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that we
violated these laws could have a material adverse effect on our business.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign
governments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining
or retaining business. We have operations, agreements with third parties, and make most of our sales in China. The PRC also strictly
prohibits bribery of government officials. Our activities in China create the risk of unauthorized payments or offers of payments by
the employees, consultants, sales agents, or distributors of our Company to government officials or political parties, even though they
may not always be subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However,
our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents,
or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption
laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our
business, operating results and financial condition. In addition, the U.S. government may seek to hold our Company liable for FCPA violations
committed by companies in which we invest or that we acquire.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>If
we become directly subject to the scrutiny, criticism, and negative publicity involving U.S.-listed Chinese companies, we may have to
expend significant resources to investigate and resolve the matter, which could harm our business operations, stock price, and reputation.
It could result in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved favorably.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the past few years, U.S. publicly traded companies that have substantially all of their operations in China, particularly companies like
us have been the subject of intense scrutiny, criticism, and negative publicity by investors, financial commentators, and regulatory
agencies, such as the SEC. Much of the scrutiny, criticism, and negative publicity has centered around financial and accounting irregularities
and mistakes, lack of effective internal controls over financial accounting, inadequate corporate governance policies or lack of adherence
thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism, and negative publicity, the publicly traded
stocks of many U.S. listed Chinese companies have sharply decreased in value and, in some cases, have become virtually worthless. Many
of these companies are now subject to shareholder lawsuits and SEC enforcement actions, and are conducting internal and external investigations
into the allegations. It is not clear the effect of this sector-wide scrutiny, criticism, and negative publicity will have on our Company,
our business, and our stock price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be
true or untrue, we will have to expend significant resources to investigate such allegations defending our Company. This situation will
be costly, time-consuming, and distract our management from growing our company.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span style="text-decoration: underline">Risks
Relating to Our Securities</span></i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>If
we fail to comply with the continued listing requirements of NASDAQ, we would face possible delisting, which would result in a limited
public market for our shares and make obtaining future debt or equity financing more difficult for us.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
ordinary shares are traded and listed on the Nasdaq Capital Market under the symbol of &#8220;TAOP.&#8221; We received a notification
from Nasdaq Listing Qualifications on September 16, 2022, as announced in a report with the SEC on a 6-K Form filed on September 16,
2022, that we were not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued
listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00
per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency
continues for a period of 30 consecutive business days. Based on the closing bid price of the Company&#8217;s ordinary shares for the
30 consecutive business days prior to the date of the notification letter from Nasdaq, the Company no longer satisfied the minimum bid
price requirement. The notification letter provided that the Company had 180 calendar days, or until March 15, 2023, to regain compliance
with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the Company&#8217;s ordinary shares must have a closing bid price of at least
$1.00 per share for a minimum of 10 consecutive business days (Nasdaq may monitor the price for as long as 20 consecutive business days
prior to making a final compliance determination). In the event the Company does not regain compliance with the minimum bid price requirement
by March 15, 2023, the Company may be eligible for an additional 180 calendar day grace period. On March 16, 2023, we received a second
notice from the Nasdaq Listing Qualifications, in which Nasdaq granted us an additional 180 days, or until September 11, 2023, to regain
compliance, because the Company met the continued listing requirement for public float and other applicable requirements, except the
bid price requirement, and the Company had indicated its intention of curing the deficiency by effecting a share combination, if necessary.
On July 31, 2023, the board of directors of the Company approved a one-for-ten share combination of the Company&#8217;s issued and outstanding
ordinary shares, no par value. The share combination was intended to increase the per share trading price of the ordinary shares to satisfy
the $1.00 minimum bid price requirement for continued listing on the NASDAQ Stock Market. On August 15, 2023, we received a notice from
the Nasdaq Listing Qualifications, in which Nasdaq determined that for the last 10 consecutive business days, from August 1 through 14,
2023, the closing bid price of the Company&#8217;s ordinary shares stock had been at $1.00 per share or greater. Accordingly, the Company
has regained compliance with Listing Rule 5550(a)(2) and this matter was closed.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
there is no assurance that we will be able to continue to maintain our compliance with the NASDAQ continued listing requirements. If
we fail to so, the Company&#8217;s ordinary shares may lose their status on NASDAQ Capital Market and they would likely be traded on
the over-the-counter markets, including the Pink Sheets market. As a result, selling the Company&#8217;s ordinary shares could be more
difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and security analysts&#8217;
coverage of us may be reduced. In addition, in the event that the Company&#8217;s ordinary shares are delisted, broker dealers would
bear certain regulatory burdens which may discourage broker dealers from effecting transactions in the Company&#8217;s ordinary shares
and further limit the liquidity of the Company&#8217;s shares. These factors could result in lower prices and larger spreads in the bid
and ask prices for the Company&#8217;s ordinary shares. Such delisting from NASDAQ and continued or further declines in the Company&#8217;s
ordinary share price could also greatly impair our ability to raise additional necessary capital through equity or debt financing and
could significantly increase the ownership dilution to shareholders caused by the Company&#8217;s issuing equity in financing or other
transactions.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>If
we were delisted from NASDAQ, we may become subject to the trading complications experienced by &#8220;Penny Stocks&#8221; in the over-the-counter
market.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Delisting
from NASDAQ may cause the Company&#8217;s shares to become subject to the SEC&#8217;s &#8220;penny stock&#8221; rules. The SEC generally
defines a penny stock as an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exemptions. One such exemption is to be listed on NASDAQ. Therefore, were we to be delisted from NASDAQ,
the Company&#8217;s ordinary shares may become subject to the SEC&#8217;s &#8220;penny stock&#8221; rules. These rules require, among
other things, that any broker engaging in a purchase or sale of the Company&#8217;s securities provide its customers with: (i) a risk
disclosure document, (ii) disclosure of market quotations, if any, (iii) disclosure of the compensation of the broker and its salespersons
in the transaction, and (iv) monthly account statements showing the market values of the Company&#8217;s securities held in the customer&#8217;s
accounts. A broker would be required to provide the bid and offer quotations and compensation information before effecting the transaction.
This information must be contained on the customer&#8217;s confirmation. Generally, brokers are less willing to effect transactions in
penny stocks due to these additional delivery requirements. These requirements may make it more difficult for shareholders to purchase
or sell the Company&#8217;s ordinary shares. Since the broker, not us, prepares this information, we would not be able to assure that
such information is accurate, complete or current.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
have issued convertible notes that contains variable conversion prices which could result in substantial dilution to the Company&#8217;s
existing shareholders.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
September 27, 2023, we entered into a securities purchase agreement to an investor, pursuant to which we sold to the investor an unsecured
convertible promissory note with a 12-month maturity. The note has the original principal amount of $609,000. The investor may, at any time after six months from the issue date, convert
all or any part of the outstanding balance of the note, at a conversion price of $8.00 per share. In addition, at any time after six months from the issue date, the investor may redeem all or any portion of the note, subject to a maximum amount of $150,000 per month, into ordinary
shares of the Company at a price equal to 80% multiplied by the lowest daily volume-weighted average price during the 10 trading
days immediately preceding the applicable redemption, subject to certain adjustments and limitations. The investor also has the
right, on any trading day and the following trading day, that any intraday trade price of the ordinary shares is 10% greater than
the previous measurement period&#8217;s closing trade price (as defined in the note), to redeem all or any portion of the
outstanding balance of the note into ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Therefore,
if the investor elects to convert the then-outstanding balance of the note into the Company ordinary shares at or prior to maturity,
such conversion may be made at a significant discount to the then market price of the Company&#8217;s shares. In the event that the investor
converts any or all of the above note, the Company&#8217;s existing shareholders will experience immediate dilution in their ownership
of the Company&#8217;s shares, as a result of the discounted price at which the note may be converted.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
trading price of the Company&#8217;s ordinary shares is highly volatile, leading to the possibility of their value being depressed at
a time when you want to sell your holdings.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
market price of the Company&#8217;s ordinary shares is volatile, and this volatility may continue. Numerous factors, many of which are
beyond our control, may cause the market price of the Company&#8217;s ordinary shares to fluctuate significantly. These factors include:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
    earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the
    expectations of financial market analysts and investors;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">speculations
    about our business in the press or the investment community;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">significant
    developments relating to our relationships with our customers or suppliers;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">stock
    market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industries;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">customer
    demand for our products;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">investor
    perceptions of our industry in general and our company in particular;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    operating and stock performance of comparable companies;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">general
    economic conditions and trends;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">major
    catastrophic events;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">announcements
    by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
    in accounting standards, policies, guidance, interpretation or principles;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">loss
    of external funding sources;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">sales
    of the Company&#8217;s ordinary shares, including sales by our directors, officers or significant shareholders; and</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">additions
    or departures of key personnel.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the past, shareholders of a public company often brought securities class action suits against the company following periods of instability
in the market price of that company&#8217;s securities. If we were involved in a class action suit, it could divert a significant amount
of our management&#8217;s attention and other resources from our business and operations, which could harm our results of operations
and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our
reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be
required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
Company&#8217;s outstanding warrants and convertible notes may adversely affect the market price of the Company&#8217;s ordinary shares.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of the date of this report, there are warrants outstanding to purchase 36,000 ordinary shares of the Company. These warrants are exercisable
for 36,000 ordinary shares at an exercise price of $45.6 per share. These warrants can only be exercised in cash. We also sold to the
investor an unsecured convertible promissory note with a 12-month maturity on September 27, 2023. The investor may, at any time after
six months from the issue date, convert all or any part of the outstanding balance of the note.
The sale or possibility of sale of the shares underlying the warrants and the conversion or possibility of conversion of the note could
have an adverse effect on the market price of our ordinary shares or our ability to obtain future financing. If and to the extent these
warrants and convertible note are exercised or converted, as the case may be, you may experience dilution to your holdings.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Techniques
employed by short sellers may drive down the market price of the Company&#8217;s ordinary shares.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Short
selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention
of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value
of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects
to pay less in that purchase than it received in the sale. As it is in the short seller&#8217;s interest for the price of the security
to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business
prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short
attacks have, in the past, led to selling of shares in the market.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Public
companies that have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative
publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting
irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations
of fraud. As a result, a number of targets of such efforts are now conducting internal and external investigations into the allegations
and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have
to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would vigorously defend
against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller
by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and
time-consuming, and could distract our management from growing our business. Even if such allegations are ultimately proven to be groundless,
allegations against us could severely impact our business operations, and any investment in the Company&#8217;s ordinary shares could
be greatly reduced or even rendered worthless.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>If
securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market
price and trading volume for the Company&#8217;s shares could decline.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
trading market for the Company&#8217;s ordinary shares will depend in part on the research and reports that securities or industry analysts
publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of
the analysts who covers us downgrades the Company&#8217;s ordinary shares or publishes inaccurate or unfavorable research about our business,
the market price for the Company&#8217;s ordinary shares would likely decline. If one or more of these analysts cease coverage of the
Company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the
market price or trading volume for the Company&#8217;s ordinary shares to decline.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
do not intend to pay dividends for the foreseeable future.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and do not anticipate
paying any cash dividends on the Company&#8217;s shares. Accordingly, investors must be prepared to rely on sales of their shares after
price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase the Company&#8217;s
shares. Any determination to pay dividends in the future will be made at the discretion of our Board of Directors, and will depend on
our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable laws, and other factors
our board deems relevant.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
Company&#8217;s outstanding voting securities may be concentrated in a few shareholders.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of April 24, 2024, our officers, directors and beneficially own or control, directly or indirectly, approximately 13.9% of our
outstanding ordinary shares. As a result, they possess significant influence over our company. These persons will be able to significantly
influence, though not independently determine, the outcome of matters required to be submitted to our shareholders for approval, including
significant corporate actions such as mergers, consolidations, sales of all or substantially all of our assets, election of directors
and other significant corporate actions. They may take actions that are not in the best interest of the Company or our other shareholders. This
concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders
of an opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of the ordinary shares.
These actions may be taken even if they are opposed by our other shareholders. In addition, the significant concentration of ownership
may adversely affect the trading price of the ordinary shares due to investors&#8217; perception that conflicts of interest may exist
or arise.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We are a
&#8220;foreign private issuer&#8221; and have disclosure obligations that are different than those of U.S. domestic reporting companies.
Therefore, you should not expect to receive the same information about us as a U.S. domestic reporting company may provide. Furthermore,
if we lose our status as a foreign private issuer, we would be required to fully comply with the reporting requirements of the Exchange
Act applicable to U.S. domestic issuers and incur significant operational, administrative, legal, and accounting costs that we would
not incur as a foreign private issuer.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a foreign private issuer. As a result, we are not subject to certain of the requirements imposed upon U.S. domestic issuers by the
SEC. For example, we are not required by the SEC or the federal securities laws to issue quarterly reports or file proxy statements with
the SEC. We are also allowed to file our annual report with the SEC within four months of our fiscal year end. We are also not required
to disclose certain detailed information regarding executive compensation that is required from U.S. domestic issuers. Further, our directors
and executive officers are not required to report equity holdings under Section 16 of the Securities Act. As a foreign private issuer,
we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, aim to ensure that select groups of investors
are not privy to specific information about an issuer before other investors. We are, however, still subject to the anti-fraud and anti-manipulation
rules of the SEC, such as Rule 10b-5. Since many of the disclosure obligations required of us as a foreign private issuer are different
than those required by U.S. domestic reporting companies, our shareholders should not expect to receive all of the same types of information
about us and at the same time as information is received from, or provided by, U.S. domestic reporting companies. We are liable for violations
of the rules and regulations of the SEC, which do apply to us as a foreign private issuer. Violations of these rules could affect our
business, results of operations, and financial condition.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>As
a foreign private issuer, we are permitted to rely on exemptions from certain NASDAQ corporate governance standards applicable to domestic
U.S. issuers and are subject to reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. issuer.
This may afford less protection to holders of the Company&#8217;s securities.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are exempted from certain corporate governance requirements of the Nasdaq Capital Market by virtue of being a foreign private issuer.
As a foreign private issuer, we are permitted to follow the governance practices of our home country, the BVI in lieu of certain corporate
governance requirements of the Nasdaq Capital Market. As a result, the standards applicable to us are considerably different than the
standards applied to domestic U.S. issuers. For instance, we are not required to:</span></p>

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<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">have
    a majority of the board be independent (although all of the members of the audit committee must be independent under the Exchange
    Act);</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">have
    a compensation committee and a nominating committee to be comprised solely of &#8220;independent directors&#8221;; and</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">hold
    an annual meeting of shareholders no later than one year after the end of the Company&#8217;s fiscal year-end.</span></td></tr>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
information we are required to file with or furnish to the SEC will be less extensive and less timely as compared to that required to
be filed with the SEC by U.S. domestic issuers. Certain corporate governance practices in the BVI, which is our home country, may differ
significantly from the NASDAQ Capital Market corporate governance listing standards.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result, you may not have the same protections afforded to shareholders of companies that are subject to all of the Nasdaq corporate
governance requirements.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>You
may have difficulty enforcing judgments obtained against us or our directors and officers.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping
is a BVI company with substantially all of our assets and operations located outside of the United States. In addition, all of Taoping&#8217;s
directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of
these persons is also located outside the United States. As a result, it may be difficult for you to effect service of process within
the United States upon us or these persons. As a result, it may be difficult or impossible for you to bring an action against us or against
these individuals in the United States. It may also be difficult for you to enforce the U.S. courts judgments obtained in U.S. courts
including judgments based on the civil liability provisions of the U.S. federal securities laws against us or our officers and directors.
In addition, there is uncertainty as to whether the courts of the BVI or Hong Kong would (i) recognize or enforce judgments of United
States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws
of the United States or any state in the United States or (ii) entertain original actions brought in the BVI or Hong Kong against us
or our directors or officers predicated upon the securities laws of the United States or any state in the United States. The courts of
the BVI or Hong Kong may enforce a foreign judgment subject to various conditions, including but not limited to, that the foreign judgment
is a final judgment conclusive upon the merits of the claim, the judgment is for a liquidated amount in a civil matter and not in respect
of taxes, fines, penalties, or similar charges, the proceedings in which the judgment was obtained were not contrary to natural justice,
and the enforcement of the judgment is not contrary to public policy of the BVI or Hong Kong.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
recognition and enforcement of foreign judgments in mainland China are provided for under the PRC Civil Procedures Law. PRC courts may
recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties
between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any
treaties or other forms of reciprocity with the United States that provide for the reciprocal recognition and enforcement of foreign
judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our
director and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or
public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the
United States.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
are a BVI company and, because judicial precedent regarding the rights of shareholders is more limited under BVI law than that under
U.S. law, you may have less protection for your shareholder rights than you would under U.S. law.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
corporate affairs are governed by our memorandum and articles of association, as amended and restated from time to time, the BVI Act
and the common law of the BVI. The rights of shareholders to take action against the directors, actions by minority shareholders and
the fiduciary responsibilities of our directors to us under BVI law are to a large extent governed by the common law of the BVI. The
common law of the BVI is derived in part from comparatively limited judicial precedent in the BVI as well as that from English common
law, which has persuasive, but not binding, authority on a court in the BVI. The rights of our shareholders and the fiduciary responsibilities
of our directors under BVI law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions
in the U.S. In particular, the BVI has a less exhaustive body of securities laws than the U.S. In addition, some U.S. states, such as
Delaware, have more fully developed and judicially interpreted bodies of corporate law than the BVI. There is no statutory recognition
in the BVI of judgments obtained in the U.S., although the courts of the BVI will in certain circumstances recognize and enforce a non-penal
judgment of a foreign court of competent jurisdiction without retrial on the merits.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the laws of most jurisdictions in the United States, majority and controlling shareholders generally have certain fiduciary responsibilities
to the minority shareholders. Shareholders&#8217; actions must be taken in good faith and any unreasonable actions by controlling shareholders
may be declared null and void. BVI law protecting the interests of minority shareholders may not be as vigorous in all circumstances
as the law protecting minority shareholders in United States or other jurisdictions. Although a shareholder of a BVI company may sue
the company derivatively, the procedures and defenses available to the company may result in the rights of shareholders of a BVI company
being more limited than those of shareholders of a company organized in the United States. Furthermore, our directors have the power
to take certain actions without shareholders&#8217; approval, which would require shareholders&#8217; approval under the laws of most
United States or other jurisdictions. The directors of a BVI company, subject in certain cases to the court&#8217;s approval but without
shareholders&#8217; approval, may implement a reorganization, merger or consolidation, or sale of assets, property, business or securities
of the company which sale is subject to a limit of up to 50% in total value of the company. The ability of our board of directors to
create new classes or series of shares and the rights attached by amending the Company&#8217;s memorandum and articles of association
could have the effect of delaying, deterring or preventing a change in our control, including a tender offer to purchase the Company&#8217;s
ordinary shares at a premium over then market prices.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken
by management, members of the board of directors or controlling shareholders than they would as shareholders of a U.S. public company.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span style="text-decoration: underline">General
Risk Factors</span></i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
are subject to changing law and regulations regarding regulatory matters, corporate governance and public disclosure that have increased
both our costs and the risk of non-compliance. </i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are subject to rules and regulations by various governing bodies, including, for example, the SEC, which are charged with the protection
of investors and the oversight of companies whose securities are publicly traded, and to new and evolving regulatory measures under applicable
law, including the laws of the BVI. Our efforts to comply with new and changing laws and regulations have resulted in and are likely
to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating
activities to compliance activities.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Moreover,
because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time
as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs
necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations
and any subsequent changes, we may be subject to penalty and our business may be harmed.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Taoping
employs a mail forwarding service, which may delay or disrupt our ability to receive mail in a timely manner.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mail
addressed to Taoping and received at its registered office in the BVI will be forwarded unopened to the forwarding address supplied by
Taoping to be dealt with. None of Taoping, its directors, officers, advisors or service providers (including the organization which provides
registered office services in the BVI) will bear any responsibility for any delay howsoever caused in mail reaching the forwarding address,
which may impair your ability to communicate with us.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Political
risks associated with conducting business in Hong Kong. </i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
current corporate structure includes certain Hong Kong subsidiaries. Accordingly, our business operation could be affected by the political
and legal developments in Hong Kong. Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding
Hong Kong are reflected in the Basic Law, namely, Hong Kong&#8217;s constitutional document, which provides Hong Kong with a high degree
of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of &#8220;one
country, two systems&#8221;. However, there is no assurance that there will not be any changes in the economic, political and legal environment
in Hong Kong in the future.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Basic Law of the Hong Kong Special Administrative Region of the PRC, Hong Kong is exclusively in charge of its internal affairs and
external relations, while the government of the PRC is responsible for its foreign affairs and defense. As a separate customs territory,
Hong Kong maintains and develops relations with foreign states and regions. Based on certain recent development including the Law of
the People&#8217;s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region issued by the SCNPC
in June 2020, the U.S. State Department has indicated that the United States no longer considers Hong Kong to have significant autonomy
from PRC and President Trump signed an executive order and Hong Kong Autonomy Act, or HKAA, to remove Hong Kong&#8217;s preferential
trade status and to authorize the U.S. administration to impose blocking sanctions against individuals and entities who are determined
to have materially contributed to the erosion of Hong Kong&#8217;s autonomy. The United States may impose the same tariffs and other
trade restrictions on exports from Hong Kong that it places on goods from mainland China. These and other recent actions may represent
an escalation in political and trade tensions involving the U.S., mainland China and Hong Kong, which could potentially harm our business.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Given
the relatively small geographical size of Hong Kong, any of such incidents may have a widespread effect on our business operations, which
could in turn adversely and materially affect our business, results of operations and financial condition. It is difficult to predict
the full impact of the HKAA on Hong Kong and companies with operations in Hong Kong like us. Furthermore, legislative or administrative
actions in respect of China-U.S. relations could cause investor uncertainty for affected issuers, including us, and the market price
of the Company&#8217;s ordinary shares could be adversely affected.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Adverse
developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance
by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our
financial condition and results of operations.</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Actual
events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional
counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors
about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.
For example, on March 10, 2023, Silicon Valley Bank failed and was taken into receivership by the U.S. Federal Deposit Insurance Corporation;
on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership; the following week, a syndicate of
U.S. banks infused $30 billion in First Republic Bank; and later that same week, the Swiss Central Bank provided $54 billion in covered
loan and short-term liquidity facilities to Credit Suisse Group AG, all in an attempt to reassure depositors and calm fears of a banking
contagion. Our ability to effectively run our business could be adversely affected by general conditions in the global economy and in
the financial services industry. Various macroeconomic factors could adversely affect our business, including fears concerning the banking
sector, changes in inflation, interest rates and overall economic conditions and uncertainties. A severe or prolonged economic downturn
could result in a variety of risks, including our ability to raise additional funding on a timely basis or on acceptable terms. A weak
or declining economy could also impact third parties upon whom we depend to run our business. Increasing concerns over bank failures
and bailouts and their potential broader effects and potential systemic risk on the global banking sector generally and its participants
may adversely affect our access to capital and our business and operations more generally.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently,
we do not have a business relationship with any of the banking institutions mentioned above, and our cash, cash equivalents and short
term investments that are mostly concentrated in China have been unaffected by the turmoil in the financial industry in the US and Europe;
however, we cannot guarantee that the banking institution with which we do business will not face similar circumstances in the future,
or that the third parties with whom we do business will not be negatively affected by such circumstances.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_014"></span>ITEM
4. INFORMATION ON THE COMPANY</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_015"></span>A.
History and Development of the Company</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>General
Information</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">The
current legal and commercial name of the Company is Taoping Inc. Taoping Inc. was incorporated in the BVI under the BVI Act on June 18,
2012. The address of our principal place of business is 21<sup>st</sup> Floor, Everbright Bank Building, Zhuzilin, Futian District, Shenzhen
518040 Guangdong China. Our telephone number is 86-755-83708333. Taoping&#8217;s registered agent in the BVI is Maples Corporate Services
(BVI) Limited of Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Corporate
History</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping
Inc.&#8217;s predecessor company was originally organized under the laws of the State of Florida on September 19, 1979 under the name
Mark Thomas Publishing Inc. On April 29, 2003, we changed our name to Irish Mag, Inc. From our inception through October 8, 2006, we
provided consulting services in the offset printing industry, targeting individual retail consumers as well as small to medium sized
companies.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
April 7, 2008, we re-incorporated in the State of Nevada by merging into China Information Security Technology, Inc., a subsidiary that
we established in Nevada to effect the re-incorporation. As a result, the Company&#8217;s name was changed to China Information Security
Technology, Inc. and we became a Nevada corporation.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 26, 2010, the Company changed its name to China Information Technology, Inc., or CITN.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
October 31, 2012, we completed a corporate reorganization, whereby the Company, which was established as a subsidiary of CITN under the
laws of the BVI to effect the reorganization, became the parent company of a publicly held entity. Consequently, CITN became a wholly-owned
subsidiary of the Company. In connection with the reorganization, each outstanding share of the common stock of CITN was converted into
the right to receive one ordinary share of the Company. The ordinary shares of the Company were listed on the NASDAQ Global Select Market
under the trading symbol of &#8220;CNIT,&#8221; the same symbol under which the common stock of CITN were listed. Prior to the reorganization,
shares of CITN&#8217;s common stock were registered pursuant to Section 12(b) of the Exchange Act. On October 31, 2012, the Company filed
a Form 8-K12B under cover of a Form 6-K to establish the Company as the successor issuer to CITN pursuant to Rule 12g-3 under the Exchange
Act. Pursuant to Rule 12g-3(a) under the Exchange Act, the ordinary shares of the Company, as successor issuer, were deemed registered
under Section 12(b) of the Exchange Act. On November 13, 2012, CITN filed a Form 15 with the SEC to terminate the registration of the
shares of its common stock and suspend its reporting obligations under Sections 13 and 15(d) of the Exchange Act. On November 19, 2012,
we changed the name of CITN to China Information Technology (Nevada), Inc., which was liquidated and dissolved in July 2014.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">At
the Company&#8217;s 2017 Annual Meeting of Members, which was held on September 19, 2017, the shareholders of the Company approved an
amendment to the Company&#8217;s Memorandum and Articles of Association to remove the par value of the Company&#8217;s ordinary shares.
On October 12, 2017, the Company filed an amended and restated Memorandum and Articles of Association with the Registrar of Corporate
Affairs in the BVI, pursuant to which the par value per share of the Company&#8217;s ordinary shares has been removed.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
May 25, 2018, the Company held its 2018 Annual Meeting of Members and its shareholders approved the change of company name to &#8220;Taoping
Inc.&#8221; and an amendment and restatement of its Memorandum and Articles of Association to reflect such change of name. In connection
with the name change, the trading symbol of its ordinary shares was changed to &#8220;TAOP,&#8221; effective on June 1, 2018.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 30, 2020, Taoping completed a share combination of the Company&#8217;s ordinary shares at a ratio of one-for-six, which decreased
its outstanding ordinary shares to approximately 7,332,434 shares. This share combination did not change the maximum number of shares
Taoping is authorised to issue or the par value of its ordinary shares.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 1, 2023, Taoping completed a share combination of the Company&#8217;s ordinary shares at a ratio of one-for-ten, which decreased
its outstanding ordinary shares to approximately 1,864,554 shares. This share combination did not change the maximum number of shares
Taoping is authorised to issue or the par value of its ordinary shares. Accordingly, except as otherwise indicated, all share and per
share information contained in this annual report has been restated to retroactively show the effect of the share combination.</span></p>

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Services Agreement</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 1, 2007, our subsidiary IST entered into a management services agreement, or MSA, with iASPEC and its shareholders. Pursuant to
the MSA, iASPEC granted IST an exclusive, royalty-free, transferable, worldwide license to use and install certain iASPEC software, along
with copies of source and object codes relating to such software in any manner permitted by applicable laws for ten years. Under the
MSA, IST was entitled to receive 100% of the modified net profit of iASPEC, and would reimburse iASPEC for all net losses incurred. In
connection with the MSA, IST also entered into a purchase option agreement, or Option Agreement, with iASPEC and its shareholders, effective
as of July 1, 2007. Pursuant to the Option Agreement, the iASPEC shareholders granted IST, or its designee(s), an exclusive, irrevocable
option to purchase from the iASPEC shareholders, from time to time, all or part of iASPEC&#8217;s shares, according to an equity transfer
agreement, or to purchase all or part of iASPEC&#8217;s assets, according to an asset purchase and transfer agreement. Under the terms
of the Option Agreement, the option is immediately exercisable at an exercise price of $1,800,000, in the aggregate, which is subject
to regulatory approval.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of the relationship with iASPEC, iASPEC became a variable interest entity of the Company.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 1, 2008, our Chairman and Chief Executive Officer, Mr. Jianghuai Lin, entered into an Equity Transfer Agreement with Mr. Jin Zhu
Cai, the owner of a 24% minority interest in iASPEC. Pursuant to the Agreement, Mr. Lin purchased Mr. Cai&#8217;s minority interest for
a total consideration of RMB 60 million (approximately $8.7 million). As a result of the Equity Transfer Agreement, Mr. Lin holds 100%
of the equity interests of iASPEC.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 13, 2009, IST, iASPEC and Mr. Lin, as the sole shareholder of iASPEC, amended and restated the MSA, pursuant to which IST would
continue to provide management and consulting services to iASPEC.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Dissolution
of the Variable Interest Entity Structure </span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
September 2021, we dissolved the VIE structure by exercising the purchase option under the Option Agreement to purchase all of the equity
interests in iASPEC at an aggregate exercise price of $1,800,000. On September 18, 2021, Taoping and IST entered into an equity transfer
agreement with iASPEC and iASPEC&#8217;s then sole shareholder, Mr. Lin, under which Mr. Lin sold and transferred to IST all of the equity
interests in and any and all rights and benefits relating thereto of iASPEC in exchange for 61,225 unregistered ordinary shares of Taoping
as determined by dividing $1,800,000 by the volume-weighted average closing price of ordinary shares for the consecutive five (5) trading
days immediately prior to September 18, 2021. The parties thereafter completed the equity transfer through applicable PRC governmental
registration(s).</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Upon
the closing of the equity transfer, the Company&#8217;s variable interest entity structure was dissolved and iASPEC became a wholly owned
indirect subsidiary of the Company. The amended and restated MSA was automatically terminated.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
June 2022, as a result of the Company&#8217;s business transformation and its exit from the TIT business, the Company disposed of 100%
equity interests of iASPEC (excluding iASPEC&#8217;s subsidiaries) which mainly conducted the Company&#8217;s TIT business to an unrelated
third party for nil consideration.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Corporate
Structure</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following diagram illustrates our corporate structure as of the date of this report.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img src="form20-f_001.jpg" alt="" style="height: 377px; width: 670px"/>&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Securities and Exchange Commission, or SEC, maintains an Internet site that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC at http://www.sec.gov.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
web site address is http://www.taop.com. Information contained on, or that can be accessed through, our website does not constitute a
part of this Annual Report.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Principal
Capital Expenditures and Divestitures </i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the year ended December 31, 2023, our total capital expenditures and divestitures were $1.2 million and $0 million, respectively. For
the year ended December 31, 2022, our total capital expenditures and divestitures were $1.8 million and $0 million, respectively. For
the year ended December 31, 2021, our total capital expenditures and divestitures were $11.3 million and $0 million, respectively. Such
expenditures and divestitures were primarily related to the purchase and sale of long-lived assets and business acquisitions. These capital
expenditures were mainly funded by our operating cash flow.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_016"></span>B.
Business Overview</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>General</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Executive
Offices of the Company are located in Shenzhen, China. As of December 31, 2023, we had approximately 56 full-time employees.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a provider of cloud-app technologies for Smart City IoT platforms, digital advertising delivery, and other internet-based information
distribution systems in China. Our Internet ecosystem enables all participants of the new media community to efficiently promote branding,
disseminate information, and exchange resources. In addition, we provide a broad portfolio of software and hardware with fully integrated
solutions, including Information Technology infrastructure, Internet-enabled display technologies, and IoT platforms to customers in
government, education, residential community management, media, transportation, and other private sectors.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Prior
to 2014, we generated the majority of our revenues through selling our products and services mostly to the public service entities to
help them improve their operational efficiency and service quality. Our representative customers included the China Ministry of Public
Security, provincial bureaus of public security, fire departments, traffic bureaus, police stations, human resource departments, urban
planning boards, civic administrations, land resource administrations, mapping and surveying bureaus, and the Shenzhen General Station
of Immigration Frontier Inspection.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
2014, we have expanded and diversified our customer base into the private sector as well. Our customers in the private sector include,
among others, elevator maintenance companies, residential community management, advertising agencies, auto dealerships, and educational
institutes. Our new corporate mission is to make publicity accessible and affordable for businesses of all sizes.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
generated revenues from sales of hardware products, software products, system integration services, and related maintenance and support
services. In 2015, with the introduction of our cloud-based software as a service (SaaS) offering, we expected to generate additional
recurring monthly revenues from SaaS fees. In 2019 and 2020, only a very small portion of our revenue was generated from SaaS, which
is expected to increase in the coming years with the nationwide roll-out of our cloud-based ad display terminal network.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
May 2017, we completed our transformation to a provider of CAT and IoT technology based digital advertising distribution network and
new media resource sharing platform, and offered an end-to-end digital advertising solution enabling customers to efficiently and cost-effectively
direct advertisements to specific interactive ad display terminals in the out-of-home advertising market across China. In 2017, we became
profitable as a result of a successful transition of our business model. We continued to improve our financial position in 2018. However,
as a result of the outbreak of Covid-19 pandemic in 2020, our business was negatively impacted from 2020 to 2022, and experienced certain
recovery in 2023 with rebounded customer demands of our products. We had net loss of approximately $0.7 million, $7.1 million and $9.9
million respectively in 2023, 2022, and 2021. For years going forward, we intend to continue to execute our business plan of expanding
our cloud-based and AI-related product offerings and building a nationwide cloud-based ad terminal network by penetrating into more cities
throughout China, which is expected to generate recurring service revenue for the Company, in addition to equipment sales.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
June 9, 2021, the Company consummated an acquisition of 100% of the equity interest of Taoping New Media Co., Ltd (&#8220;TNM&#8221;),
a leading media operator in China&#8217;s out-of-home digital advertising industry. Mr. Jianghuai Lin, the Chairman and CEO of the Company,
who owns approximately 27.1% of total shares outstanding of the Company, owned approximately 51% of TNM. TNM focuses on digital life
scenes and mainly engaged in selling out-of-home advertising time slots on its networked smart digital advertising display terminals
with artificial intelligence and big data technologies. The acquisition of TNM is expected to enhance the Company&#8217;s presence in
the new media and advertising sectors.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2021, the Company ventured into blockchain related business through the launch of cryptocurrency mining operations and established new
subsidiaries in Hong Kong to diversity revenue streams, following a decline in its Traditional Information Technology (TIT) business
segment.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
September 2021, the Company and the Company&#8217;s wholly owned subsidiary, Information Security Technology (China) Co., Ltd. (&#8220;IST&#8221;)
entered into an equity transfer agreement with Mr. Jianghuai Lin, the sole shareholder of iASPEC. Upon closing of the equity transfer,
the Company&#8217;s existing variable interest entity structure was dissolved and iASPEC became a wholly owned indirect subsidiary of
the Company.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
January 2022, the Company completed the acquisition of 100% equity interest of ZJIOT, aiming to accelerate the Company&#8217;s smart
charging pile and digital new media businesses in East China.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2022, the Company entered into a series of contracts with certain third parties to sell its cryptocurrency mining and
related equipment for a total sale price of approximately $1.08 million. The Company also terminated the leases for both the office
facility and the storage rooms, which were previously used to house most of its mining machines for its cryptocurrency mining
operations, and laid off relevant employees. As a result, the Company had ceased its cryptocurrency mining business by December 31,
2022. The Company disposed of 100% equity interests of Taoping Digital Assets (Hong Kong) Limited to an unrelated third
party for nil consideration on September 6, 2023, and disposed of 100% equity interests of Taoping Digital Assets (Asia) Limited and Taoping
Capital Limited (including their respective subsidiary) to an unrelated third party for nil consideration on October 27, 2023.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
May 2023, the Company established a subsidiary Taoping EP Holdings (Shenzhen) Co., Ltd. with a majority stake of 51%, to explore the new off-grid wastewater treatment business line.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
September 2023, the Company acquired 80% equity from other shareholders of Fujian Taoping Investment Co., Ltd. with nil consideration,
to expand its digital advertising and other businesses in Fujian Province. As a result of the acquisition, the Company currently owns
100% of Fujian Taoping Investment Co, Ltd.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
November 2023, the Company established a subsidiary Taoping (Guangxi) EP Tech Co., Ltd. to expand its wastewater treatment business in
Guangxi Province.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
report financial and operational information in the following three segments:</span></p>

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    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(</b>1)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cloud-based
    Technology (CBT) segment - It includes the Company&#8217;s cloud-based products, high-end data storage servers and related services
    sold to private sectors including new media, healthcare, education and residential community management, and among other industries
    and applications. In this segment, the Company generates revenues from the sales of hardware and software total solutions with proprietary
    software and content as well as from designing and developing software products specifically customized for private sector customers&#8217;
    needs for a fixed price. The Company includes the revenue and cost of revenue of high-end data storage servers in the CBT segment.
    Advertising services is included in the CBT segment, after the Company consummated the acquisition of TNM. Advertisements are delivered
    to the ads display terminals and vehicular ads display terminals through the Company&#8217;s cloud-based new media sharing platform.
    Incorporation of advertising services complements the Company&#8217;s out-of-home advertising business strategy.</span></td></tr>

<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Blockchain
    Technology (BT) segment - The BT segment is the Company&#8217;s newly formed business sector. Cryptocurrency mining is the first
    initiative implemented in the BT segment. However, due to the decreased output and the highly volatile cryptocurrency market, the
    Company had ceased the operation of the BT segment by December 2022.</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Traditional
    Information Technology (TIT) segment -The TIT segment includes the Company&#8217;s project-based technology products and services
    sold to the public sector. The solutions the Company has sold primarily include Geographic Information Systems (GIS), Digital Public
    Security Technology (DPST), and Digital Hospital Information Systems (DHIS). In this segment, the Company generates revenues from
    sales of hardware and system integration services. As a result of the business transformation, the TIT segment is gradually being
    phased out in 2021.</span></td></tr>
  </table>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Industry
Overview</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">General</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Urbanization
is the primary driver for the demand of our Cloud-based solutions for advertising placement and public information dissemination. China&#8217;s
urbanization rate has accelerated in the past 30 years. The Chinese urban population has grown to more than 1 billion in 2023. According
to Chinese Social Development Research, approximately 70% of the Chinese population is expected to live in urban areas by 2035. Urban
lifestyle revolves around consumption of information, goods, and services that necessitates advertising and public information dissemination.
At the same time, urbanization has imposed considerable pressure on land use, environment protection, and municipal infrastructure. Urbanization
has also led to increasing demands for equitable treatment for all dwellers in the cities.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the first quarter of 2014, China&#8217;s State Council unveiled a new urbanization plan for the period from 2014 to 2020 in an effort
to steer the country onto a more humanistic and environmentally friendly urbanization path. The plan increases the country&#8217;s investment
in urban infrastructure, public service facilities, and affordable housing constructions. It also calls for closer coordination between
urban and rural developments, optimization of city planning, and tighter integration of environmental protection measures into urbanization
efforts. The plan also projects new construction of 20,000 to 50,000 skyscrapers around the country, as well as implementation of mass
transit systems in more than 170 cities by 2025. In addition, it requires construction of regular railways to connect all medium sized
cities of over 200,000 in population and high-speed railways to connect large cities of over 500,000 in population by 2020. Also, it
plans to expand the nation&#8217;s civil aviation network to cover 90 percent of its total population.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to the new urbanization implementation plan during the 14th Five-Year Plan period (2021-2025), China will further focus on high-quality
urbanization. The plan regards transforming the urban development mode as top priority and takes institutional innovation as a fundamental
driving force. Meeting people&#8217;s growing expectations for a better life will be the plan&#8217;s final goal. The plan is supposed
to promote a people-centered new urbanization strategy and continue to grant permanent urban residency to the agricultural migrant population.
An upgraded urbanization pattern featuring coordinated development in all sizes of cities will be built. The plan should also promote
healthy, livable and safe urban development, further modernize urban governance systems and capabilities, and promote integrated urban
and rural development.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Out-of-Home
Digital Advertising Market in China</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Rising
urbanization has resulted in prevalent traffic congestions throughout China. In medium to large sized cities, people on an average spend
39 minutes of commuting time to work. According to China New-type Urbanization Report (2014-2018), in densely populated tier one cities
including Beijing, Guangzhou, and Shanghai, it costs commuters 14, 12, and 11 minutes every day in traffic jams, respectively. In Beijing,
a megacity of over 21 million residents, the daily commute takes 45 minutes, the worst of all Chinese cities.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">While
traffic jams are a headache for urban commuters and city planners, they present revenue generating opportunities for out-of-home advertisers,
who seek attentive audience in high traffic areas. According to China Industry Information Net, the estimated total market size of China&#8217;s
out-of-home advertising is expected to reach RMB 295 billion in 2023, with a CAGR of 14%. Cosmetics, beverage, and financial service
companies are ranked as top spenders consistently. Internet and real estate companies also increased their advertisement spending significantly.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
growth, starting in 2013, can be attributed to three factors: 1) macroeconomic recovery in China has encouraged businesses to increase
their advertising spending; 2) industry leaders have led consolidation in the out-of-home advertising market and grown their market share
in tier one cities like Beijing, Guangzhou, Shanghai, and Shenzhen; 3) rapid advancement in Internet and mobile technologies has resulted
in new O2O (offline-to-online) advertising opportunities.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Over
50% of the advertisers rated commercial buildings and public transportation hubs as the top two prime locations for advertisement placement.
There are over 200 million people riding elevators every day in China. The number of advertisers opting for residential buildings also
increased considerably. Precision advertisement uses digital technologies, such as internet-based ads management and distribution and
big data analysis, to target its audience, and continues to be the advertisers&#8217; focal point, which resulted in the increasing demands
for digital advertising.</span></p>

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Trends</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition to urbanization, two technological developments further accelerate the demand for our CBT products and services: 1) offline-to-online
migration of display terminals and 2) adoption of Quick Response (QR) codes.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently,
most of the advertising display terminals in China are not connected to any network. Consequently, updating their media contents requires
onsite manual operation through flash drives or other means. They also tend to have low asset utilization rates. Based on our own primary
research, we have estimated that offline terminals have an average asset utilization rate of 40% in tier-one cities, 30% in tier-two
cities, and 20% in tier-three and smaller cities. In comparison, content on cloud-based terminals can be remotely uploaded, updated,
and managed resulting in substantial labor cost savings for terminal operators, i.e. advertising agencies. In addition, cloud-based terminals
offer advertising agencies the flexibility of fine-tuning advertisement schedules on the fly and customizing advertisement content at
each location as specific as one single office building. More importantly, idle time slots on cloud-based terminals can be discovered
and sold on Taoping, an online resource exchange platform of ours that was released in the fourth quarter of 2015 as a module of our
Yunfa Net (www.pubds.com), an information distribution and advertising delivery system. Therefore, asset utilization rate of advertising
agencies can be greatly improved. As a result, there is a growing demand to convert offline terminals into networked terminals using
our CBT products and services. In January 2018, we separated Taoping module from Yunfa Net and officially launched the Taoping Net (www.taoping.cn)
and Taoping App. Taoping Net provides an advertising-resources trading service platform which connects screen owners, advertisers and
consumers. Taoping Net integrates nationwide high-quality screen resources of Taoping Alliance, a new media operating organization founded
by us and Taoping New Media Co., Ltd. (&#8220;TNM&#8221;), a company controlled by Mr. Jianghuai Lin and was then acquired by the Company
in June 2021. Taoping App, which enables customers to distribute and manage ads from mobile terminals, effectively satisfies the need
to distribute fragmented ads. Using Taoping App, anyone can buy and distribute real-time ads to designated terminals.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furthermore,
the wide adoption of QR codes is also positively impacting the demand for our cloud-based products and services. A QR code is a digital
barcode that contains merchants&#8217; information. By incentivizing consumers to scan the QR code embedded in advertisement, advertising
agencies can analyze the effectiveness of their advertisements and adjust their sales and marketing tactics on a real-time basis. In
China, the application of QR codes is permeating from tier-one cities to the rest of the country. Although QR codes have frequently appeared
in print ads as well as in digital ads displayed on offline terminals, the codes can be changed only as frequently as the advertisement
itself. The data brought in to advertising agencies by the QR codes cannot be segmented by precise locations or time slots, and thus
can generate only limited insight into viewer behavior. In contrast, individualized QR codes embedded in advertisement displayed on networked
terminals can vary by location and time slot, and offer advertising agencies deeper insights at a much higher precision than offline
terminals or print ads. Consequently, the adoption of QR codes is further driving the demand for our cloud-based ad display terminals.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
recent years, artificial intelligence (AI) has garnered substantial attention in the global advertising sector, and this focus is expected
to increase significantly as technology continues to advance.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
most used functionalities of AI in advertising and marketing are:</span></p>

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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0; background-color: white"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Recommendations:
                                            </span></td></tr></table>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">By
utilizing predictive analytics, advertising agencies can offer more accurate recommendations to their clients, enabling them to fully
leverage the services and products available. This approach leads to stronger customer satisfaction and value proposition.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0; background-color: white"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Programmatic
                                            advertising: </span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
ad targeting, a key challenge for advertisers selling ad clips is ensuring the right ads reach the right customers at the right time.
With the incorporation of artificial intelligence technologies, such as programmatic advertising, many advertising agencies have managed
to automate the process of buying and selling advertising space by combining the power of AI and real-time bidding on mobile, video and
social channels. This AI technology effectively analyzes a visitor&#8217;s behavior and enables real-time campaign optimization for an audience
that is likely to convert.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0; background-color: white"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            use of artificial intelligence and machine learning to purchase advertising in real time,
                                            rather than through human negotiations and pre-set prices, is a key component of programmatic
                                            advertising. </span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
response to the adoption of AI technology in the out-of-home advertising industry, in 2023 we started the development of Cloud Nest AI,
a powerful generative AI system across the Cloud to accelerate growth. Cloud Nest AI will leverage the Company&#8217;s existing cloud-based
technology and applications and integrate AI with intelligent Cloud platform technology and product capabilities. End users are empowered
with smart scene terminals, that deeply integrate numerous industry-specific application scenarios across all major industries and subsegments.
Our industry specific applications for different scenarios based on the Cloud Nest AI system are expected to provide multi-dimensional
empowerment for various industries from multiple perspectives, such as content generation, human-computer interaction, visual perception,
and cognitive decision-making. In the field of advertising media, Taoping&#8217;s cloud platform enables advertisers to upload creative content,
including graphics, videos, and texts, for specific promotional strategies. Artificial intelligence then effectively utilizes this content
to develop mixed-media promotions.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Our
Products and Services</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the CBT segment, we provide cloud-based ecosystem solutions mainly to the new media in out-of-home digital advertising customers. Underpinning
our ecosystems are our industry-specific integrated advertisement display terminal product, digital advertising distribution technology
platform, resource exchange and sharing, and big data analysis services. In 2014, we sold our cloud-based solutions predominately to
the Chinese new media industry. Starting from 2016, we have also focused our efforts in selling IoT ads display terminal hardware and
providing digital ads distribution and resource sharing services for out-of-home advertising market. As a result of COVID-19 pandemic
in 2020, city lockdowns, travel restrictions, and other preventive measures and persistent outbreaks of infection in regional localities
through 2021 had negatively impacted on the China out-of-home advertising business and significantly dampened customers&#8217; demand
for ads display terminals. Nevertheless, mandatory home stays and work from remote locations triggered a steep surge in on-line gaming,
on-line shopping, on-line entertainment, and electronic communication that created a great demand for high-end data storage servers to
accommodate internet information transmission. We have stabilized supply chains for the high-end data storage server to meet market demands
supplementing the declining revenue from ads display terminals and included the revenue and cost of revenue of high-end data storage
servers in the CBT segment. Starting from late 2022, due to reopening of China to the world and the recovery of macro market conditions
and customer demands, we experienced significant recovery of revenue in our existing business lines as well as our newly expanded AI
related products and solutions.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the out-of-home new media industry, we provide our software as a service to automate the entire interactive workflows between advertising
agencies and their customers, including, among others, establishing new advertising projects, submitting advertisement proposals, revising
and approving advertising proposals, processing payment online, remotely uploading advertisement content, and tracking and analyzing
performance data.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Our
Technology Platform</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
foundation of our product offerings is our proprietary technology platform called Cloud-Application-Terminal (CAT). Its trademark has
been registered in PRC. Our CAT platform includes three layers of technology: 1) cloud infrastructure, 2) software application, and 3)
high-definition digital display terminals ranging from 18.5 to 84 inches in display size. Bundled together, three layers of technology
serve as a turnkey solution for our customers to improve their operational efficiency and maximize their revenue.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
CAT platform can be accessed from a variety of devices, including networked display terminals, desktop computers, and mobile devices.
It can operate in all operating systems, including Windows, Android and iOS. It unifies all access points into one unique user account,
through which a user can log onto our cloud system and enjoy all available software features and functions.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Our
Resource Exchange and Sharing</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Building
on top of our CAT platform is our industry-specific resource sharing functionality. For the out-of-home new media industry, in the fourth
quarter of 2015, we released a resource exchange called &#8220;Taoping&#8221; as a module of our proprietary cloud-based information
distribution and ad delivery platform - Yunfa Net (www.pubds.com). Taoping in Chinese means &#8220;search and select display terminals.&#8221;
Taoping pairs those who seek, with those who own out-of-home advertisement resources of interactive display terminals, and facilitates
their transactions online.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
example, a local advertising agency based in Shenzhen City may need to place advertisement in Guangzhou City, but does not own any display
terminals in Guangzhou. Through Taoping, the advertising agency can search available display terminals by location, venue, and time slots,
find suitable resources, negotiate rental prices with terminal owners, and process payments online. Then through Taoping, the advertising
agency can upload advertisement content onto remote terminals, monitor advertisement performances, make necessary editing to the advertisement,
and update advertisement content.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping
enables advertising terminal resource owners to improve their asset utilization rates and returns on investments. At the same time, Taoping
allows advertisement promoters to leverage available advertising resources in other geographic regions, and cost effectively expand into
new business territories.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Our
Big Data Services</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Building
on top of our resource sharing capability is our big data analysis service. After releasing our resource sharing feature, we have been
compiling and analyzing data related to buyer/seller behavioral preferences, so that we can provide value-added services to our customers.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
example, through big data analyses, we are able to make insightful suggestions to advertising resource owners on which specific types
of venues being displayed at specific time slots likely garner high rental fees as well as the optimal range of rental fees they could
charge for each type of resources they own. For advertising promoters, we are able to provide advice such as the optimal combinations
of terminals to rent in order to reach the biggest possible audience they desire, and attain the greatest impact while staying within
their advertising budget.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Our
Industry-Specific Ecosystems</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
combining our proprietary CAT technology platform, resource sharing functionality, and big data services with our industry expertise,
we provide integrated ecosystem solutions to the industries of out-of-home digital advertising new media, healthcare, education, and
residential community management. As described above, starting from the out-of-home digital advertising new media industry, we have been
in the process of rolling out product offerings to all of those four industries.</span></p>

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<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">New
    Media Elevator Management - Our New Media Elevator Management solution integrates advertisement placement with safety supervision
    into one single technology unit. The built-in LED screen of the unit delivers high-definition digital advertisement, while its safety
    sensors and data collectors transmit operational and technical data of the elevator to the appropriate property managers, safety
    supervisors, and maintenance crew, so that such staff can efficiently maintain operational safety of the elevator, and instantaneously
    respond to emergencies. Since our New Media Elevator Management solution combines public safety with media display, property managers
    view our products as of strategic importance to their daily operations, and they welcome our products better than the ones that are
    pure advertisement display terminals without safety devices. As a result, we are able to help advertising agencies that purchase
    our products to attain customers more easily and enter into new markets more cost effectively. In addition, the Elevator Management
    platform could be sold as a separate product depending on customer needs to facilitate digital elevator maintenance, big data solution
    for elevator maintenance company, residential management, and government authorities.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">New
    Media Transportation Management - Our New Media Transportation Management solution remotely uploads advertisement content together
    with critical transportation information - such as arrival and departure schedules, delay or cancellation notifications, gate assignments,
    and station announcements - into our cloud infrastructure and displays the content on our large-screen terminals strategically placed
    at high-traffic transportation hubs, including high-speed railway stations, subway stations, airports, and onboard public buses.
    Because our Transportation New Media Application combines advertisement display with transportation information crucial to commuters,
    we enable advertising agencies that purchase our products to attain large and attentive audiences at prime locations, which in turn
    help them achieve good advertisement placement rates and generate high revenue amounts.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">New
    Media Community Management - Our New Media Community Management solution combines advertisement display with dissemination of community
    information. Placed within various high-rise residential communities, our large screen display terminals serve as a window of information
    into various resources available to community residents, including community maps, news updates, emergency announcements, safety
    precautions, health tips, recreational activities, and local commercial promotions.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Product
Warranty</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
our TIT segment, we usually offer a one-year or three-year warranty for our system integration services depending on the project. Our
warranty includes support services, minimal updates and system maintenance. No rights of return are allowed except for non-conforming
products, which have been insignificant based on historical experiences. If nonconforming products are returned due to software issues,
we will provide upgrades or additional customization to suit the customers&#8217; needs, which is infrequent with immaterial costs. The
original vendors of hardware are ultimately liable for replacement of defective or non-conforming hardware products. In cases where non-conformity
is due to the integrated hardware, we return the hardware to the original vendor for replacement. Based on our past experience, the cost
of our warranty provision has been immaterial.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
our CBT segment, we provide a one-year warranty for our digital displays and high-end data servers. The actual warranty service is carried
out by our OEM partners, with whom we have obtained a contractual guarantee that they will repair or replace any defective hardware products
that we have purchased on behalf of our customers. Our OEM partners ultimately bear and are liable for the costs of product warranty.
Consequently, our own cost of warranty for this segment has been minimal.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Sales
and Marketing</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
develop new businesses by identifying and contacting potential new customers and through referrals, or by direct contacts from new customers
as a result of our strong brand recognition and reputation in the industry. We solidify our market presence through various types of
marketing campaigns, such as participating in exhibitions, trade shows, and seminars, developing distributors and dealers, and presenting
solutions to prospective customers. We founded and played a key role in the Taoping Alliance, a new media operating organization that
includes numerous advertising agencies throughout China, which greatly improved our market expansion capability and industry reputation.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Customers
and Related Parties</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
fiscal year 2023, one customer accounted for greater than 10% of total revenues in 2023. In fiscal year 2022 and 2021, no single customer
represented 10% or more of our total revenue of continuing operations. The following tables provide revenue by our major customers of
continuing operations for the years ended December 31, 2023, 2022 and 2021.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Year
2023</b></span></p>

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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
    <td colspan="2" style="font-weight: bold; font-style: normal; text-align: center">Revenues</td><td style="font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
    <td colspan="2" style="font-weight: bold; font-style: normal; text-align: center">% of</td><td style="font-weight: bold; font-style: normal">&#160;</td></tr>
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    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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    <td style="width: 64%; font-weight: normal; font-style: normal; text-align: left">Fujian Haixia Xingyun Information Technology Co., Ltd</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
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    <td style="font-weight: normal; font-style: normal; text-align: left">Shenzhen Chuangzhi Tiancheng Technology Co., Ltd</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">1,714</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">4</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Fuzhou Shenpeng Technology Co., Ltd</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">1,487</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">4</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Guangzhou Shengzhuo Intelligent Technology Co., Ltd</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">1,234</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">3</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1.5pt">Shenzhen Dashan Intelligent Technology Co., Ltd</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">3</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; font-style: normal; padding-bottom: 2.5pt">TOTAL</td><td style="font-weight: bold; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; font-style: normal; text-align: right">11,568</td><td style="padding-bottom: 2.5pt; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; font-style: normal; text-align: right">30</td><td style="padding-bottom: 2.5pt; font-weight: bold; font-style: normal; text-align: left">%</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Year
2022</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
    <td colspan="2" style="font-weight: bold; font-style: normal; text-align: center">Revenues</td><td style="font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
    <td colspan="2" style="font-weight: bold; font-style: normal; text-align: center">% of</td><td style="font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">(Thousands)</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">Revenues</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; font-weight: normal; font-style: normal; text-align: left">Guangzhou Shengzhuo Intelligent Technology Co., Ltd</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</td><td style="width: 14%; font-weight: normal; font-style: normal; text-align: right">1,831</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">1,464</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Shenzhen Nortel Positive Light Technology Co., Ltd</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">949</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">4</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Shenzhen Dingsheng Huaxun Technology Co., Ltd</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">840</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">3</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1.5pt">Shanghai Easy Net E-commerce Co., Ltd</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">835</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">3</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; font-style: normal; padding-bottom: 2.5pt">TOTAL</td><td style="font-weight: bold; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; font-style: normal; text-align: right">5,919</td><td style="padding-bottom: 2.5pt; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; font-style: normal; text-align: right">24</td><td style="padding-bottom: 2.5pt; font-weight: bold; font-style: normal; text-align: left">%</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Year
2021</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
    <td colspan="2" style="font-weight: bold; font-style: normal; text-align: center">Revenues</td><td style="font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
    <td colspan="2" style="font-weight: bold; font-style: normal; text-align: center">% of</td><td style="font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">(Thousands)</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">Revenues</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; font-weight: normal; font-style: normal; text-align: left">Shenzhen Yixing Information Technology Co. Ltd</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</td><td style="width: 14%; font-weight: normal; font-style: normal; text-align: right">1,654</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 14%; font-weight: normal; font-style: normal; text-align: right">9</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Guangxi Wancang Technology Group Co., Ltd</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">1,092</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">6</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Guangzhou Shengzhuo Intelligent Technology Co., Ltd</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">990</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">5</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Shenzhen Taitao Electronic Technology Co., Ltd</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">967</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">5</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1.5pt">Shenzhen Chuangzhi Tiancheng Technology Co. Ltd</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">750</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">4</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; font-style: normal; padding-bottom: 2.5pt">TOTAL</td><td style="font-weight: bold; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; font-style: normal; text-align: right">5,453</td><td style="padding-bottom: 2.5pt; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; font-style: normal; text-align: right">29</td><td style="padding-bottom: 2.5pt; font-weight: bold; font-style: normal; text-align: left">%</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Competition</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the CBT segment, there are many small IT service companies in China providing one-off software packages to solve one aspect of the problems,
but not integrated solutions combining technology platform, resource exchange and sharing, and big data services like ours. For example,
in the new media industry, we encounter competition from 56iq.com, Fujian Star-net Communication Co., Ltd, Shanghai View Show Technology
Co., Ltd., and Maipu Communications Technology Co., Ltd. After completion of acquisition of Taoping New Media Co., Ltd, we compete with
advertising agencies, such as Focus Media, Air Media, and Vision China in some geographic regions in China.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Compared
with our competitors, we believe we have the following advantages:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    provide integrated ecosystem solutions that combine technology platform, resource exchange and sharing, and big data services. Our
    solution not only helps our customers improve their operational efficiency and reduce their labor cost, more importantly, help them
    maximize their asset utilization rate and increase their revenue. For example, by utilizing our solution, an advertising agency can
    upload its advertisement content from a centralized location to geographically dispersed display terminals, saving its maintenance
    staff from traveling to each terminal and updating media content manually. In addition, the advertising agency can list its idle
    terminal assets on Taoping, our resource exchange platform, and lease display terminals to other agencies by location and time slot,
    generating additional revenue from their existing assets.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
    solution has high scalability, availability, and flexibility. Because our technology solution is architected from ground up using
    the latest cloud-computing technology, our system can easily scale up to handle a rapidly increasing amount of data. In addition,
    as the number of display terminals connected to our network continues to grow, our system is able to handle additional workload and
    workflows to ensure high availability of each terminal. More importantly, because we own our cloud infrastructure and platform, we
    have the flexibility of changing or upgrading our software anytime without any constraints.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
    solution has a high level of security guarantee. Because we own the entire stack of technology infrastructure and terminals, we have
    a solid security fortress to prevent hackers from breaking into our system. In addition, because we have over 10 years of experience
    providing large-scale information systems to the public entities, such as police stations and public security bureaus, we have a
    track record of protecting our network from security intrusions or breaches. Lastly, to protect ourselves from national security
    concerns, we have an operational agreement with China&#8217;s Internet Oversight Board to inspect and filter all of our advertisement
    contents before uploading them onto our display network.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
    solution combines digital network with physical assets, establishing a high barrier to entry than other internet related companies.
    Our proprietary Cloud-Application-Terminal platform has integrated three layers of technology: cloud storage, application software,
    and display terminals. Although it is relatively easy for potential competitors to develop software application with technology advancement
    nowadays, it will take them a considerable amount of time and capital to replicate our nationwide physical network of cloud-based
    display terminals.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Business
Transformation Efforts </i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Prior
to 2014, we predominately sold large-scale customized IT solutions to the Chinese public service sector through various build-and-transfer
projects. Due to changes in policies and regulations in China in 2012, various local governments started postponing IT projects they
had previously contracted with us indefinitely. As a result, many of our existing receivables became uncollectable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
early 2013, our management team made a strategic decision to transition our business from servicing the public sector to focusing on
the private sector. We started completing our in-process IT projects and ceased taking on new customers in the public sector. In addition,
we wrote off accounts receivable that we deemed no longer collectable. At the same time, we decided to transform our business from a
build-and-transfer IT service company into a standardized IT product company. Leveraging our experience and expertise in handling large-scale
IT projects for the public sector, we started investing in research and development of our own software products suitable for the private
sector.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2014, continuing our transition from the public sector to the private sector, we identified new media, healthcare, education, and residential
community management as the four core end markets on which we would focus. After fortifying our own software R&amp;D efforts through
our acquisition of Biznest in September 2014, we decided to exit the hardware manufacturing business and complete our transformation
into a software company. In November 2014, we initiated the process of closing our own manufacturing facilities and transferring hardware
production to our OEM partners. Transferring hardware production to our OEM partners was completed during 2015. As a result, we wrote
off a large amount of accounts receivable and took substantial goodwill and identifiable intangible asset impairment charges in 2015
and 2016.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
part of transition from the traditional IT business to the cloud-based business, we sold iASPEC&#8217;s 100% equity holding in Zhongtian
and 54.89% equity holding in Geo in 2015. Proceeds from these sales totaling $19.5 million have been invested in the development and
market expansion of our new cloud-based business, as well as repayment of a portion of our short-term debts.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2017, we completed our business transformation to a leading products and services provider of CAT and IoT technology based digital advertising
distribution network and new media resource sharing platform in the out-of-home Advertising Market in China. In 2017, we gained profitability
as a result of the successful transition of our business model. In 2018, we continued to prove the sustainability of the new business
model and increased the net income to be approximately $1.7 million. In 2021, 2020 and 2019, due to the unfavorable macro-economic environment
and the slowdown of the out-of-home advertising market in China, we had net loss of approximately $9.9 million, $18.3 million and $3.6
million respectively. For years going forward, we will continue to execute our business plan and build a nationwide cloud-based ad terminal
network by penetrating into more cities throughout China, which is expected to generate recurring service revenue for the Company, in
addition to equipment sales. In addition, we have been actively exploring other cloud-based solutions including the smart charging pile
business throughout China, by leveraging our TAOP smart cloud and the Taoping Alliance national distribution network.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2021, we expanded our CAT based new media sharing platform into digital advertising and smart community sectors by acquiring Taoping
New Media Co., Ltd. to provide out-of-home digital advertising. Also, we explored business opportunities in blockchain, digital assets,
and cryptocurrency mining operations by recruiting seasoned executives, contracting various well-known consulting firms, suppliers, and
operators in these areas. In addition, we formed a Blockchain Business Division to manage blockchain development, digital assets NFT
(None Fungible Token) and cryptocurrency mining operations, and a Digital Culture Business Division to cover on-line education and digital
advertising operations. We generated revenues of $5.5 million from the blockchain business during the year ended December 31, 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
due to a decrease in output and the highly volatile nature of the cryptocurrency market, in December 2022, the Company entered into a
series of contracts with certain third parties to sell its cryptocurrency mining and related equipment for a total sale price of approximately
$1.08 million. The Company also terminated the leases for both the office facility and the storage rooms, which were previously used
to house most of its mining machines for its cryptocurrency mining operations, and laid off relevant employees. As a result, the Company
had ceased its cryptocurrency mining business by December 31, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2023, as an application expansion of its cloud-based platform, the Company started to explore new business opportunities in off-grid
wastewater treatment and other AI-related product and solutions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Intellectual
Property</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
success depends, in part, on our ability to maintain and protect our proprietary technology and to conduct our business without infringing
on the proprietary rights of others. We rely primarily on a combination of copyrights, patents, trademarks, and trade secrets, as well
as executions of employee and third-party confidentiality agreements, to safeguard our intellectual property.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023, through our wholly-owned subsidiaries IST, TopCloud, Biznest, Bocom, and ISIOT, we had 187 registered and copyrighted
software products, 528 registered trademarks and held 30 patents. We also own three domain names <span style="text-decoration: underline">(http://www.taop.com; http://www.taoping.cn;
and http://www.pubds.com</span>).</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
protect our know-how and technologies through confidentiality provisions in the employment contracts we enter into with our employees.
In addition, our engineers are generally divided into different project groups, each of which generally handles only a portion of the
project. As a result, no one engineer generally has access to the entire design process and documentation for a particular product.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have funded a vendor to develop vehicular display terminal using our digital new media sharing platform to deliver advertisements. The
development of vehicular display terminal was completed in September 2020 and started earning advertising revenue. According to modified
contract, we have capitalized the funding as purchased software enjoying the intellectual property of the vehicular display terminal
and shared advertising revenue generated from the vehicular display terminal within the four-year modified contract term.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Regulation
</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
all of our operating entities are located in the PRC, we are regulated by the national and local laws of the PRC. This section summarizes
the major PRC regulations relating to our business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Permits
and Certificates</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Through
our subsidiaries, we hold the following permits and certificates:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; width: 30%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; text-align: center; width: 54%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Expiration
    Date</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; text-align: center; width: 12%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Company</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">National
    High-tech Enterprise</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Valid
    till December 22, 2024, subject to renewal every three years.</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">IST</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">National
    High-tech Enterprise</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Valid
    till December 22, 2024, subject to renewal every three years.</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Biznest</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
establishment, operation and management of corporate entities in mainland China are governed by the Company Law of the People&#8217;s
Republic of China, or the China Company Law, which was adopted by the SCNPC in December 1993, implemented in July 1994, and subsequently
amended in December 1999, August 2004, October 2005, December 2013 and October 2018. Under the China Company Law, companies are generally
classified into two categories: limited liability companies and companies limited by shares. The China Company Law applies to both domestic
and foreign-invested companies.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Investment
activities in mainland China by foreign investors are governed by the Guiding Foreign Investment Direction, which was promulgated by
the State Council on February 11, 2002, and came into effect on April 1, 2002, and the latest Special Administrative Measures (Negative
List) for Foreign Investment Access (2022), or the Negative List, which was promulgated by the MOFCOM and the NDRC on March 12, 2022,
and took effect on the same date. The Negative List sets out in a unified manner the restrictive measures, such as the requirements on
shareholding percentages and management, for the access of foreign investments, and the industries that are prohibited for foreign investment.
Any field not falling in the Negative List shall be administered under the principle of equal treatment to domestic and foreign investment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8239;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Foreign Investment Law of the People&#8217;s Republic of China, or the Foreign Investment Law was promulgated by the NPC in March 2019
and become effective in January 2020. The investment activities of foreign natural persons, enterprises or other organizations (hereinafter
referred to as foreign investors) directly or indirectly within the territory of mainland China are governed by the Foreign Investment
Law, including: 1) establishing by foreign investors of foreign-invested enterprises in mainland China alone or jointly with other investors;
2) acquiring by foreign investors of shares, equity, property shares, or other similar interests of Chinese domestic enterprises; 3)
investing by foreign investors in new projects in mainland China alone or jointly with other investors; and 4) other forms of investment
prescribed by laws, administrative regulations or the State Council.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8239;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2019, the State Council issued the Regulations on Implementing the Foreign Investment Law, which came into effect in January
2020. After the Regulations on Implementing the Foreign Investment Law came into effect, the Regulation on Implementing the Law on Sino-foreign
Equity Joint Ventures, Provisional Regulations on the Duration of Sino-Foreign Equity Joint Ventures, the Regulations on Implementing
the Law on Wholly Foreign-Owned Enterprises and the Regulations on Implementing the Law on Sino-Foreign Cooperative Joint Ventures have
been repealed simultaneously.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8239;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2019, the MOFCOM and the SAMR issued the Measures for the Reporting of Foreign Investment Information, which came into effect
in January 2020. After the Measures for the Reporting of Foreign Investment Information came into effect, the Interim Measures on the
Administration of Filing for Establishment and Change of Foreign Invested Enterprises has been repealed simultaneously. Since January
1, 2020, for foreign investors carrying out investment activities directly or indirectly in mainland China, the foreign investors or
foreign-invested enterprises shall submit investment information to the relevant commerce administrative authorities pursuant to these
measures.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
light of the above restrictions and requirements, prior to the dissolution of our VIE structure in September 2021, we had conducted our
value-added telecommunications businesses through our then consolidated VIEs. As a result of the dissolution of our VIE structure, we
ceased the e-commerce and related businesses which had constituted a minor portion of our consolidated revenue. Based on the legal analysis
of the Company&#8217;s in-house legal counsel, who is a licensed attorney in the PRC, we believe that none of our PRC subsidiaries&#8217;
current business is stipulated on the Negative List.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result, according to the laws and regulations currently in effect, our PRC subsidiaries are able to conduct their business without
being subject to restrictions imposed by the foreign investment laws and regulations of the PRC and none of Taoping or our subsidiaries
is required to obtain additional licenses or permits beyond a regular business license for each PRC subsidiary&#8217;s operations. Each
of our PRC subsidiaries is required to obtain and has obtained such regular business license from the local branch of the SAMR. No application
for any such license has been denied.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Amended
Company Law</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
establishment, operation and management of corporate entities in the PRC are governed by the Company Law of the PRC. On December 29,
2023, the SCNPC promulgated the amended Company Law of the PRC, which will come into effect on July 1, 2024, to supersede the existing
PRC Company Law which was amended in October 2018. The major revisions made by the amended PRC Company Law included improving the system
for the establishment and liquidation of companies, optimizing organizational structures of companies, improving the capital system of
companies, strengthening the responsibilities of the controlling shareholder and management staff, and enhancing the social responsibilities
of companies, etc. With respect to the period for payment of the registered capital, pursuant to the amended PRC Company Law, all shareholders
of a PRC limited liability company shall fully pay up the registered capital subscribed for by such shareholders within five years since
the date of establishment of the PRC limited liability company, unless otherwise provided by laws and regulations. On February 6, 2024,
the SAMR issued a draft of the Provisions of the State Council on Implementing the Registered Capital Registration and Management System
under the PRC Company Law for public comments, which further specified the detailed requirements and measures of the registration and
management of registered capital under the amended PRC Company Law. Pursuant to such draft provisions, there shall be a three-year interim
period from July 1, 2024 to June 30, 2027 for the existing companies to adjust their periods of capital contribution.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
on Mobile Internet Applications Information Services</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mobile
Internet applications and the Internet application store are especially regulated by the Administrative Provisions on Mobile Internet
Applications Information Services, or the APP Provisions, which was promulgated by the CAC, on June 28, 2016 and entered into force on
August 1, 2016. The APP Provisions regulate the APP information and the APP store service providers, and the CAC and local offices of
cyberspace administration are responsible for the supervision and administration of nationwide or local APP information respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
APP information service providers shall acquire relevant qualifications in accordance with laws and regulations and fulfil the information
security management obligations as follows: (1) shall authenticate the identity information of the registered users including their mobile
telephone number and other identity information under the principle of mandatory real name registration at the back-office end, and voluntary
real name display at the front-office end; (2) shall establish and perfect the mechanism for the protection of users&#8217; information,
and follow the principle of legality, rightfulness and necessity, indicate expressly the purpose, method and scope of collection and
use and obtain the consent of users while collecting and using users&#8217; personal information; (3) shall establish and perfect the
mechanism for the examination and management of information content, and in terms of any information content released that violates laws
or regulations, take such measures as warning, restricting the functions, suspending the update and closing the accounts as the case
may be, keep relevant records and report the same to relevant competent authorities; (4) shall safeguard users&#8217; right to know and
to make choices when users are installing or using such applications, and shall neither start such functions as collecting the information
of users&#8217; positions, accessing users&#8217; contacts, turning on the camera and recording the sound, or any other function irrelevant
to the services, nor forcefully install any other irrelevant applications without prior consent of users when noticed expressly; (5)
shall respect and protect the intellectual properties and shall neither produce nor release any application that infringes others&#8217;
intellectual properties; and (6) shall record the users&#8217; log information and keep the same for 60 days.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have established necessary mechanisms and adopted data encryption and protection technology in our mobile application to ensure the collection,
protection and storage of user information are in compliance with the requirements of the APP Provisions in all material aspects.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
on Internet Information Security</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
1997, the Ministry of Public Security promulgated measures that prohibit use of the internet in ways which, among other things, result
in a leakage of state secrets or a spread of socially destabilizing content. If an internet information service provider violates these
measures, the Ministry of Public Security and the local security bureaus may revoke its operating license and shut down its websites.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Internet
information in China is regulated and restricted from a national security standpoint. The Standing Committee of the National People&#8217;s
Congress, or the SCNPC, has enacted the Decisions on Maintaining Internet Security on December 28, 2000 and further amended on August
27, 2009, which may subject violators to criminal punishment in China for any effort to: (i) gain improper entry into a computer or system
of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial
information; or (v) infringe intellectual property rights.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC Cybersecurity Law was promulgated by the SCNPC on November 7, 2016 and became effective on June 1, 2017. Under this regulation, network
operators, including online information service providers, shall comply with laws and regulations and fulfill their obligations to safeguard
security of the network when conducting business and providing services, and take all necessary measures pursuant to laws, regulations
and compulsory national requirements to safeguard the safe and stable operation of the networks, respond to network security incidents
effectively, prevent illegal and criminal activities, and maintain the integrity, confidentiality and usability of network data.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 6, 2021, certain PRC regulatory authorities issued Opinions on Strictly Cracking Down on Illegal Securities Activities, which, among
others, provides for improving the laws and regulations on data security, cross-border data transmission, and confidential information
management. It provided that efforts will be made to revise the regulations on strengthening the confidentiality and file management
relating to the offering and listing of securities overseas, to implement the responsibility on information security of overseas listed
companies, and to strengthen the standardized management of cross-border information provision mechanisms and procedures.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 12, 2021, the Ministry of Industry and Information Technology (the &#8220;MIIT&#8221;) and two other authorities jointly issued
the Provisions on the Administration of Security Vulnerabilities of Network Products. The Provisions state that, no organization or individual
may abuse the security vulnerabilities of network products to engage in activities that endanger network security, or to illegally collect,
sell, or publish the information on such security vulnerabilities. Anyone who is aware of the aforesaid offences shall not provide technical
support, advertising, payment settlement and other assistance to the offenders. According to the Provisions, network product providers,
network operators, and platforms collecting network product security vulnerabilities shall establish and improve channels for receiving
network product security vulnerability information and keep such channels available, and retain network product security vulnerability
information reception logs for at least six months. The Provisions also bans provision of undisclosed vulnerabilities to overseas organizations
or individuals other than to the product providers.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 30, 2021, the State Council issued the Regulations on Protection of Critical Information Infrastructure. Pursuant to these regulations,
critical information infrastructure shall mean the important network facilities or information systems of key industries or fields such
as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs
and national defense science, and important network facilities or information systems which may endanger national security, people&#8217;s
livelihood and public interest once there occur damage, malfunctioning or data leakage to them. The Regulations provide that no individual
or organization may carry out any illegal activity of intruding into, interfering with, or sabotaging any critical information infrastructures,
or endanger the security of any critical information infrastructures. The Regulations also require that critical information infrastructure
operators shall establish a cybersecurity protection system and accountability system, and that the main responsible person of a critical
information infrastructure operator shall take full responsibility for the security protection of the critical information infrastructures
operated by it. In addition, the administration departments for each important industry and sector shall be responsible for formulating
the rule of critical information infrastructure determination applicable to their respective industry or sector, and determine the critical
information infrastructure operators in their industry or sector.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
November 14, 2021, the CAC released the discussion draft of the Administrative Measures for Internet Data Security, which provides that
data processors refer to individuals or organizations that autonomously determine the purpose and the manner of processing data. In accordance
with the draft measures, data processors shall apply for a cybersecurity review for the following activities: (i) merger, reorganization
or division of internet platform operators that have acquired a large number of data resources related to national security, economic
development or public interests to the extent that affects or may affect national security; (ii) listing abroad of data processors which
process over one million users&#8217; personal information; (iii) listing in Hong Kong which affects or may affect national security;
or (iv) other data processing activities that affect or may affect national security. Besides, data processors that are listed overseas
shall carry out an annual data security assessment. The draft measures remains unclear on whether the requirements will be applicable
to companies that have been listed in the United States and Hong Kong, such as us. There is no timetable as to when the draft measures
will be enacted.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 7, 2022, the CAC promulgated the Security Assessment Measures for Outbound Data Transfer, which became effective on September 1,
2022. These measures provide for the circumstances under which a data processor shall be subject to security assessment, including (i)
where a data processor provides important data abroad; (ii) where a critical information infrastructure operator or a data processor
that processes personal information of more than one million individuals provides personal information abroad; (iii) where a data processor
that has exported personal information of over 100,000 individuals or sensitive personal information of over 10,000 individuals in total
since January 1 of the previous year provides personal information abroad; and (iv) other circumstances prescribed by the CAC.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have, in accordance with relevant provisions on network security of the PRC, established necessary mechanisms to protect information
security, including, among others, adopting necessary network security protection technologies such as anti-virus firewalls, intrusion
detection and data encryption, keeping record of network logs, and implementing information classification framework.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
Relating to Advertising Business</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
SAMR is the government agency responsible for regulating advertising activities in the PRC. According to PRC laws and regulations, companies
that engage in advertising activities must obtain a business license from the SAMR or its local branches which specifically includes
operating an advertising business within its business scope. The business license of an advertising company is valid for the duration
of its existence, unless the license is suspended or revoked due to a violation of any law or regulation. PRC advertising laws and regulations
set forth certain content requirements for advertisements in the PRC including, among other things, prohibitions on false or misleading
content, superlative wording, socially destabilizing content or content involving obscenities, superstition, violence, discrimination
or infringement of the public interest. Advertisers, advertising agencies, and advertising distributors are required to ensure that the
content of the advertisements they prepare or distribute is true and in full compliance with applicable law. In providing advertising
services, advertising operators and advertising distributors must review the supporting documents provided by advertisers for advertisements
and verify that the content of the advertisements complies with applicable PRC laws and regulations. Prior to distributing advertisements
that are subject to government censorship and approval, advertising distributors are obligated to verify that such censorship has been
performed and approval has been obtained. The release or delivery of advertisements through the internet must not impair the normal use
of the network by users. The advertisements released in&#160;pop-up&#160;form on a webpage and other forms must show the close flag prominently
and ensure&#160;one-click&#160;close. Violation of these regulations may result in penalties, including fines, confiscation of advertising
income, orders to cease dissemination of the advertisements and orders to eliminate the effect of illegal advertisement. In circumstances
involving serious violations, the SAMR or its local branches may revoke the violators&#8217; licenses or permits for their advertising
business operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
July 2016, the State Administration of Industry and Commerce issued the Interim Measures for the Administration of Internet Advertising
to regulate internet advertising activities. On February&#160;25, 2023, the SAMR released the Administrative Measures for Internet Advertising,
which came into effect from May&#160;1, 2023 and replaced Interim Measures for the Administration of Internet Advertising. The Administrative
Measures for Internet Advertising set out, among other things, the following requirements for Internet advertising activities:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">online
    advertisements for tobacco (including&#160;e-cigarettes)&#160;are not allowed, and online advertisements for prescription medicine
    are not allowed unless otherwise permitted by laws and regulations;</span></td></tr>
  </table>
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<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">online
    advertisements for special commodities and services such as medical treatments, pharmaceuticals, medical devices, agrochemicals,
    veterinary medicine, health foods and food for special medical purposes must be reviewed by competent authorities before online publication,
    and the advertisements for such commodities and services are not allowed to be published in the form of introducing health and wellness
    knowledge;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">advertisements
    for medical treatments, pharmaceuticals, health foods, special medical purpose formula foods, medical devices, cosmetics, alcohol,
    beauty advertisements, and online game advertisements that are detrimental to the physical and mental health of minors shall not
    be published on Internet media targeted to minors;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Internet
    advertisements must be visibly marked as &#8220;advertisement&#8221; while paid-search results must be obviously distinguished from
    natural search results; and</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">if
    the Internet advertisements are published by means of algorithmic recommendation or other technologies, the rules related to algorithm
    recommendation services and advertising records shall be included in the advertising archives</span></td></tr>
  </table>

<p style="margin-top: 0; margin-bottom: 0">&#160;</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to the Administrative Measures for Internet Advertising, the advertisers are responsible for the authenticity of the content of internet
advertisements, while the internet advertisement publishers and advertisement agencies are required to establish, improve, and implement
registration, review, and archive management systems for internet advertising businesses, which include verifying and registering advertiser
information, verifying supporting documents and advertisements content, and allocating advertising review personnel familiar with advertising
laws and regulations or establish advertising review bodies.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, the Administrative Measures for Internet Advertising require internet platform operators providing internet information services
to take measures to prevent and stop illegal advertisements, which include recording and storing the real identity information of users
who publish advertisements for at least three years, monitoring and investigating the content of advertisements, and employing measures
to stop illegal advertisements. Internet platform operators are also required to establish effective complaint and reporting mechanisms,
cooperate with market regulatory departments in investigating illegal conduct, and use measures such as warnings, suspending or terminating
services for users who publish illegal advertisements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
on Privacy Protection</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT in December 2011, provide that,
an internet information service provider may not collect any user personal information or provide any such information to third parties
without the consent of a user. An internet information service provider must expressly inform the users of the method, content and purpose
of the collection and processing of such user personal information and may only collect such information necessary for the provision
of its services. An internet information service provider is also required to properly maintain the user personal information, and in
case of any leak or likely leak of the user personal information, online lending service providers must take immediate remedial measures
and, in severe circumstances, make an immediate report to the telecommunications regulatory authority.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, pursuant to the Decision on Strengthening the Protection of Online Information issued by the SCNPC in December 2012 and the
Order for the Protection of Telecommunication and Internet User Personal Information issued by the MIIT in July 2013, any collection
and use of user personal information must be subject to the consent of the user, abide by the principles of legality, rationality and
necessity and be within the specified purposes, methods and scopes.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Guidelines jointly released by ten PRC regulatory agencies in July 2015 aim, among other things, to require service providers to improve
technology security standards, and safeguard user and transaction information. The Guidelines also prohibit service providers from illegally
selling or disclosing users&#8217; personal information. Pursuant to the Ninth Amendment to the Criminal Law issued by the SCNPC in August
2015, which became effective in November 2015, any Internet service provider that fails to fulfill the obligations related to Internet
information security administration as required by applicable laws and refuses to rectify upon orders is subject to criminal penalty
for the result of (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client&#8217;s
information; (iii) any serious loss of criminal evidence; or (iv) other severe situation, and any individual or entity that (i) sells
or provides personal information to others in a way violating the applicable law, or (ii) steals or illegally obtain any personal information
is subject to criminal penalty in severe situation. In addition, the Interpretations of the Supreme People&#8217;s Court and the Supreme
People&#8217;s Procuratorate of the PRC on Several Issues Concerning the Application of Law in Handling Criminal Cases of Infringing
Personal Information, effective in June 2017, have clarified certain standards for the conviction and sentencing in relation to personal
information infringement. The PRC government has the power and authority to order internet content provider operators to turn over personal
information if an internet user posts any prohibited content or engages in illegal activities on the internet. The Civil Code further
provides in a stand-alone chapter of right of personality and reiterate that the personal information of a natural person shall be protected
by the law. Any organization or individual shall legitimately obtain such personal information of others in due course on a need-to-know
basis and ensure the safety and privacy of such information, and refrain from excessively handling or using such information.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">With
respect to the security of information collected and used by mobile apps, pursuant to the Announcement of Conducting Special Supervision
against the Illegal Collection and Use of Personal Information by Apps, which was issued on January 23, 2019, app operators should collect
and use personal information in compliance with the Cyber Security Law and should be responsible for the security of personal information
obtained from users and take effective measures to strengthen the personal information protection. Furthermore, app operators should
not force their users to make authorization by means of bundling, suspending installation or in other default forms and should not collect
personal information in violation of laws, regulations or breach of user agreements. Such regulatory requirements were emphasized by
the Notice on the Special Rectification of Apps Infringing upon User&#8217;s Personal Rights and Interests, which was issued by MIIT
on October 31, 2019. On November 28, 2019, the CAC, the MIIT, the Ministry of Public Security and the SAMR jointly issued the Methods
of Identifying Illegal Acts of Apps to Collect and Use Personal Information. This regulation further illustrates certain commonly-seen
illegal practices of apps operators in terms of personal information protection, including &#8220;failure to publicize rules for collection
and use,&#8221; &#8220;failure to expressly state the purpose, manner and scope of collecting and using personal information,&#8221;
&#8220;collection and use of personal information without consent of users,&#8221; &#8220;collecting personal information irrelevant
to the services provided by such app in violation of the principle of necessity,&#8221; &#8220;provision of personal information to others
without consent,&#8221; &#8220;failure to provide the function of deleting or correcting personal information as required by laws&#8221;
and &#8220;failure to publish information such as methods for complaints and reporting.&#8221; Among others, any of the following acts
of an app operator will constitute &#8220;collection and use of personal information without consent of users&#8221;: (i) collecting
an user&#8217;s personal information or activating the permission for collecting any user&#8217;s personal information without obtaining
such user&#8217;s consent; (ii) collecting personal information or activating the permission for collecting the personal information
of any user who explicitly refuses such collection, or repeatedly seeking for user&#8217;s consent such that the user&#8217;s normal
use of such app is disturbed; (iii) any user&#8217;s personal information which has been actually collected by the app operator or the
permission for collecting any user&#8217;s personal information activated by the app operator is beyond the scope of personal information
which such user authorizes such app operator to collect; (iv) seeking for any user&#8217;s consent in a non-explicit manner; (v) modifying
any user&#8217;s settings for activating the permission for collecting any personal information without such user&#8217;s consent; (vi)
using users&#8217; personal information and any algorithms to directionally push any information, without providing the option of non-directed
pushing such information; (vii) misleading users to permit collecting their personal information or activating the permission for collecting
such users&#8217; personal information by improper methods such as fraud and deception; (viii) failing to provide users with the means
and methods to withdraw their permission of collecting personal information; and (ix) collecting and using personal information in violation
of the rules for collecting and using personal information promulgated by such app operator.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 22, 2019, the CAC promulgated the Provisions on the Internet Protection of Children&#8217;s Personal Information, which took effect
on October 1, 2019, requiring that before collecting, using, transferring or disclosing the personal information of a child, the Internet
service operator should inform the child&#8217;s guardians in a noticeable and clear manner and obtain their consents. Meanwhile, internet
service operators should take measures like encryption when storing children&#8217;s personal information. On March 12, 2021, the CAC
and three other authorities jointly issued the Rules on the Scope of Necessary Personal Information for Common Types of Mobile Internet
Applications. The Rules specifies the scope of necessary personal information to be collected each for a variety of common mobile internet
applications, such as maps and navigation apps, online ride-hailing apps, instant messaging apps, online community apps. Operators of
such apps shall not refuse to provide basic services to users on the ground of users&#8217; refusal to provide their personal non-essential
information.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, on August 20, 2021, the SCNPC adopted the Personal Information Protection Law which took effect on November 1, 2021. The Personal
Information Protection Law requires, among others, that (i) the processing of personal information should have a clear and reasonable
purpose which should be directly related to the processing purpose, in a method that has the least impact on personal rights and interests,
and (ii) the collection of personal information should be limited to the minimum scope necessary to achieve the processing purpose to
avoid the excessive collection of personal information. Different types of personal information and personal information processing will
be subject to various rules on consent, transfer, and security. Entities handling personal information shall bear responsibilities for
their personal information handling activities, and adopt necessary measures to safeguard the security of the personal information they
handle. The entities failing to comply could be ordered to correct, or suspend or terminate the provision of services, and face confiscation
of illegal income, fines or other penalties.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Taoping APP is used to facilitate cloud ads and content distribution to the designated terminal in our network, which does not invoice
the collection and storage of any personal information.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Regulations
Relating to Artificial Intelligence</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Internet Information Service Algorithmic Recommendation Management Provisions, which came into effect on March&#160;1, 2022, algorithm
recommendation service providers shall clearly inform users of their provision of algorithm recommendation services, and make public
the basic principles, intentions and main operating mechanisms of the algorithm recommendation services. The algorithmic recommendation
service providers shall not (i)&#160;carry out any illegal activity which may endanger national security and social public interest,
disturb economic order and social order, or infringe third parties&#8217; legal interest, or (ii)&#160;spread any information prohibited
by laws or regulations. Algorithm recommendation service providers selling goods or providing services to consumers shall also protect
consumers&#8217; rights of fair trade, and are prohibited from carrying out illegal conduct such as unreasonable, differentiated treatment
based on consumers&#8217; preferences, purchase behavior or such other characteristics.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July&#160;10, 2023, the CAC and six other regulatory authorities in China promulgated the Interim Measures for Generative
Artificial Intelligence Services, which took effect on August&#160;15, 2023. The measures impose compliance requirements for providers
of generative artificial intelligence services to the general public within the Chinese mainland. The measures stipulate that providers
of generative artificial intelligence services related to text, image, audio, video and other content to the general public within the
Chinese mainland will be responsible as &#8220;producers of Internet information content&#8221; and &#8220;personal information processors,&#8221;
with the responsibilities specified in the Personal Information Protection Law, the Data Security Law, the Internet Security Law, and
other Chinese mainland laws and regulations related to cybersecurity and personal information protection. Providers of generative artificial
intelligence services are required to enter into service agreements with their users and adopt effective measures to prevent minor users
from over-relying upon or becoming addicted to generative artificial intelligence services. In addition, providers of generative artificial
intelligence services that have the potential to influence public opinion or provoke social agitation are required to conduct security
assessments and complete filings in accordance with the Internet Information Service Algorithmic Recommendation Management Provisions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
Related to Intellectual Property</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
SCNPC and the State Council have promulgated comprehensive laws and regulations to protect trademarks. The Trademark Law of the PRC (2019
revision, effective November 1, 2019) promulgated on August 23, 1982 and subsequently amended on February 22, 1993, October 27, 2001,
August 30, 2013 and April 23, 2019 respectively, and the Implementation Regulation of the PRC Trademark Law (2014 revision) issued by
the State Council on August 3, 2002 and amended on April 29, 2014, are the main regulations protecting registered trademarks. The Trademark
Office under the SAIC administrates the registration of trademarks on a &#8220;first-to-file&#8221; basis, and grants a term of ten years
to registered trademarks.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC Copyright Law, adopted in 1990 and revised in 2001 and 2010 respectively, with its implementation rules adopted on August 8, 2002
and revised in 2011 and 2013 respectively, and the Regulations for the Protection of Computer Software as promulgated on December 20,
2001 and amended in 2011 and 2013 provide protection for copyright of computer software in the PRC. Under these rules and regulations,
software owners, licensees and transferees may register their rights in software with the National Copyright Administration Center or
its local branches to obtain software copyright registration certificates.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Patent Law of the PRC was adopted by NPCSC in 1984 and amended in 1992, 2000 and 2008, respectively. A patentable invention, utility
model or design must meet three conditions: novelty, inventiveness and practical applicability. Patents cannot be granted for scientific
discoveries, rules and methods for intellectual activities, methods used to diagnose or treat diseases, animal and plant breeds or substances
obtained by means of nuclear transformation. The Patent Office under the State Intellectual Property Office is responsible for receiving,
examining and approving patent applications. A patent is valid for a term of twenty years for an invention and a term of ten years for
a utility model or design, commencing on the application date. Subject to limited exceptions provided by law, any third-party user must
obtain consent or a proper license from the patent owner to use the patent, or otherwise the use will constitute an infringement of the
rights of the patent holder.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
MIIT, promulgated the Administrative Measures on Internet Domain Name, or the Domain Name Measures, on August 24, 2017 to protect domain
names. According to the Domain Name Measures, domain name applicants are required to duly register their domain names with domain name
registration service institutions. The applicants will become the holder of such domain names upon the completion of the registration
procedure.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have adopted necessary mechanisms to register, maintain and enforce intellectual property rights in China. However, we cannot assure
you that we can prevent our intellectual property from all the unauthorized use by any third party, neither can we promise that none
of our intellectual property rights would be challenged any third party.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
Related to Employment</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC Labor Law and the Labor Contract Law require that employers execute written employment contracts with full-time employees. All employers
must compensate their employees with wages equal to at least the local minimum wage standards. Violations of the PRC Labor Law and the
Labor Contract Law may result in the imposition of fines and other administrative sanctions, and serious violations may constitute criminal
offences.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 28, 2012, the PRC Labor Contract Law was amended, effective since July 1, 2013 to impose more stringent requirements on labor
dispatch. Under such law, dispatched workers are entitled to pay equal to that of full-time employees for equal work, but the number
of dispatched workers that an employer hires may not exceed a certain percentage of its total number of employees as determined by the
Ministry of Human Resources and Social Security. Additionally, dispatched workers are only permitted to engage in temporary, auxiliary
or substitute work. According to the Interim Provisions on Labor Dispatch promulgated by the Ministry of Human Resources and Social Security
on January 24, 2014, which became effective on March 1, 2014, the number of dispatched workers hired by an employer shall not exceed
10% of the total number of its employees (including both directly hired employees and dispatched workers). The Interim Provisions on
Labor Dispatch require employers not in compliance with the PRC Labor Contract Law in this regard to reduce the number of its dispatched
workers to below 10% of the total number of its employees prior to March 1, 2016.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Enterprises
in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds,
namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity
insurance plan, and a housing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries,
including bonuses and allowances, of the employees as specified by the local government from time to time at locations where they operate
their businesses or where they are located.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to the Interim Regulations on the Collection and Payment of Social Insurance Premiums, the Regulations on Work Injury Insurance, the
Regulations on Unemployment Insurance and the Trial Measures on Employee Maternity Insurance of Enterprises, enterprises in the PRC shall
provide benefit plans for their employees, which include basic pension insurance, unemployment insurance, maternity insurance, work injury
insurance and basic medical insurance. An enterprise must provide social insurance by making social insurance registration with local
social insurance agencies, and shall pay or withhold relevant social insurance premiums for and on behalf of employees. The Law on Social
Insurance of the PRC, which was promulgated by the SCNPC on October 28, 2010, became effective on July 1, 2011, and was most recently
updated on December 29, 2018, has consolidated pertinent provisions for basic pension insurance, unemployment insurance, maternity insurance,
work injury insurance and basic medical insurance, and has elaborated in detail the legal obligations and liabilities of employers who
do not comply with laws and regulations on social insurance.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to the Regulations on the Administration of Housing Provident Fund, which was promulgated by the State Counsel and became effective on
April 3, 1999, and was amended on March 24, 2002 and was partially revised on March 24, 2019 by the Decision of the State Council on
Revising Some Administrative Regulations (Decree No. 710 of the State Council), housing provident fund contributions by an individual
employee and housing provident fund contributions by his or her employer shall belong to the individual employee. Registration by PRC
companies with the applicable housing provident fund management center is compulsory, and a special housing provident fund account for
each of the employees shall be opened at an entrusted bank.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
employer shall timely pay up and deposit housing provident fund contributions in full amount and late or insufficient payments of such
contributions are unlawful. The employer shall make the housing provident fund payment and deposit registrations with the housing provident
fund administration center. With respect to companies which violate the above regulations and fail to complete housing provident fund
payment and deposit registrations or open housing provident fund accounts for their employees, such companies shall be ordered by the
housing provident fund administration center to complete such procedures within a designated time limit. Those who fail to complete their
registrations within the designated period shall be levied a fine ranging from RMB 10,000 to RMB 50,000. When companies breach these
regulations and fail to pay housing provident fund contributions in full amount that are due, the housing provident fund administration
center shall order such companies to pay up within a designated period, and may further petition a People&#8217;s Court for mandatory
enforcement against those who still fail to comply after the expiry of such period.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
on Foreign Currency Exchange</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the PRC Foreign Currency Administration Rules promulgated on January 29, 1996 and last amended on August 5, 2008 and various regulations
issued by SAFE and other relevant PRC government authorities, payment of current account items in foreign currencies, such as trade and
service payments, payment of interest and dividends can be made without prior approval from SAFE by following the appropriate procedural
requirements. By contrast, the conversion of RMB into foreign currencies and remittance of the converted foreign currency outside the
PRC for the purpose of capital account items, such as direct equity investments, loans and repatriation of investment, requires prior
approval from SAFE or its local office.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 13, 2015, SAFE promulgated the Circular on Simplifying and Improving the Foreign Currency Management Policy on Direct Investment,
effective from June 1, 2015, which cancels the requirement for obtaining approvals of foreign exchange registration of inbound foreign
direct investment and outbound overseas direct investment from SAFE. The application for the registration of foreign exchange for the
purpose of inbound foreign direct investment and outbound overseas direct investment may be filed with qualified banks, which, under
the supervision of SAFE, may review the application and process the registration.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Circular of the SAFE on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise,
or SAFE Circular 19, was promulgated on March 30, 2015 and became effective on June 1, 2015. According to SAFE Circular 19, a foreign-invested
enterprise may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital
account for which the relevant foreign exchange bureau has confirmed monetary contribution rights and interests (or for which the bank
has registered the account-crediting of monetary contribution). For the time being, foreign-invested enterprises are allowed to settle
100% of their foreign exchange capitals on a discretionary basis; a foreign-invested enterprise shall truthfully use its capital for
its own operational purposes within the scope of business; where an ordinary foreign-invested enterprise makes domestic equity investment
with the amount of foreign exchanges settled, the invested enterprise shall first go through domestic re-investment registration and
open a corresponding Account for Foreign Exchange Settlement Pending Payment with the foreign exchange bureau (bank) at the place of
registration. The Circular of the SAFE on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital
Accounts, or SAFE Circular 16, was promulgated and became effective on June 9, 2016. According to SAFE Circular 16, enterprises registered
in PRC may also convert their foreign debts from foreign currency into Renminbi at the enterprise&#8217;s discretion. SAFE Circular 16
provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign
currency capital and foreign debts) at the enterprise&#8217;s discretion, which applies to all enterprises registered in the PRC. SAFE
Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly
or indirectly used for purposes beyond its business scope and may not be used for investments in securities or other investment with
the exception of bank financial products that can guarantee the principal within the PRC unless otherwise specifically provided. Besides,
the converted Renminbi shall not be used to make loans for related enterprises unless it is within the business scope or to build or
to purchase any real estate that is not for the enterprise own use with the exception for the real estate enterprise.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness
and Compliance Verification, or SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance
of profits from domestic entities to offshore entities, including (i) banks must check whether the transaction is genuine by reviewing
board resolutions regarding profit distribution, original copies of tax filing records and audited financial statements, and (ii) domestic
entities must retain income to account for previous years&#8217; losses before remitting any profits. Moreover, pursuant to SAFE Circular
3, domestic entities must explain in detail the sources of capital and how the capital will be used, and provide board resolutions, contracts
and other proof as a part of the registration procedure for outbound investment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
October 25, 2019, SAFE promulgated the Notice on Further Facilitating Cross-Board Trade and Investment, which became effective on the
same date (except for Article 8.2 thereof). The notice removed restrictions on the capital equity investment in China by non-investment
foreign-invested enterprises. In addition, restrictions on the use of funds for foreign exchange settlement of domestic accounts for
the realization of assets have been removed and restrictions on the use and foreign exchange settlement of foreign investors&#8217; security
deposits have been relaxed. Eligible enterprises in the pilot areas are also allowed to use revenues under capital accounts, such as
capital funds, foreign debts and overseas listing revenues for domestic payments without providing materials to the bank in advance for
authenticity verification on an item by item basis, while the use of funds should be true, in compliance with applicable rules and conforming
to the current capital revenue management regulations.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
on Foreign Exchange Registration of Overseas Investment by PRC Residents</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">SAFE
issued the Circular on Relevant Issues Relating to Domestic Resident&#8217;s Investment and Financing and Roundtrip Investment through
Special Purpose Vehicles, or SAFE Circular 37, which became effective in July 2014, to replace the Circular of the State Administration
of Foreign Exchange on Issues Concerning the Regulation of Foreign Exchange in Equity Finance and Roundtrip Investments by Domestic Residents
through Offshore Special Purpose Vehicles, to regulate foreign exchange matters in relation to the use of special purpose vehicles, or
SPVs, by PRC residents or entities to seek offshore investment and financing or conduct round trip investment in China. SAFE Circular
37 defines a SPV as an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose
of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests, while &#8220;round
trip investment&#8221; is defined as direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested
enterprises to obtain the ownership, control rights and management rights. SAFE Circular 37 stipulates that, prior to making contributions
into an SPV, PRC residents or entities be required to complete foreign exchange registration with SAFE or its local branch. In addition,
SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment
in February 2015, which amended SAFE Circular 37 and became effective on June 1, 2015, requiring PRC residents or entities to register
with qualified banks rather than SAFE in connection with their establishment or control of an offshore entity established for the purpose
of overseas investment or financing.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRC
residents or entities who had contributed legitimate onshore or offshore interests or assets to SPVs but had not obtained registration
as required before the implementation of the SAFE Circular 37 must register their ownership interests or control in the SPVs with qualified
banks. An amendment to the registration is required if there is a material change with respect to the SPV registered, such as any change
of basic information (including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers
or exchanges of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and
the subsequent notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established
through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested
enterprise, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or
liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC
residents or entities to penalties under PRC foreign exchange administration regulations. See &#8220;Risk Factors-Risks Related to Doing
Business in China-PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial
owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary or limit our PRC
subsidiary&#8217;s ability to increase their registered capital or distribute profits.&#8221;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
on Stock Incentive Plans</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">SAFE
promulgated the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive
Plan of Overseas Publicly Listed Company, or the Stock Incentive Plan Notice, in February 2012, replacing the previous rules issued by
SAFE in March 2007. Pursuant to the Stock Incentive Plan Notice and other relevant rules and regulations, PRC residents participating
in stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and follow certain
other procedures. Participants of a stock incentive plan who are PRC residents must conduct the SAFE registration and other procedures
with respect to the stock incentive plan through a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed
company or another qualified institution appointed by the PRC subsidiary. In addition, the PRC agent is required to update the relevant
SAFE registration should there be any material change to the stock incentive plan, the PRC agent or other material changes. The PRC agent
must, on behalf of the PRC residents who have the right to exercise the employee stock options, apply to SAFE or its local branches for
an annual quota for the payment of foreign currencies in connection with the PRC residents&#8217; exercise of the employee stock options.
The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends
distributed by the overseas listed companies must be remitted into the bank accounts in the PRC opened by the PRC agents prior to distribution
to such PRC residents.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have adopted an equity incentive plan, under which we will have the discretion to award incentives and rewards to eligible participants.
We have advised the recipients of awards under our equity incentive plan to handle relevant foreign exchange matters in accordance with
the Stock Incentive Plan Notice. However, we cannot guarantee that all employees awarded equity-based incentives can successfully register
with SAFE in full compliance with the Stock Incentive Plan Notice. See &#8220;Risk Factors-Risks Relating to Doing Business in China-Any
failure to comply with PRC regulations regarding employee share incentive plans may subject the PRC plan participants or us to fines
and other legal or administrative sanctions.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
on Dividend Distribution</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Distribution
of dividends of foreign investment enterprises are mainly governed by the Foreign Investment Enterprise Law, issued in 1986 and amended
in 2000 and 2016 respectively, and the Implementation Rules under the Foreign Investment Enterprise Law, issued in 1990 and amended in
2001 and 2014 respectively. Under these regulations, foreign investment enterprises in the PRC may distribute dividends only out of their
accumulative profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, no less than 10% of
the accumulated profits of the foreign investment enterprises in the PRC are required to be allocated to fund certain reserve funds each
year unless these reserves have reached 50% of the registered capital of the enterprises. A PRC company is not permitted to distribute
any profits until any losses from previous fiscal years have been offset. Profits retained from prior fiscal years may be distributed
together with distributable profits from the current fiscal year. Under our current corporate structure, our BVI holding company may
rely on dividend payments from IST, which is a wholly foreign-owned enterprise incorporated in China, to fund any cash and financing
requirements we may have. Limitation on the ability of our consolidated VIEs to make remittance to IST and on the ability of IST to pay
dividends to us could limit our ability to access cash generated by the operations of those entities. See &#8220;Risk Factors-Risks Relating
to Doing Business in China-- Restrictions under PRC law on our PRC subsidiaries&#8217; ability to make dividends and other distributions
could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends
to you, and otherwise fund and conduct our business.&#8221;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Dividend
Withholding Tax</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
March 2007, the SCNPC enacted the Enterprise Income Tax Law which became effective on January 1, 2008 and last amended on December 29,
2018. The PRC State Council promulgated the Implementation Rules of the Enterprise Income Tax Law on December 6, 2007, which became effective
on January 1, 2008 and was partially amended on April 23, 2019. According to Enterprise Income Tax Law and its Implementation Rules,
dividends payable by a foreign-invested enterprise in China to its foreign enterprise investors are subject to a 10% withholding tax,
unless any such foreign investor&#8217;s jurisdiction of incorporation has a tax treaty with China that provides for a preferential withholding
arrangement. Pursuant to the Notice of the State Administration of Taxation on Negotiated Reduction of Dividends and Interest Rates,
issued on January 29, 2008 and supplemented and revised on February 29, 2008, and the Arrangement between Mainland China and the Hong
Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income,
which became effective on December 8, 2006 and applicable to income derived in any year of assessment commencing on or after April 1,
2007 in Hong Kong and in any year commencing on or after January 1, 2007 in the PRC, such withholding tax rate may be lowered to 5% if
a Hong Kong enterprise is deemed the beneficial owner of any dividend paid by a PRC subsidiary by PRC tax authorities and holds at least
25% of the equity interest in that particular PRC subsidiary at all times within the 12-month period immediately prior to the distribution
of the dividends. Furthermore, pursuant to the Announcement on Issues concerning &#8220;Beneficial Owners&#8221; in Tax Treaties issued
on February 3, 2018 by the State Administration of Taxation, when determining the status of &#8220;beneficial owners,&#8221; a comprehensive
analysis may be conducted through materials such as articles of association, financial statements, records of capital flows, minutes
of board of directors, resolutions of board of directors, allocation of manpower and material resources, the relevant expenses, functions
and risk assumption, loan contracts, royalty contracts or transfer contracts, patent registration certificates and copyright certificates,
etc. However, even if an applicant has the status as a &#8220;beneficiary owner,&#8221; if the competent tax authority finds necessity
to apply the principal purpose test clause in the tax treaties or the general anti-tax avoidance rules stipulated in domestic tax laws,
the general anti-tax avoidance provisions shall apply.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Enterprise
Income Tax</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2007, the State Council promulgated the Implementing Rules of the Enterprise Income Tax Law, or the Implementing Rules, which
became effective on January 1, 2008. The Enterprise Income Tax Law and its relevant Implementing Rules (i) impose a uniform 25% enterprise
income tax rate, which is applicable to both foreign invested enterprises and domestic enterprises (ii) permits companies to continue
to enjoy their existing tax incentives, subject to certain transitional phase-out rules and (iii) introduces new tax incentives, subject
to various qualification criteria.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Enterprise Income Tax Law also provides that enterprises organized under the laws of jurisdictions outside China with their &#8220;de
facto management bodies&#8221; located within China may be considered PRC resident enterprises and therefore be subject to PRC enterprise
income tax at the rate of 25% on their worldwide income. The Implementing Rules further define the term &#8220;de facto management body&#8221;
as the management body that exercises substantial and overall management and control over the production and operations, personnel, accounts
and properties of an enterprise. If an enterprise organized under the laws of jurisdiction outside China is considered a PRC resident
enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, it would be subject
to the PRC enterprise income tax at the rate of 25% on its worldwide income. Second, a 10% withholding tax would be imposed on dividends
it pays to its non-PRC enterprise shareholders and with respect to gains derived by its non-PRC enterprise shareholders from transfer
of its shares. Dividends paid to non-PRC individual shareholders and any gain realized on the transfer of equity by such shareholders
may be subject to PRC tax at a rate of 20%, if such income is deemed to be from PRC sources. See &#8220;Risk Factors-Risks Relating to
Doing Business in China-Under the Enterprise Income Tax Law, we may be classified as a &#8220;resident enterprise&#8221; of China. Such
classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
October 17, 2017, the State Administration of Taxation issued the Bulletin on Issues Concerning the Withholding of Non-PRC Resident Enterprise
Income Tax at Source, or Bulletin 37, which replaced the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers
by Non-PRC Resident Enterprises issued by the State Administration of Taxation on December 10, 2009, and partially replaced and supplemented
rules under the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or Bulletin
7, issued by the State Administration of Taxation on February 3, 2015. Under Bulletin 7, an &#8220;indirect transfer&#8221; of assets,
including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct
transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose
of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise
income tax. In respect of an indirect offshore transfer of assets of a PRC establishment, the relevant gain is to be regarded as effectively
connected with the PRC establishment and therefore included in its enterprise income tax filing, and would consequently be subject to
PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immoveable properties in China or to equity
investments in a PRC resident enterprise, which is not effectively connected to a PRC establishment of a non-resident enterprise, a PRC
enterprise income tax at 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements,
and the party who is obligated to make the transfer payments has the withholding obligation. Pursuant to Bulletin 37, the withholding
party shall declare and pay the withheld tax to the competent tax authority in the place where such withholding party is located within
7 days from the date of occurrence of the withholding obligation. Both Bulletin 37 and Bulletin 7 do not apply to transactions of sale
of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange.
See &#8220;Risk Factors-Risks Relating to Doing Business in China-We and our shareholders face uncertainties with respect to indirect
transfers of equity interests in PRC resident enterprises or other assets attributed to a Chinese establishment of a non-Chinese company,
or immovable properties located in China owned by non-Chinese companies.&#8221;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Value-Added
Tax</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Provisional Regulations on Value-Added Tax of the PRC, or the VAT Regulations, which were promulgated by the State Council on
December 13, 1993, and took effect on January 1, 1994, and were amended on November 10, 2008, February 6, 2016, and November 19, 2017,
respectively, and the Rules for the Implementation of the Provisional Regulations on Value Added Tax of the PRC, which were promulgated
by the Ministry of Finance, on December 25, 1993, and were amended on December 15, 2008, and October 28, 2011, respectively, entities
and individuals that sell goods or labor services of processing, repair or replacement, sell services, intangible assets, or immovables,
or import goods within the territory of the People&#8217;s Republic of China are taxpayers of value-added tax. The VAT rate is 17% for
taxpayers selling goods, labor services, or tangible movable property leasing services or importing goods, except otherwise specified;
11% for taxpayers selling goods, labor services, or tangible movable property leasing services or importing goods, except otherwise specified;
6% for taxpayers selling services or intangible assets.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to Provisions in the Notice on Adjusting the Value added Tax Rates, or the Notice, issued by the State Administration of Taxation and
the Ministry of Finance, where taxpayers make VAT taxable sales or import goods, the applicable tax rates shall be adjusted from 17%
to 16% and from 11% to 10%, respectively. The Notice took effect on May 1, 2018, and the adjusted VAT rates took effect at the same time.
Pursuant to the Notice of the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs of
the PRC on Relevant Policies for Deepening the Value-Added Tax Reform, which was promulgated on March 20, 2019 and became effective on
April 1, 2019, the tax rate of 16% applicable to the VAT taxable sale or import of goods by a general VAT taxpayer shall be adjusted
to 13%, and the tax rate of 10% applicable thereto shall be adjusted to 9. On September 30, 2019, the Ministry of Finance and the State
Taxation Administration jointly issued the Announcement on Clarifying the VAT Additional Deduction Policy for the Living Services, pursuant
to which, from October 1, 2019 to December 31, 2021, the taxpayers engaging in providing living services are allowed to deduct additional
15% of the deductible input VAT amount for the current period from the payable tax. For aforementioned taxpayers providing production
and living services relating to Announcement on Policies for Deepening the VAT Reform and Announcement on Clarifying the VAT Additional
Deduction Policy for the Living Services, the input VAT additional deduction policies is further extended to December 31, 2022 according
to the regulations. From January 1, 2023 to December 31, 2023, the VAT Additional Deduction policy is implemented in accordance with
the following provisions: (i). Taxpayers in the productive service industry are allowed to add 5% of the current deductible input tax
to offset the taxable amount; (ii). Taxpayers in the lifestyle service industry are allowed to deduct 10% of the current deductible input
tax to offset the taxable amount.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
November 2011, the Ministry of Finance and the State Administration of Taxation promulgated the Pilot Plan for Imposition of Value-Added
Tax to Replace Business Tax, or the Pilot Plan. The Notice of the Ministry of Finance and the State Administration of Taxation on Implementing
the Pilot Plan of Replacing Business Tax with Value-Added Tax in an All-round Manner, issued on March 23, 2016, took effect on May 1,
2016. Pursuant to the Pilot Plan and the subsequent Notice, VAT at a rate of 6% is applied nationwide to revenue generated from the provision
of certain modern services in lieu of the prior Business Tax.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">New
Overseas Listing Rules issued by the Chinese Government</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC government has recently indicated an intent to take actions to exert more oversight and control over offerings that are conducted
overseas and/or foreign investment in China-based issuers. For example, on July 6, 2021, the relevant PRC government authorities made
public the Opinions on Strictly Scrutinizing Illegal Securities Activities in Accordance with the Law, or the Opinions. These Opinions
emphasized the need to strengthen the administration over illegal securities activities and the supervision of overseas listings by China-based
companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the
risks and incidents faced by China-based overseas-listed companies.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 24, 2021, the CSRC issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing
by Domestic Companies (Draft for Comments) and the Administrative Measures for the Filing of Overseas Securities Offering and Listing
by Domestic Companies (Draft for Comments), collectively the Draft Overseas Listing Regulations, for public comment until January 23,
2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Following
issuance of the Draft Overseas Listing Regulations, on February 17, 2023, the CSRC issued the CSRC Filing Notice, stating that the CSRC
has published the Trial Measures and Listing Guidelines, collectively the Trial Measures and Listing Guidelines or the Oversea Listing
Rules. Among others, the Oversea Listing Rules provide that overseas offerings and listings by PRC domestic companies shall:</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)
require submission of relevant materials that contain a filing report and a legal opinion, providing truthful, accurate and complete
information on matters including but not limited to the shareholders of the issuer. Where the filing documents are complete and in compliance
with stipulated requirements, the CSRC shall, within 20 working days after receipt of filing documents, conclude the filing procedure
and publish filing results on the CSRC website. Where filing documents are incomplete or do not conform to stipulated requirements, the
CSRC shall request supplementation and amendment thereto within five working days after receipt of the filing documents. The issuer should
then complete supplementation and amendment within 30 working days;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(ii)
abide by laws, administrative regulations and relevant state rules concerning foreign investment in China, state-owned asset administration,
industry regulation and outbound investment, and shall not disrupt the PRC domestic market order, harm state or public interests or undermine
the lawful rights and interests of PRC domestic investors;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)
abide by national secrecy laws and relevant provisions. Necessary measures shall be taken to fulfill confidentiality obligations. Divulgence
of state secrets or working secrets of government agencies is strictly prohibited. Provision of personal information and important data,
etc., to overseas parties in relation to overseas offering and listing of PRC domestic companies shall be in compliance with applicable
laws, administrative regulations and relevant state rules; and</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iv)
be made in strict compliance with relevant laws, administrative regulations and rules concerning national security in the spheres of
foreign investment, cybersecurity, data security, etc., and issuers shall duly fulfill their obligations to protect national security.
If the intended overseas offering and listing necessitates a national security review, relevant security review procedures shall be completed
according to the law before the application for such offering and listing is submitted to any overseas parties such as securities regulatory
agencies and trading venues.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trial Measures came into effect on March 31, 2023. PRC domestic companies seeking to offer and list securities (which, for the purposes
of the Trial Measures, are defined thereunder as equity shares, depository receipts, corporate bonds convertible to equity shares, and
other equity securities that are offered and listed overseas, either directly or indirectly, by PRC domestic companies) in overseas markets,
either via direct or indirect means, must file with the CSRC within three working days after their application for an overseas listing
is submitted.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trial Measures provide that where a PRC domestic company seeks to indirectly offer and list securities in overseas markets, the issuer
shall designate a major domestic operating entity, which shall, as the domestic entity responsible, file with the CSRC. The Trial Measures
stipulate that an overseas listing will be determined as &#8220;indirect&#8221; if the issuer meets both of the following conditions:
(1) 50% or more of any of the issuer&#8217;s operating revenue, total profit, total assets or net assets as documented in its audited
consolidated financial statements for the most recent accounting year are accounted for by PRC domestic companies (Condition I), and
(2) the main parts of the issuer&#8217;s business activities are conducted in the PRC, or its main places of business are located in
the PRC, or the senior managers in charge of its business operations and management are mostly Chinese citizens or domiciled in the PRC
(Condition II); whether Chinese citizens from Taiwan, Hong Kong, and Macau are included in the foregoing specification is not specified.
The determination as to whether or not an overseas offering and listing by PRC domestic companies is indirect shall be made on a &#8216;substance
over form&#8217; basis; the Listing Guidelines further stipulate that if an issuer not satisfying Condition I submits an application
for issuance and listing in overseas markets in accordance with relevant non-PRC issuance regulations requiring such issuer to disclose
risk factors mainly related to the PRC, the securities firm(s) and the issuer&#8217;s PRC counsel should follow the principle of &#8220;substance
over form&#8221; in order to identify and argue whether the issuer should complete a filing under the Trial Measures. Subsequent securities
offerings of an issuer in (i) the same overseas market where it has previously offered and listed securities, and (ii) an overseas market
other than one where the issuer has previously offered and listed securities shall be filed with the CSRC within three working days after
offerings are completed. Additionally, the Trial Measures stipulate that after an issuer has offered and listed securities in an overseas
market, the issuer shall submit a report to the CSRC within three working days after the occurrence and public disclosure of (i) a change
of control thereof, (ii) investigations of or sanctions imposed on the issuer by overseas securities regulators or relevant competent
authorities, (iii) changes of listing status or transfers of listing segment, and (iv) a voluntary or mandatory delisting.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
CSRC Filing Notice states that, beginning from March 31, 2023, PRC domestic enterprises which have already issued and listed securities
overseas and fall within the scope of filing under the Trial Measures shall be considered Existing Listed Enterprises. Existing Listed
Enterprises are not required to complete filings immediately; rather, Existing Listed Enterprises should complete filings if they are
subsequently involved in matters require filings, such as follow-on financing activities, in accordance with the Trial Measures.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
is a possibility that we may be deemed as an Existing Listed Enterprise as defined under the CSRC Filing Notice, and that future offerings
of listed securities or listings outside China by us may be subject to CSRC filing requirements in accordance with the Trial Measures.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
Relating to Anti-Monopoly</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
currently effective Anti-Monopoly Law was promulgated by SCNPC in 2007 and most recently amended on June 24, 2022. Pursuant to the Anti-Monopoly
Law, the operators of a concentration of undertakings which reaches the standard for declaration shall make an advance declaration to
the Anti-Monopoly Law enforcement authority under the State Council. The fines for illegal concentration of business operators shall
be &#8220;no more than ten percent of its preceding year&#8217;s sales revenue if the concentration of business operator has or may have
an effect of excluding or limiting competition; or a fine of up to RMB5 million if the concentration of business operator does not have
an effect of excluding or limiting competition.&#8221; Pursuant to the Anti-Monopoly Law, the authority may require the operators to
make a declaration where there is evidence that the concentration has or may have the effect of eliminating or restricting competition,
even if such concentration does not reach the filing threshold.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 7, 2021, the Anti-Monopoly Committee of the State Council promulgated the Anti-Monopoly Guidelines for the Internet Platform
Economy Sector which stipulates that any concentration of undertakings involving variable interest entities shall fall within the scope
of antimonopoly review. Furthermore, the Guidelines to Anti-Monopoly in the Field of Internet Platforms prohibit certain monopolistic
acts of internet platforms so as to protect market competition and safeguard interests of users and undertakings participating in internet
platform economy, including without limitation, prohibiting platforms with dominant position from abusing their market dominance (such
as discriminating customers in terms of pricing and other transactional conditions using big data and analytics, coercing counterparties
into exclusivity arrangements, using technology means to block competitors&#8217; interface, favorable positioning in search results
of goods displays, using bundle services to sell services or products, compulsory collection of unnecessary user data). On August 17,
2021, the SAMR issued the Provisions on Prohibition of Unfair Competition on the Internet (Draft for Comments), which prohibits business
operators from using data, algorithms and other technical means to commit traffic hijacking, interference, malicious incompatibility
and other improprieties to influence user choices or hinder or damage the normal operation of network products or services offered by
other business operators.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Seasonality</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
first quarter of the calendar year is typically the slowest season of the year due to the Chinese New Year holiday. During this period,
accounts receivable collection is very slow and we also need to prepare for upcoming busier seasons by making payments for inventory.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_001"></span>C.
Organizational Structure</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
&#8220;A. History and Development of the Company-Corporate Structure&#8221; above for details of our current organizational structure.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_002"></span>D.
Property, Plant and Equipment</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
land in China is owned by the state or local governments. Individuals and companies are permitted to acquire rights to use land or land
use rights for specific purposes. In the case of land used for industrial purposes, the land use rights are granted for a period of 50
years. This period may be renewed at the expiration of the initial and any subsequent terms according to the relevant Chinese laws. Granted
land use rights are transferable and may be used as collateral for borrowings and other obligations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
current executive offices are located at 21<sup>st</sup> Floor, Everbright Bank Building, Zhuzilin, Futian District, Shenzhen, Guangdong,
518040, China, of which IST currently has property use rights. This office facility property consists of approximately 1,200 square meters
and is currently being used as collateral for certain of our short-term bank loans. Our other properties primarily consist of media display
equipment, computer equipment, servers, licensed software, furniture and fixtures. We currently do not have any intention to make large
scale improvements or developments with respect to these properties.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe that all our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our
business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_003"></span>ITEM
4A. UNRESOLVED STAFF COMMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_004"></span>ITEM
5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated
financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking
statements. Our actual results may differ materially from those anticipated in these forward-looking statements because of various factors,
including those set forth under Item 3 &#8220;Key Information-D. Risk Factors&#8221; or in other parts of this annual report on Form
20-F. See also &#8220;Introductory Notes-Forward-looking Information.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_005"></span>A.
Operating Results</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Overview</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a provider of cloud-app technologies for Smart City IoT platforms, digital advertising delivery, and other internet-based information
distribution systems in China. Our Internet ecosystem enables all participants of the new media community to efficiently promote branding,
disseminate information, and exchange resources. In addition, we provide a broad portfolio of software and hardware with fully integrated
solutions, including Information Technology infrastructure, Internet-enabled display technologies, and IoT platforms to customers in
government, education, residential community management, media, transportation, and other private sectors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
were founded in 1993. As of December 31, 2023, we had approximately 56 full-time employees.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Prior
to 2014, we generated majority of our revenues through selling our products to public service entities to help improve their operational
efficiency and service quality. Our representative customers included China Ministry of Public Security, provincial bureaus of public
security, fire departments, traffic bureaus, police stations, human resource departments, urban planning boards, civic administrations,
land resource administrations, mapping and surveying bureaus, and the Shenzhen General Station of Exit and Entry Frontier Inspection.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2014, we generated revenues from sales of hardware products, software products, system integration services, and related maintenance
and supporting services. Starting in 2015, with the introduction of our cloud-based software as a service (SaaS) offering, we generated
additional recurring monthly revenues from SaaS fees. The revenue from SaaS was still small in 2018 and 2019, which is expected to pick
up in future years along with the large-scale roll-out of our cloud-based new media terminals.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
May 2017, we completed the business transformation and rolled out CAT and IoT technology based digital ads distribution network and new
media resource sharing platform in the out-of-home advertising market. In 2017, 2018 and 2019, we generated most revenue from selling
fully integrated ads display terminals. In 2020, we have a portion of revenue generated from the sale of cloud severs as part of our
CBT business. The revenue generated from SaaS and other software products and services remained small.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2021, we ventured into the blockchain related business through the launch of cryptocurrency mining operations. However, in December 2022,
the Company entered into a series of contracts with certain third parties to sell its cryptocurrency mining and related equipment for
a total sale price of approximately $1.08 million. The Company also terminated the leases for both the office facility and storage rooms,
which were previously used to house most of its mining machines for its cryptocurrency mining operations, and laid off relevant employees.
As a result, the Company had ceased its cryptocurrency mining business by December 31, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Recent
Developments</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
March and April 2023, the Company entered into two long-term strategic cooperation agreements (the &#8220;Agreements&#8221;) with Zhaoyuan
City, Shandong Province and Wuxuan County, Guangxi Province, respectively. Under the Agreements, the Company will provide Taoping&#8217;s
cloud-based intelligent product solutions, including its IoT Smart Rest Station, fully autonomous street sweeper, smart large screen
displays, and Blue Box off-grid wastewater treatment solution. Zhaoyuan City and Wuxuan County will provide the Company with multiple
channels of support and preferential policies. As part of the Agreements, both parties will also work together on low-carbon environmental
protection, urban renewal, rural ecological revitalization, and other related projects.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Leveraging
its strong technological reserves and advanced supporting technologies such as AI and IoT, the Company will provide Zhaoyuan City and
Wuxuan County with smart city renewal solutions and technical support, and implement environmental governance projects such as wastewater,
waste gas, and garbage treatment. Based on the concept of efficient and low-carbon environmental governance, the Company has combined
its digital and intelligent innovative technology products, including its IoT Smart Rest Station with fully autonomous street sweeper
and its new off-grid wastewater treatment solution, which will effectively improve the overall public service and environmental protection
level for both urban and rural areas.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
above collaborations are expected to continue to bring revenue streams for the Company in the future.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Principal
Factors Affecting Our Financial Performance</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Demand
for Software Products and Services, Advertising, and High-End Server</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
revenue growth and profitability of our business depend on the overall market demand for software products and related services, high-end
data servers, and out-of-home advertising. The demand for our CBT products is attributable to rapid urbanization and rising living standards
in China. As a result of migration to the cities, individuals&#8217; disposable income and consumptions of information to assist their
purchases of goods and services increase as well. Consequently, our CBT products become increasingly receptive to advertisements displayed
at public locations. Meanwhile, rising competition has driven merchants and service providers to seek advertisements as a way to make
their brands visible and memorable that drives up the demand for innovative advertising technology like our cloud-based software and
services. COVID-19 pandemic has changed landscape of business operations and resulted in significant increase in working from remote
locations, on-line shopping, on-line education, on-line entertainment, and other on-line business transactions creating high demand for
high-end data storage servers to accommodate the surging internet information transmission.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
demand for our TIT products is attributable to digitization of public services in China. Due to changes in policies and regulations in
China in 2012, various local governments started postponing IT projects they had previously contracted with us indefinitely. As a result,
many of our existing receivables became uncollectable. Starting 2013, we made a strategic decision to transition our business from servicing
the public sector to focusing on the private sector. We started completing our in-process IT projects and ceased taking on new customers
in the public sector. As a result, the TIT business has diminished throughout the years and gradually being phased out.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Taxation</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping
and Taoping Holdings were incorporated in the BVI, and not subject to taxation in that jurisdiction. Under the &#8220;anti-inversion&#8221;
rules of Section 7874 of the U.S. Internal Revenue Code, Taoping is treated for U.S. federal taxation purpose as a U.S. corporation and,
accordingly, is subject to U.S. federal income tax on its worldwide income with a maximum income tax rate of 21%.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No
provision for income tax in the United States has been made as Taoping has no taxable income in the United States.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">IST
HK, and our former subsidiary, HPC Electronics (China) Co., Limited (&#8220;HPC&#8221;) were incorporated in Hong Kong and subject to
a Hong Kong Profits Tax of 16.5% according to the current Hong Kong tax laws.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Chinese EIT Law, IST is approved as High Technology Enterprises and respective income tax rates were reduced to 15%. Biznest is approved
as software enterprises and enjoys EIT at the tax rate of 12.5%. TopCloud, ISIOT, iASPEC and Bocom are subject to regular EIT at 25%.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Business
Segment Information</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Segment
information is consistent with how the Chief Operating Decision Maker, i.e., the Directors of the Company, review business health, make
investment, allocates resources and assess operating performances. Transfers and sales between reportable segments, if any, are recorded
at cost.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
report financial and operational information in the following three segments:</span></p>

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<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cloud-based
    Technology (CBT) segment - It includes the Company&#8217;s cloud-based products, high-end data storage servers and related services
    sold to private sectors including new media, healthcare, education and residential community management, and among other industries
    and applications. In this segment, the Company generates revenues from the sales of hardware and software total solutions with proprietary
    software and content as well as from designing and developing software products specifically customized for private sector customers&#8217;
    needs for a fixed price. The Company includes the revenue and cost of revenue of high-end data storage servers in the CBT segment.
    Advertising services is included in the CBT segment, after the Company consummated the acquisition of TNM. Advertisements are delivered
    to the ads display terminals and vehicular ads display terminals through the Company&#8217;s cloud-based new media sharing platform.
    Incorporation of advertising services complements the Company&#8217;s out-of-home advertising business strategy.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Blockchain
    Technology (BT) segment - The BT segment is the Company&#8217;s newly formed business sector in 2021. Cryptocurrency mining is the
    first initiative implemented in the BT segment. However, due to the decreased output and the highly volatile cryptocurrency market,
    the Company had ceased the operation of the BT segment by December 2022.</span></td></tr>

<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Traditional
    Information Technology (TIT) segment - The TIT segment includes the Company&#8217;s project-based technology products and services
    sold to the public sector. The solutions the Company has sold primarily include Geographic Information Systems (GIS), Digital Public
    Security Technology (DPST), and Digital Hospital Information Systems (DHIS). In this segment, the Company generates revenues from
    sales of hardware and system integration services. As a result of the business transformation, the TIT segment is gradually being
    phased out in 2021.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
more information regarding our operating segments, see Note 20 (Consolidated Segment Data) to our audited consolidated financial statements
included elsewhere in this report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Results
of Operations</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Comparison
of Years Ended December 31, 2023 and 2022</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth key components of our results of operations for fiscal years ended December 31, 2023 and 2022, both in dollars
and as a percentage of our revenue.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">December 31, 2023</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">% of Revenue</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">% of Revenue</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 40%; font-weight: normal; font-style: normal">Revenue</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</td><td style="width: 11%; font-weight: normal; font-style: normal; text-align: right">38,635,635</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 11%; font-weight: normal; font-style: normal; text-align: right">100.00</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">%</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</td><td style="width: 11%; font-weight: normal; font-style: normal; text-align: right">24,233,463</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 11%; font-weight: normal; font-style: normal; text-align: right">100.00</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">Costs of revenue</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">29,783,354</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">77.09</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">%</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">17,003,414</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">70.17</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; font-style: normal; text-align: left; padding-bottom: 1.5pt">Gross profit</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">8,852,281</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">22.91</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">%</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">7,230,049</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">29.83</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Administrative expenses</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(5,600,578</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(14.50</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(6,149,981</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(25.38</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Research and development expenses</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(2,967,043</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(7.68</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(3,606,653</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(14.88</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1.5pt">Selling expenses</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(482,358</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(1.25</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(639,052</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(2.64</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; font-style: normal; text-align: left">(Loss) from operations</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(197,698</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(0.51</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(3,165,637</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(13.06</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Subsidy income</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">292,797</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">0.76</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">148,577</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">0.61</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">(Loss) from equity method investment</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(8,031</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(0.02</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(261,397</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(1.08</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Other income (loss), net</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">267,292</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">0.69</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">3,314,433</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">13.68</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Interest income</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">2,100</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">0.01</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">7,956</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">0.03</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1.5pt">Interest expense</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(580,630</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(1.50</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(556,434</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(2.30</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; font-style: normal; text-align: left">(Loss) before income taxes</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(224,170</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(0.58</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(512,502</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(2.11</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1.5pt">Income tax (expense) benefit</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(7,980</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(0.02</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(0.29</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(2.40</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; font-style: normal; text-align: left; padding-bottom: 1.5pt">Net loss from discontinued operations</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; font-style: normal; text-align: left">Net (loss)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(697,941</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(1.81</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(7,081,647</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(29.22</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1.5pt">Less: Net loss attributable to non- controlling interest</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; font-style: normal; text-align: left; padding-bottom: 2.5pt">Net (loss) attributable to Company</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">(697,941</td><td style="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Revenue.
</i>We generate revenues from advertising, selling hardware, software, and other technology-related services to customers. For the year
ended December 31, 2023, our total revenue of continuing operations was $38.6 million, of which approximately $0.2 million was from related
parties, compared to total revenue of $24.2 million for the year ended December 31, 2022, an increase of $14.4 million, or 59.4%. The
increase was primarily due to an increase of $12.0 million revenue from products, and an increase of $4.0 million of software revenue,
offset by a decrease of $1.2 million of other revenue, and a decrease of $0.4 million of advertising revenue. The Company expects that
revenue for the year of 2024 would increase moderately as a result of the steady growth of its product sales and digital advertising,
as well as the additions of its new cloud-based intelligent products and solutions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table shows our revenue, percentage of revenue, cost of revenue and gross margin, by revenue categories:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 28%; font-weight: normal; font-style: normal">Products</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</td><td style="width: 5%; font-weight: normal; font-style: normal; text-align: right">24,239,113</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
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    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">4,145,233</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">52.89</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal">Advertising</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">5,001,695</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">49.15</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">%</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">Total</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Cost
of revenue and gross profit</i>. As indicated in the tables above, our cost of revenue increased by $12.8 million, which were mainly
attributed to increases in cost of products of $10.3 million and cost of software of $3.5 million, or 75.2%, to $29.8 million, for the
year ended December 31, 2023, from $17.0 million for the year ended December 31, 2022. As a percentage of revenue, our cost of revenue
increased to 77.1% during the year ended December 31, 2023, from 70.2% during the year ended December 31, 2022. As a result, gross profit
as a percentage of revenue decreased to 22.9% for the year ended December 31, 2023 from 29.8% for the year ended December 31, 2022. The
decrease in the overall gross margin primarily resulted from lower margin of software and advertising.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Administrative
expenses</i>. Our administrative expenses consist primarily of compensation and benefits for our general management, finance and administrative
staff, professional advisor consulting fees, audit fees, and other expenses incurred in connection with general operations. Our administrative
expenses decreased by $0.5 million, or 8.9%, to $5.6 million for the year ended December 31, 2023, from $6.1 million for the year ended
December 31, 2022. As a percentage of revenue, administrative expenses decreased to 14.5% for 2023, from 25.4% for 2022. Such decrease
was primarily due to a decrease of $0.4 million of professional service fee, a decrease of $0.3 million in depreciation expenses, a decrease
of foreign currency exchange loss of $0.4 million, and a decrease of $0.2 million in office expenses, offset by increase of $1.0 million
in share-based compensation to certain directors, executive officers, employees and consultants. We expect that the administrative expenses
in 2024 will decrease as a result of the decrease of share-based compensation. As a percentage of revenue, administrative expenses will
decrease as result of the expected additions of new revenue streams.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Research
and development expenses</i>. Our research and development expenses consist primarily of personnel related expenses, as well as costs
associated with new software and hardware development and enhancement. Our research and development expenses decreased by $0.6 million,
or 17.7%, to $3.0 million for the year ended December 31, 2023, from $3.6 million for the year ended December 31, 2022. Such decrease
was primarily due to the decrease in depreciation of R&amp;D related hardware equipment and software, and the decrease in payroll and
benefits to R&amp;D staff. As a percentage of revenue, research and development expenses decreased to 7.7% for 2023, from 14.9% for 2022.
We expect that the R&amp;D expenses in 2024 will be consistent with that of fiscal 2023, while as a percentage of revenue, R&amp;D expenses
will slightly decrease.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Selling
expenses</i>. Our selling expenses consist primarily of the compensation and benefits to our sales and marketing staff, business entertainment
expenses, and marketing expenses. Our selling expenses decreased by $0.16 million, or 24.5%, to $0.48 million for the year ended December
31, 2023, from $0.64 million for the year ended December 31, 2022. This decrease was due to the decrease of the selling activities related
costs. We expect that the selling expenses in 2024 will increase in line with revenue increase, while as a percentage of revenue, selling
expenses will slightly decrease.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Subsidy
income</i>. Our subsidy income consists primarily of the compensation and benefits to governmental subsidies. Our subsidy income increased
by $0.14 million, or 97.1%, to $0.29 million for the year ended December 31, 2023, from $0.15 million for the year ended December 31,
2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Other
income (loss)</i>. Our other income decreased by $3.0 million, or 91.9%, to $0.3 million for the year ended December 31, 2023, from $3.3
million for the year ended December 31, 2022. Other income in 2022 was mainly generated from an income of approximately $3.0 million
for disposition of a subsidiary.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Interest
expense</i>. Interest expense for the year ended December 31, 2023 was approximately $0.6 million, compared to interest expense of approximately
$0.6 million in 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Income
tax expense</i>. We recorded income tax expense of $7,980 for the year ended December 31, 2023, as compared to $69,869 of income tax
expense in 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Net
loss (income) from discontinued operations. </i>Net loss from discontinued operations for the year ended December 31, 2023 was approximately
$0.5 million, compared to a net loss of approximately $6.5 million in 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Net
loss attributable to Company</i>. As a result of the cumulative effect of the foregoing factors, we had a net loss attributable to the
Company of $0.7 million for the year ended December 31, 2023, as compared to net loss of $7.1 million for the year ended December 31,
2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Comparison
of Years Ended December 31, 2022 and 2021</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth key components of our results of operations for fiscal years ended December 31, 2022 and 2021, both in dollars
and as a percentage of our revenue.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(3,165,637</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(13.06</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(10,140,756</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">148,577</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
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    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">181,620</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">(Loss) from equity method investment</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(261,397</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(1.08</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(814,440</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(4.20</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Other income (loss), net</td><td style="font-weight: normal; font-style: normal">&#160;</td>
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    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(59,867</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(0.31</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Interest income</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">7,956</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">0.03</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">4,631</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">0.02</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Interest expense</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(556,434</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(2.30</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(928,352</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(4.79</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; font-style: normal; text-align: left">(Loss) before income taxes</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(512,502</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(2.11</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(11,757,164</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(60.63</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1.5pt">Income tax (expense) benefit</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(69,869</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(0.29</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(5,321</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(0.03</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; font-style: normal; text-align: left">Net loss from continuing operations</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(582,371</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(2.40</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(11,762,485</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(60.66</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; font-style: normal; text-align: left; padding-bottom: 1.5pt">Net loss (income) from discontinued operations</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(6,499,276</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(26.82</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">1,837,626</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">9.48</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; font-style: normal; text-align: left">Net (loss)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(7,081,647</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(29.22</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(9,924,859</td><td style="font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">(51.18</td><td style="font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1.5pt">Less: Net loss attributable to non- controlling interest</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; font-style: normal; text-align: left; padding-bottom: 2.5pt">Net (loss) attributable to Company</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">(7,081,647</td><td style="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">(29.22</td><td style="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">)%</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">(9,924,859</td><td style="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">)</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">(51.18</td><td style="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">)%</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Revenue.
</i>We generate revenues from advertising, selling hardware, software, and other technology-related services to customers. For the year
ended December 31, 2022, our total revenue of continuing operations was $24.2 million, of which approximately $0.2 million was from related
parties, compared to total revenue of $19.4 million for the year ended December 31, 2021, an increase of $4.8 million, or 25.0%. The
increase was primarily due to an increase of $1.5 million revenue from products, an increase of $2.8 million of advertising revenue,
an increase of $0.8 million of other revenue, offset by a decrease of $0.3 million of software revenue. The Company expects that revenue
for the year of 2023 would increase moderately as a result of the growth of advertising businesses, as well as the sales of its new cloud-based
intelligent products and solutions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table shows our revenue, percentage of revenue, cost of revenue and gross margin, by revenue categories:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="14" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">Year Ended December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="14" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">Year Ended December 31, 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
breakdown of revenue, percentage of revenue, cost of revenue and gross margin by segments is as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Cost
of revenue and gross profit</i>. As indicated in the tables above, our cost of revenue increased by $4.3 million, which were mainly attributed
to increases in cost of products of $1.2 million, cost of advertising of $1.6 million, cost of software of $0.1 million, and cost of
others of $1.4 million, or 33.7%, to $17.0 million, for the year ended December 31, 2022, from $12.7 million for the year ended December
31, 2021. As a percentage of revenue, our cost of revenue increased to 70.2% during the year ended December 31, 2022, from 65.6% during
the year ended December 31, 2021. As a result, gross profit as a percentage of revenue decreased to 29.8% for the year ended December
31, 2022 from 34.4% for the year ended December 31, 2021. The decrease in the overall gross margin primarily resulted from lower margin
of software and other revenue.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Administrative
expenses</i>. Our administrative expenses consist primarily of compensation and benefits for our general management, finance and administrative
staff, professional advisor consulting fees, audit fees, and other expenses incurred in connection with general operations. Our administrative
expenses decreased by $5.5 million, or 47.2%, to $6.1 million for the year ended December 31, 2022, from $11.6 million for the year ended
December 31, 2021. As a percentage of revenue, administrative expenses decreased to 25.4% for 2022, from 60.0% for 2021. Such decrease
was primarily due to a decrease of $4.5 million in allowance for credit losses, and decrease in share-based compensation of $2.6 million
to certain employees and consultants, offset by an increase of consulting fees of $0.6 million and an increase of foreign currency exchange
loss of $0.7 million. We expect that the administrative expenses in 2023 will be consistent with that of fiscal year 2022. As a percentage
of revenue, administrative expenses will decrease as result of the expected additions of new revenue streams.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Research
and development expenses</i>. Our research and development expenses consist primarily of personnel related expenses, as well as costs
associated with new software and hardware development and enhancement. Our research and development expenses decreased by $0.9 million,
or 19.5%, to $3.6 million for the year ended December 31, 2022, from $4.5 million for the year ended December 31, 2021. Such decrease
was primarily due to the decrease of amortization of intangible assets, decrease of depreciation of R&amp;D related hardware equipment
and software, and the decrease in payroll and benefits to R&amp;D staff. As a percentage of revenue, research and development expenses
decreased to 14.9% for 2022, from 23.1% for 2021. We expect that the R&amp;D expenses in 2023 will be consistent with that of fiscal
2022, while as a percentage of revenue, R&amp;D expenses will slightly decrease.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Selling
expenses</i>. Our selling expenses consist primarily of the compensation and benefits to our sales and marketing staff, business entertainment
expenses, and marketing expenses. Our selling expenses decreased by $0.06 million, or 8.0%, to $0.64 million for the year ended December
31, 2022, from $0.70 million for the year ended December 31, 2021. This decrease was due to the decrease of the other selling activities
related costs. We expect that the selling expenses in 2023 will increase in line with revenue increase, while as a percentage of revenue,
selling expenses will slightly decrease.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Subsidy
income</i>. Our subsidy income consists primarily of the compensation and benefits to governmental subsidies. Our subsidy income decreased
by $0.03 million, or 18.2%, to $0.15 million for the year ended December 31, 2022, from $0.18 million for the year ended December 31,
2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Other
income (loss)</i>. Other income for the year ended December 31, 2022 was approximately $3.3 million, compared to other loss of approximately
$0.1 million in 2021. Other income in 2022 was mainly the income generated from the write-off of approximately $0.3 million of accounts
payable and other payables, and an income of approximately $3.0 million for disposition of a subsidiary.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Interest
expense</i>. Interest expense for the year ended December 31, 2022 was approximately $0.6 million, compared to interest expense of approximately
$0.9 million in 2021. The decrease of interest expense in 2022 was mainly due to the decrease of interest accrual and the amortization
of debt discount from issuance of convertible notes in 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Income
tax expense</i>. We recorded income tax expense of $69,869 for the year ended December 31, 2022, as compared to $5,321 of income tax
expense in 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Net
loss (income) from discontinued operations. </i>Net loss from discontinued operations for the year ended December 31, 2022 was approximately
$6.5 million, compared to net income of approximately $1.8 million in 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Net
loss attributable to Company</i>. As a result of the cumulative effect of the foregoing factors, we had a net loss attributable to the
Company of $7.1 million for the year ended December 31, 2022, as compared to net loss of $9.9 million for the year ended December 31,
2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Inflation</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inflation
does not materially affect our business or the results of our operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Foreign
Currency Fluctuations</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
Item 11 &#8220;Quantitative and Qualitative Disclosures about Market Risk-Foreign Exchange Risk.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_006"></span>B.
Liquidity and Capital Resources</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023, we had cash and cash equivalents of $1.3 million.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
January 2020, the Company adopted ASU 2016-13, Topics 326-Credit Losses, Measurement of Credit Losses on Financial Instruments, which
replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL)
methodology, as its accounting standard for its trade accounts receivable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company considers the following factors when determining whether to permit a longer payment period or provide other concessions to customers:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">macroeconomic
    conditions that may affect a customer&#8217;s ability to pay; and</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    relative importance of the customer relationship to the Company&#8217;s business.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
normal credit term is ranging from 1 month to 3 months after the customers&#8217; acceptance of high-end data storage servers or software,
and completion of advertising and other services, and ranging from 1 month to 6 months after the customers&#8217; acceptance of ads display
terminals. However, because of various factors of business cycle, the actual collection of outstanding accounts receivable may be beyond
the normal credit terms.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
allowance for credit losses at December 31, 2023 and 2022, totaled approximately $25.6 million and $25.5 million, respectively, representing
management&#8217;s best estimate. The following table describes the movement for allowance for credit losses during the year ended December
31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 82%; font-weight: normal; font-style: normal">Balance at December 31, 2022</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</td><td style="width: 14%; font-weight: normal; font-style: normal; text-align: right">25,484,295</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: justify">Increase in allowance for credit losses</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">794,087</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: justify; padding-bottom: 1.5pt">Foreign exchange difference</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">(686,436</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">25,591,946</td><td style="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table summarizes the key cash flow components from our consolidated statements of cash flows for the periods indicated.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span style="text-decoration: underline">Cash
Flows</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Operating
Activities</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
cash used in operating activities was $2.3 million for the year ended December 31, 2023, $7.5 million for the year ended December 31,
2022 and $16.1 million for the year ended December 31, 2021. For the fiscal year 2023, net cash used in operating activities were primarily
attributed to increase in advances to suppliers, increase in inventories and the decrease in accounts payable. For the fiscal year 2022,
net cash used in operating activities were primarily attributed to the increase in accounts receivable for approximately $4.0 million
and approximately $6.0 million for decrease in accounts payable. Net cash used in operating activities in the fiscal year 2021 were primarily
attributed to increase in advance to suppliers for approximately $4.3 million and approximately $9.8 million for reduction of our payable
liabilities. &#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Investing
Activities</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
cash used in investing activities was $1.2 million for the year ended December 31, 2023 and net cash provided by investing activities
was $4.3 million for the year ended December 31, 2022. Net cash used in investing activities was $14.0 million for the year ended December
31, 2021. Net cash used in investing activities in 2023 was mainly due to purchase of property and equipment of approximately $1.2 million.
Net cash provided by investing activities in 2022 was mainly due to purchase of property and equipment of approximately $1.8 million,
offset by the proceeds from sales of property and equipment of $1.1 million, and proceeds from sales of cryptocurrencies of $5.0 million.
Net cash used in investing activities in 2021 was mainly due to the purchase of property and equipment of approximately $11.3 million,
and the consideration paid for acquisition of $7.3 million, offset by the proceeds from sales of cryptocurrencies of $4.5 million.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Financing
Activities</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
cash provided by financing activities was $3.8 million for the year ended December 31, 2023, mainly attributable to proceeds from borrowings
under short-term loans of $8.8 million, repayment of short-term loan of $7.2 million, proceeds from issuance of ordinary shares
of $1.7 million, and proceeds from issuance of convertible note of $0.6 million. Net cash provided by financing activities
was $22,700 for the year ended December 31, 2022, mainly attributable to proceeds from borrowings under short-term loans of $7.4 million,
and repayment of short-term loan of $7.4 million. Net cash provided by financing activities was $33.0 million for the year ended December
31, 2021, mainly attributable to receipts of the borrowings from related party of $3.1 million, and net proceeds of $28.3 million from
issuance of ordinary shares through private placement offerings.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Loan
Facilities</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023 and 2022, our loan facilities were as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Short-term
bank loans</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1.5pt">Secured short-term loans</td><td style="width: 2%; font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; font-weight: normal; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 14%; font-weight: normal; font-style: normal; text-align: right">8,547,509</td><td style="width: 1%; padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 2%; font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; font-weight: normal; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 14%; font-weight: normal; font-style: normal; text-align: right">7,203,762</td><td style="width: 1%; padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 2.5pt">Total short-term bank loans</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">8,547,509</td><td style="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">7,203,762</td><td style="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Management&#8217;s
Plans</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0"><span style="font: normal 10pt Times New Roman, Times, Serif">As
a result of the recovery of market conditions and customer demands, as well as the Company&#8217;s continued efforts in diversifying
applications of its innovative Taoping smart cloud, the Company achieved a 59.4% year-over-year revenue growth and significantly reduced
net loss by $6.4 million in 2023. Cash and cash equivalents at December 31, 2023 was $1.3 million, compared to cash and cash equivalents
of $1.0 million a year ago.</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font: normal 10pt Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0"><span style="font: normal 10pt Times New Roman, Times, Serif">The
Company incurred a net loss of $0.7 million for year ended December 31, 2023, compared to a net loss of $7.1 million for 2022. The improved
profitability was mainly due to the increase of gross profit, and the Company&#8217;s cessation of cryptocurrency mining business in
2023. As of December 31, 2023, the Company had a working capital surplus of approximately $5.2 million, significantly improved from a
working capital deficit of $0.2 million as of December 31, 2022.</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font: normal 10pt Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0"><span style="font: normal 10pt Times New Roman, Times, Serif">The
Company will continue to focus the efforts on the digital advertising and other cloud-based and AI-related products and applications.
Furthermore, its two core competencies, the Taoping national sales network and the highly scalable and compatible cloud platform, and
its strong software development capability, make it a valued partner by many other smart-community customers and solution providers.
In addition to seeking strategic acquisition to expand its digital advertising business, the Company continues to explore business opportunity
in the smart community and new energy sectors. Starting from April 2023, the Company has entered into a series of long-term strategic
cooperation agreements with various customers to provide Taoping&#8217;s cloud-based intelligent product solutions, including smart large
screen, IoT smart rest station and off-grid wastewater treatment solution, which are expected to generate revenue and operating cashflow
for the Company for year 2023 and beyond.</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font: normal 10pt Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0"><span style="font: normal 10pt Times New Roman, Times, Serif">If
the Company&#8217;s execution of business strategies is not successful in addressing its current financial concerns, additional capital
raise from issuing equity security or debt instrument or additional loan facility may occur to support required cash flows. The Company&#8217;s
existing $8.5 million revolving bank loan, which was collateralized with the Company&#8217;s office property, provides important capital
support for its operation. In addition, the Company has renewed the bank facility line with a value of approximately $2.6 million in
July 2023 and a value of approximately $4.9 million in September 2023, and both are valid for 12 months.</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font: normal 10pt Times New Roman, Times, Serif"><i>July
2023 Standby Equity Purchase Agreements</i></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font: normal 10pt Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0"><span style="font: normal 10pt Times New Roman, Times, Serif">On
July 17, 2023, the Company entered into a public standby equity purchase agreement and a private standby equity purchase agreement with
an investor. Pursuant to the agreements, the Company has the right, but not the obligation, to sell to the investor up to $1,000,000
and $10,000,000, respectively, of its ordinary shares, within 24 months and 36 months, respectively, from the date of the agreements.
As of April 2024, the Company has raised a total of $3.3 million through this equity line offering. In conclusion, the Company believes
that it has the ability to raise needed capital to fund its operations and business growth, and is able to operate as a going concern.</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font: normal 10pt Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0"><span style="font: normal 10pt Times New Roman, Times, Serif">However,
the Company can make no assurances that financing will be available for the amounts we need, or on terms commercially acceptable to us,
if at all. If one or all of these events do not occur or subsequent capital raise was insufficient to bridge financial and liquidity
shortfall, substantial doubt exists about the Company&#8217;s ability to continue as a going concern. The consolidated financial statements
have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might
result from the outcome of this uncertainty.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>September
2023 Securities Purchase Agreement and Convertible Promissory Note</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
September 27, 2023, the Company entered into a securities purchase agreement, pursuant to which the Company sold to the investor an
unsecured convertible promissory note (the &#8220;Note&#8221;) with a 12-month maturity. The Note has the original principal amount
of $609,000.00 including the original issue discount of $44,000 and the investor&#8217;s legal and other transaction costs of
$15,000. The Company anticipates using the proceeds for general working capital purposes. The investor may, at any time after six
months from the issue date, convert all or any part of the outstanding balance of the note, at a conversion price of $8.00 per
share. In addition, at any time after six months from the issue date, the investor may redeem all or any portion of the note,
subject to a maximum amount of $150,000 per month, into ordinary shares of the Company at a price equal to 80% multiplied by the
lowest daily volume-weighted average price during the 10 trading days immediately preceding the applicable redemption, subject to
certain adjustments and limitations. The investor also has the right, on any trading day and the following trading day, that any
intraday trade price of the ordinary shares is 10% greater than the previous measurement period&#8217;s closing trade price (as
defined in the Note), to redeem all or any portion of the outstanding balance of the note into ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Note is recognized initially at fair value, net of debt discounts including original issue discount, transaction Expense Amount, and
allocation of proceeds to beneficial conversion feature, in the amount of $215,440. As of December 31, 2023, the remaining unamortized
debt discount was $159,785, and will be amortized through September 27, 2024. See &#8220;Notes to Consolidated Financial Statements-
16. Convertible Note Payable&#8221; on page F-37 for additional information.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Intercompany
Transfers</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
subsidiaries organized in the PRC may pay dividends only out of their accumulated profits. Our PRC subsidiaries are required to set aside
at least 10% of their after-tax profit to their general reserves until such reserves cumulatively reach 50% of their respective registered
capital. General reserves of our PRC subsidiaries are not distributable as cash dividends. Restrictions on our net assets also include
the conversion of local currency into foreign currencies, tax withholding obligations on dividend distributions, the need to obtain approval
from SAFE for loans to a non-PRC consolidated entity, and the covenants or financial restrictions related to outstanding debt obligations.
We are not aware of other restrictions on our net assets or the transferability of assets via loans or advances to our non-PRC consolidated
entities. As our operations are principally based in China, our non-PRC consolidated entities do not have material cash obligations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table provides the amount of our statutory general reserve, the amount of restricted net assets, consolidated net assets, and
the amount of restricted net assets as a percentage of consolidated net assets, as of December 31, 2023 and 2022:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td></tr>
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    <td style="width: 64%; font-weight: normal; font-style: normal; text-align: left">PRC general reserve - restricted net assets</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</td><td style="width: 14%; font-weight: normal; font-style: normal; text-align: right">10,209,086</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</td><td style="width: 14%; font-weight: normal; font-style: normal; text-align: right">10,209,086</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
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    <td style="font-weight: normal; font-style: normal; text-align: left">Consolidated net assets</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">$</td><td style="font-weight: normal; font-style: normal; text-align: right">12,763,297</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Restricted net assets as percentage of consolidated net assets</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">79.99</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td><td style="font-weight: normal; font-style: normal">&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
offshore holding company, as a shareholder of a Foreign Investment Entity (FIE), can make loans to the FIE, provided the parties being
in compliance with the PRC regulations governing such loans. Our parent company can make a shareholder loan to a PRC subsidiary provided
that (i) the amount of the loan does not exceed the difference between the total investment and registered capital as approved by the
local Administration for Industry and Commerce that issued the business license of the subsidiary; and (ii) before the loan can be converted
into RMB, the subsidiary reports to SAFE the intended use of proceeds (which cannot be to purchase domestic assets). The subsidiary can
finance the operations of iASPEC in accordance with the terms of the MSA with iASPEC.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023 and 2022, the breakdown of our cash and cash equivalents (including restricted cash) was as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">1,300,855</td><td style="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
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  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
do not believe that there would be any material costs to transfer cash outside the PRC. In addition, as our operations are principally
based in China, our non-PRC consolidated entities do not incur material cash obligations. If nature of the businesses for our non-PRC
consolidated entities have changed in the future and require material amounts of cash being transferred to them, we will assess the feasibility
and plan cash transfers in accordance with foreign exchange regulations, taking into account of tax consequences. A company registered
in mainland China must apply for and receive an approval from the SAFE to remit foreign currency to any foreign country, and must comply
with PRC statutory reserve requirement as disclosed in Item 3 Key Information - D. Risk Factor of this annual report. As we conduct all
of our operations in China, our inability to convert cash and short-term investments held in RMB to other currencies will materially
affect our liquidity.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_007"></span>C.
Research and Development, Patents and Licenses, Etc.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
industry is characterized by extremely rapid technological change, evolving industry standards, and changing customer demands. These
conditions require continuous expenditures on product research and development to enhance existing products, create new products, and
avoid product obsolescence. See Item 3 &#8220;Key Information-D. Risk Factors-If we are unable to develop and offer competitive new products
and services, our future operations could be adversely affected,&#8221; -&#8220;If we are unable to keep abreast with the rapid technological
changes in our industry, demand for our products and services could decline and adversely affect our revenue and growth,&#8221; and -&#8220;Our
technology may become obsolete, which could materially adversely affect our ability to sell our products and services.&#8221; For a detailed
analysis of research and development costs, see Item 5.A. &#8220;Operating Results-Results of Operations-Research and development expenses&#8221;.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_008"></span>D.
Trend Information</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
than as disclosed elsewhere in this annual report, we are not aware of any trend, uncertainty, demand, commitment or event that is reasonably
likely to have a material effect on our net revenues and income from continuing operations, profitability, liquidity, capital resources,
or would cause reported financial information not necessarily to be indicative of future operation results or financial condition.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_009"></span>E.
Accounting policies adopted on the preparation of financial statements</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
preparation of financial statements in conformity with U.S. GAAP requires our management to make assumptions, estimates and judgments
that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and
contingencies, if any. We consider our accounting policies to be those that require the more significant judgments and estimates in the
preparation of financial statements, including the following:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Revenue
Recognition</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
accordance with the ASC 606, the Company recognizes revenues net of applicable taxes, when goods or services are transferred to customers
in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company generates its revenues primarily from four sources: (1) product sales, (2) software sales, (3) advertising and (4) other sales.
Revenue is recognized when obligations under the terms of a contract with our customers are satisfied, generally, upon delivery of the
goods and services.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Revenue
- Products</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Product
revenues are generated primarily from the sale of Cloud-Application-Terminal based digital ads display terminals with integrated software
essential to the functionality of the hardware to our customers (inclusive of related parties) and high-end data storage servers. Although
manufacturing of the products has been outsourced to the Company&#8217;s Original Equipment Manufacturer (OEM) suppliers, the Company
has acted as the principal of the contract. The Company recognized the product sales at the point of delivery. The Company may from time
to time provide future unspecified software upgrades to the hardware products&#8217; essential software, which is expected to be infrequent
and, free of charge. Non-software service is mainly the one-time training session provided to the customer to familiarize them with the
software operation upon the customer&#8217;s initial introduction to the software platform. The costs of providing infrequent software
upgrade and training are de minimis. As a result, the Company does not allocate transaction price to software upgrade and customer training.
Product sales are classified as &#8220;Revenue-Products&#8221; on the Company&#8217;s consolidated statements of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Revenue
- Software</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company designs and develops software products. Software development usually includes developing software, integrating various isolated
software systems into one, and testing the software. The design and build process, together with the integration of the various elements,
are generally determined to be essential to the functionality of the delivered software. The contracted price is usually paid at the
delivery of the software. The Company usually provides non-software services including after-sale support and training. The training
only occurs at the introduction of the software. The software is high ended and stable, after-sale support and subsequent upgrade or
enhancement are infrequent. The Company has estimated the costs associated with the non-software performance obligations and concludes
that these obligations are de minimis to the overall contract. Therefore, the Company does not further allocate transaction price.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company usually completes the software support service in one-off and recognizes the revenue at the point of delivery of service because
the Company does not have an enforceable right to payment for performance completed to date. Revenues from software development contracts
are classified as &#8220;Revenue-Software&#8221; on the Company&#8217;s consolidated statements of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Revenue
- Advertising</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company generates revenues primarily from providing advertising slots to customers to promote their businesses by broadcasting advertisements
on identifiable digital ads display terminals and vehicular ads display terminals in different geographic regions and locations through
a cloud-based new media sharing platform. The Company also contracts individuals to promote special events or for various occasions.
The Company is only obligated to broadcast the advertisements to the contracted digital ads display terminals, and therefore allocates
100% of the transaction price to advertisement broadcasting. The transaction price for advertisement broadcasting is fixed based on the
numbers of advertisement delivery and duration of the contract, and has no variable consideration, or significant financing component,
or subsequent price change, and is not refundable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company recognizes the revenues, net of applicable taxes, from advertisement broadcasting contracts with customers over the contracted
advertising duration.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Revenue
- Cryptocurrency mining</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has entered into digital asset mining pools by executing contracts with the mining pool operators to provide computing power
to the mining pool. The contracts are terminable under certain circumstances. Both the Company and the mining pool operator have the
right to terminate the contract at any time, with or without cause, and without compensation. In exchange for providing computing power,
the Company is entitled to a fractional share of the fixed cryptocurrency awards the mining pool operator receives (less digital asset
transaction fees to the mining pool operator, if any.) for successfully adding a block to the blockchain. The Company&#8217;s fractional
share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power
contributed by all mining pool participants in solving the current algorithm. The contract first exists upon the successful placement
of a block on the blockchain by the pool operator because that is the point when the parties have performed their contract obligation
and neither party can unilaterally terminate the contract without compensating the other party.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Providing
computing power in digital asset transaction verification services is an output of the Company&#8217;s ordinary activities. The provision
of providing such computing power is the only performance obligation in the Company&#8217;s contract with mining pool operator.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value using the
quoted price from principal market of the related cryptocurrency on the date received, which is not materially different than the fair
value at the contract inception or at the time the Company has earned the award from the pools. The consideration is all variable. Because
it is not probable that a significant reversal of cumulative revenue will not occur (ASC 606-10-32-11), the consideration is constrained
until the mining pool operator successfully places a block (by being the first to solve an algorithm), and the Company receives confirmation
of the consideration it will receive, at which time revenue is recognized. There is no financing component, nor allocation of transaction
price in these transactions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Revenue
- Other</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company also reports other revenue which comprises revenue generates from System upgrade and technical support services, platform service
fee, and rental income.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">System
upgrade and technical support revenue is recognized when performance obligations are satisfied upon completion of the services. Platform
service fee is charged based on number of the display terminals used by the customers or a percentage of advertising revenue generated
by the display terminals. Platform service revenue is recognized on a monthly basis over the contract period.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company follows ASC 842 &#8211; Leases that requires lessor to identify the underlying assets and allocate rental income among considerations
in lease and non-lease components. The Company owns two units of office space renting out to a third party and TNM under non-cancelable
operating lease agreements with lease terms of two years starting from May 1, 2022 and four years starting from July 1, 2022, respectively.
The lease agreements have fixed monthly rental payments, and no non-lease component or option for lessees to purchase the underlying
assets. The Company collects monthly rental payments from the lessees and recognizes rental income.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
completion of the business acquisition on June 9, 2021, TNM became a subsidiary of the Company. The rental income from TNM has become
an intercompany revenue and been eliminated since June 9, 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Contract
balances</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company records advances from customers when cash payments are received or due in advance of our performance.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Practical
expedients and exemptions</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company generally expenses sales commissions if any incurred because the amortization period would have been one year or less. In many
cases, the Company is approached by customers for customizing software products for their specific needs without incurring significant
selling expenses.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year
or less.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Accounts
Receivable, Accounts Receivable -related parties</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accounts
receivable are recognized and carried at carrying amount less an allowance for credit loss, if any. The Company maintains an allowance
for credit losses resulting from the inability of its customers to make required payments based on contractual terms. The Company reviews
the collectability of its receivables on a regular and ongoing basis according to historical trend, and estimates its provision for expected
credit losses on receivables aging analysis.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company estimates allowance for credit losses for the anticipation of future economic condition and credit risk indicators of customers.
After all attempts to collect a receivable have failed, the receivable is written off against the allowance. In the event the Company
recovers amounts previously reserved for, the Company will reduce the specific allowance for credit losses.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Inventories</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inventories
are valued at the lower of cost (weighted average basis) and net realizable value. Net realizable value is the expected selling price
in the ordinary course of business minus any costs of completion, disposal, and transportation to make the sale.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company performs an analysis of slow-moving or obsolete inventory periodically and any necessary valuation reserves, which could potentially
be significant, are included in the period in which the evaluations are completed. Any inventory impairment results in a new cost basis
for accounting purposes.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Cryptocurrencies</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cryptocurrencies
held, including Bitcoin and Ethereum, are accounted for as intangible assets with indefinite useful lives. An intangible asset with an
indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances
occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount
exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured.
If the carrying amount of the cryptocurrency exceeds its fair value, the Company recognizes an impairment loss in an amount equal to
that excess. Subsequent reversal of impairment losses is not permitted.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
are no cash flows from cryptocurrencies included in net cash used in operating activities since the revenue recognized from mining is
a noncash activity. The sales of cryptocurrencies are included within investing activities in the consolidated statements of cash flows
and any realized gains or losses from such sales are included in other income (expense) in the consolidated statements of operations.
The Company accounts for its gains or losses in accordance with the first in first out (FIFO) method of accounting.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Long-term
investment</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s long-term investment consists of investments accounted for under the equity method and equity investments without readily
determinable fair value. Pursuant to ASC 321, equity investments, except for those accounted for under the equity method, those that
result in consolidation of the investee and certain other investments, are measured at fair value, and any changes in fair value are
recognized in earnings. For equity securities without readily determinable fair value and do not qualify for the existing practical expedient
in ASC Topic 820, Fair Value Measurements and Disclosures (&#8220;ASC 820&#8221;) to estimate fair value using the net asset value per
share (or its equivalent) of the investment, the Company elected to measure those investments at cost, less any impairment, plus or minus
changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
equity investments that the Company elects to measure at cost, less any impairment, plus or minus changes resulting from observable price
changes, the Company makes a qualitative assessment considering impairment indicators to evaluate whether investments are impaired at
each reporting date. Impairment indicators considered include, but are not limited to, a significant deterioration in the earnings performance
or business prospects of the investee, including factors that raise significant concerns about the investee&#8217;s ability to continue
as a going concern, a significant adverse change in the regulatory, economic, or technologic environment of the investee and a significant
adverse change in the general market condition of either the geographical area or the industry in which the investee operates. If a qualitative
assessment indicates that the investment is impaired, the entity has to estimate the investment&#8217;s fair value in accordance with
the principles of ASC 820. For equity investments without readily determinable fair value, the Company uses Level 3 inputs of fair value
accounting in accordance with ASC 820-10 and recognizes impairment loss other than temporary in the statement of operations equal to
the difference between its initial investment and its proportional share of the net book value of the investee&#8217;s net assets which
approximates its fair value.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
impairment on equity investments without readily determinable fair value, the Company uses Level 3 inputs of fair value accounting in
accordance with ASC 820-10 and recognizes impairment loss in the statement of operations equal to the difference between its initial
investment and its proportional share of the net book value of investee&#8217;s net assets which approximates its fair value if those
are determined to be other than temporary.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Operating
leases - Right-of-use assets and lease liabilities</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company accounts for lease under ASC 842 &#8220;Leases&#8221;, and also elects practical expedient not to separate non-lease component
from lease components in accordance with ASC 842-10-15-37 and instead to account for each separate lease component and the non-lease
components associated with that lease component as a single lease component. The Company also elects the practical expedient not to recognize
lease assets and lease liabilities for leases with a term of 12 months or less.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company recognized a lease liability and corresponding right-to-use asset based on the present value of minimum lease payments discounted
at the Company&#8217;s incremental borrowing rate. The Company records amortization and interest expense on a straight-line basis based
on lease terms and reduces lease liabilities upon making lease payments.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Income
Taxes</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Income
taxes are provided on an asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes are
recognized for all significant temporary differences at enacted rates and classified as non-current in the financial statements. A valuation
allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion, or all
of, the deferred tax assets will not be realized. The Company classifies interest and/or penalties related to unrecognized tax benefits,
if any, as a component of income tax expense.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Discontinued
Operations</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company follows &#8220;ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting
Discontinued Operations and Disclosures of Disposals of Components of an Entity&#8221; for reporting discontinued operations. Under the
revised standard, a discontinued operation must represent a strategic shift that has or will have a major effect on an entity&#8217;s
operations and financial results. Examples could include a disposal of a major line of business, a major geographical area, a major equity
method investment, or other major parts of an entity. The revised standard also allows an entity to have certain continuing cash flows
or involvement with the component after the disposal. Additionally, the standard requires expanded disclosures about discontinued operations
that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued
operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Recent
Accounting Pronouncements</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Please
refer to Note 2 to our audited consolidated financial statements for a discussion of relevant pronouncements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_010"></span>ITEM
6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_011"></span>A.
Directors and Senior Management</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth certain information regarding our directors and senior management, as well as employees upon whose work we
are dependent, as of the date of this annual report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; width: 24%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NAME</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; text-align: center; width: 10%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>AGE</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; width: 62%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>POSITION</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Jianghuai
    Lin </span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">55</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chairman
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhiqiang
    Zhao </span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">53</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">President
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Liqiong
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">47</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief
    Financial Officer </span></td></tr>
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhixiong
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">55</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief
    Operating Officer </span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Guangzeng
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">45</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief
    Technology Officer </span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Huan
    Li</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">39</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief
    Marketing Officer </span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ping
    Cai</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">64</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Director
    </span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yong
    Jiang </span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">50</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Director
    </span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Remington
    C.H. Hu </span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">58</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Director
    </span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Mr.
Jianghuai Lin. </b>Mr. Lin has been the Chairman of Board of Directors and the Chief Executive Officer of the Company since 2006. Mr.
Lin has also served as the Chairman and Chief Executive Officer of our subsidiary, IST, since its incorporation in January 2006. During
the period from September 2000 to June 2004, Mr. Lin served as the President and Chief Executive Officer of Hong Kong United Development
Group, a consolidated enterprise engaging in investment, high technology, and education. Before that, during the period from February
1995 through August 2000, Mr. Lin was a Director and the General Manager of Fujian Wild Wolf Electronics Limited, a company engaged in
the business of manufacturing electrical consumer products. Mr. Lin holds a Master&#8217;s Degree in Software Engineering from Wuhan
University and a Bachelor&#8217;s Degree in Industrial Accounting from Xiamen University.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Mr.
Zhiqiang Zhao. </b>Mr. Zhao has been the President of the Company since August 2015 and a member of Board of Directors since June 19,
2012. Mr. Zhao has extensive experience in corporate operations and integrations, strategic planning, and human resource management.
From March 2003 to March 2005, Mr. Zhao served as Supervisor of Human Resources for the Foxconn Technology Group. From April 2005 to
July 2006, Mr. Zhao served as Administrative and Human Resource Director of iASPEC; and as Deputy General Manager of iASPEC from July
2006 to August 2010. From November 2010, Mr. Zhao began serving as the Chief Operating Officer and Vice President of the Company. From
August 2010, he was vice chairman of iASPEC. From July 2011, Mr. Zhao served as General Manager of ISIOT (former HPC Electronics (Shenzhen)
Ltd.). Mr. Zhao holds a Bachelor&#8217;s Degree in Mechanical &amp; Electrical Engineering from Inner Mongolia University.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Ms.
Liqiong (Iris) Yan.</b> Ms. Yan has been the Chief Financial Officer of the Company since May 2021. Ms. Yan has over ten years&#8217;
experience in finance, investor relations and corporate governance. She served as the Company&#8217;s Assistant CFO between 2018 and
2021 and prior to that she was the Director of Investor Relations and Secretary of the Board of the Company since 2007. During her tenure,
Ms. Yan assisted in Company&#8217;s NASDAQ listing, Company&#8217;s strategic acquisitions and overseas equity/debt financings, and was
instrumental in strategy planning, financial management and capital strategy management. Ms. Yan is a Certified Management Accountant
(CMA) licensed by the Institute of Management Accountants. Ms. Yan received a postgraduate diploma in Investment from Fudan University
and a bachelor&#8217;s degree in International Economics from Beijing Normal University.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Mr.
Zhixiong Huang. </b>Mr. Huang has been Chief Operating Officer of the Company since August 2015. Between July 2001 and March 2002, Mr.
Huang served as the General Manager of product development of Shenzhen Runsheng Information Systems Company Ltd., and was responsible
for overseeing general operations. From September 2002 and October 2006, Mr. Huang served as the deputy general manager of iASPEC, where
he supervised iASPEC&#8217;s research and development activities and consulted on various sophisticated technical issues. From January
2006 to September 2013, he served as the Company&#8217;s Vice President, and was Chief Technology Officer from December 2008 and September
2013. Mr. Huang holds a Bachelor&#8217;s Degree in computer science from Hehai University in China, and has over twenty years of&#8217;
experience in information systems. Mr. Huang is currently a Director of the Shenzhen Computer Association, and an expert with the Shenzhen
Expert Association and the Shenzhen Science and Technology Innovation Association.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Mr.
Guangzeng Chen.</b> Mr. Chen has served as Chief Technology Officer of the Company since December 1, 2015. Mr. Chen joined the Company
as Vice President of the Research &amp; Development Division in March 2014. Prior to joining the Company, Mr. Chen was a project manager
at CoolPad Group Limited, a Shenzhen-based telecommunications equipment company that was one of the top ten smartphone manufacturing
companies in China, from May 2011 to February 2014. Previously, Mr. Chen was the head of research and development at VideoHome, a Taiwanese
multimedia appliance manufacturer and exporter, from June 2004 to May 2011. Mr. Chen graduated from Zhengzhou University with a Bachelor&#8217;s
Degree in Computer Science.&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Mr.
Huan Li. </b>Mr. Li has served as Chief Marketing Officer of the Company since July 2021. He has over 15 years&#8217; experience in the
culture and media field. He has worked as a reporter for several media outlets including Asia Pacific Media Group. Mr. Li has been directly
responsible for the planning and operation management of a number of large-scale commercial and cultural projects. Mr. Li holds a Bachelor&#8217;s
Degree in Journalism from Jiangsu Ocean University in China.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Ms.
Ping Cai. </b>Ms. Cai has been serving as an Associate Professor of Engineering at Shenzhen MSU-BIT University since August 2022. Prior
to her current role, she held the position of Associate Professor at the College of Big Data and Internet at Shenzhen Technology University
from August 2020 to July 2022. Before that, she made significant contributions to the academic community as an Associate Professor at
the College of Computer Science and Software Engineering in Shenzhen University from August 1988 to July 2020. Ms. Cai is an accomplished
academician, having edited a major textbook titled &#8220;Introduction to Computer&#8221; and co-edited four textbooks in collaboration
with others. She has demonstrated her commitment to research by presiding over two projects above the provincial level and publishing
more than ten research papers.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Her
outstanding contributions to education have been recognized through various honors, including winning one first prize and one second
prize for higher education teaching achievement in Guangdong Province. Additionally, she received one first prize for Excellent Teaching
Achievement at Shenzhen University and the prestigious award for Excellent Undergraduate Teacher of Shenzhen University. Ms. Cai earned
her Bachelor&#8217;s degree in Computer Software from Nanjing University in 1982 and went on to achieve a Master&#8217;s degree in Software
Engineering from Wuhan University in 2004. Her educational background, coupled with her extensive experience in academia, underscores
her dedication and expertise in the field of engineering and software development.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Dr.
Yong Jiang. </b>Dr. Jiang has been a member of Board of Directors of the Company since August 13, 2013. As a professor and supervisor
for Ph. D candidates, Dr. Jiang has been the Vice Director of Division of Information Science &amp; Technology and the Director of Network
Center in the Graduate School at Shenzhen, Tsinghua University (GSST) since 2002. Dr. Jiang is a member of Association of Computing Machinery
(ACM), the world&#8217;s largest educational and scientific computing society, and a member of China Computer Federation (CCF). He also
serves as the Vice Chairman of Shenzhen Association of Chief Information Officer, and a committee member of Shenzhen Association of Experts.
Dr. Jiang was majored in the research of next generation internet and computer network architecture, and has led more than 10 national-level
scientific research programs, including programs from National Natural Science Foundation of China (NSFC), the National 863 Program,
the pilot program from China Next Generation Internet (CNGI), and National Major Projects. Dr. Jiang graduated from the Department of
Computer Science and Technology of Tsinghua University.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Mr.
Remington C.H. Hu. </b>Mr. Hu has been a member of Board of Directors of the Company since June 19, 2012 and was a member of the Board
of CITN from October 30, 2009 until completion of the corporate reorganization on October 31, 2012. He is a seasoned executive with more
than 16 years of experience in corporate finance and investment management, and is the founder and CEO of Tomorrow Capital Limited, a
financial advisory firm. Prior to founding Tomorrow Capital Limited, Mr. Hu served, from February 2008 to July 2009, as Chief Financial
Officer of Yucheng Technologies Limited, a Nasdaq listed top IT solutions and BPO company servicing Chinese banking industry. From August
2004 to August 2007, Mr. Hu served as China Representative for CVM Capital Partners, LLC, the largest Taiwanese Venture Capital affiliated
with the largest Taiwanese private equity investment group. Earlier in his career, Mr. Hu founded and served, from June 1999 to June
2002, as Chief Financial Officer of eSoon Communications International Corp., a software start-up focusing on the then fast-growing CRM/CTI
market. He also served, from August 1996 to May 1999, as Vice President of Crimson Asia Capital Holdings, Ltd., former Asia&#8217;s largest
venture capital firm backed by Taiwanese China Trust Financial Group. He began his career at Citibank, NA, as an Assistant Vice President
in the Taipei and Hong Kong. Mr. Hu holds a Master&#8217;s Degree in Business Administration from the Wharton Business School and a Bachelor&#8217;s
Degree in Computer Science and Information Engineering from the National Chiao Tung University.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
is no arrangement or understanding with any major shareholders, customers, suppliers or others, pursuant to which any person named above
was selected as a director or member of senior management.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No
family relationship exists between any of the persons named above.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_012"></span>B.
Compensation</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2023, we paid an aggregate of approximately $626,000 in cash compensation to our directors and senior management as a group. We do not
set aside or accrue any amounts for pension, retirement or other benefits for our directors and senior management. However, we reimburse
our directors for out-of-pocket expenses incurred in connection with their services in such capacity.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>2016
Equity Incentive Plan, as amended</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
May 9, 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan, or the 2016 Plan, pursuant to which the Company
may offer up to five million ordinary shares as equity incentives to its directors, employees and consultants. Such number of shares
is subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends,
or other change in the corporate structure of the Company affecting the shares issuable under the 2016 Plan. On July 30, 2020, the Company
effectuated a 6-to-1 share combination, which effectively reduced the ordinary shares authorized to be issued under the 2016 Plan from
5,000,000 to 833,334. On May 9, 2021, the Board of Directors of the Company amended the 2016 Plan to, among other things, (1) increase
the number of ordinary shares authorized to be issued pursuant to the 2016 Plan by 4,166,666 to 5,000,000, and (2) extend the term of
the 2016 Plan to May 9, 2026. On August 1, 2023, the Company effectuated a 10-to-1 share combination, which effectively reduced the ordinary
shares authorized to be issued under the 2016 Plan from 5,000,000 to 500,000.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following paragraphs summarize the terms of our 2016 Plan:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.15in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Purpose</i>.
The purposes of the 2016 Plan are to promote the long-term growth and profitability of the Company and its Affiliates by stimulating
the efforts of Employees, Directors and Consultants of the Company and its Affiliates who are selected to be participants, aligning the
long-term interests of participants with those of shareholders, heightening the desire of participants to continue working toward and
contributing to our success, attracting and retaining the best available personnel for positions of substantial responsibility, and generally
providing additional incentive for them to promote the success of our business through the grant of Awards of or pertaining to the Company&#8217;s
ordinary shares. The 2016 Plan permits the grant of ISOs, NSOs, Restricted Shares, Restricted Share Units, Share Appreciation Rights,
Performance Units and Performance Shares as the Administrator may determine.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.15in; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Administration</i>.
The 2016 Plan may be administered by our Board or a committee. The 2016 Plan is currently being administered by our Compensation Committee.
The Administrator has the authority to determine the specific terms and conditions of all Awards granted under the 2016 Plan, including,
without limitation, the number of ordinary shares subject to each Award, the price to be paid for the ordinary shares and the applicable
vesting criteria. The Administrator has discretion to make all other determinations necessary or advisable for the administration of
the 2016 Plan.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.15in; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Eligibility</i>.
NSOs, Restricted Shares, Restricted Share Units, Share Appreciation Rights, Performance Units and Performance Shares may be granted to
Employees, Directors or Consultants either alone or in combination with any other Awards. ISOs may be granted only to employees of the
Company, and of any Parent or Subsidiary.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.15in; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Shares
Available for Issuance Under the 2016 Plan</i>. Subject to adjustment as described below, (a) the maximum aggregate number of Shares
that may be issued under the 2016 Plan is 500,000 ordinary shares, (b) to the extent consistent with Section 422 of the Code, not more
than an aggregate of 500,000 Ordinary Shares may be issued under ISOs, and (c) not more than 50,000 ordinary shares (or for Awards denominated
in cash, the Fair Market Value of 50,000 ordinary shares on the Grant Date), may be awarded to any individual Participant in the aggregate
in any one fiscal year of the Company, such limitation to be applied in a manner consistent with the requirements of, and only to the
extent required for compliance with, the exclusion from the limitation on deductibility of compensation under Code Section 162(m). The
number and class of shares available under the 2016 Plan are subject to adjustment in the event of certain reorganizations, mergers,
combinations, recapitalizations, share splits, share dividends, or other similar events which change the number or kind of shares outstanding.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.15in; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Transferability</i>.
Unless otherwise provided in the 2016 Plan or otherwise determined by the Administrator, an Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Participant, only by the Participant. However, the Administrator may, at or after the grant of an Award other
than an ISO, provide that such Award may be transferred by the recipient to a &#8220;family member&#8221; (as defined in the 2016 Plan);
provided, however, that any such transfer is without payment of any consideration whatsoever and that no transfer shall be valid unless
first approved by the Administrator, acting in its sole discretion, and as required by the Company&#8217;s memorandum and articles of
association. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator
deems appropriate.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.15in; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Termination
of, or Amendments to, the 2016 Plan</i>. The Board may at any time amend, alter, suspend or terminate the 2016 Plan, provided that the
Company will obtain shareholder approval of any 2016 Plan amendment to the extent necessary and desirable to comply with Applicable Laws.
No amendment, alteration, suspension or termination of the 2016 Plan will impair the rights of any Participant, unless mutually agreed
otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company.
Termination of the 2016 Plan will not affect the Administrator&#8217;s ability to exercise the powers granted to it hereunder with respect
to Awards granted prior to the date of such termination.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
2016 Plan will expire on May 9, 2026, unless sooner terminated by the Board.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
May 27, 2016, the following directors and officers were granted options to purchase ordinary shares of the Company under the 2016 Plan:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Jianghuai
    Lin, options to purchase 5,000 ordinary shares</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhiqiang
    Zhao, options to purchase 3,334 ordinary shares</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhixiong
    Huang, options to purchase 3,334 ordinary shares</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Guangzeng
    Chen, options to purchase 2,500 ordinary shares</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
options are exercisable at the fair market value of the Company&#8217;s ordinary shares on the grant date ($72.6 per share) with 40%
of the options vesting 18 months after the date of grant, 30% vesting 30 months after the date of grant and the remaining 30% vesting
42 months after the date of grant. On January 22, 2018, Messrs. Lin, Zhao, Huang and Chen partially exercised their options granted on
May 27, 2016 on a cashless basis, and received 1,194, 796, 796 and 597 ordinary shares of the Company, respectively. On July 31, 2020,
Messrs. Lin, Zhao, Huang and Chen partially exercised their options on a cashless basis, and received 525, 350, 350, 263 ordinary shares
of the Company, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
May 17, 2017, Mr. Chen was granted options to purchase additional 4,000 ordinary shares of the Company under the 2016 Plan. The options
are exercisable at the fair market value of the Company&#8217;s ordinary shares on the date of the grant ($59.4 per share) with 40% of
the options vesting 12 months after the date of grant, 30% vesting 24 months after the date of grant and the remaining 30% vesting 36
months after the date of grant. On July 31, 2020, Mr. Chen exercised his options on a cashless basis, and received 1,300 ordinary shares
of the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 10, 2020, a total of 5,737 share options were granted to certain consultants of the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 24, 2020, the following directors and officers were granted options to purchase ordinary shares of the Company under the 2016 Plan:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Jianghuai
    Lin, options to purchase 4,250 ordinary shares</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhiqiang
    Zhao, options to purchase 3,334 ordinary shares</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhixiong
    Huang, options to purchase 3,334 ordinary shares</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Guangzeng
    Chen, options to purchase 3,084 ordinary shares</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">From
December 2021 to July 2022, a total of 3,000 restricted shares were granted to certain consultant of the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
May 26, 2023, the board of directors granted restricted shares in an aggregate amount of 200,000 ordinary shares, no par value under
the 2016 Plan to certain of its directors, executive officers and employees as compensations for their services. The following shares
were granted to the executive officers and directors of the Company:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Jianghuai
                                            Lin, 100,000 shares;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhiqiang
                                            Zhao, 27,000 shares;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhixiong
                                            Huang, 27,000 shares;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Iris
                                            Yan, 27,000 shares;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Huan
                                            Li, 8,000 shares;</span></td></tr></table>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Guangzeng
                                            Chen, 2,000 shares;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yong
                                            Jiang, 1,500 shares;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Remington
                                            C.H. Hu, 1,500 shares.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
of the restricted shares vested immediately upon the grant date.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of the date of this report, we have issued 238,453 restricted shares under the 2016 Plan and no options to purchase ordinary shares are
outstanding.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_032"></span>C.
Board Practices</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Terms
of Directors and Executive Officers</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Board of Directors currently consists of five directors, who were elected to serve until they resign, are removed or otherwise leave
offices. Eligible directors may be elected by shareholders at any general meeting by a majority of votes cast assuming properly proposed
or nominated in accordance with our memorandum and articles of association.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
member or the Board may propose any person for election as a director. Where any person, other than a director retiring at the meeting
or a person proposed for re-election or election as a director by the Board, is to be proposed for election as a director, notice must
be given to the Company of the intention to propose him and of his willingness to serve as a director. Such notice must be given not
later than 10 days following the earlier of the date on which notice of the general meeting was posted to the shareholders or the date
on which public disclosure of the date of the next general meeting was made. Where the number of persons validly proposed for re-election
or election as a director is greater than the number of directors to be elected, the persons receiving the most votes (up to the number
of directors to be elected) shall be elected as directors, and an absolute majority of the votes cast shall not be a prerequisite to
the election of such directors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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    <!-- Field: /Page -->

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
director so elected holds office for the term, if any, as may be specified in the resolution appointing him or until his earlier death,
disqualification, resignation or removal. The directors may appoint one or more directors to fill a vacancy on the Board of Directors.
We do not have any contracts with our directors providing for benefits upon termination of employment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
executive officers are appointed by our Board of Directors. The executive officers shall hold office until their successors are duly
elected and qualified, but any officer elected or appointed by the directors may be removed at any time, with or without cause, by a
majority vote of the directors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
chairman of the board of directors shall have a second or casting vote in the case of an equality of votes at any meeting of the board
of directors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Board
Composition and Committees</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Board has established three standing committees: Audit Committee, Compensation Committee and Governance and Nominating Committee. Each
of the Audit Committee, Compensation Committee and Governance and Nominating Committee is comprised entirely of independent directors.
From time to time, the Board may establish other committees. The Board has adopted a written charter for each of the Committees which
are available on the corporate governance page of our website at <span style="text-decoration: underline">www.taop.com</span>. Printed copies of these charters may be obtained,
without charge, by contacting the Corporate Secretary, Taoping Inc., 21<sup>st</sup> Floor, Everbright Bank Building, Zhuzilin, Futian
District, Shenzhen, Guangdong 518040, China.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Audit
Committee and Audit Committee Financial Expert</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Audit Committee is currently composed of three members: Messrs. Ping Cai, Yong Jiang, and Remington C.H. Hu. Our Board of Directors determined
that each member of the Audit Committee meets the independence criteria prescribed by applicable regulation and the rules of the SEC
for audit committee membership and is an &#8220;independent&#8221; director within the meaning of the NASDAQ Marketplace Rules. Each
Audit Committee member also meets NASDAQ&#8217;s financial literacy requirements. Mr. Hu serves as Chair of the Audit Committee.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Audit Committee oversees our accounting and financial reporting processes and the audits of our financial statements. Our Audit Committee
is responsible for, among other things:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">selecting
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
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    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">discussing
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<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
    major issues as to the adequacy of our internal controls and any special audit steps adopted in light of significant internal control
    deficiencies;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">annually
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">meeting
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reporting
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">such
    other matters that are specifically delegated to our Audit Committee by our Board of Directors from time to time.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Board of Directors has determined that Mr. Hu is the &#8220;audit committee financial expert&#8221; as such term is defined in Item 407(d)
of Regulation S-K promulgated by the SEC and also meets NASDAQ&#8217;s financial sophistication requirements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Compensation
Committee</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Compensation Committee is currently composed of three members: Messrs. Ping Cai, Yong Jiang, and Remington C.H. Hu, each of whom is &#8220;independent&#8221;
within the meaning of the NASDAQ Marketplace Rules. Ms. Cai serves as Chair of the Compensation Committee.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
purpose of our Compensation Committee discharges the responsibilities of the Company&#8217;s Board of Directors relating to compensation
of the Company&#8217;s executives, to produce an annual report on executive compensation for inclusion in the Company&#8217;s proxy statement,
if required, and to oversee and advise the Board on the adoption of policies that govern the Company&#8217;s compensation programs, including
stock and benefit plans. Our chief executive officer may not be present at any Compensation Committee meeting during which his compensation
is deliberated. The Compensation Committee is responsible for, among other things:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reviewing
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Overseeing
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    bonus, incentive and equity compensation, for the executive officers;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reviewing
    and approving chief executive officer goals and objectives, evaluating chief executive officer performance in light of these corporate
    objectives, and setting chief executive officer compensation consistent with Company philosophy;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Making
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reviewing
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    otherwise delegated by the Board of Directors, the Compensation Committee will act on behalf of the Board of Directors as the &#8220;Committee&#8221;
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  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Governance
and Nominating Committee</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Governance and Nominating Committee is currently composed of three members: Messrs. Ping Cai, Yong Jiang, and Remington C.H. Hu, each
of whom is &#8220;independent&#8221; within the meaning of the NASDAQ Marketplace Rules. Mr. Jiang serves as Chair of the Governance
and Nominating Committee.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Governance and Nominating Committee assists the Board in identifying individuals qualified to become our directors and in determining
the composition of the Board and its committees.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Governance and Nominating Committee is responsible for, among other things:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">identifying
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">identifying
    and recommending to the Board the directors to serve as members of the Board&#8217;s committees; and</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">monitoring
    compliance with our code of ethics.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
procedures by which stockholders may recommend nominees have not changed materially since last year&#8217;s proxy statement.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td colspan="3" style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Board
    Diversity Matrix (As of April 24, 2024)</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 84%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Country
    of Principal Executive Offices:</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; width: 14%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">China</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Foreign
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yes</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Disclosure
    Prohibited under Home Country Law</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Total
    Number of Directors</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; width: 48%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; text-align: center; width: 12%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Female</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; text-align: center; width: 12%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Male</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; text-align: center; width: 12%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Non-
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    <td style="font: normal 10pt Times New Roman, Times, Serif; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Gender</b></span></p></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Part
    I: Gender Identity</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Directors</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Part
    II: Demographic Background</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Underrepresented
    Individual in Home Country Jurisdiction</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: white">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">LGBTQ+</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Did
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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    </tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_013"></span>D.
Employees</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2021, 2022 and 2023, we had a total of 76, 63 and 56 full-time employees, respectively. The following table illustrates
the allocation of these employees among the various job functions conducted at our company as of December 31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal">Department</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">Number of Employees</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 78%; font-weight: normal; font-style: normal; text-align: left">Software Development</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: center">&#160;</td><td style="width: 18%; font-weight: normal; font-style: normal; text-align: center">16</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Sales &amp; Marketing</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: center">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: center">12</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Administration &amp; Human Resources</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: center">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: center">4</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal">Operation</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: center">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: center">9</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Finance and Accounting</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: center">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: center">9</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">Management</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: center">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: center">6</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">TOTAL</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">56</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal; text-align: left">&#160;</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe that our relationship with our employees is good. Our Chinese subsidiaries have trade unions which protect employees&#8217; rights,
aim to assist in the fulfillment of our economic objectives, encourage employee participation in management decisions and assist in mediating
disputes between us and union members. We have not experienced any significant problems or disruption to our operations due to labor
disputes, nor have we experienced any difficulties in recruitment and retention of experienced staff. The remuneration payable to employees
includes basic salaries and allowances. We also provide training for our staff from time to time to enhance their technical knowledge.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
required by applicable Chinese law, we have entered into employment contracts with all of our officers, managers and employees.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
employees in China participate in a state pension scheme organized by Chinese municipal and provincial governments. We are required to
contribute to the scheme at rates ranging from 13% to 18% of the average monthly salary. As of the date of this report, we have complied
with the regulation and have paid the state pension plan as required by law. In addition, we are required by Chinese law to cover employees
in China with various types of social insurance. We have purchased social insurance for all of our full-time employees.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_014"></span>E.
Share Ownership</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-indent: 20pt; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth information regarding beneficial ownership of each class of our voting securities as of April 24, 2024
(i) by each person who is known by us to beneficially own 5% or more of each class of our voting securities; (ii) by each of our officers
and directors; and (iii) by all of our officers and directors as a group. Unless otherwise specified, the address of each of the persons
set forth below is in care of the Company, 21<sup>st</sup> Floor, Everbright Bank Building, Zhuzilin, Shenzhen 518040, China.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal">Name and Address of Beneficial Owner</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: justify">Office, If Any</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: center">Title of Class</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Percent of Class<sup>(2)</sup></span></td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="15" style="font-weight: bold; font-style: normal; text-align: center">Officers and Directors</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="width: 19%; font-weight: normal; font-style: normal; text-align: left">Jianghuai Lin</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 19%; font-weight: normal; font-style: normal; text-align: left">Chairman and CEO</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 18%; font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary Shares</span></td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 15%; font-weight: normal; font-style: normal; text-align: right">518,956</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Zhiqiang Zhao</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">President and Director</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary Shares</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">33,658</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Liqiong (Iris) Yan</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">Chief Financial Officer</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary Shares</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">27,762</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Zhixiong Huang</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">Chief Operating Officer</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary Shares</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">31,946</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Guangzeng Chen</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">Chief Technology Officer</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary Shares</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">3,000</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Huan Li</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">Chief Marketing Officer</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary Shares</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Ping Cai</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal">Director</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary Shares</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">-</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Yong Jiang</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal">Director</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary Shares</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
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    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left">Remington C.H. Hu</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal">Director</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary Shares</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">All officers and directors as a group <br/> (10 persons named above)</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary Shares</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">626,320</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">13.9</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; font-style: normal; text-align: center">5% Security Holders</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: normal; font-style: normal; text-align: left">Jianghuai Lin</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary Shares</span></td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">518,956</td><td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal">&#160;</td>
    <td style="font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; text-align: right">11.5</td><td style="font-weight: normal; font-style: normal; text-align: left">%</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*
Less than 1%</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beneficial
    Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to
    securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect
    to our ordinary shares.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
    of April 24, 2024, a total of 4,516,126 ordinary shares are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1).
    For each Beneficial Owner above, any securities that are exercisable or convertible within 60 days have been included in the denominator.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">None
of our major shareholders have different voting rights from other shareholders. We are not aware of any arrangement that may, at a subsequent
date, result in a change of control of our Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_015"></span>ITEM
7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_016"></span>A.
Major Shareholders</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Please
refer to Item 6 &#8220;Directors, Senior Management and Employees-E. Share Ownership.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_017"></span>B.
Related Party Transactions</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following includes a summary of transactions since January 1, 2021 between us and certain related persons. We believe the terms obtained
or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms
available or the amounts that would be paid or received, as applicable, in arm&#8217;s-length transactions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
    May 2017, the Company has entered into a series of contracts with Taoping New Media Co., Ltd. (TNM) and its affiliates for the sale
    of the Company&#8217;s Cloud-Application-Terminal based digital ads display terminals, software and technical services. TNM was a
    related party company controlled by Mr. Lin, the Company&#8217;s Chairman and Chief Executive Officer, until the Company&#8217;s
    completion of the acquisition on June 9, 2021, after which date the related party transactions were eliminated in the Company&#8217;s
    consolidated financial statements. For the years ended December 31, 2023, 2022 and 2021, revenues from related parties for sales
    of products, software, and advertising were approximately $0.2 million, $0.1 million and $0.1 million, respectively. Accounts receivable
    from related parties, net of allowance for credit losses, as of December 31, 2023, 2022 and 2021 were approximately $0.6 million,
    $0.1 million and $0.4 million, respectively. Advances received from related parties were approximately $0.1 million, $0.1 million
    and $0.1 million as of December 31, 2023, 2022 and 2021, respectively.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
    the year ended December 31, 2021, the Company had a rental income of approximately $27,000, from TNM which was for the office lease
    between TNM and the Company. Upon completion of the Company&#8217;s acquisition of TNM on June 9, 2021, the related party rental
    income was eliminated in the Company&#8217;s consolidated financial statements thereafter. Other revenue generated from related parties
    also includes system maintenance service provided to Taoping affiliate customers, which was approximately $nil, $20,000 and $49,000,
    for the years ended December 31, 2023, 2022 and 2021, respectively.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
    of December 31, 2023 and 2022, the amounts due to related parties was $3.0 million and $3.3 million, respectively, which included
    the borrowing from the major shareholder, Mr. Jianghuai Lin (&#8220;Mr. Lin&#8221;), of approximately $0.9 million and $0.4 million,
    respectively, for 2 years without interest and matures on September 4, 2024, and a loan balance of approximately $2.1 million (RMB15
    million) and approximately $2.9 million (RMB20 million), respectively, from a related company 100% owned by Mr. Lin for 12-month
    at the interest of 5.85% per annum, which matures on May 17, 2024.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
    June 9, 2021, the Company and Biznest, a subsidiary of the Company, consummated an acquisition of 100% of the equity interests of
    TNM. Mr. Lin, the Chairman and CEO of the Company, who then owned approximately 24.6% of total shares outstanding of the
    Company, owned approximately 51% of TNM. TNM is a new media operator focusing on digital life scenes and mainly engaged in selling
    out-of-home advertising time slots on its networked smart digital advertising display terminals with artificial intelligence and
    big data technologies. Acquiring TNM and synergizing its new media network will enhance the Company&#8217;s presence in the new media
    and advertising sectors. After completion of the acquisition, TNM becomes a wholly owned subsidiary of Biznest. </span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
    September 18, 2021, the Company and the Company&#8217;s wholly owned subsidiary, Information Security Technology (China) Co., Ltd.
    entered into an equity transfer agreement with Mr. Lin, the sole shareholder of iASPEC. Upon closing of the equity transfer,
    the Company&#8217;s existing VIE structure was dissolved and iASPEC became a wholly owned subsidiary of the Company.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
also Item 6 &#8220;Directors, Senior Management and Employees-B. Compensation.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_018"></span>C.
Interests of Experts and Counsel</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_019"></span>ITEM
8. FINANCIAL INFORMATION</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_020"></span>A.
Consolidated Statements and Other Financial Information</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Financial
Statements</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have appended consolidated financial statements filed as part of this annual report. See Item 18 &#8220;Financial Statements.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Legal
Proceedings </i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may be subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
September 2023, Guangdong Zexun Advertising Co., Ltd. filed a lawsuit against the Company which claimed a payment of RMB 231,866 (approximately
$32,200) from the Company resulted from its alleged failure of performance for a business subcontract agreement signed by both parties
in 2017. The Company anticipated an unfavorable outcome from the lawsuit and accrued a contingent liability of $32,200 for probable loss
in 2023. The lawsuit was settled in a court mediation on January 30, 2024, and the Company agreed to pay the above claimed amount in
three installments in 2024.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Dividend
Policy</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
date, we have not paid any cash dividends on the Company ordinary shares. As a BVI company, we may only declare and pay dividends if
our directors are satisfied, on reasonable grounds, that immediately after the distribution (i) the value of our assets will exceed our
liabilities and (ii) we will be able to pay our debts as they fall due. We currently anticipate that we will retain any available funds
to finance the growth and operation of our business and we do not anticipate paying any cash dividends in the foreseeable future. Additionally,
our cash held in foreign countries may be subject to certain control limitations or repatriation requirements, limiting our ability to
use this cash to pay dividends.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_021"></span>B.
Significant Changes</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No
significant change has occurred since the date of our consolidated financial statements filed as part of this annual report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_022"></span>ITEM
9. THE OFFER AND LISTING</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_023"></span>A.
Offer and Listing Details</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping&#8217;s
ordinary shares have been listed on the NASDAQ Capital Market under the trading symbol &#8220;TAOP&#8221; since June 1, 2018. Prior to
that, the ordinary shares were listed on the NASDAQ Capital Market under the symbol &#8220;CNIT.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_024"></span>B.
Plan of Distribution</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_025"></span>C.
Markets</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
our disclosures above under &#8220;A. Offer and Listing Details.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_026"></span>D.
Selling Shareholders</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="p_027"></span><b>E.
Dilution</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_028"></span>F.
Expenses of the Issue</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_029"></span>ITEM
10. ADDITIONAL INFORMATION</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_030"></span>A.
Share Capital</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_031"></span>B.
Memorandum and Articles of Association</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>The
following represents a summary of certain key provisions of the Company&#8217;s memorandum and articles of association. The summary does
not purport to be a summary of all of the provisions of the Company&#8217;s memorandum and articles of association and of all relevant
provisions of BVI law governing the management and regulation of BVI companies.</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Register</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping
was incorporated in the BVI on June 18, 2012 under the BVI Act. Its memorandum of association authorizes the issuance of up to 100,000,000
ordinary shares without par value, which may be issued from time to time at the discretion of the Board of Directors without shareholder
approval. Subject to the memorandum of association being amended by resolution of shareholders, the Board of Directors is authorized
to issue shares in different classes and series and, with respect to each class or series, to determine the designations, powers, preferences,
privileges and other rights, including dividend rights, conversion rights, terms of redemption and liquidation preferences, any or all
of which may be greater than the powers and rights associated with the ordinary shares, at such times and on such other terms as they
think proper.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 30, 2020, we completed a share combination of Taoping&#8217;s ordinary shares at a ratio of one-for-six, which decreased the Company&#8217;s
outstanding ordinary shares to approximately 7,332,434 shares. This share combination did not change the maximum number of shares Taoping
is authorised to issue or the par value of Taoping ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 1, 2023, we completed a share combination of Taoping&#8217;s ordinary shares at a ratio of one-for-ten, which decreased the Company&#8217;s
outstanding ordinary shares to approximately 1,864,554 shares. This share combination did not change the maximum number of shares Taoping
is authorised to issue or the par value of its ordinary shares. Accordingly, except as otherwise indicated, all share and per share information
contained in this annual report has been restated to retroactively show the effect of the share combination.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Objects
and Purposes</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping&#8217;s
memorandum of association grants the Company full power and authority to carry out any object not prohibited by the BVI Act or any other
BVI legislation.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Directors</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Directors
may exercise all such powers necessary for managing, and for directing and supervising the business and affairs of the Company as are
not by the BVI Act or by the memorandum and articles of association of the Company required to be exercised by the shareholders, including
general powers to borrow on behalf of the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping&#8217;s
memorandum and articles of association provide that a director who is interested in a transaction entered into or to be entered into
by the Company may: (i) vote on a matter relating to the transaction; (ii) attend a meeting of directors at which a matter relating to
the transaction arises and be included among the directors present at the meeting for the purposes of a quorum; and (iii) sign a document
on our behalf, or do any other thing in his capacity as a director, that relates to the transaction. Additionally, Taoping&#8217;s articles
of association provide that no director shall be disqualified by his office from contracting with the Company either as a buyer, seller
or otherwise, nor shall any such contract or arrangement entered into by or on the Company&#8217;s behalf in which any director shall
be in any way interested be voided, nor shall any director so contracting or being so interested be liable to account to us for any profit
realized by any such contract or arrangement, by reason of such director holding that office or by reason of the fiduciary relationship
thereby established, provided such director shall, immediately after becoming aware of the fact that he is interested in a transaction
entered into or to be entered into by us, disclose such interest to the Company&#8217;s Board of Directors. A director is not required
to make such a disclosure if: (i) the transaction or proposed transaction is between us and the director, and (ii) the transaction or
proposed transaction is or is to be entered into in the ordinary course of the Company&#8217;s business and on usual terms and conditions.
A disclosure to the Company&#8217;s Board to the effect that a director is a member, director, officer or trustee of another named company
or other person and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered
into with that company or person, is a sufficient disclosure of interest in relation to that transaction. Such a disclosure is not made
to our Board of directors unless it is made or brought to the attention of every director on the Board. Subject to Section 125(1) of
the BVI Act, the failure by a director to comply with this provision does not affect the validity of a transaction entered into by the
director or the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Company&#8217;s articles of association, a director shall not require a share qualification, but nevertheless shall be entitled
to attend and speak at any meeting of the directors and meeting of the shareholders and (if applicable) at any separate meeting of the
holders of any class of the Company&#8217;s shares. In addition, the remuneration of directors (whether by way of salary, commission,
participation in profits or otherwise) in respect of services rendered or to be rendered in any capacity to us (including to any company
in which we may be interested) shall be fixed by resolution of directors or shareholders. The directors may also be paid such travelling,
hotel and other expenses properly incurred by them in attending and returning from meetings of the directors, or any committee of the
directors or meetings of the shareholders, or in connection with our business as shall be approved by resolution of directors or of shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Notwithstanding
any other requirement of the memorandum of association or articles of association, immediately following each annual meeting of the shareholders,
there shall be held at the same place as the annual meeting of the shareholders as aforesaid, a meeting of the directors (and there shall
be no requirement for any further notice of that meeting of the directors to be provided to the directors). This requirement may only
be disapplied where the directors (being the directors in office immediately after the annual meeting of the shareholders as aforesaid)
unanimously resolve to change such time or place of such meeting of the directors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Rights
and Obligations of Shareholders </i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Dividends</i>.
Subject to the BVI Act, the directors may, by resolution of directors, authorize a distribution (including a dividend) by us to shareholders
at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately after the distribution,
the value of our assets exceeds our liabilities and we are able to pay our debts as they fall due. Any distribution payable in respect
of a share which has remained unclaimed for three years from the date when it became due for payment shall, if the board of the directors
so resolves, be forfeited for the benefit of the Company. The directors may, before recommending any distribution, set aside out of the
profits of the Company such sums as they think proper as a reserve or reserves which shall, at their discretion, either be employed in
the business of the Company or be invested in such investments as the directors may from time to time think fit. The holder of each ordinary
share has the right to an equal share in any distribution paid by us.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Voting
Rights</i>. Each ordinary share confers on the shareholder the right to one vote at a meeting of the shareholders or on any resolution
of shareholders on all matters before the Company&#8217;s shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Winding
Up</i>. The holder of each ordinary share is entitled to an equal share in the distribution of the surplus assets of us on a winding
up.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Redemption</i>.
The directors may, on behalf of the Company, purchase, redeem or otherwise acquire any of the Company&#8217;s own shares for such consideration
as the directors consider fit, and either cancel or hold such shares as treasury shares. Shares may be purchased or otherwise acquired
in exchange for newly issued shares. The directors shall not, unless permitted pursuant to the BVI Act, purchase, redeem or otherwise
acquire any of the Company&#8217;s own shares unless immediately after such purchase, redemption or other acquisition, the value of the
Company&#8217;s assets exceeds the Company&#8217;s liabilities and we are able to pay the Company&#8217;s debts as they fall due.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Changes
in Rights of Shareholders</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Company&#8217;s memorandum and articles of association, if at any time the shares which we are authorized to issue are divided into
more than one class or series of shares, the rights attaching to any class may only be changed by a consent in writing of the holders
of a majority of the issued shares of that class or with the sanction of a resolution passed by the holders of at least a majority of
the shares of the class present in person or by proxy at a separate general meeting of the holders of the shares of the class. At such
a separate general meeting, the quorum shall be at least one person holding or representing by proxy a majority of the issued shares
of the class.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i></i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Meetings</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the BVI Act, there is no requirement for an annual meeting of shareholders. Under the Company&#8217;s memorandum and articles of association,
we are not required to hold an annual meeting of shareholders. The Company&#8217;s shareholders&#8217; meetings may be held at such times
and in such place within or outside the BVI as our Board of Directors considers appropriate.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Board of Directors shall call a shareholders&#8217; meeting if requested in writing to do so by shareholders entitled to exercise at
least 10% of the voting rights in respect of the matter for which the meeting is being requested. Our Board of Directors shall give not
less than 10 days and not more than 60 days prior written notice of a shareholders&#8217; meeting to those persons whose names on, either
(a) the date the notice is given or (b) on a date fixed by the directors as the record date (which must be a date that is not less than
10 days nor more than 60 days prior to the meeting), appear as shareholders in our register and are entitled to vote at the meeting.
The inadvertent failure of the directors to give notice of a meeting to a shareholder, or the fact that a shareholder has not received
notice, does not invalidate the meeting.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s memorandum and articles of association provide that a meeting of shareholders is duly constituted if, at the commencement
of the meeting, there are shareholders present in person or by proxy representing not less than a majority of the votes of the shares
or class or series of shares entitled to vote on resolutions of shareholders to be considered at the meeting. A shareholder may be represented
at a meeting of shareholders by a proxy (who need not be a shareholder) who may speak and vote on behalf of the shareholder. A written
instrument giving the proxy such authority must be produced at the place appointed for the meeting before the time for holding the meeting
at which the person named in such instrument proposes to vote. A shareholder or his proxy shall be deemed to be present at the meeting
if he participates by telephone or other electronic means and all shareholders and proxies participating in the meeting are able to hear
each other.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Holders
of the Company&#8217;s ordinary shares are entitled to one vote for each share held of record on all matters at all meetings of shareholders.
The Company&#8217;s shareholders have no cumulative voting rights. The Company&#8217;s shareholders take action by a majority of votes
cast by shareholders entitled to vote and voting, unless otherwise provided by the BVI Act or the Company&#8217;s memorandum and articles
of association. A resolution of shareholders may be also be passed in writing by the holders of a majority of in excess of fifty (50)
percent of the votes of those shareholders entitled to vote on the resolution.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Notices</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
notice, information or written statement required to be given to shareholders shall be served by mail (air-mail service if available)
addressed to each shareholder at the address shown in the Company&#8217;s register of members.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
notices directed to be given to the shareholders shall, with respect to any registered shares to which persons are jointly entitled,
be given to whichever of such persons is named first in the Company&#8217;s register of members, and notice so given shall be sufficient
notice to all the holders of such shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
notice, if served by post, shall be deemed to have been served within ten days of posting, and in proving such service it shall be sufficient
to prove that the letter containing the notice was properly addressed and mailed with the postage prepaid.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Limitations
on Ownership of Securities</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
are no limitations on the right of non-residents or foreign persons to own the Company&#8217;s securities imposed by BVI law or by the
Company&#8217;s memorandum and articles of association.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Change
in Control of Company</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Board of Directors is authorized to issue the Company&#8217;s ordinary shares at such times and on such other terms as they think proper.
Subject to the memorandum of association being amended by resolution of shareholders, the Board of Directors is authorized to issue these
shares in different classes and series and, with respect to each class or series, to determine the designations, powers, preferences,
privileges and other rights, including dividend rights, conversion rights, terms of redemption and liquidation preferences, any or all
of which may be greater than the powers and rights associated with the ordinary shares, at such times and on such other terms as they
think proper. Such power could be used in a manner that would delay, defer or prevent a change of control of the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Ownership
Threshold</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
are no provisions governing the ownership threshold above which shareholder ownership must be disclosed imposed by BVI law or by the
Company&#8217;s memorandum and articles of association.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Changes
in Capital</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Subject
to the provisions of the Company&#8217;s memorandum and articles of association, the BVI Act and the rules of NASDAQ, the Company&#8217;s
unissued shares shall be at the disposal of the directors who may, without prejudice to any rights previously conferred on the holders
of any existing shares, offer, allot, grant options over or otherwise dispose of the shares to such persons, at such times and upon such
terms and conditions as we may by resolution of directors determine.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may, by a resolution of shareholders, amend the Company&#8217;s memorandum of association to increase or decrease the maximum number
of ordinary shares authorized to be issued.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Amendments
to Memorandum and Articles of Association</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s memorandum of association may be amended by resolution of shareholders and the Company&#8217;s articles of association
may be amended by resolution of shareholders or resolution of directors. For the avoidance of doubt, the memorandum of association cannot
be amended the directors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Further,
the directors shall not have the power to amend the articles of association of the Company (a) to restrict the rights or powers of shareholders
to amend the memorandum of association or articles of association, (b) to change the percentage of shareholders required to pass a resolution
to amend the memorandum of association or articles of association, (c) to change the manner prescribed in the articles of association
for the election of directors to hold office, (d) where to do so would involve amending the provisions of Regulations 17.3 or 23.9 of
the articles of association, and (e) in circumstances where the memorandum of association or articles of association may only be amended
by the shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
rights conferred upon the holders of the shares of any class issued with preferred or other rights (for the purpose of this paragraph,
any such shares of any class being referred to herein as &#8220;Preferred Shares&#8221;) shall not, unless otherwise expressly provided
by the terms of issue of the Preferred Shares, be deemed to be varied by the creation or issue of further shares (a) ranking pari passu
with the Preferred Shares, or (b) which in all respects do not rank ahead of the Preferred Shares and which would not confer on the holders
of such further shares any rights which are superior to the rights conferred upon the holders of the Preferred Shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
directors shall give notice of such resolutions passed to amend the memorandum and / or articles of association to the registered agent
of the Company, for the registered agent to file with the Registrar of Corporate Affairs of the BVI a notice of the amendment to the
memorandum of association or articles of association, or a restated memorandum and articles of association incorporating the amendment(s)
made, and any such amendment(s) to the memorandum of association or articles of association will take effect from the date of the registration
by the Registrar of Corporate Affairs of the notice of amendment or restated memorandum and articles of association incorporating the
amendment(s) made.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Differences
in Corporate Law</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">BVI
law differs from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of the significant differences
between the provisions of BVI law applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Protection
for Minority Shareholders</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the laws of most U.S. jurisdictions, majority and controlling shareholders of a company generally have certain &#8220;fiduciary&#8221;
responsibilities to the minority shareholders. Corporate actions taken by majority and controlling shareholders which are unreasonable
and materially detrimental to the interests of minority shareholders may be declared null and void. Minority shareholders may have less
protection for their rights under BVI law than they would have under U.S. law.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Powers
of Directors</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Unlike
most U.S. jurisdictions, the directors of a BVI company, subject in certain cases to court approval but without shareholders&#8217; approval,
may implement the sale, transfer, exchange or disposition of any Company asset, property, part of the business, or securities, with the
exception that shareholder approval is required for the disposition of over 50% in the value of the Company&#8217;s total assets.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Conflict
of Interests</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Similar
to the laws of most U.S. jurisdictions, when a director becomes aware of the fact that he has an interest in a transaction which we are
to enter into, he must disclose it to our Board. However, with sufficient disclosure of interest in relation to that transaction, the
director who is interested in a transaction entered into or to be entered into by us may (i) vote on a matter relating to the transaction;
(ii) attend a meeting of directors at which a matter relating to the transaction arises and be included in the quorum; and (iii) sign
a document on behalf of us, or do any other thing in his capacity as a director, that relates to the transaction.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Written
Consent and Cumulative Voting</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Similar
to the laws of most U.S. jurisdictions, under BVI law, shareholders are permitted to approve matters by way of written resolution in
place of a formal meeting. There are no prohibitions in relation to cumulative voting under the laws of the BVI but the Company&#8217;s
memorandum and articles of association do not provide for cumulative voting. As a result, our shareholders are not afforded any less
protections or rights on this issue than shareholders of a Delaware corporation.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Takeover
Provisions</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Some
provisions of the Company&#8217;s memorandum and articles of association may discourage, delay or prevent a change in control of the
Company or management that shareholders may consider favorable. For instance, subject to the memorandum of association being amended
by resolution of shareholders, the Board of Directors is authorized to issue shares in different classes and series and, with respect
to each class or series, to determine the designations, powers, preferences, privileges and other rights, including dividend rights,
conversion rights, terms of redemption and liquidation preferences, any or all of which may be greater than the powers and rights associated
with the ordinary shares, at such times and on such other terms as they think proper.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
under BVI law, our directors may only exercise the rights and powers granted to them under the Company&#8217;s memorandum and articles
of association for a proper purpose and for what they believe in good faith to be in the best interests of the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Shareholder&#8217;s
Access to Corporate Records</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
shareholder of the Company is entitled, on giving written notice to the Company, to inspect (a) the memorandum and articles of association
of the Company; (b) the register of members; (c) the register of directors; and (d) the minutes of meetings and resolutions of shareholders
and of those classes of shares of which he is a shareholder; and to make copies of or take extracts from the documents and records. Subject
to the Company&#8217;s memorandum and articles of association, the directors may, if they are satisfied that it would be contrary to
the Company&#8217;s interests to allow a shareholder to inspect any document, or part of a document, specified in (b), (c) and (d) above,
refuse to permit the shareholder to inspect the document or limit the inspection of the document, including limiting the making of copies
or the taking of extracts from the records.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Where
a company fails or refuses to permit a shareholder to inspect a document or permits a shareholder to inspect a document subject to limitations,
that shareholder may apply to the BVI High Court for an order that he should be permitted to inspect the document or to inspect the document
without limitation.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
company is required to keep at the office of its registered agent: its memorandum and articles of association of the company; the register
of members or a copy of the register of members; the register of directors or a copy of the register of directors; and copies of all
notices and other documents filed by the company in the previous ten years.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, the Company&#8217;s memorandum and articles of association allow any shareholder of record who owns at least 15% of the Company&#8217;s
outstanding shares, upon at least five days&#8217; written demand, to inspect, during usual business hours, the books of account and
all financial records, to make copies of records, and to conduct an audit of such records at their own cost.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Indemnification</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">BVI
law does not limit the extent to which a company&#8217;s memorandum and articles of association may provide for indemnification of officers
and directors, except to the extent any such provision may be held by the BVI High Court to be contrary to public policy (e.g. for purporting
to provide indemnification against the consequences of committing a crime). An indemnity will be void and of no effect and will not apply
to a person unless the person acted honestly and in good faith and in what he believed to be in the best interests of the company and,
in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful. The Company&#8217;s
memorandum and articles of association permit indemnification of officers and directors for losses, damages, costs and expenses incurred
in their capacities as such unless such losses or damages arise from dishonesty or fraud of such directors or officers.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Company&#8217;s memorandum and articles of association, subject to the BVI Act, we shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is or was a director or officer (excluding the auditors), or who is or was serving
at our request as a director or officer of another company, partnership, joint venture, trust or other enterprise. Each such indemnified
person shall be indemnified out of our assets against any liability, action, proceeding, claim, demand, judgments, fines, costs, damages
or expenses, including legal expenses, whatsoever which they or any of them may reasonably incur as a result of any act or failure to
act in carrying out their functions other than such liability that they may incur by reason of their own actual fraud or willful default.
In addition, to be entitled to indemnification, an indemnified person must not have acted in such a manner as to have incurred the liability
by virtue of having committed actual fraud or willful default but no person shall be found to have committed actual fraud or willful
default unless or until a court of competent jurisdiction shall have made a finding to that effect.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us
under the foregoing provisions, we have been advised that in the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Mergers
and Similar Arrangements</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the BVI Act two or more BVI companies or a BVI company and non-BVI company, each a &#8220;constituent company&#8221;, may merge or consolidate.
The BVI Act provides for slightly different procedures depending on the nature of the parties to the merger.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
merger involves the merging of two or more companies into one of the constituent companies (to the merger) with one constituent company
continuing in existence to become the surviving company post-merger. A consolidation involves two or more companies consolidating into
a new company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
merger is effective on the date that the articles of merger (as described below) are registered by the Registrar of Corporate Affairs
in the BVI, or on such later date, not exceeding 30 days from the date of registration as is stated in the articles of merger.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
soon as a merger becomes effective:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">a)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the surviving company (so far as is consistent with its memorandum and articles, as amended by the articles of merger) has all rights, privileges, immunities, powers, objects and purposes of each of the constituent companies;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">b)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the memorandum and articles of the surviving company are automatically amended to the extent, if any, that changes to its memorandum and articles are contained in the articles of merger;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">c)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">assets of every description, including choses in action and the business of each of the constituent companies, immediately vest in the surviving company;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">d)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the surviving company is liable for all claims, debts, liabilities and obligations of each of the constituent companies;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">e)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">no conviction, judgment, ruling, order, claim, debt, liability or obligation due or to become due, and no cause existing, against a constituent company or against any shareholder, director, officer or agent thereof, is released or impaired by the merger; and</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">f)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">no proceedings, whether civil or criminal, pending at the time of a merger by or against a constituent company, or against any shareholder, director or officer, or agent thereof, are abated or discontinued by the merger; but</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in"><span style="font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">i.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the proceedings may be enforced, prosecuted, settled or compromised by or against the surviving company or against the shareholder, director, officer or agent thereof, as the case may be; or</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">ii.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the surviving company may be substituted in the proceedings for a constituent company. </span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">iii.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"></span></td></tr>
  </table>

<p style="margin-top: 0; margin-bottom: 0"></p>

<p style="margin-top: 0; margin-bottom: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
registrar shall strike off the Register of Companies a constituent company that is not the surviving company in the merger.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Dissenter
Rights</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
BVI Act provides that any shareholder of the Company is entitled to payment of the fair value of his shares upon dissenting from a merger,
unless the Company is the surviving company of the merger and the shareholder continues to hold the same or similar shares. The following
is a summary of the position in respect of dissenters rights in the event of a merger under the BVI Act.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
dissenter is in most circumstances required to give to the Company written objection to the merger, which must include a statement that
the dissenter proposes to demand payment for his shares if the merger takes place. This written objection must be given before the meeting
of shareholders at which the merger is submitted to a vote, or at the meeting but before the vote. However, no objection is required
from a shareholder to whom the Company did not give notice of the meeting of shareholders or where the proposed merger is authorized
by written consent of the shareholders without a meeting.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Within
20 days immediately following the written consent, or the meeting at which the merger was approved, the Company shall give written notice
of the consent or resolution to each shareholder who gave written objection or from whom written objection was not required, except those
shareholders who voted for, or consented in writing to, the proposed merger.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
shareholder to whom the Company was required to give notice who elects to dissent shall, within 20 days immediately following the date
on which the copy of the plan of merger or an outline of the merger is given to him, give to the Company a written notice of his decision
to elect to dissent, stating:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">his
    name and address;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">b)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    number and classes of shares in respect of which he dissents (which must be all shares that he holds in the Company); and</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">c)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
    demand for payment of the fair value of his shares.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Upon
the giving of a notice of election to dissent, the dissenter ceases to have any of the rights of a shareholder except the right to be
paid the fair value of his shares, and the right to institute proceedings to obtain relief on the ground that the action is illegal.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company shall make a written offer to each dissenter to purchase his shares at a specified price that the Company determines to be their
fair value. Such offer must be given within 7 days immediately following the date of the expiration of the period within which shareholders
may give their notices of election to dissent, or within 7 days immediately following the date on which the merger is put into effect,
whichever is later.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the Company and the dissenter fail, within 30 days immediately following the date on which the offer is made, to agree on the price to
be paid for the shares owned by the dissenter, then within 20 days:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    Company and the dissenter shall each designate an appraiser;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">b)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    two designated appraisers together shall designate an appraiser;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">c)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    three appraisers shall fix the fair value of the shares owned by the dissenter as of the close of business on the day prior to the
    date of the meeting or the date on which the resolution was passed, excluding any appreciation or depreciation directly or indirectly
    induced by the action or its proposal, and that value is binding on the Company and the dissenter for all purposes; and</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
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    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    Company shall pay to the dissenter the amount in money upon the surrender by him of the certificates representing his shares, and
    such shares shall be cancelled.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Shareholders&#8217;
Suits</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the provisions of the BVI Act, the memorandum and articles of association of a company are binding as between the company and its shareholders
and between the shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the majority shareholders have infringed a minority shareholder&#8217;s rights, the minority may seek to enforce its rights either by
derivative action or by personal action. A derivative action concerns the infringement of the company&#8217;s rights where the wrongdoers
are in control of the company and are preventing it from taking action, whereas a personal action concerns the infringement of a right
that is personal to the particular shareholder concerned.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
BVI Act provides for a series of remedies available to shareholders. Where a company incorporated under the BVI Act conducts some activity
which breaches the BVI Act or the company&#8217;s memorandum and articles of association, the BVI High Court can issue a restraining
or compliance order. Shareholders can now also bring derivative, personal and Representative Actions under certain circumstances.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Generally
any other claims against a company by its shareholders must be based on the general laws of contract or tort applicable in the BVI or
their individual rights as shareholders as established by the company&#8217;s memorandum and articles of association.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
certain circumstances, a shareholder has the right to seek various remedies against the company in the event the directors are in breach
of their duties under the BVI Act. Pursuant to Section 184B of the BVI Act, if a company or director of a company engages in, proposes
to engage in or has engaged in, conduct that contravenes the provisions of the BVI Act or the memorandum or articles of association of
the company, the courts of the BVI may, on application of a shareholder or director of the company, make an order directing the company
or director to comply with, or restraining the company or director from engaging in conduct that contravenes the BVI Act or the memorandum
or articles. Furthermore, pursuant to Section 184I(1) of the BVI Act, a shareholder of a company who considers that the affairs of the
company have been, are being or likely to be, conducted in a manner that is, or any acts of the company have been, or are likely to be
oppressive, unfairly discriminatory, or unfairly prejudicial to him in that capacity, may apply to the courts of the BVI for an order
which, inter alia, can require the company or any other person to pay compensation to the shareholders.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_017"></span>C.
Material Contracts</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have not entered into any material contracts other than in the ordinary course of business and other than those described in Item 4 &#8220;Information
on the Company,&#8221; Item 5 &#8220;Operating and Financial Review and Prospects-F. Tabular Disclosure of Contractual Obligations,&#8221;
Item 7 &#8220;Major Shareholders and Related Party Transactions,&#8221; or filed (or incorporated by reference) as exhibits to this annual
report or otherwise described or referenced in this annual report.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_018"></span>D.
Exchange Controls</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>BVI
Exchange Controls</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
are no material exchange controls restrictions on payment of dividends, interest or other payments to the holders of Taoping&#8217;s
ordinary shares or on the conduct of our operations in the BVI, where Taoping was incorporated. There are no material BVI laws that impose
any material exchange controls on us or that affect the payment of dividends, interest or other payments to nonresident holders of Taoping&#8217;s
ordinary shares. BVI law and the Company&#8217;s memorandum and articles of association do not impose any material limitations on the
right of non-residents or foreign owners to hold or vote the Company&#8217;s ordinary shares.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>PRC
Exchange Controls</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
on Foreign Currency Exchange</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the <i>PRC Foreign Currency Administration Rules</i> promulgated on January 29, 1996 and last amended on August 5, 2008 and various regulations
issued by SAFE and other relevant PRC government authorities, payment of current account items in foreign currencies, such as trade and
service payments, payment of interest and dividends can be made without prior approval from SAFE by following the appropriate procedural
requirements. By contrast, the conversion of RMB into foreign currencies and remittance of the converted foreign currency outside the
PRC for the purpose of capital account items, such as direct equity investments, loans and repatriation of investment, requires prior
approval from SAFE or its local office.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 13, 2015, SAFE promulgated the <i>Circular on Simplifying and Improving the Foreign Currency Management Policy on Direct Investment</i>,
effective from June 1, 2015, which cancels the requirement for obtaining approvals of foreign exchange registration of foreign direct
investment and overseas direct investment from SAFE. The application for the registration of foreign exchange for the purpose of foreign
direct investment and overseas direct investment may be filed with qualified banks, which, under the supervision of SAFE, may review
the application and process the registration.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>The
Circular of the SAFE on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise,
</i>or SAFE Circular 19, was promulgated on March 30, 2015 and became effective on June 1, 2015. According to SAFE Circular 19, a foreign-invested
enterprise may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital
account for which the relevant foreign exchange bureau has confirmed monetary contribution rights and interests (or for which the bank
has registered the account-crediting of monetary contribution). For the time being, foreign-invested enterprises are allowed to settle
100% of their foreign exchange capitals on a discretionary basis; a foreign-invested enterprise shall truthfully use its capital for
its own operational purposes within the scope of business; where an ordinary foreign-invested enterprise makes domestic equity investment
with the amount of foreign exchanges settled, the invested enterprise shall first go through domestic re-investment registration and
open a corresponding Account for Foreign Exchange Settlement Pending Payment with the foreign exchange bureau (bank) at the place of
registration. <i>The Circular of the SAFE on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital
Accounts, </i>or SAFE Circular 16, was promulgated and became effective on June 9, 2016. According to SAFE Circular 16, enterprises registered
in PRC may also convert their foreign debts from foreign currency into Renminbi at the enterprise&#8217;s discretion. SAFE Circular 16
provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign
currency capital and foreign debts) on self-discretionary basis, which applies to all enterprises registered in the PRC. SAFE Circular
16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly
used for purposes beyond its business scope and may not be used for investments in securities or other investment with the exception
of bank financial products that can guarantee the principal in the PRC unless otherwise specifically provided. Besides, the converted
Renminbi shall not be used to make loans for related enterprises unless it is within the business scope or to build or to purchase any
real estate that is not for the enterprise own use with the exception for the real estate enterprise.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
January 26, 2017, SAFE promulgated the <i>Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness
and Compliance Verification,</i> or SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance
of profits from domestic entities to offshore entities, including (i) banks must check whether the transaction is genuine by reviewing
board resolutions regarding profit distribution, original copies of tax filing records and audited financial statements, and (ii) domestic
entities must retain income to account for previous years&#8217; losses before remitting any profits. Moreover, pursuant to SAFE Circular
3, domestic entities must explain in detail the sources of capital and how the capital will be used, and provide board resolutions, contracts
and other proof as a part of the registration procedure for outbound investment.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
October 25, 2019, SAFE promulgated the <i>Notice on Further Facilitating Cross-Board Trade and Investment</i>, which became effective
on the same date (except for Article 8.2 thereof). The notice removed restrictions on the capital equity investment in China by non-investment
foreign-invested enterprises. In addition, restrictions on the use of funds for foreign exchange settlement of domestic accounts for
the realization of assets have been removed and restrictions on the use and foreign exchange settlement of foreign investors&#8217; security
deposits have been relaxed. Eligible enterprises in the pilot areas are also allowed to use revenues under capital accounts, such as
capital funds, foreign debts and overseas listing revenues for domestic payments without providing materials to the bank in advance for
authenticity verification on an item by item basis, while the use of funds should be true, in compliance with applicable rules and conforming
to the current capital revenue management regulations.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
on Foreign Exchange Registration of Overseas Investment by PRC Residents</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
SAFE issued <i>the Circular on Relevant Issues Relating to Domestic Resident&#8217;s Investment and Financing and Roundtrip Investment
through Special Purpose Vehicles</i>, or SAFE Circular 37, which became effective in July 2014, to replace the <i>Circular of the State
Administration of Foreign Exchange on Issues Concerning the Regulation of Foreign Exchange in Equity Finance and Roundtrip Investments
by Domestic Residents through Offshore Special Purpose Vehicles</i>, to regulate foreign exchange matters in relation to the use of special
purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing or conduct round trip investment in
China. SAFE Circular 37 defines a SPV as an offshore entity established or controlled, directly or indirectly, by PRC residents or entities
for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests,
while &#8220;round trip investment&#8221; is defined as direct investment in China by PRC residents or entities through SPVs, namely,
establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. SAFE Circular 37 stipulates
that, prior to making contributions into an SPV, PRC residents or entities be required to complete foreign exchange registration with
SAFE or its local branch. In addition, SAFE promulgated the <i>Notice on Further Simplifying and Improving the Administration of the
Foreign Exchange Concerning Direct Investment in February 2015</i>, which amended SAFE Circular 37 and became effective on June 1, 2015,
requiring PRC residents or entities to register with qualified banks rather than SAFE in connection with their establishment or control
of an offshore entity established for the purpose of overseas investment or financing.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRC
residents or entities who had contributed legitimate onshore or offshore interests or assets to SPVs but had not obtained registration
as required before the implementation of the SAFE Circular 37 must register their ownership interests or control in the SPVs with qualified
banks. An amendment to the registration is required if there is a material change with respect to the SPV registered, such as any change
of basic information (including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers
or exchanges of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and
the subsequent notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established
through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested
enterprise, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or
liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC
residents or entities to penalties under PRC foreign exchange administration regulations. See &#8220;Risk Factors-Risks Relating to Doing
Business in China-PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial
owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary or limit our PRC
subsidiary&#8217;s ability to increase their registered capital or distribute profits.&#8221;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">Regulations
on Stock Incentive Plans</span></i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">SAFE
promulgated the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive
Plan of Overseas Publicly Listed Company, or the Stock Incentive Plan Notice, in February 2012, replacing the previous rules issued by
SAFE in March 2007. Pursuant to the Stock Incentive Plan Notice and other relevant rules and regulations, PRC residents participating
in stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and follow certain
other procedures. Participants of a stock incentive plan who are PRC residents must conduct the SAFE registration and other procedures
with respect to the stock incentive plan through a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed
company or another qualified institution appointed by the PRC subsidiary. In addition, the PRC agent is required to update the relevant
SAFE registration should there be any material change to the stock incentive plan, the PRC agent or other material changes. The PRC agent
must, on behalf of the PRC residents who have the right to exercise the employee stock options, apply to SAFE or its local branches for
an annual quota for the payment of foreign currencies in connection with the PRC residents&#8217; exercise of the employee stock options.
The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends
distributed by the overseas listed companies must be remitted into the bank accounts in the PRC opened by the PRC agents prior to distribution
to such PRC residents.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
adopted an equity incentive plan, under which we have the discretion to award incentives and rewards to eligible participants. We have
advised the recipients of awards under our equity incentive plan to handle relevant foreign exchange matters in accordance with the Stock
Incentive Plan Notice. However, we cannot guarantee that all employee awarded equity-based incentives can successfully register with
SAFE in full compliance with the Stock Incentive Plan Notice. See &#8220;Risk Factors-Risks Relating to Doing Business in China-Any failure
to comply with PRC regulations regarding employee share incentive plans may subject the PRC plan participants or us to fines and other
legal or administrative sanctions.&#8221;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_019"></span>E.
Taxation</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>The
following is a general summary of certain material BVI, PRC and U.S. federal income tax considerations. The discussion is not intended
to be, nor should it be construed as, legal or tax advice to any particular shareholder or prospective shareholder. The discussion is
based on laws and relevant interpretations thereof in effect as of the date hereof, all of which are subject to change or different interpretations,
possibly with retroactive effect.</i></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>BVI
Taxation</i></b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company and all dividends, interest, rents, royalties, compensation and other amounts paid by the Company to persons who are not resident
in the BVI and any capital gains realized with respect to any shares, debt obligations, or other securities of the Company by persons
who are not resident in the BVI are exempt from all provisions of the Income Tax Ordinance in the BVI.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No
estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are not resident in the BVI with
respect to any shares, debt obligation or other securities of the Company.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
instruments relating to transfers of property to or by the Company and all instruments relating to transactions in respect of the shares,
debt obligations or other securities of the Company and all instruments relating to other transactions relating to the business of the
Company are exempt from payment of stamp duty in the BVI. This assumes that the Company does not hold an interest in real estate in the
BVI.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
are currently no withholding taxes or exchange control regulations in the BVI applicable to the Company or its shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>PRC
Taxation</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping
is a holding company incorporated in the BVI, which indirectly holds equity interests in its PRC operating subsidiaries. The EIT Law
and its implementation rules, both of which became effective as of January 1, 2008, as amended on February 24, 2017, provide that a PRC
enterprise is subject to a standard income tax rate of 25% and China-sourced income of foreign enterprises, such as dividends paid by
a PRC subsidiary to its overseas parent, will normally be subject to PRC withholding tax at a rate of 10%, unless there are applicable
treaties between the overseas parent&#8217;s jurisdiction of incorporation and China to reduce such rate.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
EIT Law also provides that enterprises organized under the laws of jurisdictions outside China with their &#8220;de facto management
bodies&#8221; located within China may be considered PRC resident enterprises and therefore subject to PRC enterprise income tax at the
rate of 25% on their worldwide income. Its implementation rules further define the term &#8220;de facto management body&#8221; as the
management body that exercises substantial and overall management and control over the business, personnel, accounts, and properties
of an enterprise. While we do not currently consider Taoping or any of Taoping&#8217;s overseas subsidiaries to be a PRC resident enterprise,
there is a risk that the PRC tax authorities may deem Taoping or any of its overseas subsidiaries as a PRC resident enterprise since
a substantial majority of the members of Taoping&#8217;s management team as well as the management team of our overseas subsidiaries
are located in China, in which case Taoping or the overseas subsidiaries, as the case may be, would be subject to the PRC enterprise
income tax at the rate of 25% on worldwide income. If the PRC tax authorities determine that Taoping is a &#8220;resident enterprise&#8221;
for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. Under the EIT Law and its implementation
regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends paid to investors that are non-resident
enterprises, which do not have an establishment or place of business in the PRC or which have such establishment or place of business
but the dividends are not effectively connected with such establishment or place of business, to the extent such dividends are derived
from sources within the PRC. In addition, any gain realized on the transfer of shares by such investors is also subject to PRC tax at
a rate of 10%, if such gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident enterprise, dividends
paid on the Company&#8217;s ordinary shares, and any gain realized from the transfer of the Company&#8217;s ordinary shares, may be treated
as income derived from sources within the PRC and may as a result be subject to PRC taxation. Furthermore, if we are deemed a PRC resident
enterprise, dividends paid to individual investors who are non-PRC residents and any gain realized on the transfer of ordinary shares
by such investors may be subject to PRC tax at a current rate of 20% (which in the case of dividends may be withheld at source). Any
PRC tax liability may be reduced under applicable tax treaties or tax arrangements between China and other jurisdictions. If Taoping
or any of its subsidiaries established outside of China are considered a PRC resident enterprise, it is unclear whether holders of Taoping
ordinary shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries
or areas.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>U.S.
Federal Income Taxation</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following is a discussion of certain material U.S. federal income tax consequences of the acquisition, ownership and disposition of the
Company&#8217;s ordinary shares. It does not purport to be a comprehensive description of all of the tax considerations that may be relevant
to a particular person&#8217;s situation. The discussion applies only to holders that hold their ordinary shares as capital assets (generally
property held for investment) within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, or the Code. This
discussion is based on the Code, income tax regulations promulgated thereunder, judicial positions, published positions of the Internal
Revenue Service, or the IRS, and other applicable authorities, all as in effect as of the date hereof and all of which are subject to
change, possibly with retroactive effect. This discussion is general in nature and is not exhaustive of all possible tax considerations,
nor does the discussion address any state, local or foreign tax considerations or any U.S. tax considerations (e.g., estate or gift tax)
other than U.S. federal income tax considerations, that may be applicable to particular holders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
discussion does not address all aspects of U.S. federal income taxation that may be relevant in light of particular circumstances, nor
does it address the U.S. federal income tax consequences to persons who are subject to special rules under U.S. federal income tax law,
including:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">banks,
    insurance companies or other financial institutions;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(b)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">persons
    subject to the alternative minimum tax;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(c)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">tax-exempt
    organizations;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(d)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">controlled
    foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid United States federal
    income tax;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(e)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">certain
    former citizens or long-term residents of the United States;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(f)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">dealers
    in securities or currencies;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(g)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">traders
    in securities that elect to use a mark-to-market method of accounting for their securities holdings;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(h)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">persons
    that own, or are deemed to own, more than five percent of the Company shares;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">holders
    who acquired the Company shares as compensation or pursuant to the exercise of a share option; or</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(j)</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">persons
    who hold the Company shares as a position in a hedging transaction, &#8220;straddle,&#8221; or other risk reduction transaction.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
purposes of this discussion, a U.S. holder is (i) an individual who is a citizen or resident of the United States for U.S. federal income
tax purposes; (ii) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized
in or under the laws of the United States (or treated as such under applicable U.S. tax laws), any state thereof, or the District of
Columbia; (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source; or (iv) a trust if (a)
a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority
to control all substantial decisions of the trust, or (b) it has a valid election in effect under applicable law and regulations to be
treated as a U.S. person for U.S. federal income tax purposes. A non-U.S. holder is a holder that is neither a U.S. holder nor a partnership
or other entity classified as a partnership for U.S. federal income tax purposes.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the case of a partnership or entity classified as a partnership for U.S. federal income tax purposes, the U.S. federal income tax treatment
of a partner generally will depend on the status of the partner and the activities of the partnership. Partners of partnerships should
consult their tax advisors regarding the U.S. federal income tax consequences to them of the merger or of the ownership and disposition
of the Company&#8217;s ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
of the redomestication transaction in 2012 by which the Company, which is a BVI company, became the parent of the U.S. domestic company
of which it was formerly a subsidiary, the Company is treated, under Section 7874 of the Code, as a U.S. domestic corporation for U.S.
federal tax purposes and, among other consequences, is subject to U.S. federal income tax on its worldwide income. This discussion assumes
that Section 7874 of the Code continues to apply to treat the Company as a U.S. corporation for all purposes under the Code. If, for
some reason (e.g., future repeal of Section 7874 of the Code), the Company were no longer treated as a U.S. corporation under the Code,
the U.S. federal income tax consequences described herein could be materially and adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">U.S.
Federal Income Tax Consequences for U.S. Holders</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Distributions
</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
do not currently anticipate paying distributions on the Company&#8217;s ordinary shares. In the event that distributions are paid, however,
the gross amount of such distributions will be included in the gross income of the U.S. holder as dividend income on the date of receipt
to the extent that the distribution is paid out of current or accumulated earnings and profits, as determined under U.S. federal income
tax principles. Such dividends will be eligible for the dividends-received deduction allowed to corporations in respect of dividends
received from other U.S. corporations. Dividends received by non-corporate U.S. holders, including individuals, may be subject to reduced
rates of taxation under current law. A U.S. holder may be eligible to claim a foreign tax credit with respect to any PRC withholding
tax imposed on dividends paid by us. However, the foreign tax credit rules are complex, and their application in connection with Section
7874 of the Code and the Agreement Between the Government of the United States of America and the Government of the People&#8217;s Republic
of China for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income, or the U.S.-PRC Tax
Treaty, is not entirely clear at this time. U.S. holders should consult their own tax advisors with respect to any benefits they may
be entitled to under the foreign tax credit rules and the U.S.-PRC Tax Treaty.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
the extent that dividends paid on the Company&#8217;s ordinary shares exceed current and accumulated earnings and profits, the distributions
will be treated first as a tax-free return of tax basis on the Company&#8217;s ordinary shares, and to the extent that the amount of
the distribution exceeds tax basis, the excess will be treated as gain from the disposition of those ordinary shares. Because Section
7874 of the Code has applied to treat the Company as a U.S. corporation only since our redomestication in 2012, we may not be able to
demonstrate to the IRS the extent to which a distribution on the Company&#8217;s ordinary shares exceeds our current and accumulated
earnings and profits (as determined under U.S. federal income tax principles), in which case all of such distribution will be treated
as a dividend for U.S. federal income tax purposes.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Sale
or Other Disposition </i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">U.S.
holders of the Company&#8217;s ordinary shares will recognize taxable gain or loss on any sale, exchange, or other taxable disposition
of ordinary shares equal to the difference between the amounts realized for the ordinary shares and the U.S. holder&#8217;s tax basis
in the ordinary shares. This gain or loss generally will be capital gain or loss. Under current law, non-corporate U.S. holders, including
individuals, are eligible for reduced tax rates if the ordinary shares have been held for more than one year. The deductibility of capital
losses is subject to limitations. A U.S. holder may be eligible to claim a foreign tax credit with respect to any PRC withholding tax
imposed on gain from the sale or other disposition of ordinary shares. However, the foreign tax credit rules are complex, and their application
in connection with Section 7874 of the Code and the U.S.-PRC Tax Treaty is not entirely clear at this time. U.S. holders should consult
their own tax advisors with respect to any benefits they may be entitled to under the foreign tax credit rules and the U.S.-PRC Tax Treaty.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Net
Investment Income Tax</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain
U.S. holders who are individuals, trusts or estates are required to pay an additional 3.8% net investment income tax on, among other
things, dividends on and capital gains from the sale or other disposition of shares of stock. U.S. holders should consult their own advisors
regarding the effect, if any, of this rule on their ownership and disposition of the Company&#8217;s ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration: underline">U.S.
Federal Income Tax Consequences for Non-U.S. Holders</span></i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Distributions
</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
rules applicable to non-U.S. holders for determining the extent to which distributions on the Company&#8217;s ordinary shares, if any,
constitute dividends for U.S. federal income tax purposes are the same as for U.S. holders. See &#8220;-U.S. Federal Income Tax Consequences
for U.S. Holders- Distributions.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
dividends paid to a non-U.S. holder by us are treated as income derived from sources within the United States and generally will be subject
to U.S. federal income tax withholding at a rate of 30% of the gross amount of the dividends, or at a lower rate provided by an applicable
income tax treaty if non-U.S. holders provide proper certification of eligibility for the lower rate (usually on IRS Form W-8BEN or Form
W-8BEN-E). Dividends received by a non-U.S. holder that are effectively connected with such holder&#8217;s conduct of a U.S. trade or
business (and, if an income tax treaty applies, are attributable to a permanent establishment maintained by the non-U.S. holder in the
U.S.) are exempt from such withholding tax, provided that applicable certification requirements are satisfied. In such case, however,
non-U.S. holders will be subject to U.S. federal income tax on such dividends, net of certain deductions, at the rates applicable to
U.S. persons. In addition, corporate non-U.S. holders may be subject to an additional branch profits tax equal to 30% or such lower rate
as may be specified by an applicable tax treaty on dividends received that are effectively connected with the conduct of a trade or business
in the United States.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
non-U.S. holders are eligible for a reduced rate of U.S. withholding tax pursuant to an applicable income tax treaty, such non-U.S. holders
may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Sale
or Other Disposition</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Except
as described below for a reduced rate of U.S. withholding tax pursuant to an applicable income tax treaty, any gain realized by a non-U.S.
holder upon the sale or other disposition of the Company&#8217;s ordinary shares generally will not be subject to U.S. federal income
tax unless:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    gain is effectively connected with the conduct of a trade or business in the United States by such non- U.S. holder, and, if an income
    tax treaty applies, is attributable to a permanent establishment maintained by such non- U.S. holder in the United States;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition,
    and certain other conditions are met; or</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td>&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    Company is or has been a &#8220;U.S. real property holding corporation,&#8221; or USRPHC, for U.S. federal income tax purposes at
    any time during the shorter of the five-year period ending on the date of disposition or the period during which the holder has held
    the Company&#8217;s ordinary shares.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-U.S.
holders whose gain is described in the first bullet point above will be subject to U.S. federal income tax on the gain derived from the
sale, net of certain deductions, at the rates applicable to U.S. persons. Corporate non-U.S. holders whose gain is described in the first
bullet point above may also be subject to the branch profits tax described above at a 30% rate or lower rate provided by an applicable
income tax treaty. Individual non-U.S. holders described in the second bullet point above will be subject to a flat 30% U.S. federal
income tax rate on the gain derived from the sale, which may be offset by U.S.-source capital losses, even though such non-U.S. holders
are not considered to be residents of the United States.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
corporation will be a United States real property holding company, or USRPHC, if the fair market value of its U.S. real property interests
equals or exceeds 50 percent of the aggregate of its real property interests (U.S. and non-U.S.) and its assets used or held for use
in a trade or business. Because we do not currently own significant U.S. real property, we believe that we are not currently and will
not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real
property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in
the future. Even if we become a USRPHC, however, so long as the Company&#8217;s ordinary shares are regularly traded on an established
securities market, such ordinary shares will be treated as U.S. real property interests only if a non-U.S. holder actually or constructively
holds more than 5% of such regularly traded ordinary shares at any time during the applicable period that is specified in the Code.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Foreign
Account Tax Compliance </i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Foreign Account Tax Compliance provisions of the Hiring Incentives to Restore Employment Act (generally referred to as &#8220;FATCA&#8221;),
when applicable, impose a U.S. federal withholding tax of 30% on payments of dividends on, and gross proceeds from dispositions of, the
Company&#8217;s ordinary shares that are held through &#8220;foreign financial institutions&#8221; (which is broadly defined for this
purpose and in general includes investment vehicles) and certain other non-U.S. entities unless various U.S. information reporting and
due diligence requirements (generally relating to ownership by U.S. persons of certain interests in or accounts with those entities)
have been satisfied or an exemption applies. An intergovernmental agreement between the United States and an applicable foreign country
may modify these requirements. U.S. Holders should consult their tax advisers regarding the effect, if any, of the FATCA provisions on
their particular circumstances.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Information
Reporting and Backup Withholding </i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Payments
of dividends or of proceeds on the disposition of stock made to a holder of the Company&#8217;s ordinary shares may be subject to information
reporting and backup withholding at a current rate of 24% unless such holder provides a correct taxpayer identification number on IRS
Form W-9 (or other appropriate withholding form) or establishes an exemption from backup withholding, for example by properly certifying
the holder&#8217;s non-U.S. status on a Form W-8BEN, Form W-8BEN-E or another appropriate version of IRS Form W-8. Payments of dividends
to holders must generally be reported annually to the IRS, along with the name and address of the holder and the amount of tax withheld,
if any. A similar report is sent to the holder. Pursuant to applicable income tax treaties or other agreements, the IRS may make these
reports available to tax authorities in the holder&#8217;s country of residence.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Backup
withholding is not an additional tax; rather, the U.S. income tax liability of persons subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the
IRS, provided that the required information is furnished to the IRS in a timely manner.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_020"></span>F.
Dividends and Paying Agents</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_021"></span>G.
Statement by Experts</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_022"></span>H.
Documents on Display</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have filed this annual report on Form 20-F with the SEC under the Exchange Act. Statements made in this report as to the contents of
any document referred to are not necessarily complete. With respect to each such document filed as an exhibit to this report, reference
is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are subject to the informational requirements of the Exchange Act as a foreign private issuer and file reports and other information
with the SEC. Reports and other information filed by us with the SEC, including this report, may be inspected and copied at the public
reference room of the SEC at 100 F Street, N.E., Washington D.C. 20549. You can also obtain copies of this report by mail from the Public
Reference Section of the SEC, 100 F. Street, N.E., Washington D.C. 20549, at prescribed rates. Additionally, copies of this material
may be obtained from the SEC&#8217;s Internet site at <span style="text-decoration: underline">http://www.sec.gov.</span> The SEC&#8217;s telephone number is 1-800-SEC-0330.
In accordance with NASDAQ Stock Market Rule 5250(d), we will also post this annual report on Form 20-F on our website at <span style="text-decoration: underline">www.taop.com</span>.
In addition, we will provide hardcopies of our annual report free of charge to shareholders upon request.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports
and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery
provisions contained in Section 16 of the Exchange Act.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_023"></span>I.
Subsidiary Information</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_024"></span>ITEM
11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Interest
Rate Risk </i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
deposit surplus funds with Chinese banks earning daily interest. We do not invest in any instruments for trading purposes. Most of our
outstanding debt instruments carry fixed rates of interest. Our operations generally are not directly sensitive to fluctuations in interest
rates. There was no long-term debt outstanding as of December 31, 2023 and 2022. A hypothetical 1.0% increase in the annual interest
rates for all of our credit facilities under which we had outstanding borrowings at December 31, 2023 would increase net loss before
income taxes by approximately $85,000 or less than 1% for the year ended December 31, 2023. Management monitors the banks&#8217; prime
rates in conjunction with our cash requirements to determine the appropriate level of debt balances relative to other sources of funds.
We have not entered into any hedging transactions in an effort to reduce our exposure to interest rate risk.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Foreign
Exchange Risk</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">While
our reporting currency is the U.S. dollar, substantially all of our consolidated revenues and consolidated costs and expenses are denominated
in RMB. Substantially all of our assets are denominated in RMB except for cash. As a result, we are exposed to foreign exchange risk
as our revenues and results of operations may be affected by fluctuations in the exchange rate between the U.S. dollar and the RMB. If
the RMB depreciates against the U.S. dollar, the value of our RMB revenues, earnings and assets as expressed in our U.S. dollar financial
statements will decline. Assets and liabilities are translated at exchange rates at the balance sheet dates and revenue and expenses
are translated at the average exchange rates and equity is translated at historical exchange rates. Any resulting translation adjustments
are not included in determining net income but are included in determining other comprehensive income, a component of equity. An average
appreciation (depreciation) of the RMB against the U.S. dollar of 5% would increase (decrease) our comprehensive income by $1.2 million
based on our outstanding revenues, costs and expenses, assets and liabilities denominated in RMB as of December 31, 2023. As of December
31, 2023, our accumulated other comprehensive income was approximately $23.6 million. We have not entered into any hedging transactions
in an effort to reduce our exposure to foreign exchange risk.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
value of RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China&#8217;s political and
economic conditions. Since July 2005, RMB has not been pegged to the U.S. dollar. Although the People&#8217;s Bank of China regularly
intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, RMB may appreciate or
depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future, PRC
authorities may lift restrictions on fluctuations in RMB exchange rate and lessen intervention in the foreign exchange market.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Inflation</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inflationary
factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not
believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation
in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative
expenses as a percentage of net revenues if the selling prices of our products do not increase with these increased costs.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_025"></span>ITEM
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_026"></span>A.
Debt Securities</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_027"></span>B.
Warrants and Rights</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_028"></span>C.
Other Securities</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_029"></span>D.
American Depositary Shares</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
do not have any American Depositary Shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_030"></span>PART
II</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_031"></span>ITEM
13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">None.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_032"></span>ITEM
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF PROCEEDS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">None.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_033"></span>ITEM
15. CONTROLS AND PROCEDURES</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Disclosure
Controls and Procedures </i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures
refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the
SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief
Executive Officer, Mr. Jianghuai Lin and our Chief Financial Officer, Ms. Liqiong (Iris) Yan, of the effectiveness of the design and
operation of our disclosure controls and procedures, as of December 31, 2023. Based upon, and as of the date of this evaluation, Mr.
Lin and Ms. Yan, determined that, as of December 31, 2023, our disclosure controls and procedures were not effective due to the material
weaknesses in our internal control over financial reporting, which are described below.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Management&#8217;s
Annual Report on Internal Control Over Financial Reporting</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal
control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief
Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S.
GAAP, and includes those policies and procedures that:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our
assets;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and
directors; and</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Management
assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, management
used the framework set forth in the report entitled Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company&#8217;s internal
control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication,
and (v) monitoring. Based on our assessment, as a result of the material weaknesses described below, we determined that, as of December
31, 2023, our internal control over financial reporting was not effective based on those criteria.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of our assessment, management identified the following control deficiencies that represent material weaknesses as of December
31, 2023: (1) We lack of formal process in respect of management going concern assessment and (2) We do not have sufficient formal procedures
to be applied for the impairment assessment of the property, plant and equipment and long-lived assets and to consider appropriately
all the internal and external impairment indicators as well.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have taken steps to remediate these deficiencies as soon as practicable by implementing a plan to improve our internal control over financial
reporting including, but not limited to, hiring additional internal staff and/or outside consultants experienced in US GAAP financial
reporting as well as in SEC reporting requirements. In 2021 we promoted Ms. Liqiong (Iris) Yan to be our Chief Financial Officer to oversee
our internal control over financial reporting, and recruited seasoned accounting staff to improve our technical capability for financial
reporting process. Our management team will continue to monitor and evaluate the effectiveness of our internal controls and procedures
and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional
enhancements or improvements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
management does not believe that these deficiencies had a material effect on our financial condition or results of operations or caused
our financial statements as of and for the year ended December 31, 2023 to contain a material misstatement.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Attestation
Report of the Registered Public Accounting Firm</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
the Company is a non-accelerated filer, this annual report does not include an attestation report of our registered public accounting
firm regarding internal control over financial reporting.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Changes
in Internal Control Over Financial Reporting</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Except
as described above, there have been no changes in our internal control over financial reporting during the fiscal year ended December
31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_034"></span>ITEM
16A. AUDIT COMMITTEE FINANCIAL EXPERT</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board of directors has determined that Mr. Remington C.H. Hu is an &#8220;audit committee financial expert&#8221; and that he is an &#8220;independent
director&#8221; as defined by the rules and regulations of NASDAQ.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_035"></span>ITEM
16B. CODE OF ETHICS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
code of conduct and business ethics conforms to the rules and regulations of NASDAQ. The code of conduct and business ethics applies
to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal
accounting officer, and addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations
and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and
reporting of violations of the code. A copy of conduct and business ethics has been filed as Exhibit 11.1 to the annual report on Form
20-F dated March 30, 2018. Our code of ethics is also posted on the corporate governance page of our website at www.taop.com. During
the fiscal year ended December 31, 2023, there were no waivers of our code of ethics.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_036"></span>ITEM
16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth the aggregate fees by categories specified below in connection with services rendered by our principal external
auditors for the periods indicated.</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-left: auto; border-collapse: collapse; width: 80%; margin-right: auto">
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">Fiscal Year Ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: normal; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: normal; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: normal">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 60%; font-weight: normal; font-style: normal; text-align: left">Audit Fees</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</td><td style="width: 16%; font-weight: normal; font-style: normal; text-align: right">203,711</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="width: 2%; font-weight: normal; font-style: normal">&#160;</td>
    <td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">$</td><td style="width: 16%; font-weight: normal; font-style: normal; text-align: right">212,353</td><td style="width: 1%; font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: normal; font-style: normal; text-align: left; padding-bottom: 1.5pt">Tax Fees</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">40,000</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: normal; font-style: normal; text-align: right">40,000</td><td style="padding-bottom: 1.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; font-style: normal; padding-bottom: 2.5pt">TOTAL</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">243,711</td><td style="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td><td style="font-weight: normal; font-style: normal; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: normal; font-style: normal; text-align: right">252,353</td><td style="padding-bottom: 2.5pt; font-weight: normal; font-style: normal; text-align: left">&#160;</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Audit
Fees&#8221; consisted of the aggregate fees billed for professional services rendered for the audit of our annual financial statements
or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Tax
Fees&#8221; consisted of the aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning.
Included in such Tax Fees were fees for preparation of our tax returns and consultancy and advice on other tax planning matters.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Audit Committee pre-approves all auditing services and permitted non-audit services to be performed for us by our independent auditor,
including the fees and terms thereof (subject to the de minimums exceptions for non-audit services described in Section 10A(i)(l)(B)
of the Exchange Act that are approved by our Audit Committee prior to the completion of the audit). The percentage of services provided
for which we paid audit-related fees, tax fees, or other fees that were approved by our Audit Committee pursuant to paragraph (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X promulgated by the SEC was 100%.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_037"></span>ITEM
16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have not asked for, nor have we been granted, an exemption from the applicable listing standards for our Audit Committee.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_038"></span>ITEM
16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
were no purchases of equity securities made by or on behalf of us or any &#8220;affiliated purchaser&#8221; as defined in Rule 10b-18
of the Exchange Act during the period covered by this Annual Report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_039"></span>ITEM
16F. CHANGE IN REGISTRANT&#8217;S CERTIFYING ACCOUNTANT</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">None.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_040"></span>ITEM
16G. CORPORATE GOVERNANCE</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are incorporated in the BVI and our corporate governance practices are governed by applicable BVI law, our memorandum and articles of
association. In addition, because our ordinary shares are listed on NASDAQ, we are subject to NASDAQ&#8217;s corporate governance requirements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">NASDAQ
Listing Rule 5615(a)(3) permits a foreign private issuer like us to follow home country practices in lieu of certain requirements of
Listing Rule 5600, provided that such foreign private issuer discloses in its annual report filed with the SEC each requirement of Rule
5600 that it does not follow and describes the home country practice followed in lieu of such requirement.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
currently follow our home country practice that (i) does not require us to seek shareholders&#8217; approval of any issuance of securities
in connection with a transaction other than a public offering where such transaction involves the issuance of securities representing
more than 20% of or more of the voting power outstanding before the issuance at a price lower than the &#8220;Minimum Price&#8221;, in
lieu of the corporate governance requirements of Nasdaq Listing Rule 5635(d) with respect to shareholder approval; (ii) does not require
us to seek shareholders&#8217; approval for the establishment of or any material amendments to our equity compensation plans in lieu
of the corporate governance requirements of Nasdaq Listing Rule 5635(c) with respect to shareholder approval; and (iii) does not require
us to seek shareholders&#8217; approval for the issuance of securities to external consultants, in lieu of the corporate governance requirements
of Nasdaq Listing Rule 5635(c) with respect to shareholder approval. Our BVI counsel, Maples and Calder, has provided relevant letters
to NASDAQ certifying that under BVI law, we are not required to seek shareholders&#8217; approval in the above circumstances.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, Maples and Calder has provided a letter to NASDAQ certifying that under BVI law, we are not required to hold annual shareholders&#8217;
meetings. In the fiscal year 2023, we followed the home country practice and did not hold an annual meeting of shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_041"></span>ITEM
16H. MINE SAFETY DISCLOSURE</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_042"></span>ITEM
16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_043"></span>ITEM
16J. INSIDER TRADING POLICIES</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_044"></span>ITEM
16K. CYBERSECURITY</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risk
Management and Strategy</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
maintain a technology and cybersecurity program, which includes information security, as part of our overall risk management process
with the aim that our information systems, including those of our suppliers and other third-parties, will be resilient, effective and
capable of safeguarding against emerging risks and cybersecurity threats. We endeavor to assure our program is appropriately resourced
and to attract and retain expert talent to execute it.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
program is based on the PRC Cybersecurity Law, aiming to comply with applicable laws and regulations. We use the PRC Cybersecurity Law
as a guideline to help us identify, assess, and manage cybersecurity risks related to our business operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the PRC Cybersecurity Law, we have established preventive measures that are consistent with the national cybersecurity level. We fulfill
our security obligations to protect our networks from interference, damage, or unauthorized access, and to prevent the leakage, theft,
or alteration of network data. As part of our supplier risk management program, we conduct security assessments prior to engagement of
high-risk suppliers and other third-party providers and have a monitoring program to evaluate ongoing compliance with our cybersecurity
standards.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
key element of our technology and cybersecurity program strategy is fostering training and awareness. Our training and awareness program
includes annual cybersecurity awareness training and role-based phishing tests for our employees and for third parties with access to
our systems.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
technology and cybersecurity program focuses on the defense, rapid detection and rapid remediation of cybersecurity threats and incidents.
Our approach aims to deliver the control capabilities specified in the PRC Cybersecurity Law. Additionally, our program incorporates
comprehensive cybersecurity policies and crisis response and management procedures, aimed at rapidly addressing, responding to, and effectively
communicating about cybersecurity threats and incident.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
cybersecurity crisis management program sets forth the items, procedures and actions we expect to address and follow in the event of
a cybersecurity incident, including detection, response, mitigation and remediation. When a potential threat or incident is identified,
our cyber security incident response team will assign a risk level classification and initiate the escalation and other steps called
for by our plan. All incidents that are initially assessed by the cybersecurity incident response team as potentially high-risk are escalated
promptly to our Chief Financial Officer, who will determine whether and what elements of our cybersecurity crisis response and management
plan should be activated, including escalation to other senior management. Our Chief Financial Officer will inform our board of directors
of cybersecurity incidents, as appropriate, considering a variety of factors, including financial, operational, legal or reputational
impact.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
program&#8217;s maturity and operational readiness are regularly evaluated by independent experts using the PRC Cybersecurity Law&#8217;s
cybersecurity framework and penetration tests that are consistent with the national cybersecurity level. Our program, and the results
of these independent evaluations and testing, are regularly reviewed by our senior management and members of our board of directors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially
affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial
condition.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risk
Governance</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are committed to appropriate cybersecurity governance and oversight. </span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board of directors has oversight of our strategic and business risk management, including cybersecurity risk management. Our board of directors is responsible for ensuring that management has processes in
place designed to identify and evaluate cybersecurity risks to which we are exposed and to implement processes and programs to manage
cybersecurity risks and mitigate cybersecurity incidents. Management is responsible for identifying, assessing, and managing material
cybersecurity risks on an ongoing basis, establishing processes to ensure that such potential cybersecurity risk exposures are monitored,
putting in place appropriate mitigation measures, maintaining cybersecurity policies and procedures, and providing regular reports to
our board of directors.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
additional information on our cybersecurity risks, please see Item 1A &#8220;<i>Risk Factors</i>.&#8221;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_045"></span>PART
III</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_046"></span>ITEM
17. FINANCIAL STATEMENTS</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">We
have elected to provide our financial statements pursuant to Item 18.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_047"></span>ITEM
18. FINANCIAL STATEMENTS</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
full text of our audited consolidated financial statements begins on page F-1 of this annual report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_048"></span>ITEM
19. EXHIBITS</b></span></p>

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<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Exhibit
    No.</b></span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; vertical-align: top; width: 0.1in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif; text-align: justify; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Description</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.1 </span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000149315220024579/ex99-1.htm" style="-sec-extract: exhibit">Amended and Restated Memorandum and Articles of Association of the registrant (incorporated by reference to Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on December 30, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.1</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex2-1.htm">Description of Rights of Ordinary Shares Registered Pursuant to Section 12 of the Exchange Act as of December 31, 2023</a></span><span style="font-size: 8pt"></span><p style="margin: 0; font-family: Times New Roman, Times, Serif"></p>


<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.2</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000149315221016845/ex4-1.htm" style="-sec-extract: exhibit">Form of Warrant (incorporated by reference to Exhibit 4.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on July 14, 2021)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.1 </span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000120445912001414/exhibit10-1.htm" style="-sec-extract: exhibit">Form of Independent Director Agreement (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form F-4 filed by the registrant on June 21, 2012)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.2 </span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000120445912001414/exhibit10-2.htm" style="-sec-extract: exhibit">Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form F-4 filed by the registrant on June 21, 2012)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.3 </span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000106299316010050/exhibit99-1.htm" style="-sec-extract: exhibit">Form of Stock Option Agreement (incorporated by reference to Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on June 1, 2016)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.4</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; background-color: white; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000149315221006423/ex99-1.htm" style="-sec-extract: exhibit">English translation of Share Acquisition Agreement, dated March 17, 2021, by and among the Company, Biznest Internet Technology Co., Ltd., Taoping New Media Co., Ltd. and shareholders of Taoping New Media Co., Ltd. (incorporated by reference to Exhibit 99.1 to the Report on Form 6-K furnished by the registrant on March 19, 2021)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.5</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; background-color: white; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000149315221010848/ex4-1.htm" style="-sec-extract: exhibit">Taoping Inc. 2016 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 4.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on May 10, 2021)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.6</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; background-color: white; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000149315221016845/ex10-1.htm" style="-sec-extract: exhibit">Form of Securities Purchase Agreement, dated July 12, 2021 (incorporated by reference to Exhibit 10.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on July 14, 2021)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.7</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; background-color: white; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000149315221023117/ex99-1.htm" style="-sec-extract: exhibit">English Translation of Equity Transfer Agreement, dated September 18, 2021 (incorporated by reference to Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on September 20, 2021)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.8</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; background-color: white; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000149315223013554/ex4-9.htm" style="-sec-extract: exhibit">Form of Idle mining Machines and Accessories Sales Contract (English Translation) (incorporated by reference to Exhibit 4.9 to the Annual Report on Form 20-F filed on April 25, 2023)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.9</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; background-color: white; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000149315223024944/ex4-1.htm" style="-sec-extract: exhibit">Form of Standby Equity Purchase Agreement (Public), dated July 17, 2023 (incorporated by reference to Exhibit 4.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on July 19, 2023)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.10</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; background-color: white; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000149315223024944/ex4-2.htm" style="-sec-extract: exhibit">Form of Standby Equity Purchase Agreement (Public), dated July 17, 2023 (incorporated by reference to Exhibit 4.2 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on July 19, 2023)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.11</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; background-color: white; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000149315223034884/ex4-1.htm" style="-sec-extract: exhibit">Form of Securities Purchase Agreement, dated September 27, 2023 (incorporated by reference to Exhibit 4.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on September 29, 2023)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.12</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; background-color: white; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000149315223034884/ex4-2.htm" style="-sec-extract: exhibit">Form of Convertible Promissory Note, dated September 27, 2023 (incorporated by reference to Exhibit 4.2 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on September 29, 2023)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8.1</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex8-1.htm">List of the registrant&#8217;s subsidiaries</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">11.1 </span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1552670/000106299318001433/exhibit11-1.htm" style="-sec-extract: exhibit">Code of Conduct and Business Ethics, adopted on June 20, 2012 (incorporated by reference to Exhibit 11.1 to the Annual Report on Form 20-F filed on March 30, 2018)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12.1</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex12-1.htm">Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12.2</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex12-2.htm">Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.1</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex13-1.htm">Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.2</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex13-2.htm">Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">15.1</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex15-1.htm">Consent from PKF Littlejohn LLP, Independent Registered Public Accounting Firm</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">97.1</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex97-1.htm">Clawback Policy of the Registrant</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.INS</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="am_049"></span>SIGNATURE</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Date:
    April 25, 2024</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING INC. </b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>/s/
    Jianghuai Lin</i></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Jianghuai Lin</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: normal 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Executive Officer</span></td></tr>
  </table>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b></b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p>




<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONSOLIDATED
FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Contents</b></span></td>
    <td style="width: 0.1in">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 0.5in; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Page(s)</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#aj_001">Report of Independent Registered Public Accounting Firm</a> (PCAOB ID No. <span id="xdx_900_edei--AuditorFirmId_c20230101__20231231_zzwCsEnUU4j7"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000053" name="dei:AuditorFirmId">2814</ix:nonNumeric></span>)</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-2
    </span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#aj_002">Consolidated Balance Sheets as of December 31, 2023 and 2022</a></span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-4    </span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#aj_003">Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021</a></span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-5
    </span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#aj_004">Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 and 2021</a></span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-6    </span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#aj_005">Consolidated Statements of Changes in Stockholders&#8217; (Deficits) Equity for the years ended December 31, 2023, 2022 and 2021</a></span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-7
    </span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#aj_006">Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021</a></span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-8    </span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#aj_007">Notes to Consolidated Financial Statements</a></span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-10
    </span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="aj_001"></span>REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
the Stockholders and the Board of Directors of Taoping Inc.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Opinion
on the Consolidated Financial Statements</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have audited the accompanying consolidated balance sheets of Taoping Inc. (the &#8220;Company&#8221;) as of December 31, 2023 and 2022,
the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three
years period ended December 31, 2023, and the related notes (collectively referred to as the &#8220;consolidated financial statements&#8221;).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years period ended December
31, 2023, in conformity with accounting principles generally accepted in the United States of America.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Substantial
Doubt about the Company&#8217;s Ability to Continue as Going Concern</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated financial statements, the Company&#8217;s short-term bank loans of $8.5 million which are repayable within one
year and the uncertainty about the availability of future financing raise substantial doubt about the Company&#8217;s ability to continue
as a going concern. Management&#8217;s evaluation of the events and conditions and management&#8217;s plans regarding these matters are
also described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments
that might result from the outcome of the uncertainty.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Basis
for Opinion</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">These
consolidated financial statements are the responsibility of the Company&#8217;s management. Our responsibility is to express an opinion
on the Company&#8217;s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (&#8220;PCAOB&#8221;) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing
an opinion on the effectiveness of the Company&#8217;s internal control over financial reporting. Accordingly, we express no such opinion.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Critical
Audit Matters</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements
that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the
accounts or disclosures to which they relate.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Going
Concern</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in the &#8220;Substantial Doubt about the Company&#8217;s Ability to Continue as a Going Concern&#8221; and Note 1 to the consolidated
financial statements, the Company&#8217;s short-term bank loans of $8.5 million which are repayable within one year and the uncertainty
about the future financing raise substantial doubt about the Company&#8217;s ability to continue as a going concern. Management&#8217;s
evaluation of the events and conditions and management&#8217;s plans regarding these matters are also described in Note 1 to the consolidated
financial statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
principal considerations for our determination that the evaluation of management&#8217;s going concern assessment is a critical audit
matter are the significant judgment and subjectivity inherent risk in the Company&#8217;s assumptions made in the going concern assessment
and the uncertainty of the Company&#8217;s ability to secure funding subsequent to December 31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
audit procedures related to the evaluation of management&#8217;s going concern assessment included the following, among others:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">b.</span></td>
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    facilities available.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">c.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">considering
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  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Revenue
recognition</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has the following revenue streams:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">revenue
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">b.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">revenue
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">c.</span></td>
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  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
disclosed in Note 2 to the consolidated financial statements, the Company recognizes revenue from product, software and advertising service
upon transfer of control of promised products or completion of service. Significant judgment is exercised by the management of the Company
in determining existence criteria through evaluation on the terms and conditions in the contracts with customers and the identification
of performance obligations in the recognition of revenue. The principal considerations for our determination that revenue recognition
is a critical audit matter are:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">revenue
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
audit procedures in respect of the revenue recognition included:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">d.</span></td>
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  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 50%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>/s/
    <span id="xdx_905_edei--AuditorName_c20230101__20231231_zIMoHP4Mjhn1"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000054" name="dei:AuditorName">PKF Littlejohn LLP</ix:nonNumeric></span></i></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 50%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>PKF
    Littlejohn LLP</i></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">We have served as the Company&#8217;s auditor since 2021.</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span id="xdx_901_edei--AuditorLocation_c20230101__20231231_zm39hFl2uYag" style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000055" name="dei:AuditorLocation">London,
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PCAOB
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="aj_002"></span>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONSOLIDATED
BALANCE SHEETS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>DECEMBER
31, 2023 AND 2022</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" id="xdx_305_111_zl7mHJquHEC5" summary="xdx: Statement - Consolidated Balance Sheets" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">NOTES</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_49D_20231231_zBhGIV3f0H3d" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, <br/> 2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_497_20221231_zEEFyeAPqfw" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr id="xdx_404_eus-gaap--AssetsAbstract_iB_zCQzVEZKL2N3" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">ASSETS</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_400_eus-gaap--AssetsCurrentAbstract_i01B_zan02bTWVLA7" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">CURRENT ASSETS</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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  <tr id="xdx_405_eus-gaap--AdvancesOnInventoryPurchases_i02I_maACzriD_zN40z2Xsu1m1" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr id="xdx_40F_eus-gaap--PrepaidExpenseCurrent_i02I_maACzriD_z5yxhIhEldu1" style="vertical-align: bottom; background-color: White">
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  <tr id="xdx_400_eus-gaap--InventoryNet_i02I_maACzriD_zy9fvgk1EgVl" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr id="xdx_407_eus-gaap--OtherAssetsCurrent_i02I_maACzriD_zZqI44OpOcn3" style="vertical-align: bottom; background-color: White">
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  <tr id="xdx_40B_eus-gaap--AssetsOfDisposalGroupIncludingDiscontinuedOperationCurrent_i02I_maACzriD_zef4YvOzTR91" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr id="xdx_404_eus-gaap--AssetsCurrent_i02TI_mtACzriD_maAzsnW_zo9ZjTM342dk" style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_405_eus-gaap--PropertyPlantAndEquipmentNet_i01I_maAzsnW_zSVeRFvW5J05" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Property, equipment and software, net</td><td>&#160;</td>
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  <tr id="xdx_40A_eus-gaap--OperatingLeaseRightOfUseAsset_i01I_maAzsnW_z7rL8aYPTnA2" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr id="xdx_400_eus-gaap--LongTermInvestments_i01I_maAzsnW_zAYZbUW9Le54" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Long-term investments</td><td>&#160;</td>
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  <tr id="xdx_406_eus-gaap--Goodwill_i01I_maAzsnW_zFqL5Pz3Rg53" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Goodwill</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
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    <td style="text-align: left; padding-bottom: 1.5pt">Other assets, non-current, net</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr id="xdx_402_eus-gaap--Assets_i01TI_mtAzsnW_zxlZVnLYWtqf" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">TOTAL ASSETS</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; padding-bottom: 2.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40C_eus-gaap--LiabilitiesAndStockholdersEquityAbstract_iB_z8JRkv4zEKjd" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">LIABILITIES AND EQUITY</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_405_eus-gaap--LiabilitiesCurrentAbstract_i01B_zSUi3XlzXGDd" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">CURRENT LIABILITIES</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40A_eus-gaap--ShortTermBankLoansAndNotesPayable_i02I_maLCzhsB_zZrz4mGggI1i" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Short-term bank loans</td><td>&#160;</td>
    <td style="text-align: center">11</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction name="us-gaap:ShortTermBankLoansAndNotesPayable" contextRef="AsOf2023-12-31" id="Fact000114" format="ixt:numdotdecimal" decimals="0" unitRef="USD">8,547,509</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction name="us-gaap:ShortTermBankLoansAndNotesPayable" contextRef="AsOf2022-12-31" id="Fact000115" format="ixt:numdotdecimal" decimals="0" unitRef="USD">7,203,762</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_403_eus-gaap--AccountsPayableCurrent_i02I_hus-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--NonrelatedPartyMember_maLCzhsB_zm0eS4aWlHpi" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Accounts payable</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccountsPayableCurrent" contextRef="AsOf2023-12-31_us-gaap_NonrelatedPartyMember" id="Fact000117" format="ixt:numdotdecimal" decimals="0" unitRef="USD">832,436</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccountsPayableCurrent" contextRef="AsOf2022-12-31_us-gaap_NonrelatedPartyMember" id="Fact000118" format="ixt:numdotdecimal" decimals="0" unitRef="USD">2,287,244</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_408_eus-gaap--ContractWithCustomerLiabilityCurrent_i02I_hus-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--NonrelatedPartyMember_maLCzhsB_zUJ9gHnvvjt8" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Advances from customers</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:ContractWithCustomerLiabilityCurrent" contextRef="AsOf2023-12-31_us-gaap_NonrelatedPartyMember" id="Fact000120" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,199,732</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:ContractWithCustomerLiabilityCurrent" contextRef="AsOf2022-12-31_us-gaap_NonrelatedPartyMember" id="Fact000121" format="ixt:numdotdecimal" decimals="0" unitRef="USD">622,581</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">Advances from customers-related parties</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:ContractWithCustomerLiabilityCurrent" contextRef="AsOf2023-12-31_us-gaap_RelatedPartyMember" id="Fact000123" format="ixt:numdotdecimal" decimals="0" unitRef="USD">90,880</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:ContractWithCustomerLiabilityCurrent" contextRef="AsOf2022-12-31_us-gaap_RelatedPartyMember" id="Fact000124" format="ixt:numdotdecimal" decimals="0" unitRef="USD">94,832</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_400_eus-gaap--OtherLiabilities_i02I_hus-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--RelatedPartyMember_maLCzhsB_zi5B2iGvkv4g" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Amounts due to related parties</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2022-12-31_us-gaap_RelatedPartyMember" id="Fact000127" format="ixt:numdotdecimal" decimals="0" unitRef="USD">3,338,882</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_406_eus-gaap--AccruedSalariesCurrent_i02I_maLCzhsB_zoZfibDuWQ58" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Accrued payroll and benefits</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccruedSalariesCurrent" contextRef="AsOf2022-12-31" id="Fact000130" format="ixt:numdotdecimal" decimals="0" unitRef="USD">411,995</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">Other payables and accrued expenses</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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  <tr id="xdx_40A_eus-gaap--Liabilities_i01TI_mtLz3Vq_maLASEz68o_zOZMXw6Nhe47" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_409_eus-gaap--StockholdersEquityAbstract_i01B_zCgHkQfzA3Xl" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">EQUITY</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_404_eus-gaap--CommonStockValue_i02I_maSEzT5F_zqEHDPrVbiPi" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: center">19</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:CommonStockValue" contextRef="AsOf2023-12-31" id="Fact000162" format="ixt:numdotdecimal" decimals="0" unitRef="USD">165,115,938</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:CommonStockValue" contextRef="AsOf2022-12-31" id="Fact000163" format="ixt:numdotdecimal" decimals="0" unitRef="USD">161,404,797</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_409_eus-gaap--AdditionalPaidInCapitalCommonStock_i02I_maSEzT5F_zSMeGAp4izx9" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Additional paid-in capital</td><td>&#160;</td>
    <td style="text-align: center">19</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AdditionalPaidInCapitalCommonStock" contextRef="AsOf2023-12-31" id="Fact000181" format="ixt:numdotdecimal" decimals="0" unitRef="USD">22,603,523</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr id="xdx_407_eus-gaap--StatutoryAccountingPracticesStatutoryCapitalAndSurplusBalance_i02I_maSEzT5F_zEv2OVbYRmy" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Reserve</td><td>&#160;</td>
    <td style="text-align: center">18</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StatutoryAccountingPracticesStatutoryCapitalAndSurplusBalance" contextRef="AsOf2023-12-31" id="Fact000184" format="ixt:numdotdecimal" decimals="0" unitRef="USD">10,209,086</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StatutoryAccountingPracticesStatutoryCapitalAndSurplusBalance" contextRef="AsOf2022-12-31" id="Fact000185" format="ixt:numdotdecimal" decimals="0" unitRef="USD">10,209,086</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_406_eus-gaap--RetainedEarningsAccumulatedDeficit_i02I_maSEzT5F_z2IuKjYoLqH" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Accumulated deficit</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:RetainedEarningsAccumulatedDeficit" contextRef="AsOf2023-12-31" id="Fact000187" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">208,752,548</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:RetainedEarningsAccumulatedDeficit" contextRef="AsOf2022-12-31" id="Fact000188" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">208,054,607</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr id="xdx_400_eus-gaap--AccumulatedOtherComprehensiveIncomeLossNetOfTax_i02I_maSEzT5F_zDjCiAAUdrW1" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Accumulated other comprehensive income</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center; padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax" contextRef="AsOf2023-12-31" id="Fact000190" format="ixt:numdotdecimal" decimals="0" unitRef="USD">23,587,298</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax" contextRef="AsOf2022-12-31" id="Fact000191" format="ixt:numdotdecimal" decimals="0" unitRef="USD">23,610,333</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_405_eus-gaap--StockholdersEquity_i02TI_mtSEzT5F_maSEIPAz3rR_zOkY45V76aC7" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Total equity of the Company</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr id="xdx_406_eus-gaap--MinorityInterest_i02I_maSEIPAz3rR_zYlrObK0JQ0j" style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Non-controlling interest</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center; padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0196">-</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0197">-</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_401_eus-gaap--StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest_i02TI_mtSEIPAz3rR_maLASEz68o_zLSWr0KCQiCi" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">TOTAL EQUITY</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
accompanying notes are an integral part of these consolidated financial statements</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="aj_003"></span>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONSOLIDATED
STATEMENTS OF OPERATIONS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>YEARS
ENDED DECEMBER 31, 2023, 2022 AND 2021</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr id="xdx_405_eus-gaap--NetIncomeLoss_iT_mtNILzHbJ_zO5ByOqVtqt6" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">CONTINUING OPERATIONS</td><td/>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_407_eus-gaap--IncomeLossFromContinuingOperationsPerBasicShare_i01_zHiVuLZXrvRh" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
accompanying notes are an integral part of these consolidated financial statements</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="aj_004"></span>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>YEARS
ENDED DECEMBER 31, 2023, 2022 AND 2021</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
accompanying notes are an integral part of these consolidated financial statements</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="aj_005"></span>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>YEARS
ENDED DECEMBER 31, 2023, 2022 AND 2021</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0584">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0585">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0586">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0587">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0588">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueShareBasedCompensationGross" contextRef="From2023-01-01to2023-12-31" id="Fact000589" format="ixt:numdotdecimal" decimals="0" unitRef="USD">340,000</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_403_eus-gaap--AdjustmentsToAdditionalPaidInCapitalOther_z1kAAy4v0Xd" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Beneficial conversion feature on convertible note (Note 16)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AdjustmentsToAdditionalPaidInCapitalOther" contextRef="From2023-01-012023-12-31_us-gaap_AdditionalPaidInCapitalMember" id="Fact000594" format="ixt:numdotdecimal" decimals="0" unitRef="USD">156,440</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AdjustmentsToAdditionalPaidInCapitalOther" contextRef="From2023-01-01to2023-12-31" id="Fact000599" format="ixt:numdotdecimal" decimals="0" unitRef="USD">156,440</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40C_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_zxwtLIU6by1i" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Issuance of ordinary shares for Equity Incentive Plan (Note 19)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2023-01-012023-12-31_us-gaap_CommonStockMember" id="Fact000601" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,360,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0602">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0603">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0604">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0605">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2023-01-01to2023-12-31" id="Fact000607" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,360,000</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_407_ecustom--StockIssuedDuringPeriodValueOfIssuanceOfOrdinarySharesForFinancing_zF3ozDmmO9rb" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Issuance of ordinary shares for financing (Note 19)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="TAOP:StockIssuedDuringPeriodValueOfIssuanceOfOrdinarySharesForFinancing" contextRef="From2023-01-012023-12-31_us-gaap_CommonStockMember" id="Fact000611" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,961,923</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0612">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0613">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0614">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0615">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0616">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="TAOP:StockIssuedDuringPeriodValueOfIssuanceOfOrdinarySharesForFinancing" contextRef="From2023-01-01to2023-12-31" id="Fact000617" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,961,923</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_405_ecustom--StockIssuedDuringPeriodValueOfIssuanceOfOrdinarySharesForFinancing_z4ef3HPzXlx8" style="display: none; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Issuance of ordinary shares for financing</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_982_ecustom--StockIssuedDuringPeriodSharesOfIssuanceOfOrdinarySharesForFinancing_pid_c20230101__20231231__us-gaap--StatementEquityComponentsAxis__us-gaap--CommonStockMember_fKg_____zRRx9cjVYtj8" title="Issuance of ordinary shares for financing, shares" style="text-align: right"><ix:nonFraction name="TAOP:StockIssuedDuringPeriodSharesOfIssuanceOfOrdinarySharesForFinancing" contextRef="From2023-01-012023-12-31_us-gaap_CommonStockMember" id="Fact000629" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">1,047,733</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="TAOP:StockIssuedDuringPeriodValueOfIssuanceOfOrdinarySharesForFinancing" contextRef="From2023-01-012023-12-31_us-gaap_CommonStockMember" id="Fact000621" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,961,923</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0622">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0623">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0624">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0625">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0626">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="TAOP:StockIssuedDuringPeriodValueOfIssuanceOfOrdinarySharesForFinancing" contextRef="From2023-01-01to2023-12-31" id="Fact000627" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,961,923</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40A_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_ztDm5vYYytAd" style="display: none; vertical-align: bottom; background-color: White">
    <td style="text-align: left">Issuance of ordinary shares for Equity Incentive Plan</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_989_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20230101__20231231__us-gaap--StatementEquityComponentsAxis__us-gaap--CommonStockMember_fKg_____zNj5SopnYrPf" title="Issuance of ordinary shares for Equity Incentive Plan, shares" style="text-align: right"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2023-01-012023-12-31_us-gaap_CommonStockMember" id="Fact000639" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">200,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2023-01-012023-12-31_us-gaap_CommonStockMember" id="Fact000631" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,360,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0632">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0633">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0634">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0635">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2023-01-01to2023-12-31" id="Fact000637" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,360,000</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_407_eus-gaap--AdjustmentsToAdditionalPaidInCapitalOther_zDMt5DyKUD7d" style="display: none; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Beneficial conversion feature on convertible note</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AdjustmentsToAdditionalPaidInCapitalOther" contextRef="From2023-01-012023-12-31_us-gaap_AdditionalPaidInCapitalMember" id="Fact000642" format="ixt:numdotdecimal" decimals="0" unitRef="USD">156,440</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AdjustmentsToAdditionalPaidInCapitalOther" contextRef="From2023-01-01to2023-12-31" id="Fact000647" format="ixt:numdotdecimal" decimals="0" unitRef="USD">156,440</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40D_eus-gaap--AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue_zBIqUCG2qOx" style="display: none; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Stock-based Compensation</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0649">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue" contextRef="From2023-01-012023-12-31_us-gaap_AdditionalPaidInCapitalMember" id="Fact000650" format="ixt:numdotdecimal" decimals="0" unitRef="USD">158,070</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0651">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0652">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0653">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(<ix:nonFraction name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" contextRef="AsOf2023-12-31_us-gaap_RetainedEarningsMember" id="Fact000716" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">208,752,548</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
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    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" contextRef="AsOf2023-12-31" id="Fact000719" format="ixt:numdotdecimal" decimals="0" unitRef="USD">12,763,297</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
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</table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
accompanying notes are an integral part of these consolidated financial statements</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="aj_006"></span><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONSOLIDATED
STATEMENTS OF CASH FLOWS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>YEARS
ENDED DECEMBER 31, 2023, 2022 AND 2021</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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    <td style="text-align: left">Impairment on cryptocurrencies</td><td>&#160;</td>
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    <td style="text-align: left">(Gain) on sales of cryptocurrencies</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:GainLossOnSaleOfInvestments" contextRef="From2022-01-012022-12-31" id="Fact000789" format="ixt:numdotdecimal" decimals="0" unitRef="USD">679,111</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:GainLossOnSaleOfInvestments" contextRef="From2021-01-012021-12-31" id="Fact000790" format="ixt:numdotdecimal" decimals="0" unitRef="USD">410,979</ix:nonFraction></td><td style="text-align: left">)</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0802">-</span></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40D_eus-gaap--IncreaseDecreaseInOperatingCapitalAbstract_i02B_zs96uM2GCKm2" style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Changes in operating assets and liabilities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">Decrease (increase) in accounts receivable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInAccountsReceivable" contextRef="From2023-01-01to2023-12-31" id="Fact000808" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">393,934</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInAccountsReceivable" contextRef="From2022-01-012022-12-31" id="Fact000809" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">3,964,973</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr id="xdx_406_eus-gaap--IncreaseDecreaseInAccountsReceivableRelatedParties_i03N_pp0p0_di_msCzIDJ_zdrHyRFkHdpd" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">(Increase) decrease in accounts receivable from related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInAccountsReceivableRelatedParties" contextRef="From2023-01-01to2023-12-31" id="Fact000812" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">197,096</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInAccountsReceivableRelatedParties" contextRef="From2022-01-012022-12-31" id="Fact000813" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">238,806</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInAccountsReceivableRelatedParties" contextRef="From2021-01-012021-12-31" id="Fact000814" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">515,334</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_409_eus-gaap--IncreaseDecreaseInAccountsPayableRelatedParties_i03_pp0p0_maCzIDJ_zFoJV65eH1Og" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Decrease in accounts payable from related party</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0816">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0817">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInAccountsPayableRelatedParties" contextRef="From2021-01-012021-12-31" id="Fact000818" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">70,525</ix:nonFraction></td><td style="text-align: left">)</td></tr>
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    <td style="text-align: left">(Increase) decrease in inventories</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInInventories" contextRef="From2023-01-01to2023-12-31" id="Fact000820" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,786,825</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInInventories" contextRef="From2022-01-012022-12-31" id="Fact000821" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">101,792</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInInventories" contextRef="From2021-01-012021-12-31" id="Fact000822" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">165,566</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40F_eus-gaap--IncreaseDecreaseInIntangibleAssetsCurrent_i03N_di_msCzIDJ_z1atQDaLKJ91" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Cryptocurrencies - mining and purchases</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0824">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInIntangibleAssetsCurrent" contextRef="From2022-01-012022-12-31" id="Fact000825" format="ixt:numdotdecimal" decimals="0" unitRef="USD">5,026,628</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInIntangibleAssetsCurrent" contextRef="From2021-01-012021-12-31" id="Fact000826" format="ixt:numdotdecimal" decimals="0" unitRef="USD">5,455,345</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr id="xdx_40D_eus-gaap--IncreaseDecreaseInOtherNoncurrentAssets_i03N_pp0p0_di_msCzIDJ_zhV37eGoxptk" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Decrease in other non-current assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInOtherNoncurrentAssets" contextRef="From2023-01-01to2023-12-31" id="Fact000828" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">919,081</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInOtherNoncurrentAssets" contextRef="From2022-01-012022-12-31" id="Fact000829" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">967,407</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInOtherNoncurrentAssets" contextRef="From2021-01-012021-12-31" id="Fact000830" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">1,885,104</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40F_eus-gaap--IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets_i03N_pp0p0_di_msCzIDJ_zZC3i4FueR0j" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">(Increase) in other receivables and prepaid expenses</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets" contextRef="From2023-01-01to2023-12-31" id="Fact000832" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">53,329</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets" contextRef="From2022-01-012022-12-31" id="Fact000833" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">183,808</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0834">-</span></td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">(Increase) decrease in advances to suppliers</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInContractWithCustomerAsset" contextRef="From2023-01-01to2023-12-31" id="Fact000836" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">6,266,842</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInContractWithCustomerAsset" contextRef="From2022-01-012022-12-31" id="Fact000837" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">656,158</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInContractWithCustomerAsset" contextRef="From2021-01-012021-12-31" id="Fact000838" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">6,719,399</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr id="xdx_40A_ecustom--IncreaseDecreaseInAmountsDueTofromRelatedParties_i03N_pp0p0_di_msCzIDJ_z71isQqWGz0l" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">(Decrease) Increase in amounts due to/from related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="TAOP:IncreaseDecreaseInAmountsDueTofromRelatedParties" contextRef="From2023-01-01to2023-12-31" id="Fact000840" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">494,889</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0841">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="TAOP:IncreaseDecreaseInAmountsDueTofromRelatedParties" contextRef="From2021-01-012021-12-31" id="Fact000842" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">827,901</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr id="xdx_400_eus-gaap--IncreaseDecreaseInOtherAccountsPayableAndAccruedLiabilities_i03_pp0p0_maCzIDJ_zOCXpYlml4eg" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Increase (decrease) in other payables and accrued expenses</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInOtherAccountsPayableAndAccruedLiabilities" contextRef="From2023-01-01to2023-12-31" id="Fact000844" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">465,678</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInOtherAccountsPayableAndAccruedLiabilities" contextRef="From2022-01-012022-12-31" id="Fact000845" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">798,636</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInOtherAccountsPayableAndAccruedLiabilities" contextRef="From2021-01-012021-12-31" id="Fact000846" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">2,263,237</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr id="xdx_408_eus-gaap--IncreaseDecreaseInContractWithCustomerLiability_i03_pp0p0_maCzIDJ_zcvJkHgj52mk" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Increase in advances from customers</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInContractWithCustomerLiability" contextRef="From2023-01-01to2023-12-31" id="Fact000848" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">593,429</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInContractWithCustomerLiability" contextRef="From2022-01-012022-12-31" id="Fact000849" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">235,823</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInContractWithCustomerLiability" contextRef="From2021-01-012021-12-31" id="Fact000850" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">48,301</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40A_ecustom--IncreaseDecreaseInAdvancesFromCustomersFromRelatedParties_i03_pp0p0_maCzIDJ_zHG1DwkWc5qh" style="vertical-align: bottom; background-color: White">
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    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Net cash (used in) operating activities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction name="us-gaap:NetCashProvidedByUsedInOperatingActivities" contextRef="From2022-01-012022-12-31" id="Fact000873" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">7,511,698</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_405_eus-gaap--NetCashProvidedByUsedInInvestingActivitiesAbstract_iB_z0EBBFwbHWOb" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">Proceeds from sales of cryptocurrencies</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="TAOP:ProceedsFromSalesOfCryptocurrencies" contextRef="From2022-01-012022-12-31" id="Fact000881" format="ixt:numdotdecimal" decimals="0" unitRef="USD">5,017,732</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr id="xdx_403_eus-gaap--ProceedsFromSaleOfPropertyPlantAndEquipment_i01_maCzQZU_zQBn69Outtak" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Proceeds from sales of property and equipment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0884">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0886">-</span></td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">Purchases of property, equipment and software</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:PaymentsToAcquirePropertyPlantAndEquipment" contextRef="From2023-01-01to2023-12-31" id="Fact000888" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,209,613</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:PaymentsToAcquirePropertyPlantAndEquipment" contextRef="From2022-01-012022-12-31" id="Fact000889" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,793,342</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:PaymentsToAcquirePropertyPlantAndEquipment" contextRef="From2021-01-012021-12-31" id="Fact000890" format="ixt:numdotdecimal" decimals="0" unitRef="USD">11,293,962</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr id="xdx_40F_eus-gaap--CashAcquiredFromAcquisition_i01_maCzQZU_zcQqUKvL73ul" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Acquisition of cash in connection with a business acquisition</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:CashAcquiredFromAcquisition" contextRef="From2023-01-01to2023-12-31" id="Fact000892" format="ixt:numdotdecimal" decimals="0" unitRef="USD">589</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:CashAcquiredFromAcquisition" contextRef="From2021-01-012021-12-31" id="Fact000894" format="ixt:numdotdecimal" decimals="0" unitRef="USD">7,545</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40A_ecustom--ConsiderationPaidForAcquisition_i01N_di_msCzQZU_z2yN7tcmjLq6" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Consideration paid for acquisition</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0896">-</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0897">-</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="TAOP:ConsiderationPaidForAcquisition" contextRef="From2021-01-012021-12-31" id="Fact000898" format="ixt:numdotdecimal" decimals="0" unitRef="USD">7,257,394</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr id="xdx_40C_eus-gaap--NetCashProvidedByUsedInInvestingActivities_i01T_mtCzQZU_maCzX27_zj0jBVtYQSE2" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Net cash (used in) provided by investing activities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:NetCashProvidedByUsedInInvestingActivities" contextRef="From2022-01-012022-12-31" id="Fact000901" format="ixt:numdotdecimal" decimals="0" unitRef="USD">4,310,557</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction name="us-gaap:NetCashProvidedByUsedInInvestingActivities" contextRef="From2021-01-012021-12-31" id="Fact000902" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">14,000,268</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="font-weight: bold; text-align: left">FINANCING ACTIVITIES</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_402_eus-gaap--ProceedsFromShortTermDebt_i01_maCz80f_zI6Iwc1YOLDf" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Proceeds from borrowings under short-term loans</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:ProceedsFromShortTermDebt" contextRef="From2021-01-012021-12-31" id="Fact000910" format="ixt:numdotdecimal" decimals="0" unitRef="USD">11,937,002</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40F_eus-gaap--ProceedsFromRelatedPartyDebt_i01_maCz80f_z63K3rhqNcAd" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Borrowings from related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0912">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0913">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:ProceedsFromRelatedPartyDebt" contextRef="From2021-01-012021-12-31" id="Fact000914" format="ixt:numdotdecimal" decimals="0" unitRef="USD">3,100,520</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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    <td style="text-align: left">Cash and cash equivalents from discontinued operations</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0970">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:DisposalGroupIncludingDiscontinuedOperationCashAndCashEquivalents" contextRef="AsOf2022-12-31" id="Fact000971" format="ixt:numdotdecimal" decimals="0" unitRef="USD">8,649</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40B_eus-gaap--RestrictedCashAndCashEquivalents_i01E_z4sgJ2wV9pcf" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Total cash, cash equivalents, and restricted cash</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction name="us-gaap:RestrictedCashAndCashEquivalents" contextRef="AsOf2023-12-31" id="Fact000973" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,300,855</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction name="us-gaap:RestrictedCashAndCashEquivalents" contextRef="AsOf2022-12-31" id="Fact000974" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,023,240</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Supplemental
disclosure of significant non-cash transactions*:</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
    August 1, 2023, the Company implemented a <span id="xdx_90B_eus-gaap--StockholdersEquityReverseStockSplit_c20230801__20230801_znQBCR3locU2" title="Reverse stock split" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonNumeric contextRef="From2023-08-012023-08-01" id="Fact000976" name="us-gaap:StockholdersEquityReverseStockSplit">one-for-ten</ix:nonNumeric></span> reverse stock split of the Company&#8217;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.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
January 2021, the Company issued <span id="xdx_90E_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_pid_c20210101__20210131__srt--TitleOfIndividualAxis__custom--ConsultantMember_zBGzy1hGtu05" title="Issuance of shares" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2021-01-012021-01-31_custom_ConsultantMember" id="Fact000978" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">700</ix:nonFraction></span> non-restricted shares with a fair value of $<span id="xdx_905_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20210101__20210131__srt--TitleOfIndividualAxis__custom--ConsultantMember_zAoiTdiXz94d" title="Issuance of shares, value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2021-01-012021-01-31_custom_ConsultantMember" id="Fact000980" format="ixt:numdotdecimal" decimals="0" unitRef="USD">21,840</ix:nonFraction></span> to a consultant as a compensation for his service.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
March 2021, the Company issued <span id="xdx_901_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20210301__20210331__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember_zs9tfWMSS1Ii" title="Issuance of shares, acquisition" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2021-03-012021-03-31_custom_TwoThousandSixteenEquityIncentivePlanMember" id="Fact000982" format="ixt:numdotdecimal" decimals="0" unitRef="USD">20,000</ix:nonFraction></span> restricted ordinary shares under its 2016 Equity Incentive Plan to certain employees with the fair
value of approximately $<span id="xdx_90D_eus-gaap--StockIssuedDuringPeriodValueAcquisitions_c20210301__20210331__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember_zzH8Vf6mMT2h" title="Issuance of shares acquisition, value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueAcquisitions" contextRef="From2021-03-012021-03-31_custom_TwoThousandSixteenEquityIncentivePlanMember" id="Fact000984" format="ixt:numdotdecimal" decimals="0" unitRef="USD">2,792,000</ix:nonFraction></span> as rewards for their past services.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
April 2021, the Company issued warrants to an investor relationship consultant to purchase <span id="xdx_909_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20210401__20210430__srt--TitleOfIndividualAxis__custom--ConsultantMember_zXAw12gwwCOg" title="Issuance of shares" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2021-04-012021-04-30_custom_ConsultantMember" id="Fact000986" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">1,500</ix:nonFraction></span> ordinary shares of the Company as a
compensation for its service. The fair value of the warrants was approximately $<span id="xdx_90F_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20210401__20210430__srt--TitleOfIndividualAxis__custom--ConsultantMember_zF7LoB77VhP1" title="Issuance of shares, value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2021-04-012021-04-30_custom_ConsultantMember" id="Fact000988" format="ixt:numdotdecimal" decimals="0" unitRef="USD">73,000</ix:nonFraction></span>.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
April 2021, the Company obtained right-of-use assets of approximately $<span id="xdx_90B_eus-gaap--OperatingLeaseRightOfUseAsset_iI_pn6n6_c20210430_zgg8ePELiSjl" title="operating lease right of use of asset" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:OperatingLeaseRightOfUseAsset" contextRef="AsOf2021-04-30" id="Fact000990" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="USD">1</ix:nonFraction></span> million in exchange for lease liabilities.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
June 2021, the Company issued <span id="xdx_908_eus-gaap--StockIssuedDuringPeriodSharesAcquisitions_c20210601__20210630__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zvvmhVTYM0T9" title="Issuance of shares, acquisition" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesAcquisitions" contextRef="From2021-06-012021-06-30_custom_TaopingNewMediaCoLtdMember" id="Fact000992" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">121,363</ix:nonFraction></span> restricted ordinary shares for the acquisition of Taoping New Media Co., Ltd. The fair value of
the restricted ordinary shares was approximately $<span id="xdx_904_eus-gaap--StockIssuedDuringPeriodValueAcquisitions_c20210601__20210630__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zpwiP9FBQ1H1" title="Issuance of shares acquisition, value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueAcquisitions" contextRef="From2021-06-012021-06-30_custom_TaopingNewMediaCoLtdMember" id="Fact000994" format="ixt:numdotdecimal" decimals="0" unitRef="USD">5,436,000</ix:nonFraction></span>.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
September 2021, the Company issued <span id="xdx_90B_eus-gaap--StockIssuedDuringPeriodSharesAcquisitions_c20210901__20210930__us-gaap--BusinessAcquisitionAxis__custom--IASPECTechnologyGroupCoLtdMember_zMqc8JM7IY0b" title="Issuance of shares, acquisition" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesAcquisitions" contextRef="From2021-09-012021-09-30_custom_IASPECTechnologyGroupCoLtdMember" id="Fact000996" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">61,225</ix:nonFraction></span> ordinary shares for the acquisition of iASPEC Technology Group Co., Ltd. The fair value of
the ordinary shares was approximately $<span id="xdx_909_eus-gaap--StockIssuedDuringPeriodValueAcquisitions_pn5n6_c20210901__20210930__us-gaap--BusinessAcquisitionAxis__custom--IASPECTechnologyGroupCoLtdMember_zYosOD9DRp05" title="Issuance of shares acquisition, value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueAcquisitions" contextRef="From2021-09-012021-09-30_custom_IASPECTechnologyGroupCoLtdMember" id="Fact000998" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">1.8</ix:nonFraction></span> million.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
November 2021, the Company issued <span id="xdx_90A_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20211101__20211130__srt--TitleOfIndividualAxis__custom--ConsultantMember_zQNL4dumEHFa" title="Number of shares issued for services" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2021-11-012021-11-30_custom_ConsultantMember" id="Fact001000" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">4,500</ix:nonFraction></span> restricted ordinary shares with a fair value of $<span id="xdx_908_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20211101__20211130__srt--TitleOfIndividualAxis__custom--ConsultantMember_zhLq2IO9wQ3i" title="Number of shares issued for value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2021-11-012021-11-30_custom_ConsultantMember" id="Fact001002" format="ixt:numdotdecimal" decimals="0" unitRef="USD">136,350</ix:nonFraction></span> to a financial intermediary service
organization as a compensation for the intermediary service.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2021, the Company issued <span id="xdx_903_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20211201__20211231__srt--TitleOfIndividualAxis__custom--ConsultantMember_zJvjjGYjNxIi" title="Number of shares issued for services" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2021-12-012021-12-31_custom_ConsultantMember" id="Fact001004" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">1,000</ix:nonFraction></span> ordinary shares with a fair value of $<span id="xdx_906_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20211201__20211231__srt--TitleOfIndividualAxis__custom--ConsultantMember_zGlT0cY5rNuj" title="Number of shares issued for services, value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2021-12-012021-12-31_custom_ConsultantMember" id="Fact001006" format="ixt:numdotdecimal" decimals="0" unitRef="USD">29,200</ix:nonFraction></span> to a consultant as a compensation for his service.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2021, purchase of software and equipment in an amount of approximately $<span id="xdx_908_eus-gaap--IncreaseDecreaseInAccountsPayable_pn5n6_c20210101__20211231_zQvDivzPBNE2" title="Increase in accounts payable" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:IncreaseDecreaseInAccountsPayable" contextRef="From2021-01-012021-12-31" id="Fact001008" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">6.3</ix:nonFraction></span> million was made by an increase in accounts payable, respectively,
and $<span id="xdx_900_ecustom--IncreaseDecreaseInCustomerAdvance_pn5n6_c20210101__20211231_zOxjyRMT9hGh" title="Decrease in customer advances" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="TAOP:IncreaseDecreaseInCustomerAdvance" contextRef="From2021-01-012021-12-31" id="Fact001010" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">1.4</ix:nonFraction></span> million was made by a decrease of advances to suppliers.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2021, the Company held cryptocurrencies in an amount of approximately of $<span id="xdx_90C_ecustom--NonCashExpenseOnIntagibleAssets_c20210101__20211231_zWkF5xHxSHe7" title="Non cash expense" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="TAOP:NonCashExpenseOnIntagibleAssets" contextRef="From2021-01-012021-12-31" id="Fact001012" format="ixt:numdotdecimal" decimals="0" unitRef="USD">830,000</ix:nonFraction></span> which were noncash transactions received from cryptocurrency
mining operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
February 2022, the Company issued the first phase of approximately <span id="xdx_90D_eus-gaap--StockIssuedDuringPeriodSharesAcquisitions_c20220201__20220228__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zn6CU3gpASml" title="Issuance of shares, acquisition" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesAcquisitions" contextRef="From2022-02-012022-02-28_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001014" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">6,718</ix:nonFraction></span> restricted ordinary shares with a fair value of approximately
$<span id="xdx_90A_eus-gaap--StockIssuedDuringPeriodValueAcquisitions_c20220201__20220228__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zVhfV1qyi6zk" title="Issuance of shares acquisition, value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueAcquisitions" contextRef="From2022-02-012022-02-28_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001016" format="ixt:numdotdecimal" decimals="0" unitRef="USD">118,000</ix:nonFraction></span>, for the acquisition of Zhenjiang Taoping IoT Tech. Co., Ltd (&#8220;ZJIOT&#8221;). The Company agreed to issue to the shareholders
of ZJIOT a total of approximately <span id="xdx_90B_eus-gaap--StockIssuedDuringPeriodSharesAcquisitions_c20220201__20220228__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember__us-gaap--AwardTypeAxis__us-gaap--RestrictedStockMember_z6rYLj4eeYE2" title="Issuance of shares acquisition, shares" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesAcquisitions" contextRef="From2022-02-012022-02-28_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember_us-gaap_RestrictedStockMember" id="Fact001018" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">20,154</ix:nonFraction></span> restricted ordinary shares in three phases, conditioned upon the satisfaction of certain performance
targets.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
March 2022 and July 2022, the Company issued <span id="xdx_90D_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20220301__20220331__srt--TitleOfIndividualAxis__custom--ConsultantMember_zNXZVfpknPxd" title="Issuance of shares" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><span id="xdx_900_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20220701__20220731__srt--TitleOfIndividualAxis__custom--ConsultantMember_zbKVOABVR7na" title="Issuance of shares" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2022-03-012022-03-31_custom_ConsultantMember" id="Fact001020" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2022-07-012022-07-31_custom_ConsultantMember" id="Fact001022" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">2,000</ix:nonFraction></ix:nonFraction></span></span> ordinary shares with a fair value of $<span id="xdx_908_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20220301__20220331__srt--TitleOfIndividualAxis__custom--ConsultantMember_zHP3gzpKwByf" title="Issuance of shares, value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><span id="xdx_904_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20220701__20220731__srt--TitleOfIndividualAxis__custom--ConsultantMember_z46kM6GNQmgi" title="Issuance of shares, value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2022-03-012022-03-31_custom_ConsultantMember" id="Fact001024" format="ixt:numdotdecimal" decimals="0" unitRef="USD"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2022-07-012022-07-31_custom_ConsultantMember" id="Fact001026" format="ixt:numdotdecimal" decimals="0" unitRef="USD">23,100</ix:nonFraction></ix:nonFraction></span></span> to a consultant as a compensation for
his service.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
April 2023, the Company issued the second phase of approximately <span id="xdx_901_eus-gaap--StockIssuedDuringPeriodSharesAcquisitions_c20230401__20230430__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zE0DjT9tjBN4" title="Issuance of shares, acquisition" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesAcquisitions" contextRef="From2023-04-012023-04-30_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001028" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">6,718</ix:nonFraction></span> restricted ordinary shares with a fair value of approximately
$<span id="xdx_90E_eus-gaap--StockIssuedDuringPeriodValueAcquisitions_c20230401__20230430__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zutkQok0NqT6" title="Issuance of shares acquisition, value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueAcquisitions" contextRef="From2023-04-012023-04-30_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001030" format="ixt:numdotdecimal" decimals="0" unitRef="USD">49,000</ix:nonFraction></span>, for the acquisition of ZJIOT, upon the satisfaction of certain performance targets.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
May 2023, the Company issued <span id="xdx_900_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20230501__20230531__srt--TitleOfIndividualAxis__custom--ConsultantMember__us-gaap--AwardTypeAxis__us-gaap--RestrictedStockMember_zZxlGW6lUo6k" title="Issuance of shares" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2023-05-012023-05-31_custom_ConsultantMember_us-gaap_RestrictedStockMember" id="Fact001032" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">50,000</ix:nonFraction></span> restricted shares to a consultant as its service compensation for the service period from May 26,
2023 to May 25, 2024. The fair value of the <span id="xdx_90C_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20230501__20230531__srt--TitleOfIndividualAxis__custom--ConsultantMember_z2DWq2JVPQx6" title="Issuance of shares" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2023-05-012023-05-31_custom_ConsultantMember" id="Fact001034" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">50,000</ix:nonFraction></span> ordinary shares was $<span id="xdx_90F_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20230501__20230531__srt--TitleOfIndividualAxis__custom--ConsultantMember_zOHDSoJYVvFd" title="Issuance of shares, value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2023-05-012023-05-31_custom_ConsultantMember" id="Fact001036" format="ixt:numdotdecimal" decimals="0" unitRef="USD">340,000</ix:nonFraction></span>, which was amortized over the service period.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
May 2023, the Company issued <span id="xdx_900_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20230501__20230531__srt--TitleOfIndividualAxis__custom--DirectorsExecutiveOfficersAndEmployeesMember_zl1L5Nm29yrh" title="Issuance of shares" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2023-05-012023-05-31_custom_DirectorsExecutiveOfficersAndEmployeesMember" id="Fact001038" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">200,000</ix:nonFraction></span> ordinary shares with fair value of approximately $<span id="xdx_905_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20230501__20230531__srt--TitleOfIndividualAxis__custom--DirectorsExecutiveOfficersAndEmployeesMember_zagibNKwhfei" title="Issuance of shares, value" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIFN0YXRlbWVudHMgb2YgQ2FzaCBGbG93cyAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2023-05-012023-05-31_custom_DirectorsExecutiveOfficersAndEmployeesMember" id="Fact001040" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,360,000</ix:nonFraction></span> to certain directors, executive officers,
and employees as compensations for their services.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
accompanying notes are an integral part of these consolidated financial statements</span></p>
<!-- Field: Split-Segment; Name: 001 -->
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="aj_007"></span>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001042" name="us-gaap:NatureOfOperations"><p id="xdx_80C_eus-gaap--NatureOfOperations_z1ZTo70Oz0N5" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>1.
<span id="xdx_825_zvbPeCQ18eU">ORGANIZATION, PRINCIPAL ACTIVITIES AND MANAGEMENT&#8217;S PLANS</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taoping
Inc. (f/k/a China Information Technology, Inc.), together with its subsidiaries (the &#8220;Company&#8221;), is a provider of
cloud-app technologies for Smart City IoT platforms, digital advertising delivery, and other internet-based information distribution
systems in China. Its Internet ecosystem enables all participants of the new media community to efficiently promote branding, disseminate
information, and exchange resources. In addition, the Company provides a broad portfolio of software and hardware with fully integrated
solutions, including Information Technology infrastructure, Internet-enabled display technologies, and IoT platforms to customers in
government, education, residential community management, media, transportation, and other private sectors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
May 2018, we changed our corporate name from &#8220;China Information Technology Inc.&#8221; to &#8220;Taoping Inc.&#8221;, to reflect
our current business operations in the new media and IoT industries. In 2021, Information Security Tech International Co. Ltd. (&#8220;IST
HK&#8221;), one of the Company&#8217;s Hong Kong subsidiaries then, changed its corporate name to Taoping Group (China) Ltd. to reflect
the Company&#8217;s current corporate structure to be in line with the new business strategies. As listed in the table below, these services
are provided through the Company&#8217;s operating subsidiaries, primarily in Hong Kong and mainland China.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
June 2021, the Company consummated an acquisition of <span id="xdx_907_eus-gaap--BusinessAcquisitionPercentageOfVotingInterestsAcquired_iI_dp_uPure_c20210630__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zEVB9JwTMZg2"><ix:nonFraction name="us-gaap:BusinessAcquisitionPercentageOfVotingInterestsAcquired" contextRef="AsOf2021-06-30_custom_TaopingNewMediaCoLtdMember" id="Fact001043" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% of the equity interest of Taoping New Media Co., Ltd (&#8220;TNM&#8221;), a
leading media operator in China&#8217;s out-of-home digital advertising industry. Mr. Jianghuai Lin, the Chairman and CEO of the Company,
who then owned approximately <span id="xdx_90A_ecustom--SharesOutstandingPercentage_iI_dp_uPure_c20210630__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--MrJianghuaiLinMember_zrf5Xwocwqz" title="Outstanding percent"><ix:nonFraction name="TAOP:SharesOutstandingPercentage" contextRef="AsOf2021-06-30_custom_MrJianghuaiLinMember" id="Fact001045" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">24.6</ix:nonFraction></span>% of total shares outstanding of the Company, owned approximately <span id="xdx_908_eus-gaap--BusinessAcquisitionPercentageOfVotingInterestsAcquired_iI_dp_c20210630__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--MrJianghuaiLinMember_zQlGkZaJbFza"><ix:nonFraction name="us-gaap:BusinessAcquisitionPercentageOfVotingInterestsAcquired" contextRef="AsOf2021-06-30_custom_TaopingNewMediaCoLtdMember_custom_MrJianghuaiLinMember" id="Fact001046" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">51</ix:nonFraction></span>% of TNM. TNM focuses on digital
life scenes and mainly engaged in selling out-of-home advertising time slots on its networked smart digital advertising display terminals
with artificial intelligence and big data technologies. The acquisition of TNM is expected to enhance the Company&#8217;s presence in
the new media and advertising sectors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2021, the Company launched blockchain related new business in cryptocurrency mining operations and newly established subsidiaries in
Hong Kong to supplement its diminished Traditional Information Technology (TIT) business segment as a part of new business transformation.
However, due to the decreased output and the highly volatile cryptocurrency market, the Company had ceased the operation of cryptocurrency
mining business by December 2022, and continues to focus the efforts on its digital adverting, smart display and the newly added smart
community and related businesses.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
the cessation of the operation of cryptocurrency mining business represent a strategic shift in the Company&#8217;s strategy that will
have a major effect on the Company&#8217;s operations and financial results, the operations of cryptocurrency mining business have been
presented as &#8220;discontinued operations&#8221; in the Company&#8217;s consolidated financial statements. See Note 10.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
September 2021, the Company and the Company&#8217;s wholly owned subsidiary, Information Security Technology (China) Co., Ltd. (&#8220;IST&#8221;)
entered into an equity transfer agreement with Mr. Jianghuai Lin, the sole shareholder of iASPEC Technology Group Co., Ltd. (&#8220;iASPEC&#8221;).
Upon closing of the equity transfer, the Company&#8217;s variable interest entity structure was dissolved and iASPEC became a wholly
owned indirect subsidiary of the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<ix:exclude><!-- Field: Page; Sequence: 130; Value: 1 -->
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    <div style="break-before: page; margin-top: 6pt">&#160;</div>
    <!-- Field: /Page --></ix:exclude>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>


<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
January 2022, the Company completed the acquisition of <span id="xdx_90D_eus-gaap--BusinessAcquisitionPercentageOfVotingInterestsAcquired_iI_dp_uPure_c20220131__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zAhUxwt3YCO6" title="Equity interest acquired, percentage"><ix:nonFraction name="us-gaap:BusinessAcquisitionPercentageOfVotingInterestsAcquired" contextRef="AsOf2022-01-31_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001048" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% equity interest of ZJIOT, aiming to accelerate the Company&#8217;s smart
charging pile and digital new media businesses in East China.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of the Company&#8217;s business transformation and its exit from the TIT business, the Company disposed of <span id="xdx_903_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20221231__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--IASPECTechnologyGroupCoLtdiASPECMember_zGUui1WeyAl7" title="Equity method investment, ownership percentage"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2022-12-31_custom_IASPECTechnologyGroupCoLtdiASPECMember" id="Fact001050" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% equity interests
of iASPEC (excluding iASPEC&#8217;s subsidiaries) which mainly conducted the Company&#8217;s TIT business to an unrelated third party
for <span id="xdx_909_eus-gaap--DisposalGroupIncludingDiscontinuedOperationConsideration_iI_dxL_c20220607__us-gaap--DisposalGroupClassificationAxis__custom--IASPECTechnologyGroupCoLtdiASPECMember_zCXTA3p0RFeh" title="Disposal group including discontinued operation, consideration::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1052">nil</span></span> consideration on June 7, 2022. The disposition resulted in a total recorded income of approximately $<span id="xdx_905_eus-gaap--DisposalGroupIncludingDiscontinuedOperationOtherIncome_pn6n6_c20220101__20221231__us-gaap--DisposalGroupClassificationAxis__custom--IASPECTechnologyGroupCoLtdiASPECMember_zKPe28p6OwI7" title="Disposal group including discontinued operation other , Income"><ix:nonFraction name="us-gaap:DisposalGroupIncludingDiscontinuedOperationOtherIncome" contextRef="From2022-01-012022-12-31_custom_IASPECTechnologyGroupCoLtdiASPECMember" id="Fact001054" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="USD">3.0</ix:nonFraction></span> million for the Company
for the year ended December 31, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company disposed of <span id="xdx_90D_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20230906__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--TaopingDigitalAssetsHongKongLimitedTDLMember_zEwfMzztw4p1" title="Equity method investment, ownership percentage"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-09-06_custom_TaopingDigitalAssetsHongKongLimitedTDLMember" id="Fact001056" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>%
equity interests of TDL to an unrelated third party for <span id="xdx_900_eus-gaap--DisposalGroupIncludingDiscontinuedOperationConsideration_iI_dxL_c20220906__us-gaap--DisposalGroupClassificationAxis__custom--TaopingDigitalAssetsHongKongLimitedTDLMember_zcdC8yrsVcMj" title="Disposal group including discontinued operation, consideration::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1058">nil</span></span>
consideration on September 6, 2023, and disposed of <span id="xdx_90C_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20231027__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--TaopingDigitalAssetsAsiaLimitedTDALMember_zM5VbVWe02Ga" title="Equity method investment, ownership percentage"><span id="xdx_902_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20231027__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--TaopingCapitalLimitedTCLMember_zqSu7ILpXUw3" title="Equity method investment, ownership percentage"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-10-27_custom_TaopingDigitalAssetsAsiaLimitedTDALMember" id="Fact001060" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-10-27_custom_TaopingCapitalLimitedTCLMember" id="Fact001062" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></ix:nonFraction></span></span>%
equity interests of TDAL and TCL (including their respective subsidiary) to an unrelated third party for <span id="xdx_901_eus-gaap--DisposalGroupIncludingDiscontinuedOperationConsideration_iI_dxL_c20231027__us-gaap--DisposalGroupClassificationAxis__custom--TaopingDigitalAssetsAsiaLimitedTDALMember_z9UJ5vcGh4Fb" title="Disposal group including discontinued operation, consideration::XDX::-"><span id="xdx_903_eus-gaap--DisposalGroupIncludingDiscontinuedOperationConsideration_iI_dxL_c20231027__us-gaap--DisposalGroupClassificationAxis__custom--TaopingCapitalLimitedTCLMember_zxwkYntMjOdi" title="Disposal group including discontinued operation, consideration::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1064"><span style="-sec-ix-hidden: xdx2ixbrl1066">nil</span></span></span></span>
consideration on October 27, 2023. The disposition resulted in a total recorded loss of $<span id="xdx_905_eus-gaap--DisposalGroupIncludingDiscontinuedOperationOtherIncome_c20230101__20231231__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--TaopingDigitalAssetsHongKongLimitedTDLMember_z3h3FDKYoTq4" title="Total recorded loss"><ix:nonFraction name="us-gaap:DisposalGroupIncludingDiscontinuedOperationOtherIncome" contextRef="From2023-01-012023-12-31_custom_TaopingDigitalAssetsHongKongLimitedTDLMember" id="Fact001068" format="ixt:numdotdecimal" decimals="0" unitRef="USD">16,184</ix:nonFraction></span>
for the Company for the year ended December 31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
May 2023, the Company established a subsidiary Taoping EP Holdings (Shenzhen) Co., Ltd. with a majority stake of <span id="xdx_907_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20230531__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--TaopingEPHoldingsShenzhenCoLtdTEPHMember_zYCCKVz7YCh6"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-05-31_custom_TaopingEPHoldingsShenzhenCoLtdTEPHMember" id="Fact001069" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">51</ix:nonFraction></span></span><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">%, to explore the new off-grid wastewater treatment business line.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
September 2023, the Company acquired <span id="xdx_90A_eus-gaap--BusinessAcquisitionPercentageOfVotingInterestsAcquired_iI_pid_dp_uPure_c20230930__us-gaap--BusinessAcquisitionAxis__custom--FujianTaopingInvestmentCoMember_zpdVFZ4Pi9M9" title="Acquired percentage"><ix:nonFraction name="us-gaap:BusinessAcquisitionPercentageOfVotingInterestsAcquired" contextRef="AsOf2023-09-30_custom_FujianTaopingInvestmentCoMember" id="Fact001071" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">80</ix:nonFraction></span>% equity from other shareholders of Fujian Taoping Investment Co., Ltd. with <span id="xdx_908_eus-gaap--DisposalGroupIncludingDiscontinuedOperationConsideration_iI_dxL_c20230930__us-gaap--DisposalGroupClassificationAxis__custom--FujianTaopingInvestmentCoMember_zTnh32hVmZbl" title="Disposal group including discontinued operation, consideration::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1073">nil</span></span> consideration,
to expand its digital advertising and other businesses in Fujian Province. As a result of the acquisition, the Company currently owns
<span id="xdx_903_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20231231__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--FujianTaopingInvestmentCoMember_zwfmLonlGGh8" title="Equity method investment, ownership percentage"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-12-31_custom_FujianTaopingInvestmentCoMember" id="Fact001075" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% of Fujian Taoping Investment Co, Ltd.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
November 2023, the Company established a subsidiary Taoping (Guangxi) EP Tech Co., Ltd. to expand its wastewater treatment business in
Guangxi Province.</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001077" name="us-gaap:ScheduleOfVariableInterestEntitiesTextBlock"><p id="xdx_89A_eus-gaap--ScheduleOfVariableInterestEntitiesTextBlock_zlJBkODkTf99" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;<span id="xdx_8BD_zZVa0vQK3kte" style="display: none">SCHEDULE
OF SUBSIDIARIES AND VARIABLE INTEREST ENTITY</span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: right"><span id="xdx_90F_eus-gaap--VariableInterestEntitySimilarEntityAggregationDescription_c20230101__20231231__dei--LegalEntityAxis__custom--InformationSecurityTechMember_zr4KC49FvXJe"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_InformationSecurityTechMember" id="Fact001162" name="us-gaap:VariableInterestEntitySimilarEntityAggregationDescription">Subsidiary</ix:nonNumeric></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_905_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20230101__20231231__dei--LegalEntityAxis__custom--InformationSecurityTechMember_zUSuKMKw5X14" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2023-01-012023-12-31_custom_InformationSecurityTechMember" id="Fact001164" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_90D_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20220101__20221231__dei--LegalEntityAxis__custom--InformationSecurityTechMember_zmV6G1AVkpU8" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2022-01-012022-12-31_custom_InformationSecurityTechMember" id="Fact001166" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_90E_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20210101__20211231__dei--LegalEntityAxis__custom--InformationSecurityTechMember_zOaPPHu6hD4l" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2021-01-012021-12-31_custom_InformationSecurityTechMember" id="Fact001168" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span id="xdx_900_ecustom--Entities_c20230101__20231231__dei--LegalEntityAxis__custom--TopCloudSoftwareChinaCoLtdTopCloudMember_zb0IgfY8UyW5"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_TopCloudSoftwareChinaCoLtdTopCloudMember" id="Fact001170" name="TAOP:Entities">TopCloud Software (China) Co., Ltd. (TopCloud)</ix:nonNumeric></span></td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_90C_eus-gaap--VariableInterestEntityOwnershipPercentage_pid_dp_uPure_c20230101__20231231__dei--LegalEntityAxis__custom--TopCloudSoftwareChinaCoLtdTopCloudMember_zxETDque4Jre" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2023-01-012023-12-31_custom_TopCloudSoftwareChinaCoLtdTopCloudMember" id="Fact001174" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_907_eus-gaap--VariableInterestEntityOwnershipPercentage_pid_dp_uPure_c20220101__20221231__dei--LegalEntityAxis__custom--TopCloudSoftwareChinaCoLtdTopCloudMember_zq8FTE1jvej5" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2022-01-012022-12-31_custom_TopCloudSoftwareChinaCoLtdTopCloudMember" id="Fact001176" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_90E_eus-gaap--VariableInterestEntityOwnershipPercentage_pid_dp_uPure_c20210101__20211231__dei--LegalEntityAxis__custom--TopCloudSoftwareChinaCoLtdTopCloudMember_zkz4zMtCSdFg" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2021-01-012021-12-31_custom_TopCloudSoftwareChinaCoLtdTopCloudMember" id="Fact001178" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span id="xdx_90C_ecustom--Entities_c20230101__20231231__dei--LegalEntityAxis__custom--InformationSecurityIOTTechCoLtdISIOTMember_z6i4onuuGcWd"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_InformationSecurityIOTTechCoLtdISIOTMember" id="Fact001181" name="TAOP:Entities">Information Security IoT Tech. Co., Ltd. (ISIOT)</ix:nonNumeric></span></td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_90D_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20230101__20231231__dei--LegalEntityAxis__custom--InformationSecurityIOTTechCoLtdISIOTMember_zE26AXm7RB31" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2023-01-012023-12-31_custom_InformationSecurityIOTTechCoLtdISIOTMember" id="Fact001185" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_90A_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20220101__20221231__dei--LegalEntityAxis__custom--InformationSecurityIOTTechCoLtdISIOTMember_zdI1RF3cl6u5" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2022-01-012022-12-31_custom_InformationSecurityIOTTechCoLtdISIOTMember" id="Fact001187" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_908_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20210101__20211231__dei--LegalEntityAxis__custom--InformationSecurityIOTTechCoLtdISIOTMember_zfQYXpfzLseb" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2021-01-012021-12-31_custom_InformationSecurityIOTTechCoLtdISIOTMember" id="Fact001189" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: center"><span id="xdx_906_ecustom--Location_c20230101__20231231__dei--LegalEntityAxis__custom--InformationSecurityIOTTechCoLtdISIOTMember_z9hbzmIb0tK9" title="Location"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_InformationSecurityIOTTechCoLtdISIOTMember" id="Fact001191" name="TAOP:Location">Shenzhen, China</ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_90F_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20210101__20211231__dei--LegalEntityAxis__custom--TaopingNewMediaCoLtdTNMMember_zlZgBCKv6Pe1" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2021-01-012021-12-31_custom_TaopingNewMediaCoLtdTNMMember" id="Fact001233" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
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    <td style="text-align: right"><span id="xdx_909_eus-gaap--VariableInterestEntitySimilarEntityAggregationDescription_c20230101__20231231__dei--LegalEntityAxis__custom--ShenzhenTaopingEducationTechnologyCoLtdSZTETMember_znl7NgwQdbi5" title="Subsidiaries/VIE"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_ShenzhenTaopingEducationTechnologyCoLtdSZTETMember" id="Fact001238" name="us-gaap:VariableInterestEntitySimilarEntityAggregationDescription">Subsidiary</ix:nonNumeric></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_907_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20230101__20231231__dei--LegalEntityAxis__custom--ShenzhenTaopingEducationTechnologyCoLtdSZTETMember_ze0jrl9GQ5l4" title="Percentage owned"><span style="-sec-ix-hidden: xdx2ixbrl1240">-</span></span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_909_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20220101__20221231__dei--LegalEntityAxis__custom--ShenzhenTaopingEducationTechnologyCoLtdSZTETMember_zentuNGhzyYi" title="Percentage owned"><span style="-sec-ix-hidden: xdx2ixbrl1242">-</span></span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_903_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20210101__20211231__dei--LegalEntityAxis__custom--ShenzhenTaopingEducationTechnologyCoLtdSZTETMember_zW9FTvqIwSPl" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2021-01-012021-12-31_custom_ShenzhenTaopingEducationTechnologyCoLtdSZTETMember" id="Fact001244" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">51</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: center"><span id="xdx_907_ecustom--Location_c20230101__20231231__dei--LegalEntityAxis__custom--ShenzhenTaopingEducationTechnologyCoLtdSZTETMember_zyZcn0SJ5smf" title="Location"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_ShenzhenTaopingEducationTechnologyCoLtdSZTETMember" id="Fact001246" name="TAOP:Location">Shenzhen, China</ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span id="xdx_908_ecustom--Entities_c20230101__20231231__dei--LegalEntityAxis__custom--WuhuTaopingEducationTechnologyCoLtdWHTETMember_zhwunNiOIuB4"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_WuhuTaopingEducationTechnologyCoLtdWHTETMember" id="Fact001247" name="TAOP:Entities">Wuhu Taoping Education Technology Co., Ltd. (WHTET)</ix:nonNumeric></span></td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_907_eus-gaap--VariableInterestEntityOwnershipPercentage_pid_dp_uPure_c20230101__20231231__dei--LegalEntityAxis__custom--WuhuTaopingEducationTechnologyCoLtdWHTETMember_zGuHdHOPrj04" title="Percentage owned"><span style="-sec-ix-hidden: xdx2ixbrl1251">-</span></span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_90B_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20220101__20221231__dei--LegalEntityAxis__custom--WuhuTaopingEducationTechnologyCoLtdWHTETMember_zxmfd6WLsF2g" title="Percentage owned"><span style="-sec-ix-hidden: xdx2ixbrl1253">-</span></span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_902_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20210101__20211231__dei--LegalEntityAxis__custom--WuhuTaopingEducationTechnologyCoLtdWHTETMember_zzZHM2t4xfuj" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2021-01-012021-12-31_custom_WuhuTaopingEducationTechnologyCoLtdWHTETMember" id="Fact001255" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">51</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span id="xdx_900_ecustom--Entities_c20230101__20231231__dei--LegalEntityAxis__custom--TaopingDigitalTechDongguanCoLtdTDTDGMember_z7OH2ADlaNVj"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_TaopingDigitalTechDongguanCoLtdTDTDGMember" id="Fact001258" name="TAOP:Entities">Taoping Digital Tech. (Dongguan) Co., Ltd. (TDTDG)</ix:nonNumeric></span></td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_908_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20230101__20231231__dei--LegalEntityAxis__custom--TaopingDigitalTechDongguanCoLtdTDTDGMember_zaMMSuNv3EFb" title="Percentage owned"><span style="-sec-ix-hidden: xdx2ixbrl1262">-</span></span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_905_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20220101__20221231__dei--LegalEntityAxis__custom--TaopingDigitalTechDongguanCoLtdTDTDGMember_zGuIgHyW0xRd" title="Percentage owned"><span style="-sec-ix-hidden: xdx2ixbrl1264">-</span></span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_905_eus-gaap--VariableInterestEntityOwnershipPercentage_dp_uPure_c20210101__20211231__dei--LegalEntityAxis__custom--TaopingDigitalTechDongguanCoLtdTDTDGMember_zHGhzGaCJcA" title="Percentage owned"><ix:nonFraction name="us-gaap:VariableInterestEntityOwnershipPercentage" contextRef="From2021-01-012021-12-31_custom_TaopingDigitalTechDongguanCoLtdTDTDGMember" id="Fact001266" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span></td><td style="text-align: left">%</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span id="xdx_90B_ecustom--Entities_c20230101__20231231__dei--LegalEntityAxis__custom--TopCloudTechChenzhouCoLtdTCTCZMember_z0jO9jUVjRg8"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_TopCloudTechChenzhouCoLtdTCTCZMember" id="Fact001269" name="TAOP:Entities">TopCloud Tech. (Chenzhou) Co., Ltd. (TCTCZ)</ix:nonNumeric></span></td><td>&#160;</td>
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</ix:nonNumeric><p id="xdx_8A4_zrTh7VWe6cab" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 131; Value: 1 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Dissolution
of the Variable Interest Entity Structure</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">iASPEC
was a VIE of the Company. To comply with PRC laws and regulations that restrict foreign ownership of companies that provide public security
information technology and Geographic Information Systems software operating services to certain government and other customers, the
Company used to operate the restricted aspect of its business through iASPEC.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
September 2021, we dissolved the variable interest entity structure by exercising the purchase option under certain Option Agreement
among IST, iASPEC and its shareholders, to purchase all of the equity interests in iASPEC at an aggregate exercise price of <span id="xdx_909_eus-gaap--StockOptionExercisePriceIncrease_c20210901__20210930_zb1D7t7pOmF8" title="Aggregate exercise price">$<ix:nonFraction name="us-gaap:StockOptionExercisePriceIncrease" contextRef="From2021-09-012021-09-30" id="Fact001336" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1,800,000</ix:nonFraction></span>.
On September 18, 2021, Taoping Inc. and IST entered into an equity transfer agreement with iASPEC and iASPEC&#8217;s then sole shareholder,
Mr. Lin, under which Mr. Lin sold and transferred to IST all of the equity interests in and any and all rights and benefits relating
thereto of iASPEC in exchange for <span id="xdx_904_eus-gaap--StockIssuedDuringPeriodSharesRestrictedStockAwardGross_c20210917__20210918__us-gaap--StatementEquityComponentsAxis__us-gaap--ParentMember_zAHN2CD95hPl" title="Number of shares restricted"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardGross" contextRef="From2021-09-172021-09-18_us-gaap_ParentMember" id="Fact001338" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">61,225</ix:nonFraction></span> unregistered ordinary shares of Taoping Inc., as determined by dividing <span id="xdx_90C_eus-gaap--StockIssuedDuringPeriodValueRestrictedStockAwardGross_c20210917__20210918__us-gaap--StatementEquityComponentsAxis__us-gaap--ParentMember_zyIJLOQeWKS1" title="Number of shares restricted, value">$<ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueRestrictedStockAwardGross" contextRef="From2021-09-172021-09-18_us-gaap_ParentMember" id="Fact001340" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,800,000</ix:nonFraction></span> by the volume-weighted
average closing price of ordinary shares for the consecutive five (5) trading days immediately prior to September 18, 2021. The parties
thereafter completed the equity transfer through applicable PRC governmental registration(s).</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Upon
the closing of the equity transfer, the Company&#8217;s variable interest entity structure was dissolved and iASPEC became a wholly owned
indirect subsidiary of the Company. The amended and restated MSA was automatically terminated.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Going
Concern and Management&#8217;s Plans</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of the recovery of market conditions and customer demands, as well as the Company&#8217;s continued efforts in diversifying
applications of its innovative Taoping smart cloud, the Company achieved a <span id="xdx_907_eus-gaap--ConcentrationRiskPercentage1_dp_c20230101__20231231__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--RevenueFromRightsConcentrationRiskMember__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--RevenueFromContractWithCustomerMember__srt--MajorCustomersAxis__custom--TaopingNewMediaCoLtdMember_zMPN5A3AFHtf" title="Revenue percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2023-01-012023-12-31_us-gaap_RevenueFromRightsConcentrationRiskMember_us-gaap_RevenueFromContractWithCustomerMember_custom_TaopingNewMediaCoLtdMember" id="Fact001342" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">59.4</ix:nonFraction></span>% year-over-year revenue growth and significantly reduced
net loss by $<span id="xdx_904_ecustom--ReducedNetLoss_iN_pn5n6_di_c20230101__20231231_zPcgjjQjMNWl" title="Net loss decreased"><ix:nonFraction name="TAOP:ReducedNetLoss" contextRef="From2023-01-01to2023-12-31" id="Fact001344" format="ixt:numdotdecimal" decimals="-5" scale="6" sign="-" unitRef="USD">6.4</ix:nonFraction></span> million in 2023. Cash and cash equivalents at December 31, 2023 was $<span id="xdx_909_eus-gaap--Cash_iI_pn5n6_c20231231_zs7hL8e2gtla"><ix:nonFraction name="us-gaap:Cash" contextRef="AsOf2023-12-31" id="Fact001345" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">1.3</ix:nonFraction></span> million, compared to cash and cash equivalents
of <span id="xdx_906_eus-gaap--Cash_iI_pn5n6_c20221231_zRmPMoMurky9">$<ix:nonFraction name="us-gaap:Cash" contextRef="AsOf2022-12-31" id="Fact001346" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">1.0</ix:nonFraction></span> million a year ago.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company incurred a net loss of $<span id="xdx_90D_eus-gaap--NetIncomeLoss_iN_pn5n6_di_c20230101__20231231_zbuyqMvITkXg" title="Net income loss"><ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2023-01-01to2023-12-31" id="Fact001348" format="ixt:numdotdecimal" decimals="-5" scale="6" sign="-" unitRef="USD">0.7</ix:nonFraction></span> million for year ended December 31, 2023, compared to a net loss of $<span id="xdx_90A_eus-gaap--NetIncomeLoss_iN_pn5n6_di_c20220101__20221231_zJflXJFnejk6" title="Net income loss"><ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2022-01-012022-12-31" id="Fact001350" format="ixt:numdotdecimal" decimals="-5" scale="6" sign="-" unitRef="USD">7.1</ix:nonFraction></span> million for 2022. The improved
profitability was mainly due to the increase of gross profit, and the Company&#8217;s cessation of cryptocurrency mining business in
2023. As of December 31, 2023, the Company had a working capital surplus of approximately $<span id="xdx_902_ecustom--WorkingCapitalDeficiency_iNI_pn5n6_di_c20231231_zeidnBqmrXrd" title="Working capital deficiency"><ix:nonFraction name="TAOP:WorkingCapitalDeficiency" contextRef="AsOf2023-12-31" id="Fact001352" format="ixt:numdotdecimal" decimals="-5" scale="6" sign="-" unitRef="USD">5.2</ix:nonFraction> </span>million, significantly improved from a
working capital deficit of $<span id="xdx_905_ecustom--WorkingCapitalDeficiency_iNI_pn5n6_di_c20221231_zigh0bWxIMni" title="Working capital deficiency"><ix:nonFraction name="TAOP:WorkingCapitalDeficiency" contextRef="AsOf2022-12-31" id="Fact001354" format="ixt:numdotdecimal" decimals="-5" scale="6" sign="-" unitRef="USD">0.2</ix:nonFraction></span> million as of December 31, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company will continue to focus its efforts on the digital advertising and other cloud-based and AI-related products and applications.
Furthermore, its two core competencies, the Taoping national sales network and the highly scalable and compatible cloud platform, and
its strong software development capability, make it a valued partner by many other smart-community customers and solution providers.
In addition to seeking strategic acquisition to expand its digital advertising business, the Company continues to explore business opportunities
in the smart community and new energy sectors. Starting from April 2023, the Company has entered into a series of long-term strategic
cooperation agreements with various customers to provide Taoping&#8217;s cloud-based intelligent product solutions, including smart large
screen, IoT smart rest station and off-grid wastewater treatment solution, which are expected to generate revenue and operating cashflow
for the Company for year 2023 and beyond.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the Company&#8217;s execution of business strategies is not successful in addressing its current financial concerns, additional capital
raise from issuing equity security or debt instrument or additional loan facility may occur to support required cash flows. The Company&#8217;s
existing $<span id="xdx_907_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn5n6_c20231231__us-gaap--CreditFacilityAxis__us-gaap--RevolvingCreditFacilityMember_zB2ezRQfThrj" title="Revolving bank loan"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2023-12-31_us-gaap_RevolvingCreditFacilityMember" id="Fact001356" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">8.5</ix:nonFraction></span> million revolving bank loan, which was collateralized with the Company&#8217;s office property, provides important capital
support for its operation. In addition, the Company has renewed the bank facility line with a value of approximately $<span id="xdx_906_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn5n6_c20230731__us-gaap--CreditFacilityAxis__us-gaap--RevolvingCreditFacilityMember_zH9w5izddHWh" title="Maximum borrowing capacity"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2023-07-31_us-gaap_RevolvingCreditFacilityMember" id="Fact001358" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">2.6</ix:nonFraction></span> million in
July 2023 and a value of approximately $<span id="xdx_90C_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn5n6_c20230930__us-gaap--CreditFacilityAxis__us-gaap--RevolvingCreditFacilityMember_z0g2ZgEHgXPh" title="Maximum borrowing capacity"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2023-09-30_us-gaap_RevolvingCreditFacilityMember" id="Fact001360" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">4.9</ix:nonFraction></span> million in September 2023, and both are valid for 12 months. In addition, on July 17, 2023,
the Company entered into a public standby equity purchase agreement and a private standby equity purchase agreement with an investor.
Pursuant to the agreements, the Company has the right, but not the obligation, to sell to the investor up to $<span id="xdx_907_eus-gaap--StockIssuedDuringPeriodValueOther_c20230716__20230717__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--InvestorMember__us-gaap--TypeOfArrangementAxis__custom--PublicStandbyEquityPurchaseAgreementMember_zKQhpApThSfl" title="Right to sell ordinary shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueOther" contextRef="From2023-07-162023-07-17_us-gaap_InvestorMember_custom_PublicStandbyEquityPurchaseAgreementMember" id="Fact001362" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,000,000</ix:nonFraction></span> and $<span id="xdx_903_eus-gaap--StockIssuedDuringPeriodValueOther_c20230716__20230717__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--InvestorMember__us-gaap--TypeOfArrangementAxis__custom--PrivateStandbyEquityPurchaseAgreementMember_zkXXwCQqYbyb" title="Right to sell ordinary shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueOther" contextRef="From2023-07-162023-07-17_us-gaap_InvestorMember_custom_PrivateStandbyEquityPurchaseAgreementMember" id="Fact001364" format="ixt:numdotdecimal" decimals="0" unitRef="USD">10,000,000</ix:nonFraction></span>,
respectively, of its ordinary shares, within 24 months and 36 months, respectively, from the date of the agreements. As of April, 2024,
the Company has raised a total of $<span id="xdx_903_eus-gaap--StockIssuedDuringPeriodValueOther_pn5n6_c20240401__20240430__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--InvestorMember__us-gaap--TypeOfArrangementAxis__custom--PrivateStandbyEquityPurchaseAgreementMember__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember_zxhG9doNbyee" title="Right to sell ordinary shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueOther" contextRef="From2024-04-012024-04-30_us-gaap_InvestorMember_custom_PrivateStandbyEquityPurchaseAgreementMember_us-gaap_SubsequentEventMember" id="Fact001366" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">3.3</ix:nonFraction></span> million through this equity line offering. In conclusion, the Company believes that it has the
ability to raise needed capital to fund its operations and business growth, and is able to operate as a going concern.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
the Company can make no assurances that financing will be available for the amounts we need, or on terms commercially acceptable to us,
if at all. If one or all of these events do not occur or subsequent capital raise was insufficient to bridge financial and liquidity
shortfall, substantial doubt exists about the Company&#8217;s ability to continue as a going concern. The consolidated financial statements
have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might
result from the outcome of this uncertainty.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001368" name="us-gaap:SignificantAccountingPoliciesTextBlock"><p id="xdx_803_eus-gaap--SignificantAccountingPoliciesTextBlock_zFyQY7QzUK5d" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.
<span id="xdx_827_zTjriNq2fvv8">SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001370" name="us-gaap:ConsolidationPolicyTextBlock"><p id="xdx_845_eus-gaap--ConsolidationPolicyTextBlock_z9qpV0GEVk2k" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(a)
<span id="xdx_86F_zXjaN65pyice">Basis of Presentation and Principles of Consolidation</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the
United States of America (&#8220;U.S. GAAP&#8221;). In the opinion of management, all adjustments (consisting of normal recurring adjustments)
have been made that are necessary to present fairly the financial position, the results of its operations and cash flows. The consolidated
financial statements include the accounts of the Company, and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reverse
Stock Split: A one-for-ten reverse stock split of the Company&#8217;s issued and outstanding ordinary shares was effective on August
1, 2023 (the &#8220;Reverse Stock Split&#8221;). Except shares authorized, all share and per share information has been retroactively
adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001372" name="us-gaap:UseOfEstimates"><p id="xdx_847_eus-gaap--UseOfEstimates_zWMdk0FTRLt4" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(b)
<span id="xdx_869_zXnpUTXEOJ9f">Use of Estimates</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company&#8217;s significant
estimates include assessment of credit losses and useful lives of property and equipment. Management makes these estimates using the
best information available at the time the estimates are made; however actual results could differ from those estimates.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001374" name="TAOP:EconomicPandemicAndPoliticalRisksPolicyTextBlock"><p id="xdx_84E_ecustom--EconomicPandemicAndPoliticalRisksPolicyTextBlock_zagkImRAPll7" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(c)
<span id="xdx_867_zJl34BJUEec7">Economic, Pandemic, Political, and Currency Exchange Risks</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
the Company&#8217;s revenue-generating operations are conducted in Hong Kong and mainland China. Accordingly, the Company&#8217;s business,
financial condition and results of operations may be influenced by the political, economic, public health, and legal environments in
the PRC, and by the general state of the PRC economy. The Company&#8217;s operations in the PRC are subject to special considerations
and significant risks that are not typically pertaining to the companies in North America and Western Europe. These include risks associated
with, among others, the political, economic, public health concerns with persistent outbreaks of COVID-19 infections in various regional
localities, and legal environments, geopolitical influences, and foreign currency exchange, notably in recent events, where the government&#8217;s
sudden interventions or modifications of the laws and regulations currently in effective could negatively impact the Company&#8217;s
operations and financial results.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
functional currency of the Company is primarily Chinese Renminbi Yuan (&#8220;RMB&#8221;), which is not freely convertible into foreign
currencies. The Company cannot guarantee that the current exchange rate will remain steady. Therefore, there is a possibility that the
Company could post the same amount of profit for two comparable periods and yet, because of fluctuating exchange rates, record higher
or lower profit depending on exchange rate of RMB. RMB converted to U.S. dollars on the relevant dates. The exchange rate could fluctuate
depending on changes in the political and economic environment without notice.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001376" name="us-gaap:CashAndCashEquivalentsPolicyTextBlock"><p id="xdx_843_eus-gaap--CashAndCashEquivalentsPolicyTextBlock_z5MO9Tn6bCpc" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(d)
<span id="xdx_864_zTiPAUb6rBde">Cash and Cash Equivalents</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company considers all highly liquid investments purchased and cash deposits with financial institutions with original maturities of three
months or less to be cash equivalents. The Company had <span id="xdx_90F_eus-gaap--CashEquivalentsAtCarryingValue_iI_do_c20231231_zASDAv6BaHA7" title="Cash equivalents"><span id="xdx_906_eus-gaap--CashEquivalentsAtCarryingValue_iI_do_c20221231_zXHxu4ugPb2d" title="Cash equivalents"><ix:nonFraction name="us-gaap:CashEquivalentsAtCarryingValue" contextRef="AsOf2023-12-31" id="Fact001378" format="ixt-sec:numwordsen" decimals="0" unitRef="USD"><ix:nonFraction name="us-gaap:CashEquivalentsAtCarryingValue" contextRef="AsOf2022-12-31" id="Fact001380" format="ixt-sec:numwordsen" decimals="0" unitRef="USD">no</ix:nonFraction></ix:nonFraction></span></span> cash equivalents other than bank and cash as of December 31, 2023 or 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company maintains its bank accounts at credit worthy financial institutions and closely monitors the movements of its cash positions.
As of December 31, 2023 and 2022, approximately $<span id="xdx_90E_eus-gaap--CashAndCashEquivalentsAtCarryingValue_iI_pn5n6_c20231231_zSON2eXRkOSh" title="Cash"><ix:nonFraction name="us-gaap:CashAndCashEquivalentsAtCarryingValue" contextRef="AsOf2023-12-31" id="Fact001382" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">1.3</ix:nonFraction></span> million and $<span id="xdx_900_eus-gaap--CashAndCashEquivalentsAtCarryingValue_iI_pn5n6_c20221231_zHXjIHPxzed1" title="Cash"><ix:nonFraction name="us-gaap:CashAndCashEquivalentsAtCarryingValue" contextRef="AsOf2022-12-31" id="Fact001384" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">1.0</ix:nonFraction></span> million of cash, respectively, was held in bank accounts in Hong
Kong and mainland China.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001386" name="us-gaap:TradeAndOtherAccountsReceivablePolicy"><p id="xdx_841_eus-gaap--TradeAndOtherAccountsReceivablePolicy_zYhkanC1cqB7" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(e)
<span id="xdx_86A_zdyHToXHOFe5">Accounts Receivable, Accounts Receivable&#8211;related parties, and Concentration of Risk</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accounts
receivable are recognized and carried at carrying amount less an allowance for credit loss, if any. The Company maintains an allowance
for credit losses resulting from the inability of its customers to make required payments based on contractual terms. The Company reviews
the collectability of its receivables on a regular and ongoing basis according to historical trend, and estimates its provision for expected
credit losses on receivables aging analysis.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company estimates allowance for credit losses for the anticipation of future economic condition and credit risk indicators of customers.
After all attempts to collect a receivable have failed, the receivable is written off against the allowance. In the event the Company
recovers amounts previously reserved for, the Company will reduce the specific allowance for credit losses. The balance of allowance
for credit losses for the year ended December 31, 2023 has increased approximately $<span id="xdx_908_ecustom--IncreaseInAllowanceForCreditLosses_pn4n6_c20230101__20231231_zctfp1yXyWT6" title="Increase in allowance for credit losses"><ix:nonFraction name="TAOP:IncreaseInAllowanceForCreditLosses" contextRef="From2023-01-01to2023-12-31" id="Fact001388" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">0.03</ix:nonFraction></span> million from the year ended December 31, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 134; Value: 1 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001390" name="us-gaap:ScheduleOfAccountsNotesLoansAndFinancingReceivableTextBlock"><p id="xdx_897_eus-gaap--ScheduleOfAccountsNotesLoansAndFinancingReceivableTextBlock_z6AHy3ViCpik" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Accounts
receivable as at December 31, 2023 and 2022 are as follows:</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_8B5_zL2ig93pq7Ge" style="display: none">SCHEDULE
OF ACCOUNTS RECEIVABLE</span>&#160;</span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_49A_20231231_zLkeNGHir2Ga" style="border-bottom: Black 1.5pt solid; text-align: center">December 31, 2023</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_498_20221231_zfB7b3e9Ytxi" style="border-bottom: Black 1.5pt solid; text-align: center">December 31, 2022</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr id="xdx_40D_eus-gaap--AccountsReceivableGrossCurrent_iI_hus-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--NonrelatedPartyMember_maARNCzMzr_zn1JgQ1EQLil" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 60%; text-align: justify">Accounts Receivable</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right"><ix:nonFraction name="us-gaap:AccountsReceivableGrossCurrent" contextRef="AsOf2023-12-31_us-gaap_NonrelatedPartyMember" id="Fact001392" format="ixt:numdotdecimal" decimals="0" unitRef="USD">19,471,159</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right"><ix:nonFraction name="us-gaap:AccountsReceivableGrossCurrent" contextRef="AsOf2022-12-31_us-gaap_NonrelatedPartyMember" id="Fact001393" format="ixt:numdotdecimal" decimals="0" unitRef="USD">20,159,165</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr id="xdx_40C_eus-gaap--AllowanceForDoubtfulAccountsReceivableCurrent_iNI_di_hus-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--NonrelatedPartyMember_msARNCzMzr_zzXB3LnIWRI7" style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify; padding-bottom: 1.5pt">Allowance for credit losses</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsReceivableCurrent" contextRef="AsOf2023-12-31_us-gaap_NonrelatedPartyMember" id="Fact001395" format="ixt:numdotdecimal" decimals="0" unitRef="USD">11,407,879</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsReceivableCurrent" contextRef="AsOf2022-12-31_us-gaap_NonrelatedPartyMember" id="Fact001396" format="ixt:numdotdecimal" decimals="0" unitRef="USD">10,957,920</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr id="xdx_400_eus-gaap--AccountsReceivableNetCurrent_iTI_hus-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--NonrelatedPartyMember_mtARNCzMzr_zmHTCJoBYBGc" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-bottom: 2.5pt">Accounts Receivable, net</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:AccountsReceivableNetCurrent" contextRef="AsOf2023-12-31_us-gaap_NonrelatedPartyMember" id="Fact001398" format="ixt:numdotdecimal" decimals="0" unitRef="USD">8,063,280</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:AccountsReceivableNetCurrent" contextRef="AsOf2022-12-31_us-gaap_NonrelatedPartyMember" id="Fact001399" format="ixt:numdotdecimal" decimals="0" unitRef="USD">9,201,245</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_40D_eus-gaap--AccountsReceivableGrossCurrent_iI_hus-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--RelatedPartyMember_maARRPCzpFP_zZJQKc3LBrY5" style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">Accounts Receivable - related parties</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccountsReceivableGrossCurrent" contextRef="AsOf2023-12-31_us-gaap_RelatedPartyMember" id="Fact001401" format="ixt:numdotdecimal" decimals="0" unitRef="USD">14,814,842</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccountsReceivableGrossCurrent" contextRef="AsOf2022-12-31_us-gaap_RelatedPartyMember" id="Fact001402" format="ixt:numdotdecimal" decimals="0" unitRef="USD">14,617,746</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_406_eus-gaap--AllowanceForDoubtfulAccountsReceivableCurrent_iNI_di_hus-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--RelatedPartyMember_msARNCzMzr_zNVAlcI7vhR" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-bottom: 1.5pt">Allowance for credit losses</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsReceivableCurrent" contextRef="AsOf2023-12-31_us-gaap_RelatedPartyMember" id="Fact001404" format="ixt:numdotdecimal" decimals="0" unitRef="USD">14,184,067</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsReceivableCurrent" contextRef="AsOf2022-12-31_us-gaap_RelatedPartyMember" id="Fact001405" format="ixt:numdotdecimal" decimals="0" unitRef="USD">14,526,375</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr id="xdx_408_eus-gaap--AccountsReceivableNetCurrent_iTI_hus-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--RelatedPartyMember_mtARRPCzpFP_z5XYhqeoxzGb" style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify; padding-bottom: 2.5pt">Accounts Receivable - related parties, net</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:AccountsReceivableNetCurrent" contextRef="AsOf2023-12-31_us-gaap_RelatedPartyMember" id="Fact001407" format="ixt:numdotdecimal" decimals="0" unitRef="USD">630,775</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:AccountsReceivableNetCurrent" contextRef="AsOf2022-12-31_us-gaap_RelatedPartyMember" id="Fact001408" format="ixt:numdotdecimal" decimals="0" unitRef="USD">91,371</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table>

</ix:nonNumeric><p id="xdx_8A0_zZomSLyV30Df" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
normal credit term is ranging from 1 month to 3 months after the customers&#8217; acceptance of high-end data storage servers or software,
and completion of advertising and other services, and ranging from 1 month to 6 months after the customers&#8217; acceptance of ads display
terminals. However, because of various factors of business cycle, the actual collection of outstanding accounts receivable may be beyond
the normal credit terms.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
allowance for credit losses at December 31, 2023 and 2022, totaled approximately $<span id="xdx_902_eus-gaap--AllowanceForDoubtfulAccountsReceivable_iI_pn5n6_c20231231_zEBBSz1bB8W9" title="Allowance for credit losses"><ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsReceivable" contextRef="AsOf2023-12-31" id="Fact001410" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">25.6</ix:nonFraction></span> million and $<span id="xdx_90F_eus-gaap--AllowanceForDoubtfulAccountsReceivable_iI_pn5n6_c20221231_zgvHBaOTwW43" title="Allowance for credit losses"><ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsReceivable" contextRef="AsOf2022-12-31" id="Fact001412" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">25.5</ix:nonFraction></span> million, respectively, representing
management&#8217;s best estimate. The following table describes the movements for allowance for credit losses during the years ended
December 31, 2023 and 2022:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"></p><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001414" name="us-gaap:AccountsReceivableAllowanceForCreditLossTableTextBlock"><p id="xdx_898_eus-gaap--AccountsReceivableAllowanceForCreditLossTableTextBlock_zlk8BThMalD9" style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;<span id="xdx_8B6_zwwc5M0ZfUu4" style="display: none">SCHEDULE
OF ALLOWANCE FOR CREDIT LOSSES</span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 80%; text-align: justify">Balance at January 1, 2022</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td id="xdx_983_eus-gaap--AllowanceForDoubtfulAccountsReceivable_iS_c20220101__20221231_zeXhNnp9vBmk" title="Allowance for credit losses, beginning" style="width: 16%; text-align: right"><ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsReceivable" contextRef="AsOf2021-12-31" id="Fact001416" format="ixt:numdotdecimal" decimals="0" unitRef="USD">27,262,848</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">Decrease for balance due to transfer of a company</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_989_ecustom--DecreaseForBalanceRecovered_c20220101__20221231_ztLcZOIvkznl" title="Decrease for balance recovered due to transfer of a company" style="text-align: right">(<ix:nonFraction name="TAOP:DecreaseForBalanceRecovered" contextRef="From2022-01-012022-12-31" id="Fact001418" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">771,189</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Increase in allowance for credit losses</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_98C_eus-gaap--AllowanceForDoubtfulAccountsReceivablePeriodIncreaseDecrease_c20220101__20221231_zgb9K0NsrZ26" title="Increase in allowance for credit losses" style="text-align: right"><ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsReceivablePeriodIncreaseDecrease" contextRef="From2022-01-012022-12-31" id="Fact001420" format="ixt:numdotdecimal" decimals="0" unitRef="USD">674,664</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify; padding-bottom: 1.5pt">Foreign exchange difference</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td id="xdx_98E_ecustom--ForeignExchangeDifference_c20220101__20221231_zukdLRDfqOi8" title="Foreign exchange difference" style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="TAOP:ForeignExchangeDifference" contextRef="From2022-01-012022-12-31" id="Fact001422" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">1,682,028</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Balance at December 31, 2022</td><td>&#160;</td>
    <td style="text-align: left">$</td><td id="xdx_987_eus-gaap--AllowanceForDoubtfulAccountsReceivable_iS_c20230101__20231231_zNI7GYp8n0n2" title="Allowance for credit losses, beginning" style="text-align: right"><ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsReceivable" contextRef="AsOf2022-12-31" id="Fact001424" format="ixt:numdotdecimal" decimals="0" unitRef="USD">25,484,295</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">Increase in allowance for credit losses</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_988_eus-gaap--AllowanceForDoubtfulAccountsReceivablePeriodIncreaseDecrease_c20230101__20231231_z5Jd6jiEbned" title="Increase in allowance for credit losses" style="text-align: right"><ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsReceivablePeriodIncreaseDecrease" contextRef="From2023-01-01to2023-12-31" id="Fact001426" format="ixt:numdotdecimal" decimals="0" unitRef="USD">794,087</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-bottom: 1.5pt">Foreign exchange difference</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td id="xdx_986_ecustom--ForeignExchangeDifference_c20230101__20231231_z3U7a68U1ZWj" title="Foreign exchange difference" style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="TAOP:ForeignExchangeDifference" contextRef="From2023-01-01to2023-12-31" id="Fact001428" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">686,436</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify; padding-bottom: 2.5pt">Balance at December 31, 2023</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td id="xdx_986_eus-gaap--AllowanceForDoubtfulAccountsReceivable_iE_c20230101__20231231_zBwQlH6jZdtf" title="Allowance for credit losses, ending" style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsReceivable" contextRef="AsOf2023-12-31" id="Fact001430" format="ixt:numdotdecimal" decimals="0" unitRef="USD">25,591,946</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table>

</ix:nonNumeric><p id="xdx_8A1_znPyvEsvN0oa" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001432" name="TAOP:AdvancesToSuppliersPolicyTextBlock"><p id="xdx_843_ecustom--AdvancesToSuppliersPolicyTextBlock_z9yd8fdqWpP" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(f)
<span id="xdx_863_zpvq8bWjsDV">Advances to Suppliers</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Advances
to suppliers include but are not limited to cash deposits for the purchase of inventory items and super-computing server machines from
suppliers.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001434" name="TAOP:AdvancesFromCustomersAndRelatedPartiesPolicyTextBlock"><p id="xdx_845_ecustom--AdvancesFromCustomersAndRelatedPartiesPolicyTextBlock_zo10lxaplwm4" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(g)
<span id="xdx_861_zAiC7EJ4P5Xb">Advances from Customers and Related Parties</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Advances
from customers and related parties represent cash received from customers and related parties as advance payments for the purchases of
the Company&#8217;s products and services.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001436" name="us-gaap:FairValueOfFinancialInstrumentsPolicy"><p id="xdx_849_eus-gaap--FairValueOfFinancialInstrumentsPolicy_zO6m2nXeCh3b" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(h)
<span id="xdx_865_zbHDq9JEFZ37">Fair Value and Fair Value Measurement of Financial Instruments</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Management
has estimated that carrying amounts reported in the consolidated balance sheets for cash, accounts receivable, accounts receivable &#8211;
related parties, advances to suppliers, other current assets, other non-current assets, short-term bank loans, accounts payable, advances
from customers, advances from customers - related parties, other payables and accrued expenses, income taxes payable, and due to related
parties approximate their fair market value</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">based
on the short-term maturity of these instruments.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001438" name="us-gaap:FairValueMeasurementPolicyPolicyTextBlock"><p id="xdx_84A_eus-gaap--FairValueMeasurementPolicyPolicyTextBlock_z6OOfs5s9444" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(i)
<span id="xdx_86E_zfCYJCt8C632">Fair Value Accounting</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Financial
Accounting Standards Board (FASB) Accounting Standards Codifications (ASC) 820-10 &#8220;Fair Value Measurements and Disclosures&#8221;,
establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). As required by FASB ASC 820-10, assets are classified in their entirety
based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy under
FASB ASC 820-10 are described below:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Level
    1</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Unadjusted
    quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: white">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Level
    2</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Quoted
    prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term
    of the asset or liability; and</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Level
    3</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Prices
    or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by
    little or no market activity).</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 136; Value: 1 -->
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    <div style="break-before: page; margin-top: 6pt">&#160;</div>
    <!-- Field: /Page --></ix:exclude>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001440" name="us-gaap:InventoryPolicyTextBlock"><p id="xdx_847_eus-gaap--InventoryPolicyTextBlock_ztprJ5NJ2zsd" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(j)
<span id="xdx_860_zITM9jMQyt3b">Inventories, net</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inventories
are valued at the lower of cost (weighted average basis) and net realizable value. Net realizable value is the expected selling price
in the ordinary course of business minus any costs of completion, disposal, and transportation to make the sale.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company performs an analysis of slow-moving or obsolete inventory periodically and any necessary valuation reserves, which could potentially
be significant, are included in the period in which the evaluations are completed. Any inventory impairment results in a new cost basis
for accounting purposes.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001442" name="us-gaap:PropertyPlantAndEquipmentPolicyTextBlock"><p id="xdx_842_eus-gaap--PropertyPlantAndEquipmentPolicyTextBlock_zmWodlMLEFr4" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(k)
<span id="xdx_86F_zKreCnxId0Eg">Property, equipment and software</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Property,
equipment and software are stated at cost less accumulated amortization and depreciation. Amortization and depreciation are provided
over the assets&#8217; estimated useful lives, using the straight-line method. Estimated useful lives of property, equipment and software
are as follows:</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001444" name="TAOP:ScheduleOfEstimatedUsefulLivesTableTextBlock"><p id="xdx_891_ecustom--ScheduleOfEstimatedUsefulLivesTableTextBlock_zhKbilKSHSL4" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;<span id="xdx_8B4_zOgzctWSOVZ1" style="display: none">SCHEDULE
OF PROPERTY , EQUIPMENT AND SOFTWARE ESTIMATED USEFUL LIVES</span></span></span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 49%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Office
    buildings</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 2%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 49%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_908_eus-gaap--PropertyPlantAndEquipmentUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__srt--OfficeBuildingMember__srt--RangeAxis__srt--MinimumMember_zYmUL1lQ9bE9" title="Estimated useful life of property, plant and equipment"><ix:nonNumeric contextRef="AsOf2023-12-31_srt_OfficeBuildingMember_srt_MinimumMember" format="ixt-sec:duryear" id="Fact001446" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">20</ix:nonNumeric></span>-<span id="xdx_908_eus-gaap--PropertyPlantAndEquipmentUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__srt--OfficeBuildingMember__srt--RangeAxis__srt--MaximumMember_zLfIBByRe9Pa" title="Estimated useful life of property, plant and equipment"><ix:nonNumeric contextRef="AsOf2023-12-31_srt_OfficeBuildingMember_srt_MaximumMember" format="ixt-sec:duryear" id="Fact001448" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">50</ix:nonNumeric></span>
    years</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Lease
    improvement</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_909_eus-gaap--PropertyPlantAndEquipmentUsefulLifeDescriptionOfTermExtensibleEnumeration_iI_dxL_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__us-gaap--LeaseholdImprovementsMember_zXrhzts1FG76" title="::XDX::http%3A%2F%2Ffasb.org%2Fus-gaap%2F2023%23UsefulLifeShorterOfTermOfLeaseOrAssetUtilityMember"><span style="-sec-ix-hidden: xdx2ixbrl1449">Shorter
    of lease term or assets lives</span></span></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Electronics
    equipment, furniture and fixtures</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_90D_eus-gaap--PropertyPlantAndEquipmentUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__custom--ElectronicsEquipmentFurnitureAndFixturesMember__srt--RangeAxis__srt--MinimumMember_zJoTeIGXdYbc" title="Estimated useful life of property, plant and equipment"><ix:nonNumeric contextRef="AsOf2023-12-31_custom_ElectronicsEquipmentFurnitureAndFixturesMember_srt_MinimumMember" format="ixt-sec:duryear" id="Fact001451" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">3</ix:nonNumeric></span>-<span id="xdx_907_eus-gaap--PropertyPlantAndEquipmentUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__custom--ElectronicsEquipmentFurnitureAndFixturesMember__srt--RangeAxis__srt--MaximumMember_zpC6XEdXBbuh" title="Estimated useful life of property, plant and equipment"><ix:nonNumeric contextRef="AsOf2023-12-31_custom_ElectronicsEquipmentFurnitureAndFixturesMember_srt_MaximumMember" format="ixt-sec:duryear" id="Fact001453" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric></span>
    years</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Motor
    vehicles</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_904_eus-gaap--PropertyPlantAndEquipmentUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__custom--MotorVehiclesMember_zkg0VJouukwk" title="Estimated useful life of property, plant and equipment"><ix:nonNumeric contextRef="AsOf2023-12-31_custom_MotorVehiclesMember" format="ixt-sec:duryear" id="Fact001455" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric></span>
    years</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Purchased
    software</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_900_eus-gaap--FiniteLivedIntangibleAssetUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__custom--PurchasedSoftwareMember_z1XPPPqjBpW4" title="Estimated useful life of intangible assets"><ix:nonNumeric contextRef="AsOf2023-12-31_custom_PurchasedSoftwareMember" format="ixt-sec:duryear" id="Fact001457" name="us-gaap:FiniteLivedIntangibleAssetUsefulLife">5</ix:nonNumeric></span>
    years</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Media
    display equipment</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_90A_eus-gaap--PropertyPlantAndEquipmentUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__custom--MediaDisplayEquipmentMember_z18iiCr8A3b9" title="Estimated useful life of property, plant and equipment"><ix:nonNumeric contextRef="AsOf2023-12-31_custom_MediaDisplayEquipmentMember" format="ixt-sec:duryear" id="Fact001459" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric></span>
    years</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cryptocurrency
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_901_eus-gaap--PropertyPlantAndEquipmentUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__custom--CryptocurrencyMiningMachineMember_z1qaF50xAWab" title="Estimated useful life of property, plant and equipment"><ix:nonNumeric contextRef="AsOf2023-12-31_custom_CryptocurrencyMiningMachineMember" format="ixt-sec:duryear" id="Fact001461" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">3</ix:nonNumeric></span>
    years</span></td></tr>
  </table>
</ix:nonNumeric><p id="xdx_8AC_zUFSWPUfNzSa" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Expenditures
for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures
for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated
depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss are included in the Company&#8217;s
results of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001463" name="TAOP:CryptocurrenciesPolicyTextBlock"><p id="xdx_849_ecustom--CryptocurrenciesPolicyTextBlock_zXulpZq1zCde" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(l)
<span id="xdx_86C_z1OdqT80KZO4">Cryptocurrencies</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cryptocurrencies
held, including Bitcoin and Ethereum, are accounted for as intangible assets with indefinite useful lives. An intangible asset with an
indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances
occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount
exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured.
If the carrying amount of the cryptocurrency exceeds its fair value, the Company recognizes an impairment loss in an amount equal to
that excess. Subsequent reversal of impairment losses is not permitted.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
are no cash flows from cryptocurrencies included in net cash used in operating activities since the revenue recognized from mining is
a noncash activity. The sales of cryptocurrencies are included within investing activities in the consolidated statements of cash flows
and any realized gains or losses from such sales are included in other income (expense) in the consolidated statements of operations.
The Company accounts for its gains or losses in accordance with the first in first out (FIFO) method of accounting.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Upon
disposal of cryptocurrencies, the Company will evaluate whether the control of the cryptocurrencies is transferred in accordance with
ASC 610-20. The control over the cryptocurrencies disposed will transfer at the same time of the disposal, hence the cryptocurrencies
transferred will be derecognized at the same time of the disposal. The gain or loss on disposal is calculated as the difference between
the consideration allocated to each distinct cryptocurrency and its carrying amount.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify">The Company had ceased the operation of cryptocurrency mining business
by December 2022.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify">&#160;</p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001465" name="us-gaap:BusinessCombinationsPolicy"><p id="xdx_840_eus-gaap--BusinessCombinationsPolicy_zt7dyQbTzyG5" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(m)
<span id="xdx_86F_zApzzsrr6Vqd">Business combination</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; text-indent: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
accordance with ASC 805, the Company applies acquisition method to account for business combination. The acquisition method requires
that the fair value of the underlying exchange transaction is used to establish a new accounting basis of the acquired entity upon the
acquirer taking control over the acquiree. Furthermore, because of obtaining control the acquirer is responsible and accountable for
all of the acquiree&#8217;s assets, liabilities and operations, the acquirer recognizes and measures the assets acquired and liabilities
assumed at their full fair values as of the date control is obtained, which may result in goodwill, when purchase consideration exceeds
the net of fair value of the assets acquired and liabilities assumed, or a bargain purchase gain, when the net of fair value of the assets
acquired and liabilities assumed exceeds the purchase consideration, regardless of the percentage ownership in the acquiree or how the
acquisition was achieved.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001467" name="TAOP:DisposalofSubsidiaryPolicyTextBlock"><p id="xdx_84D_ecustom--DisposalofSubsidiaryPolicyTextBlock_zQfFr8N7Jp34" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(n)
<span id="xdx_86D_zFZbI0cP5cb6">Disposal of subsidiary</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company deconsolidates a subsidiary upon the loss of control, the related subsidiary&#8217;s assets (including goodwill), liabilities,
non-controlling interest and other components of equity are de-recognized. This may mean that amounts previously recognized in other
comprehensive income are reclassified to profit or loss.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
consideration received is recognized at fair value. Any resultant gain or loss is recognized in the Statement of Operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001469" name="us-gaap:InvestmentPolicyTextBlock"><p id="xdx_84B_eus-gaap--InvestmentPolicyTextBlock_zqpbpjufCq8k" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(o)
<span id="xdx_86A_zR8tMmfrrhjj">Long-term investment</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s long-term investment consists of investments accounted for under the equity method and equity investments without readily
determinable fair value. Pursuant to ASC 321, equity investments, except for those accounted for under the equity method, those that
result in consolidation of the investee and certain other investments, are measured at fair value, and any changes in fair value are
recognized in earnings. For equity securities without readily determinable fair value and do not qualify for the existing practical expedient
in ASC Topic 820, Fair Value Measurements and Disclosures (&#8220;ASC 820&#8221;) to estimate fair value using the net asset value per
share (or its equivalent) of the investment, the Company elected to measure those investments at cost, less any impairment, plus or minus
changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
equity investments that the Company elects to measure at cost, less any impairment, plus or minus changes resulting from observable price
changes, the Company makes a qualitative assessment considering impairment indicators to evaluate whether investments are impaired at
each reporting date. Impairment indicators considered include, but are not limited to, a significant deterioration in the earnings performance
or business prospects of the investee, including factors that raise significant concerns about the investee&#8217;s ability to continue
as a going concern, a significant adverse change in the regulatory, economic, or technologic environment of the investee and a significant
adverse change in the general market condition of either the geographical area or the industry in which the investee operates. If a qualitative
assessment indicates that the investment is impaired, the entity has to estimate the investment&#8217;s fair value in accordance with
the principles of ASC 820. For equity investments without readily determinable fair value, the Company uses Level 3 inputs of fair value
accounting in accordance with ASC 820-10 and recognizes impairment loss other than temporary in the statement of operations equal to
the difference between its initial investment and its proportional share of the net book value of the investee&#8217;s net assets which
approximates its fair value.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
impairment on equity investments without readily determinable fair value, the Company uses Level 3 inputs of fair value accounting in
accordance with ASC 820-10 and recognizes impairment loss in the statement of operations equal to the difference between its initial
investment and its proportional share of the net book value of investee&#8217;s net assets which approximates its fair value if those
are determined to be other than temporary.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001471" name="TAOP:ConvertibleDebtPolicyTextBlock"><p id="xdx_84C_ecustom--ConvertibleDebtPolicyTextBlock_z1OWso28rEkf" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(p)
<span id="xdx_865_z1LH8crBufuj">Convertible promissory note</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company determines the appropriate accounting treatment of its convertible debts in accordance with the terms in relation to conversion
features. After considering the impact of such features, the Company may account for such instrument as a liability in its entirety,
or separate the instrument into debt and equity components following the guidance described under ASC 815 Derivatives and Hedging and
ASC 470 Debt. The debt discount, if any, together with related issuance cost are subsequently amortized as interest expense over the
period from the issuance date to the earliest conversion date or stated redemption date. The Company presented the issuance cost of debt
in the balance sheet as a direct deduction from the related debt.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>TAOPING INC.</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001473" name="us-gaap:ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock"><p id="xdx_84F_eus-gaap--ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock_zcZriCrEKBck" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(q)
<span id="xdx_86B_z5A2fwFM4V8d">Impairment of Long-Lived Assets</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Long-lived
assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology
or other industry changes. Recoverability of assets to be held and used is determined by comparing their carrying amount with their expected
future net undiscounted future cash flows from the assets. If such assets are considered to be impaired, the impairment to be recognized
is measured by how much the carrying amount exceeds the fair value of the assets. There were impairment charges of approximately <span id="xdx_905_eus-gaap--AssetImpairmentCharges_pn3d_do_c20220101__20221231_zJ3CKObWLSTi" title="Asset impairment charges">$<ix:nonFraction name="us-gaap:AssetImpairmentCharges" contextRef="From2022-01-012022-12-31" id="Fact001475" format="ixt:numdotdecimal" decimals="-3" unitRef="USD">1,468,000</ix:nonFraction></span>
for the year ended December 31, 2022, and <span id="xdx_900_eus-gaap--AssetImpairmentCharges_pdp0_dxL_c20230101__20231231_zwnnBsCJZLo7" title="Impairment of long-lived assets::XDX::-"><span id="xdx_904_eus-gaap--AssetImpairmentCharges_pdp0_dxL_c20210101__20211231_z7ye8JF9WJ3a" title="Impairment of long-lived assets::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1477"><span style="-sec-ix-hidden: xdx2ixbrl1479">no</span></span></span></span> impairment charges for the year ended December 31, 2023 and 2021. Assets held for disposal,
if any, are reported at the lower of the carrying amount or fair value less costs to sell.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001481" name="us-gaap:LesseeLeasesPolicyTextBlock"><p id="xdx_846_eus-gaap--LesseeLeasesPolicyTextBlock_z5g807R8t2I8" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(r)
<span id="xdx_864_zr8Q3Ka1pBBh">Operating leases - Right-of-use assets and lease liabilities</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company accounts for lease under ASC 842 &#8220;Leases&#8221;, and also elects practical expedient not to separate non-lease component
from lease components in accordance with ASC 842-10-15-37 and instead to account for each separate lease component and the non-lease
components associated with that lease component as a single lease component. The Company also elects the practical expedient not to recognize
lease assets and lease liabilities for leases with a term of 12 months or less.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; text-indent: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company recognized a lease liability and corresponding right-of-use asset based on the present value of minimum lease payments discounted
at the Company&#8217;s incremental borrowing rate. The Company records amortization and interest expense on a straight-line basis based
on lease terms and reduces lease liabilities upon making lease payments.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001483" name="us-gaap:RevenueFromContractWithCustomerPolicyTextBlock"><p id="xdx_84A_eus-gaap--RevenueFromContractWithCustomerPolicyTextBlock_zqStuL6nzc1j" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(s)
<span id="xdx_86F_zScAFfFecU9b">Revenue Recognition</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
accordance with the ASC 606, the Company recognizes revenues net of applicable taxes, when goods or services are transferred to customers
in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company generates its revenues primarily from four sources: (1) product sales, (2) software sales, (3) advertising and (4) other sales.
Revenue is recognized when obligations under the terms of a contract with our customers are satisfied, generally, upon delivery of the
goods and services.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Revenue
- Products</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Product
revenues are generated primarily from the sale of Cloud-Application-Terminal based digital ads display terminals with integrated software
essential to the functionality of the hardware to our customers (inclusive of related parties) and high-end data storage servers. Although
manufacturing of the products has been outsourced to the Company&#8217;s Original Equipment Manufacturer (OEM) suppliers, the Company
has acted as the principal of the contract. The Company recognized the product sales at the point of delivery.
Product sales are classified as &#8220;Revenue-Products&#8221; on the Company&#8217;s consolidated statements of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Revenue
- Software</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company designs and develops software products. Software development usually includes developing software, integrating various isolated
software systems into one, and testing the software. The design and build process, together with the integration of the various elements,
are generally determined to be essential to the functionality of the delivered software. The Company recognized the software sales at the point of delivery.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company usually completes the software support service in one-off and recognizes the revenue at the point of delivery of service because
the Company does not have an enforceable right to payment for performance completed to date. Revenues from software development contracts
are classified as &#8220;Revenue-Software&#8221; on the Company&#8217;s consolidated statements of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Revenue
- Advertising</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company generates revenues primarily from providing advertising slots to customers to promote their businesses by broadcasting advertisements
on identifiable digital ads display terminals and vehicular ads display terminals in different geographic regions and locations through
a cloud-based new media sharing platform. The Company also contracts individuals to promote special events or for various occasions.
The Company is only obligated to broadcast the advertisements to the contracted digital ads display terminals, and therefore allocates
<span id="xdx_90B_ecustom--AdvertisingCostPercentage_iI_pid_dp_c20231231_zjwR2srV3CE1" title="Advertising cost, percentage"><ix:nonFraction name="TAOP:AdvertisingCostPercentage" contextRef="AsOf2023-12-31" id="Fact001485" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% of the transaction price to advertisement broadcasting. The transaction price for advertisement broadcasting is fixed based on the
numbers of advertisement delivery and duration of the contract, and has no variable consideration, or significant financing component,
or subsequent price change, and is not refundable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company recognizes the revenues, net of applicable taxes, from advertisement broadcasting contracts with customers over the contracted
advertising duration.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Revenue
- Cryptocurrency mining</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has entered into digital asset mining pools by executing contracts with the mining pool operators to provide computing power
to the mining pool. The contracts are terminable under certain circumstances. Both the Company and the mining pool operator have the
right to terminate the contract at any time, with or without clause, and without compensation. In exchange for providing computing power,
the Company is entitled to a fractional share of the fixed cryptocurrency awards the mining pool operator receives (less digital asset
transaction fees to the mining pool operator, if any.) for successfully adding a block to the blockchain. The Company&#8217;s fractional
share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power
contributed by all mining pool participants in solving the current algorithm. The contract first exists upon the successful placement
of a block on the blockchain by the pool operator because that is the point when the parties have performed their contract obligation
and neither party can unilaterally terminate the contract without compensating the other party.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Providing
computing power in digital asset transaction verification services is an output of the Company&#8217;s ordinary activities. The provision
of providing such computing power is the only performance obligation in the Company&#8217;s contract with mining pool operator.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value using the
quoted price from principal market of the related cryptocurrency on the date received, which is not materially different than the fair
value at the contract inception or at the time the Company has earned the award from the pools. The consideration is variable. Because
it is not probable that a significant reversal of cumulative revenue will not occur (ASC 606-10-32-11), the consideration is constrained
until the mining pool operator successfully places a block (by being the first to solve an algorithm), and the Company receives confirmation
of the consideration it will receive, at which time revenue is recognized. There is no financing component, nor allocation of transaction
price in these transactions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company had ceased the operation of cryptocurrency mining business by December 2022, and there is no Revenue - Cryptocurrency mining
for the year ended December 31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Revenue
- Other</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company also reports other revenue which comprises revenue generated from System upgrade and technical support services, platform service
fee, and rental income.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">System
upgrade and technical support revenue is recognized when performance obligations are satisfied upon completion of the services. Platform
service fee is charged based on number of the display terminals used by the customers or a percentage of advertising revenue generated
by the display terminals. Platform service revenue is recognized on a monthly basis over the contract period.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company follows ASC 842 &#8211; Leases that requires lessor to identify the underlying assets and allocate rental income among considerations
in lease and non-lease components. The Company owns two units of office space renting out to a third party and TNM under non-cancelable
operating lease agreements with lease terms of two years starting from May 1, 2022 and four years starting from July 1, 2022, respectively.
The lease agreements have fixed monthly rental payments, and no non-lease component or option for lessees to purchase the underlying
assets. The Company collects monthly rental payments from the lessees, and has generated approximately <span id="xdx_900_eus-gaap--RentalIncomeNonoperating_c20230101__20231231_z9wZ225mK0Tj" title="Rental income">$<ix:nonFraction name="us-gaap:RentalIncomeNonoperating" contextRef="From2023-01-01to2023-12-31" id="Fact001487" format="ixt:numdotdecimal" decimals="0" unitRef="USD">251,000</ix:nonFraction></span> and <span id="xdx_907_eus-gaap--RentalIncomeNonoperating_c20220101__20221231_zoR2POHV4pgi" title="Rental income">$<ix:nonFraction name="us-gaap:RentalIncomeNonoperating" contextRef="From2022-01-012022-12-31" id="Fact001489" format="ixt:numdotdecimal" decimals="0" unitRef="USD">276,000</ix:nonFraction></span> rental income
for the year ended December 31, 2023, and 2022, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>


<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
completion of the business acquisition on June 9, 2021, TNM became a subsidiary of the Company. The rental income from TNM has become
an intercompany revenue and been eliminated since June 9, 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001491" name="TAOP:ScheduleOfAnnualMinimumRentalIncomeReceviedTableTextBlock"><p id="xdx_892_ecustom--ScheduleOfAnnualMinimumRentalIncomeReceviedTableTextBlock_zkOLrbVqw6Ol" style="font: 10pt Times New Roman, Times, Serif; display: none; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;<span id="xdx_8B1_zGske2nKvs5" style="display: none">SCHEDULE
OF ANNUAL MINIMUM RENTAL INCOME RECEIVED</span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Annual minimum rental income to be received in the next 5 years:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_49A_20231231_zAzV7yQIrJN4" style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40D_eus-gaap--LessorOperatingLeasePaymentsToBeReceivedNextTwelveMonths_iI_maLOLLPzMCQ_zsXnDG4olU16" style="vertical-align: bottom; background-color: White">
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  <tr id="xdx_40F_eus-gaap--LessorOperatingLeasePaymentsToBeReceived_iTI_mtLOLLPzMCQ_zIQJpAkZLR6h" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Total</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</ix:nonNumeric><p id="xdx_8A4_zp7Yq7IfSLUb" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Contract
balances</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company records advances from customers when cash payments are received or due in advance of our performance. For the year ended December
31, 2023, 2022 and 2021, the Company recognized revenue of <span id="xdx_908_eus-gaap--ContractWithCustomerLiability_iI_c20231231_zoIruaVovvD6" title="Recognized revenue">$<ix:nonFraction name="us-gaap:ContractWithCustomerLiability" contextRef="AsOf2023-12-31" id="Fact001497" format="ixt:numdotdecimal" decimals="0" unitRef="USD">290,000</ix:nonFraction></span>, <span id="xdx_903_eus-gaap--ContractWithCustomerLiability_iI_c20221231_z09ZYFxB7xC" title="Recognized revenue">$<ix:nonFraction name="us-gaap:ContractWithCustomerLiability" contextRef="AsOf2022-12-31" id="Fact001499" format="ixt:numdotdecimal" decimals="0" unitRef="USD">232,000</ix:nonFraction></span> and $<span id="xdx_90F_eus-gaap--ContractWithCustomerLiability_iI_c20211231_zmZgftQRoUz6" title="Recognized revenue"><ix:nonFraction name="us-gaap:ContractWithCustomerLiability" contextRef="AsOf2021-12-31" id="Fact001501" format="ixt:numdotdecimal" decimals="0" unitRef="USD">141,000</ix:nonFraction></span>, respectively, that was included in the advances
from customers balance at the beginning of each reporting period.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Practical
expedients and exemptions</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company generally expenses sales commissions if any incurred because the amortization period would have been one year or less. In many
cases, the Company is approached by customers for customizing software products for their specific needs without incurring significant
selling expenses.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year
or less.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001503" name="us-gaap:AdvertisingCostsPolicyTextBlock"><p id="xdx_847_eus-gaap--AdvertisingCostsPolicyTextBlock_zKNlatHZ7si7" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(t)
<span id="xdx_86A_zeLpHNoPtCq3">Cost of Sales - advertising and cost of cryptocurrencies</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
cost of sales for advertising revenue mainly comprises of direct costs of generating advertising revenue including lease expense for
the wall space, to where the ads display terminal to be installed, installation costs of ads display terminals, depreciation of display
termination, labor, and other related expenses.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
cost of sales for cryptocurrencies revenue consists primarily of direct costs of earning Bitcoin and Ethereum related to mining operations,
including mining platform fees, mining pool fees, mining facility rental fees, electric power costs, other utilities, depreciation of
mining machines, labor, insurance, and among other ancillary costs.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company had ceased the operation of cryptocurrency mining business by December 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001505" name="us-gaap:ShareBasedCompensationOptionAndIncentivePlansPolicy"><p id="xdx_840_eus-gaap--ShareBasedCompensationOptionAndIncentivePlansPolicy_zHZE2XfFtuU2" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(u)<span id="xdx_861_zvbF8wrS3bk8">
Stock-based compensation</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company applies ASC No. 718, &#8220;Compensation-Stock Compensation&#8221;, which requires that share-based payment transactions with
employees, such as share options, be measured based on the grant date fair value of the equity instrument and recognized as compensation
expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation cost related to employee
share options or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over
the period during which an employee is required to provide service in exchange for the award, which generally is the vesting period.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company adopted ASU 2018-07, Compensation-Stock Compensation (Topic: 718): Improvements to Nonemployee Share-Based Payment Accounting
on January 1, 2019, to account for stock-based compensation to goods and services provided by the third parties. The fair value of the
equity awards to nonemployee are measured on the grant day. Under this guidance, compensation cost related to nonemployee share options
or similar equity instruments is recognized in the same period and in the same manner (i.e. capitalize or expense) the entity would if
it paid cash for the goods or services. The Company&#8217;s adoption of ASU 2018-07 has no material impact to the Company&#8217;s consolidated
financial statements, nor requirement for cumulative adjustment in retained earnings or other components of equity or net assets.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">During
the year ended December 31, 2023, 2022, and 2021, the Company recognized approximately $<span id="xdx_905_eus-gaap--StockIssuedDuringPeriodValueShareBasedCompensation_pp0p0_c20230101__20231231_zxcN9aRpjgI9" title="Stock-based compensation expense"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueShareBasedCompensation" contextRef="From2023-01-01to2023-12-31" id="Fact001507" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,564,000</ix:nonFraction></span>, $<span id="xdx_904_eus-gaap--StockIssuedDuringPeriodValueShareBasedCompensation_pp0p0_c20220101__20221231_zYERrt9za6Cg" title="Stock-based compensation expense"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueShareBasedCompensation" contextRef="From2022-01-012022-12-31" id="Fact001509" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">23,100</ix:nonFraction></span>, and $<span id="xdx_900_eus-gaap--StockIssuedDuringPeriodValueShareBasedCompensation_pp0p0_c20210101__20211231_zfGmQBFWEC0d" title="Stock-based compensation expense"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueShareBasedCompensation" contextRef="From2021-01-012021-12-31" id="Fact001511" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">3,137,000</ix:nonFraction></span>, respectively,
of stock-based compensation expense.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 142; Value: 1 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001513" name="us-gaap:ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock"><p id="xdx_843_eus-gaap--ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock_z9bXao9VTwF3" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(v)
<span id="xdx_86C_zword6EVjO8h">Foreign Currency Translation</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
functional currency of the US and BVI companies is the United States dollar. The functional currency of the Company&#8217;s Hong Kong
subsidiaries is the Hong Kong dollar.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
functional currency of the Company&#8217;s PRC subsidiaries is the Chinese Renminbi Yuan, (&#8220;RMB&#8221;). RMB is not freely convertible
into foreign currencies. The Company&#8217;s PRC subsidiaries&#8217; financial statements are maintained in the functional currency.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency
at rates of exchange prevailing at the balance sheet date. Transactions denominated in currencies other than the functional currency
are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Exchange gains or losses
arising from foreign currency transactions are included in the determination of net loss for the respective periods.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
financial reporting purposes, the financial statements of the Company have been translated into United States dollars. Assets and liabilities
are translated at exchange rates at the balance sheet dates, revenue and expenses are translated at average exchange rates, and equity
is translated at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are
included in other comprehensive loss, a component of equity.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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exchange rates adopted are as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;<span id="xdx_8B2_zKtUR8oplsG" style="display: none">SCHEDULE
OF FOREIGN CURRENCY TRANSLATION</span></span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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    <td style="width: 60%; text-align: justify">Year-end RMB to US$ exchange rate</td><td style="width: 2%">&#160;</td>
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    <td style="text-align: justify">Average yearly RMB to US$ exchange rate</td><td>&#160;</td>
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  <tr id="xdx_40B_eus-gaap--ForeignCurrencyExchangeRateTranslation1_iI_hus-gaap--VariableRateAxis__custom--YearEndHKDMember_z4DTNghEZw43" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Year-end HKD to US$ exchange rate</td><td>&#160;</td>
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  <tr id="xdx_404_eus-gaap--ForeignCurrencyExchangeRateTranslation1_iI_hus-gaap--VariableRateAxis__custom--AverageYearlyHKDMember_zQ2WrszLZF23" style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">Average yearly HKD to US$ exchange rate</td><td>&#160;</td>
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  </table>

</ix:nonNumeric><p id="xdx_8AC_zZT5qDpAQnlg" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
average yearly RMB to US$ exchange rate adopted for the year ended December 31, 2021 was <span id="xdx_90C_eus-gaap--ForeignCurrencyExchangeRateTranslation1_iI_c20211231__us-gaap--VariableRateAxis__custom--AverageYearlyRMBMember_zNtDkjb2FXyf" title="Foreign currency exchange rate, translation"><ix:nonFraction name="us-gaap:ForeignCurrencyExchangeRateTranslation1" contextRef="AsOf2021-12-31_custom_AverageYearlyRMBMember" id="Fact001529" format="ixt:numdotdecimal" decimals="INF" unitRef="Pure">6.4505</ix:nonFraction></span>.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No
representation is made that the RMB amounts and HKD amounts could have been, or could be, converted into United States dollars at the
rates used in translation.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001531" name="us-gaap:ResearchAndDevelopmentExpensePolicy"><p id="xdx_848_eus-gaap--ResearchAndDevelopmentExpensePolicy_z1vRPccMIO1b" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(w)
<span id="xdx_86A_zToEDFR5doW8">Research &amp; Development Expenses</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company follows the guidance in FASB ASC 985-20, Cost of Software to Be Sold, Leased or Marketed, regarding software development costs
to be sold, leased, or otherwise marketed.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">FASB
ASC 985-20-25 requires research and development costs for software development to be expensed as incurred until the software model is
technologically feasible. Technological feasibility is established when the enterprise has completed all planning, designing, coding,
testing, and identification of risks activities necessary to establish that the product can be produced to meet its design specifications,
features, functions, technical performance requirements. A certain amount of judgment and estimation is required to assess when technological
feasibility is established, as well as the ongoing assessment of the recoverability of capitalized costs. The Company&#8217;s products
reach technological feasibility shortly before the products are released and sold to the public. Therefore, research and development
costs are generally expensed as incurred.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001533" name="TAOP:SubsidyIncomePolicyTextBlock"><p id="xdx_847_ecustom--SubsidyIncomePolicyTextBlock_zKAaFZOxHbTl" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(x)
<span id="xdx_865_zDHzpPVi1xR9">Subsidy Income</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Subsidy
income mainly represents income received from various local governmental agencies in China for developing high technology products in
the fields designated by the government as new and highly innovative. The Company has no continuing obligation under the subsidy provision.
The Company recognizes subsidy income upon receipt of official grant notice from local government authorities.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001535" name="TAOP:SalesUseAndOtherValueAddedTaxPolicyTextBlock"><p id="xdx_845_ecustom--SalesUseAndOtherValueAddedTaxPolicyTextBlock_zGu6KqZpr6w" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(y)
<span id="xdx_86A_zc3UvZ7OfZ9j">Sales, use, other value-added taxes, and income taxes</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Revenue
is recorded net of applicable sales, use, and value-added taxes.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Income
taxes are provided on an asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes are
recognized for all significant temporary differences at enacted rates and classified as non-current in the financial statements. A valuation
allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion, or all
of, the deferred tax assets will not be realized. The Company classifies interest and/or penalties related to unrecognized tax benefits,
if any, as a component of income tax expense.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 143; Value: 1 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></td></tr></table></div>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company applies the provisions of ASC No. 740 &#8220;Income Taxes&#8221; (&#8220;ASC 740&#8221;), which clarifies the accounting for
uncertainty in income taxes recognized by prescribing a recognition threshold and measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides accounting guidance on de-recognition,
classification, interest and penalties, and disclosure.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001537" name="us-gaap:DiscontinuedOperationsPolicyTextBlock"><p id="xdx_84A_eus-gaap--DiscontinuedOperationsPolicyTextBlock_zc1BnkCm6BL3" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(z)
<span id="xdx_863_zJ0ekAnrWrbe">Discontinued Operations</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company follows &#8220;ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting
Discontinued Operations and Disclosures of Disposals of Components of an Entity&#8221; for reporting discontinued operations. Under the
revised standard, a discontinued operation must represent a strategic shift that has or will have a major effect on an entity&#8217;s
operations and financial results. Examples could include a disposal of a major line of business, a major geographical area, a major equity
method investment, or other major parts of an entity. The revised standard also allows an entity to have certain continuing cash flows
or involvement with the component after the disposal. Additionally, the standard requires expanded disclosures about discontinued operations
that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued
operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001539" name="us-gaap:SegmentReportingPolicyPolicyTextBlock"><p id="xdx_845_eus-gaap--SegmentReportingPolicyPolicyTextBlock_z2GotbMYH3X2" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(aa)
<span id="xdx_86C_zLYQiZvyUHNb">Segment reporting</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Segment
information is consistent with how the Chief Operating Decision Maker, i.e., the Directors of the Company, review the businesses, make
investing and resource allocation decisions and assess operating performance. Transfers and sales between reportable segments, if any,
are recorded at cost.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company reports financial and operating information in the following three segments:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cloud-based
    Technology (CBT) segment &#8212; It includes the Company&#8217;s cloud-based products, high-end data storage servers and related
    services sold to private sectors including new media, healthcare, education and residential community management, and among other
    industries and applications. In this segment, the Company generates revenues from the sales of hardware and software total solutions
    with proprietary software and content as well as from designing and developing software products specifically customized for private
    sector customers&#8217; needs for a fixed price. The Company includes the revenue and cost of revenue of high-end data storage servers
    in the CBT segment. Advertising services is included in the CBT segment, after the Company consummated the acquisition of TNM. Advertisements
    are delivered to the ads display terminals and vehicular ads display terminals through the Company&#8217;s cloud-based new media
    sharing platform. Incorporation of advertising services complements the Company&#8217;s out-of-home advertising business strategy.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Blockchain
    Technology (BT) segment &#8212; The BT segment is the Company&#8217;s newly formed business sector in 2021. Cryptocurrency mining
    is the first initiative implemented in the BT segment. However, due to the decreased output and the highly volatile cryptocurrency
    market, the Company had ceased the operation of the BT segment by December 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Traditional
    Information Technology (TIT) segment &#8212; The TIT segment includes the Company&#8217;s project-based technology products and services
    sold to the public sector. The solutions the Company has sold primarily include Geographic Information Systems (GIS), Digital Public
    Security Technology (DPST), and Digital Hospital Information Systems (DHIS). In this segment, the Company generates revenues from
    sales of hardware and system integration services. As a result of the business transformation, the TIT segment is gradually being
    phased out in 2021.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
more information regarding our operating segments, see Note 20 (Consolidated Segment Data).</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001541" name="us-gaap:NewAccountingPronouncementsPolicyPolicyTextBlock"><p id="xdx_841_eus-gaap--NewAccountingPronouncementsPolicyPolicyTextBlock_zRwmWqhi5ENj" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">(ab)
<span id="xdx_865_zu1O3FSED7tb">Recent Accounting Pronouncements</span></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
October 2021, the FASB issued ASU 2021-08, &#8220;Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers&#8221;. Under ASU 2021-08, an acquirer must recognize and measure contract assets and contract liabilities
acquired in a business combination in accordance with Topic 606, as if it had originated the contracts. Prior to this ASU, an acquirer
generally recognized contract assets acquired and contract liabilities assumed that arose from contracts with customers at fair value
on the acquisition date. The Company adopted the ASU on January 1, 2023 and the adoption did not have a material impact on the Company&#8217;s
consolidated financial statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
November 2023, the FASB issued ASU 2023-07, &#8220;Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,&#8221;
which requires public entities to disclose expanded information about their reportable segment(s)&#8217; significant expenses and other
segment items on an interim and annual basis. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods
within fiscal years beginning after December 15, 2024, with early adoption permitted. The ASU is required to be applied retrospectively
to all prior periods presented in the financial statements once adopted. The Company is evaluating the disclosure requirements related
to the new standard.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2023, the FASB issued ASU 2023-09, &#8220;Income Taxes (Topic 740): Improvements to Income Tax Disclosures,&#8221; which requires
public entities to disclose specific tax rate reconciliation categories, as well as income taxes paid disaggregated by jurisdiction,
amongst other disclosure enhancements. The ASU is effective for financial statements issued for annual periods beginning after December
15, 2024, with early adoption permitted. The ASU can be adopted on a prospective or retrospective basis. The Company is evaluating the
disclosure requirements related to the new standard.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has considered all other recently issued accounting pronouncements and does not believe that the adoption of such pronouncements
will have a material impact on the consolidated financial statements.</span></p>

</ix:nonNumeric><p id="xdx_855_zq7ycOQ48k7j" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001543" name="us-gaap:BusinessCombinationDisclosureTextBlock"><p id="xdx_805_eus-gaap--BusinessCombinationDisclosureTextBlock_zl0F6AJSPRVf" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>3.
<span id="xdx_821_zpfMymi9GFx">BUSINESS ACQUISITION</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
June 9, 2021, the Company and Biznest, a subsidiary of the Company, consummated an acquisition of <span id="xdx_904_eus-gaap--BusinessAcquisitionPercentageOfVotingInterestsAcquired_iI_dp_c20210609__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zscaL1izb63a"><ix:nonFraction name="us-gaap:BusinessAcquisitionPercentageOfVotingInterestsAcquired" contextRef="AsOf2021-06-09_custom_TaopingNewMediaCoLtdMember" id="Fact001544" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% of the equity interests of TNM
and its subsidiary. Mr. Jianghuai Lin, the Chairman and CEO of the Company, who then owned approximately <span id="xdx_90A_ecustom--SharesOutstandingPercentage_iI_dp_c20210609__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_zCnPTVq9o6xj" title="Outstanding percent"><ix:nonFraction name="TAOP:SharesOutstandingPercentage" contextRef="AsOf2021-06-09_custom_TaopingNewMediaCoLtdMember67978265" id="Fact001546" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">24.6</ix:nonFraction></span>% of total shares outstanding
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out-of-home advertising time slots on its networked smart digital advertising display terminals with artificial intelligence and big
data technologies. Acquiring TNM and synergizing its new media network will enhance the Company&#8217;s presence in the new media and
advertising sectors. After completion of the acquisition, TNM becomes a wholly owned subsidiary of Biznest.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
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ordinary shares equivalent to the value of approximately $<span id="xdx_900_eus-gaap--BusinessAcquisitionEquityInterestIssuedOrIssuableValueAssigned_iI_pn5n6_c20210609__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zYBHGFztPtB5" title="Business acquisition, shares issued, value"><ix:nonFraction name="us-gaap:BusinessAcquisitionEquityInterestIssuedOrIssuableValueAssigned" contextRef="AsOf2021-06-09_custom_TaopingNewMediaCoLtdMember" id="Fact001551" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">5.4</ix:nonFraction></span> million.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company uses Level 3 inputs of fair value accounting for the identifiable assets and liabilities of TNM. The allocation of the purchase
consideration is final, which was determined after the completion of a detailed analysis of the fair value for all assets acquired.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001553" name="us-gaap:ScheduleOfRecognizedIdentifiedAssetsAcquiredAndLiabilitiesAssumedTableTextBlock"><p id="xdx_891_eus-gaap--ScheduleOfRecognizedIdentifiedAssetsAcquiredAndLiabilitiesAssumedTableTextBlock_z2GqF9TVyvrj" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table summarizes the purchase price allocation for TNM, and the amounts of the assets acquired, and liabilities assumed which
were based on their estimated fair values at the acquisition date:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span id="xdx_8B7_zMeOBjv4F37d" style="display: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">SCHEDULE
OF BUSINESS ACQUISITION ASSETS ACQUIRED, AND LIABILITIES ASSUMED</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_492_20210609__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zhBxuC3E3n9j" style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_401_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCashAndEquivalents_iI_pp0p0_maBCRIAzHXL_z8UU28pzXEOe" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 80%; text-align: left">Cash</td><td style="width: 2%">&#160;</td>
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    <td style="text-align: left">Long-term investments</td><td>&#160;</td>
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  <tr id="xdx_407_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedPropertyPlantAndEquipment_iI_pp0p0_maBCRIAzHXL_zY14gYSnvXsi" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">Right of use assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedOtherNoncurrentAssets" contextRef="AsOf2021-06-09_custom_TaopingNewMediaCoLtdMember" id="Fact001567" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">74,812</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40E_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesAccountsPayable_iNI_pp0p0_di_msBCRIAzHXL_zuhJWZAiKxJl" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Accounts payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesAccountsPayable" contextRef="AsOf2021-06-09_custom_TaopingNewMediaCoLtdMember" id="Fact001569" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">339,198</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr id="xdx_407_ecustom--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesAdvancesFromCustomer_iI_pp0p0_msBCRIAzHXL_zHpujoEh4kzj" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Advances from customers</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="TAOP:BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesAdvancesFromCustomer" contextRef="AsOf2021-06-09_custom_TaopingNewMediaCoLtdMember" id="Fact001571" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">10,943</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr id="xdx_40B_ecustom--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesAccruedPayrollAndBenefits_iI_pp0p0_msBCRIAzHXL_zMe7Lf8EIKL5" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Accrued payroll and benefits</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="TAOP:BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesAccruedPayrollAndBenefits" contextRef="AsOf2021-06-09_custom_TaopingNewMediaCoLtdMember" id="Fact001573" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">32,840</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr id="xdx_40D_ecustom--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesDueToRelatedParties_iI_pp0p0_msBCRIAzHXL_zbXQOB3JsUJ4" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Amount due to related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="TAOP:BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesDueToRelatedParties" contextRef="AsOf2021-06-09_custom_TaopingNewMediaCoLtdMember" id="Fact001575" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">619,571</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr id="xdx_40E_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesOther_iNI_pp0p0_di_msBCRIAzHXL_zpoUAbHv3rFj" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Other payables and accrued expenses</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesOther" contextRef="AsOf2021-06-09_custom_TaopingNewMediaCoLtdMember" id="Fact001577" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">87,373</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr id="xdx_407_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCapitalLeaseObligation_iNI_pp0p0_di_msBCRIAzHXL_zDYeNmuvrgrc" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Lease liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCapitalLeaseObligation" contextRef="AsOf2021-06-09_custom_TaopingNewMediaCoLtdMember" id="Fact001579" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">153,938</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr id="xdx_40B_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedAssets_iI_pp0p0_mtBCRIAzHXL_znl1VxaqHZnd" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Total net assets acquired</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedAssets" contextRef="AsOf2021-06-09_custom_TaopingNewMediaCoLtdMember" id="Fact001581" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">5,448,801</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Bargain purchase gain</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td id="xdx_988_ecustom--BusinessCombinationBargainPurchaseGainRecognizedStatementOfIncomeOrComprehensiveIncomeExtensibleEnumerationNotDisclosedFlag_iN_pp0p0_di_c20210601__20210609__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zsJr303SaRNi" title="Bargain purchase gain" style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="TAOP:BusinessCombinationBargainPurchaseGainRecognizedStatementOfIncomeOrComprehensiveIncomeExtensibleEnumerationNotDisclosedFlag" contextRef="From2021-06-012021-06-09_custom_TaopingNewMediaCoLtdMember" id="Fact001583" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">12,345</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 2.5pt">Total purchase price</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td id="xdx_984_eus-gaap--BusinessCombinationConsiderationTransferred1_pp0p0_c20210601__20210609__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zFMiioKbeFxi" title="Total purchase price" style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:BusinessCombinationConsiderationTransferred1" contextRef="From2021-06-012021-06-09_custom_TaopingNewMediaCoLtdMember" id="Fact001585" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">5,436,456</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table>

</ix:nonNumeric><p id="xdx_8A5_zILnx8YG2xlk" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Due
to the negative impact from COVID-19 pandemic and slowdown of the out-of-home advertising industry in China, the total consideration
paid by the Company was less than the net amount of identifiable assets acquired and liabilities assumed of TNM, which resulted in a
bargain purchase gain of approximately $<span id="xdx_901_ecustom--BusinessCombinationBargainPurchaseGainRecognizedStatementOfIncomeOrComprehensiveIncomeExtensibleEnumerationNotDisclosedFlag_c20210601__20210609_zRRMFl3Xb7vh" title="Bargain purchase gain"><ix:nonFraction name="TAOP:BusinessCombinationBargainPurchaseGainRecognizedStatementOfIncomeOrComprehensiveIncomeExtensibleEnumerationNotDisclosedFlag" contextRef="From2021-06-012021-06-09" id="Fact001587" format="ixt:numdotdecimal" decimals="0" unitRef="USD">12,000</ix:nonFraction> </span>on the acquisition date.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s consolidated statement of operations for the year ended December 31, 2021 included revenue of $<span id="xdx_90A_eus-gaap--Revenues_pn4n6_c20210101__20211231__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zw0Yy8I2lsUh" title="Revenues"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2021-01-012021-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001589" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">1.78</ix:nonFraction></span> million and net loss
of $<span id="xdx_904_eus-gaap--NetIncomeLoss_pn4n6_c20210101__20211231__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zjH9vzpWjWFd" title="Net loss"><ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2021-01-012021-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001591" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">0.55</ix:nonFraction></span> million attributable to TNM since June 9, 2021, the acquisition date.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s consolidated statement of operations for the year ended December 31, 2022 included revenue of $<span id="xdx_90D_eus-gaap--Revenues_pn4n6_c20220101__20221231__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zlH1mCbPteji" title="Revenues"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2022-01-012022-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001593" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">3.3</ix:nonFraction></span> million and net loss
of $<span id="xdx_905_eus-gaap--NetIncomeLoss_pn4n6_c20220101__20221231__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zlY6so4yZdt4" title="Net loss"><ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2022-01-012022-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001595" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">0.37</ix:nonFraction></span> million attributable to TNM.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s consolidated statement of operations for the year ended December 31, 2023 included revenue of $<span id="xdx_904_eus-gaap--Revenues_pn4n6_c20230101__20231231__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zOm1f8O8ivFi" title="Revenues"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2023-01-012023-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001597" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">3.0</ix:nonFraction></span> million and net profit
of $<span id="xdx_90C_eus-gaap--NetIncomeLoss_pn4n6_c20230101__20231231__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zyvx5KQ7e20f" title="Net loss"><ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2023-01-012023-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001599" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">1.0</ix:nonFraction></span> million attributable to TNM.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 146; Value: 1 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence --></td></tr></table></div>
    <div style="break-before: page; margin-top: 6pt">&#160;</div>
    <!-- Field: /Page --></ix:exclude>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
January 13, 2022, the Company entered into a share purchase agreement to acquire <span id="xdx_90F_eus-gaap--BusinessAcquisitionPercentageOfVotingInterestsAcquired_iI_dp_uPure_c20220113__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember__us-gaap--TypeOfArrangementAxis__custom--SharePurchaseAgreementMember_zrL2KaOUpc38" title="Equity interest acquired, percentage"><ix:nonFraction name="us-gaap:BusinessAcquisitionPercentageOfVotingInterestsAcquired" contextRef="AsOf2022-01-13_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember_custom_SharePurchaseAgreementMember" id="Fact001601" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">95.56</ix:nonFraction></span>% equity interest in ZJIOT, aiming to accelerate
the Company&#8217;s smart charging pile and digital new media businesses in East China. Pursuant to the share purchase agreement, as
consideration the Company agreed to issue to the shareholders of ZJIOT a total of approximately <span id="xdx_901_eus-gaap--BusinessAcquisitionEquityInterestsIssuedOrIssuableNumberOfSharesIssued_c20220112__20220113__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zQdFYQ7fny1a" title="Business acquisition, shares issued, shares"><ix:nonFraction name="us-gaap:BusinessAcquisitionEquityInterestsIssuedOrIssuableNumberOfSharesIssued" contextRef="From2022-01-122022-01-13_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001603" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">20,154</ix:nonFraction></span> restricted ordinary shares of
the Company. The shares are expected to be issued in three phases. The first phase will issue approximately <span id="xdx_90D_eus-gaap--SharesIssued_iI_c20220113__us-gaap--VestingAxis__custom--FirstPhaseMember__us-gaap--TypeOfArrangementAxis__custom--SharePurchaseAgreementMember__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zZCE1jTrcgD9" title="Shares issued, first phase"><ix:nonFraction name="us-gaap:SharesIssued" contextRef="AsOf2022-01-13_custom_FirstPhaseMember_custom_SharePurchaseAgreementMember_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001605" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">6,718</ix:nonFraction></span> shares within 20 days
after closing of the transaction; the second phase will issue approximately <span id="xdx_907_eus-gaap--SharesIssued_iI_c20220113__us-gaap--VestingAxis__custom--SecondPhaseMember__us-gaap--TypeOfArrangementAxis__custom--SharePurchaseAgreementMember__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zW0y1vIeF7t2" title="Shares issued, second phase"><ix:nonFraction name="us-gaap:SharesIssued" contextRef="AsOf2022-01-13_custom_SecondPhaseMember_custom_SharePurchaseAgreementMember_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001607" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">6,718</ix:nonFraction></span> shares before May 31, 2023; the third phase will issue
approximately <span id="xdx_906_eus-gaap--SharesIssued_iI_c20220113__us-gaap--VestingAxis__custom--ThirdPhaseMember__us-gaap--TypeOfArrangementAxis__custom--SharePurchaseAgreementMember__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zZmBtvHAq6c3" title="Shares issued, third phase"><ix:nonFraction name="us-gaap:SharesIssued" contextRef="AsOf2022-01-13_custom_ThirdPhaseMember_custom_SharePurchaseAgreementMember_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001609" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">6,718</ix:nonFraction></span> shares before May 31, 2024. Issuance of shares during the second and third phases will be conditioned upon the satisfaction
of certain performance targets of ZJIOT as set forth in the share purchase agreement. Specifically, the second phase issuance requires
from the closing date to December 31, 2022, ZJIOT have at least <span id="xdx_90C_eus-gaap--Revenues_pn5n6_uRMB_c20220101__20221231__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember__us-gaap--VestingAxis__custom--SecondPhaseMember_zKTgIumt2heg" title="Audited revenue"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2022-01-012022-12-31_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember_custom_SecondPhaseMember" id="Fact001611" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="RMB">2.5</ix:nonFraction></span> million RMB of audited revenue and <span id="xdx_90B_eus-gaap--NetIncomeLoss_pn5n6_uRMB_c20220101__20221231__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember__us-gaap--VestingAxis__custom--SecondPhaseMember_zdW9kDcYPWnd" title="Audited net income"><ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2022-01-012022-12-31_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember_custom_SecondPhaseMember" id="Fact001613" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="RMB">0.5</ix:nonFraction></span> million RMB of audited net
income; and to be eligible for the third phase issuance, ZJIOT shall have at least <span id="xdx_902_eus-gaap--Revenues_pn5n6_uRMB_c20230101__20231231__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember__us-gaap--VestingAxis__custom--ThirdPhaseMember_zJF0jdJ2slLe" title="Revenue"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2023-01-012023-12-31_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember_custom_ThirdPhaseMember" id="Fact001615" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="RMB">2.6</ix:nonFraction></span> million RMB of revenue and <span id="xdx_90C_eus-gaap--NetIncomeLoss_pn4n6_uRMB_c20230101__20231231__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember__us-gaap--VestingAxis__custom--ThirdPhaseMember_zZXvjRySYQFe" title="Net income"><ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2023-01-012023-12-31_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember_custom_ThirdPhaseMember" id="Fact001617" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="RMB">0.55</ix:nonFraction></span> million RMB of
net income during the fiscal year 2023. Upon the completion of the acquisition, the Company currently owns <span id="xdx_90F_eus-gaap--BusinessAcquisitionPercentageOfVotingInterestsAcquired_iI_pid_dp_uPure_c20231231__us-gaap--TypeOfArrangementAxis__custom--SharePurchaseAgreementMember__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zM8dp4q9Gu77" title="Business acquisition, percentage of voting"><ix:nonFraction name="us-gaap:BusinessAcquisitionPercentageOfVotingInterestsAcquired" contextRef="AsOf2023-12-31_custom_SharePurchaseAgreementMember_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001619" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% equity interest in ZJIOT.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
total fair value of the contingent consideration presented as other current liability is in accordance with ASC 820-10 &#8220;Fair Value
Measurements and Disclosures&#8221;. The approximately <span id="xdx_907_eus-gaap--BusinessAcquisitionEquityInterestsIssuedOrIssuableNumberOfSharesIssued_c20220112__20220113__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zCvoAvT57Aae"><ix:nonFraction name="us-gaap:BusinessAcquisitionEquityInterestsIssuedOrIssuableNumberOfSharesIssued" contextRef="From2022-01-122022-01-13_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001620" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">20,154</ix:nonFraction></span> ordinary shares issued under the share purchase agreement were deemed as
the consideration transferred for the acquisition. The fair value of the shares issued was measured based on the average share price
of the Company during year 2022, which therefore is categorized as Level 3 measurement of fair value.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember67978468" escape="true" id="Fact001622" name="us-gaap:ScheduleOfRecognizedIdentifiedAssetsAcquiredAndLiabilitiesAssumedTableTextBlock"><p id="xdx_897_eus-gaap--ScheduleOfRecognizedIdentifiedAssetsAcquiredAndLiabilitiesAssumedTableTextBlock_hus-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_z5vkhPeIAuNl" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table summarizes the purchase price allocation for ZJIOT, and the amounts of the assets acquired, and liabilities assumed which
were based on their estimated fair values at the acquisition date:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;<span id="xdx_8B4_zlvnJQ9p89Ye" style="display: none">SCHEDULE
OF BUSINESS ACQUISITION ASSETS ACQUIRED, AND LIABILITIES ASSUMED</span></span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left"/><td id="xdx_495_20220113__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zTtpz7PYjHTl" style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40A_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCashAndEquivalents_iI_maBCRIAzw9M_zexEvPyXwOr1" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 80%; text-align: left">Cash</td><td style="width: 2%">&#160;</td>
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  <tr id="xdx_402_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentAssetsReceivables_iI_maBCRIAzw9M_z5d6F5c7ENOa" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Accounts receivable, net</td><td>&#160;</td>
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  <tr id="xdx_40E_ecustom--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedAdvancesToSuppliers_iI_maBCRIAzw9M_zyjoFOsi04yg" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Advances to suppliers</td><td>&#160;</td>
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  <tr id="xdx_40A_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentAssetsOther_iI_maBCRIAzw9M_zaWPRNsfepbb" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Other receivables, net</td><td>&#160;</td>
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  <tr id="xdx_40D_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedPropertyPlantAndEquipment_iI_maBCRIAzw9M_zotvxiEYBMUa" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Property, plant and equipment, net</td><td>&#160;</td>
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  <tr id="xdx_401_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesAccountsPayable_iNI_di_msBCRIAzw9M_zXEBTg7Dlii8" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Accounts payable</td><td>&#160;</td>
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  <tr id="xdx_40B_ecustom--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesAdvancesFromCustomer_iI_msBCRIAzw9M_zkWR1G4cMcp7" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Advances from customers</td><td>&#160;</td>
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  <tr id="xdx_40D_ecustom--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesAccruedPayrollAndBenefits_iI_msBCRIAzw9M_zm0BurEsNSR3" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Accrued payroll and benefits</td><td>&#160;</td>
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  <tr id="xdx_407_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesOther_iNI_di_msBCRIAzw9M_zCVQwdji6QA8" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Other payables and accrued expenses</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr id="xdx_406_eus-gaap--BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedAssets_iI_mtBCRIAzw9M_zHBa5vOIwxij" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Total net assets acquired</td><td>&#160;</td>
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  <tr id="xdx_403_eus-gaap--Goodwill_iI_zDTbfxmxNhjh" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Goodwill</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:Goodwill" contextRef="AsOf2022-01-13_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001644" format="ixt:numdotdecimal" decimals="0" unitRef="USD">58,922</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 2.5pt">Total purchase price</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td id="xdx_98C_eus-gaap--BusinessCombinationConsiderationTransferred1_c20220113__20220113__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zKls5XV63LEl" title="Total purchase price" style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:BusinessCombinationConsiderationTransferred1" contextRef="From2022-01-132022-01-13_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember" id="Fact001646" format="ixt:numdotdecimal" decimals="0" unitRef="USD">267,392</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table>

</ix:nonNumeric><p id="xdx_8A4_zV2FOicVB0Ph" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s consolidated statement of operations for the year ended December 31, 2022 included revenue of $<span id="xdx_90D_eus-gaap--RevenueFromContractWithCustomerExcludingAssessedTax_pn5n6_c20220101__20221231__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_ztvE3vxLOBxg" title="Revenue"><ix:nonFraction name="us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax" contextRef="From2022-01-012022-12-31_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember67978453" id="Fact001648" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.6</ix:nonFraction></span> million and net profit
of $<span id="xdx_90D_eus-gaap--NetIncomeLoss_pn4n6_c20220101__20221231__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zICLg1r2vm04" title="Net loss"><ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2022-01-012022-12-31_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember67978453" id="Fact001650" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">0.13</ix:nonFraction></span> million under PRC GAAP attributable to ZJIOT since January 13, 2022, the acquisition date, to the end of December 31, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s consolidated statement of operations for the year ended December 31, 2023 included revenue of $<span id="xdx_900_eus-gaap--RevenueFromContractWithCustomerExcludingAssessedTax_pn4n6_c20230101__20231231__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zEFYQD5EFL8" title="Revenue"><ix:nonFraction name="us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax" contextRef="From2023-01-012023-12-31_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember67978468" id="Fact001652" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">0.07</ix:nonFraction></span> million and net loss
of $<span id="xdx_901_eus-gaap--NetIncomeLoss_pn4n6_c20230101__20231231__us-gaap--BusinessAcquisitionAxis__custom--ZhenjiangTaopingIoTTechCoLtdZJIOTMember_zEfbCKYtw8qf" title="Net loss"><ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2023-01-012023-12-31_custom_ZhenjiangTaopingIoTTechCoLtdZJIOTMember67978468" id="Fact001654" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">0.18</ix:nonFraction></span> million attributable to ZJIOT.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company will not issue the third phase of restricted ordinary shares before May 31, 2024, due to unsatisfaction of certain performance
targets of ZJIOT as set forth in the share purchase agreement.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 147; Value: 1 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001656" name="us-gaap:VariableInterestEntityDisclosureTextBlock"><p id="xdx_80B_eus-gaap--VariableInterestEntityDisclosureTextBlock_zZOUSCYoZBM9" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>4.
<span id="xdx_82F_zqLBxHUMHqi3">VARIABLE INTEREST ENTITY</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Prior
to the dissolution of the Company&#8217;s VIE structure in September 2021, iASPEC was a variable interest entity of the Company and the
Company was the primary beneficiary of iASPEC. iASPEC&#8217;s assets, liabilities and financial results were consolidated into the Company&#8217;s
financial statements. From September 2021 to June 7, 2022, iASPEC was a wholly-owned subsidiary of the Company. Accordingly, the assets
and liabilities and revenues and expenses of iASPEC have been included in the accompanying consolidated financial statements up to June
7, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
June 2021, iASPEC, through its subsidiary Biznest, acquired TNM. In addition, Biznest formed Shenzhen Taoping Education Technology Co.,
Ltd. and Wuhu Taoping Education Technology Co., Ltd. in 2021 where iASPEC indirectly owned <span id="xdx_90B_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20210630__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--WuhuTaopingEducationTechnologyCoLtdMember_zFS66PzOU6I2" title="Ownership interest, rate"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2021-06-30_custom_WuhuTaopingEducationTechnologyCoLtdMember" id="Fact001658" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">51</ix:nonFraction></span>% equity interests of each entity. As indirect
wholly owned or majority owned subsidiaries of iASPEC, the financial results of TNM, Shenzhen Taoping Education Technology Co., Ltd.
and Wuhu Taoping Education Technology Co., Ltd. have been consolidated into the Company&#8217;s financial statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Prior
to the dissolution of the VIE structure, government licenses, permits and certificates represented substantially all of the unrecognized
revenue-producing assets held by iASPEC, the VIE, and its subsidiaries; recognized revenue-producing assets held by iASPEC and its subsidiaries
consisted of property, equipment and software.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
September 18, 2021, the Company and the Company&#8217;s wholly owned subsidiary, IST entered into an equity transfer agreement with Mr.
Jianghuai Lin, the sole shareholder of iASPEC. Upon closing of the equity transfer, the Company&#8217;s then existing variable interest
entity structure was dissolved and iASPEC became a wholly owned indirect subsidiary of the Company. As a result, all assets and liabilities
of iASPEC were incorporated into the Company&#8217;s balance sheet since December 31, 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
June 7, 2022, the Company transferred <span id="xdx_90B_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20220607__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--UnrelatedThirdPartyMember_zTg4gflYrYFe" title="Ownership interest, rate"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2022-06-07_custom_UnrelatedThirdPartyMember" id="Fact001660" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% equity interests of iASPEC, excluding its subsidiaries, to an unrelated third party for <span id="xdx_907_eus-gaap--DisposalGroupIncludingDiscontinuedOperationConsideration_iI_dxL_c20220607__us-gaap--DisposalGroupClassificationAxis__custom--IASPECTechnologyGroupCoLtdiASPECMember_zeQCkM3GiGR8" title="Disposal group including discontinued operation, consideration::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1662">nil</span></span>
consideration. The disposition resulted in a total recorded income of approximately $<span id="xdx_904_eus-gaap--DisposalGroupIncludingDiscontinuedOperationOtherIncome_pn5n6_c20220101__20221231__us-gaap--DisposalGroupClassificationAxis__custom--IASPECTechnologyGroupCoLtdiASPECMember_z27I6TUxhLm" title="Disposition of  iASPEC"><ix:nonFraction name="us-gaap:DisposalGroupIncludingDiscontinuedOperationOtherIncome" contextRef="From2022-01-012022-12-31_custom_IASPECTechnologyGroupCoLtdiASPECMember" id="Fact001664" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">3.0</ix:nonFraction></span> million for the Company for the year ended December
31, 2022. Upon the disposition, iASPEC, excluding its subsidiaries, was no longer part of the Company. As such, the Company&#8217;s consolidated
financial statements for the year ended December 31, 2022 only included the financial results of iASPEC for the period from January 1
through June 7, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 148; Value: 1 -->
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    <div style="break-before: page; margin-top: 6pt">&#160;</div>
    <!-- Field: /Page --></ix:exclude>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001666" name="TAOP:DisposalsofConsolidatedEntitiesDisclosureTextBlock"><p id="xdx_805_ecustom--DisposalsofConsolidatedEntitiesDisclosureTextBlock_zN3gAvYUzigb" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>5.
<span id="xdx_827_z5G2qPVnyHt5">DISPOSALS OF CONSOLIDATED ENTITIES</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ADG,
SZTET, WHTET, and TDTDG were dissolved on January 28, June 14, May 31, and May 17, 2022, respectively. The dissolution of these companies
results in minimal gain or loss for the year ended December 31, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">TCTCZ
was dissolved on September 20, 2023. The dissolution did not result in any gain or loss for the year ended December 31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company disposed of <span id="xdx_900_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20230906__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--TaopingDigitalAssetsHongKongLimitedMember_zCmrqlFVHWGb" title="Ownership percentage"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-09-06_custom_TaopingDigitalAssetsHongKongLimitedMember" id="Fact001668" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% equity interests of TDL to an unrelated third party for <span id="xdx_907_eus-gaap--DisposalGroupIncludingDiscontinuedOperationConsideration_iI_dxL_c20230906__us-gaap--DisposalGroupClassificationAxis__custom--TaopingDigitalAssetsHongKongLimitedMember_zfH9qX3CRAXl" title="Disposal group including discontinued operation, consideration::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1670">nil</span></span> consideration on September 6, 2023, and disposed
of <span id="xdx_904_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20231027__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--TaopingDigitalAssetsAsiaLimitedMember_zL82ZLqjoHTc" title="Ownership percentage"><span id="xdx_90E_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20231027__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--TaopingCapitalLimitedTCLMember_zvXHHXTfTAI6" title="Ownership percentage"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-10-27_custom_TaopingDigitalAssetsAsiaLimitedMember" id="Fact001672" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-10-27_custom_TaopingCapitalLimitedTCLMember" id="Fact001674" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></ix:nonFraction></span></span>% equity interests of TDAL and TCL (including their subsidiaries) to an unrelated third party for <span id="xdx_909_eus-gaap--DisposalGroupIncludingDiscontinuedOperationConsideration_iI_dxL_c20231027__us-gaap--DisposalGroupClassificationAxis__custom--TaopingDigitalAssetsAsiaLimitedMember_zv2tdlrs0Ti9" title="Disposal group including discontinued operation, consideration::XDX::-"><span id="xdx_901_eus-gaap--DisposalGroupIncludingDiscontinuedOperationConsideration_iI_dxL_c20231027__us-gaap--DisposalGroupClassificationAxis__custom--TaopingCapitalLimitedTCLMember_zASXjuSbYGra" title="Disposal group including discontinued operation, consideration::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1676"><span style="-sec-ix-hidden: xdx2ixbrl1678">nil</span></span></span></span> consideration on October
27, 2023. The disposition resulted in a total recorded loss of $<span id="xdx_90D_eus-gaap--GainLossOnDispositionOfAssets1_c20230101__20231231_zEbHyCvH5yG5" title="Loss on disposition of assets"><ix:nonFraction name="us-gaap:GainLossOnDispositionOfAssets1" contextRef="From2023-01-01to2023-12-31" id="Fact001680" format="ixt:numdotdecimal" decimals="0" unitRef="USD">16,184</ix:nonFraction></span> for the Company for the year ended December 31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">None
of the above-referenced dispositions in 2022 qualified as discontinued operations as they do not individually or in the aggregate represent
a strategic shift that has had a major impact on the Company&#8217;s operations or financial results.</span></p>
<!-- Field: Split-Segment; Name: 002 -->
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001682" name="us-gaap:EarningsPerShareTextBlock"><p id="xdx_806_eus-gaap--EarningsPerShareTextBlock_zfkRLQHZQaFa" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>6.
<span id="xdx_829_zHFCHPSMCvIb">LOSS PER SHARE</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Basic
loss per share is computed by dividing loss available to common shareholders by the weighted-average number of ordinary shares outstanding
during the period. Diluted loss per share reflects the potential dilution that could occur, if securities or other contracts to issue
ordinary shares were exercised or converted into ordinary shares, or resulted in the issuance of ordinary shares that shared in the earnings
of the entity.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001684" name="us-gaap:ScheduleOfEarningsPerShareBasicAndDilutedTableTextBlock"><p id="xdx_892_eus-gaap--ScheduleOfEarningsPerShareBasicAndDilutedTableTextBlock_z8HTBOS7TW38" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Components
of basic and diluted loss per share were as follows for the year ended December 31, 2023, 2022, and 2021:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;<span id="xdx_8B8_z0lDqqIyGrG4" style="display: none">SCHEDULE
OF COMPONENTS OF BASIC AND DILUTED EARNINGS PER SHARE</span></span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">-dilutive effect of stock options- nonemployees</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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  <tr id="xdx_40E_eus-gaap--WeightedAverageNumberOfSharesOutstandingBasic_hus-gaap--StatementOperatingActivitiesSegmentAxis__us-gaap--SegmentDiscontinuedOperationsMember_zCcYSvGPezD2" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">-dilutive effect of stock options- employees</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1751">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1752">-</span></td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">-dilutive effect of stock options- nonemployees</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1755">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1756">-</span></td><td style="text-align: left">&#160;</td></tr>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding" contextRef="From2023-01-012023-12-31_us-gaap_SegmentDiscontinuedOperationsMember" id="Fact001758" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">1,910,783</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_409_eus-gaap--IncomeLossFromDiscontinuedOperationsNetOfTaxPerBasicShare_hus-gaap--StatementOperatingActivitiesSegmentAxis__us-gaap--SegmentDiscontinuedOperationsMember_zv5MFUAqgR5a" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromDiscontinuedOperationsNetOfTaxPerDilutedShare" contextRef="From2023-01-012023-12-31_us-gaap_SegmentDiscontinuedOperationsMember" id="Fact001766" format="ixt:numdotdecimal" decimals="INF" sign="-" unitRef="USDPShares">0.24</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromDiscontinuedOperationsNetOfTaxPerDilutedShare" contextRef="From2022-01-012022-12-31_us-gaap_SegmentDiscontinuedOperationsMember" id="Fact001767" format="ixt:numdotdecimal" decimals="INF" sign="-" unitRef="USDPShares">4.10</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:IncomeLossFromDiscontinuedOperationsNetOfTaxPerDilutedShare" contextRef="From2021-01-012021-12-31_us-gaap_SegmentDiscontinuedOperationsMember" id="Fact001768" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1.39</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"></p>

</ix:nonNumeric><p id="xdx_8A3_zgHnRHLhOoAd" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the years ended December 31, 2023, 2022, and 2021, there was <span id="xdx_900_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_pid_do_c20230101__20231231_zDnitcdBeqU3" title="Diluted earnings per share"><span id="xdx_90C_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_pid_do_c20220101__20221231_z7s2GCniSin8" title="Diluted earnings per share"><span id="xdx_908_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_pid_do_c20210101__20211231_zsvGTA3o0hyi" title="Diluted earnings per share"><ix:nonFraction name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" contextRef="From2023-01-01to2023-12-31" id="Fact001770" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" contextRef="From2022-01-012022-12-31" id="Fact001772" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" contextRef="From2021-01-012021-12-31" id="Fact001774" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares">no</ix:nonFraction></ix:nonFraction></ix:nonFraction></span></span></span>
incremental shares included in the diluted earnings per share calculation, these incremental shares were not added to denominator
for the period that stock options and warrants were outstanding due to the fact that the average market price of the Company&#8217;s
ordinary shares in the period was lower than the exercise prices of the outstanding stock options and warrants. The incremental shares were computed under the treasury stock method.  Because the
effect would be anti-dilutive, there were -<span id="xdx_909_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20230101__20231231__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__us-gaap--EmployeeStockOptionMember_zpCLKZkcDIZ5" title="Number of anti-dilutive shares"><ix:nonFraction name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" contextRef="From2023-01-012023-12-31_us-gaap_EmployeeStockOptionMember" id="Fact001776" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">0</ix:nonFraction></span>-
stock options for employees, -<span id="xdx_90D_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20230101__20231231__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--NonEmployeesStockOptionsMember_zGdktAsALMO8" title="Number of anti-dilutive shares"><ix:nonFraction name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" contextRef="From2023-01-012023-12-31_custom_NonEmployeesStockOptionsMember" id="Fact001778" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">0</ix:nonFraction></span>-
stock options and <span id="xdx_901_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20230101__20231231__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--NonEmployeesStockWarrantsMember_zaBUilmy6sBb" title="Number of anti-dilutive shares"><ix:nonFraction name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" contextRef="From2023-01-012023-12-31_custom_NonEmployeesStockWarrantsMember" id="Fact001780" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">36,000</ix:nonFraction></span>
warrants for nonemployees outstanding that were not included in the computation of dilutive weighted average shares outstanding for
the year ended December 31, 2023. There were <span id="xdx_90F_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20220101__20221231__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__us-gaap--EmployeeStockOptionMember_zSyz7uMtjAqj" title="Number of anti-dilutive shares"><ix:nonFraction name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" contextRef="From2022-01-012022-12-31_us-gaap_EmployeeStockOptionMember" id="Fact001782" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">28,250</ix:nonFraction></span>
stock options for employees, <span id="xdx_901_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20220101__20221231__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--NonEmployeesStockOptionsMember_zhBBuQv1iThb" title="Number of anti-dilutive shares"><ix:nonFraction name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" contextRef="From2022-01-012022-12-31_custom_NonEmployeesStockOptionsMember" id="Fact001784" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">5,737</ix:nonFraction></span>
stock options and <span id="xdx_90B_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20220101__20221231__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--NonEmployeesStockWarrantsMember_zkPnsyGfbYma" title="Number of anti-dilutive shares"><ix:nonFraction name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" contextRef="From2022-01-012022-12-31_custom_NonEmployeesStockWarrantsMember" id="Fact001786" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">46,667</ix:nonFraction></span>
warrants for nonemployees outstanding that were not included in the computation of dilutive weighted average shares outstanding for
the year ended December 31, 2022. There were <span id="xdx_908_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20210101__20211231__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__us-gaap--EmployeeStockOptionMember_ziN6JtlUC6p" title="Number of anti-dilutive shares"><ix:nonFraction name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" contextRef="From2021-01-012021-12-31_us-gaap_EmployeeStockOptionMember" id="Fact001788" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">29,768</ix:nonFraction></span>
stock options for employees, <span id="xdx_90C_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20210101__20211231__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--NonEmployeesStockOptionsMember_zivqIEbwIdu2" title="Number of anti-dilutive shares"><ix:nonFraction name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" contextRef="From2021-01-012021-12-31_custom_NonEmployeesStockOptionsMember" id="Fact001790" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">5,737</ix:nonFraction></span>
stock options and <span id="xdx_90D_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20210101__20211231__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--NonEmployeesStockWarrantsMember_zC6DxToWIKii" title="Number of anti-dilutive shares"><ix:nonFraction name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" contextRef="From2021-01-012021-12-31_custom_NonEmployeesStockWarrantsMember" id="Fact001792" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">50,834</ix:nonFraction></span>
warrants for nonemployees outstanding that were not included in the computation of dilutive weighted average shares outstanding for
the year ended December 31, 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
September 27, 2023, the Company issued a Convertible Promissory Note (&#8220;Note&#8221;) in a private placement in aggregate
principal amount of $<span id="xdx_90C_eus-gaap--DebtInstrumentFaceAmount_iI_c20230927__us-gaap--TypeOfArrangementAxis__custom--ConvertiblePromissoryNotesMember__us-gaap--DebtInstrumentAxis__us-gaap--PrivatePlacementMember_zicdRzawbzv2" title="Aggregate principal amount"><ix:nonFraction name="us-gaap:DebtInstrumentFaceAmount" contextRef="AsOf2023-09-27_custom_ConvertiblePromissoryNotesMember_us-gaap_PrivatePlacementMember" id="Fact001794" format="ixt:numdotdecimal" decimals="0" unitRef="USD">609,000</ix:nonFraction></span>.
The Note matures in 12 months from the issuance date of the Note (the &#8220;Maturity Dates&#8221;), with an annual interest rate of <span id="xdx_90A_eus-gaap--DebtInstrumentInterestRateDuringPeriod_c20230927__20230927__us-gaap--TypeOfArrangementAxis__custom--ConvertiblePromissoryNotesMember__us-gaap--DebtInstrumentAxis__us-gaap--PrivatePlacementMember_zLSrjD90EXKh" title="Annual interest rate"><ix:nonFraction name="us-gaap:DebtInstrumentInterestRateDuringPeriod" contextRef="From2023-09-272023-09-27_custom_ConvertiblePromissoryNotesMember_us-gaap_PrivatePlacementMember" id="Fact001796" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">8</ix:nonFraction>%</span>.
The Note is convertible into the Company&#8217;s ordinary shares at $<span id="xdx_906_eus-gaap--DebtInstrumentConvertibleConversionPrice1_iI_c20230927__us-gaap--TypeOfArrangementAxis__custom--ConvertiblePromissoryNotesMember__us-gaap--DebtInstrumentAxis__us-gaap--PrivatePlacementMember_zGnDl8BNzVS8" title="Convertible ordinary shares per share"><ix:nonFraction name="us-gaap:DebtInstrumentConvertibleConversionPrice1" contextRef="AsOf2023-09-27_custom_ConvertiblePromissoryNotesMember_us-gaap_PrivatePlacementMember" id="Fact001798" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">8.0</ix:nonFraction></span>
per share or at a price equal to 80% multiplied by the lowest daily volume-weighted average price during the 10 trading days
immediately preceding the applicable redemption, subject to certain adjustments and limitations, at the holder&#8217;s option at any
time after six months from the issuance date. <span id="xdx_909_eus-gaap--DebtConversionDescription_c20230927__20230927__us-gaap--TypeOfArrangementAxis__custom--ConvertiblePromissoryNotesMember__us-gaap--DebtInstrumentAxis__us-gaap--PrivatePlacementMember_zkQMz5pGn4H1" title="Convertible note conversion description"><ix:nonNumeric contextRef="From2023-09-272023-09-27_custom_ConvertiblePromissoryNotesMember_us-gaap_PrivatePlacementMember" id="Fact001800" name="us-gaap:DebtConversionDescription">On
the Maturity Date, the holder of the Note has the right to convert all of the outstanding balance of the Note at a price of no less
than $2.0 per share (&#8220;Floor Price&#8221;), which is subject to adjustment by consents of both parties.</ix:nonNumeric></span> The computation
of diluted loss per share for year ended December 31, 2023 did not assume the conversion of the Note since the assumed conversion
would result in decrease in loss per share.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in; text-align: right"><span id="xdx_F00_zguAgtfRHsI" style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span id="xdx_F19_zqhOrdCJ8ke6" style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:footnote id="Footnote001801" xml:lang="en-US">On
    August 1, 2023, the Company implemented a <span id="xdx_90B_eus-gaap--StockholdersEquityReverseStockSplit_c20230801__20230801_zHyl8z59F6s4" title="Reverse stock split" class="xdx_phnt_U3RhdGVtZW50IC0gQ29uc29saWRhdGVkIEJhbGFuY2UgU2hlZXRzIChQYXJlbnRoZXRpY2FsKQA_"><ix:nonNumeric contextRef="From2023-08-012023-08-01" id="Fact001803" name="us-gaap:StockholdersEquityReverseStockSplit">one-for-ten</ix:nonNumeric></span> reverse stock split of the Company&#8217;s issued and outstanding ordinary
    shares. Except shares authorized, all share and per share information has been retroactively adjusted to give effect to the reverse
    stock split for all periods presented, unless otherwise indicated.</ix:footnote></span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 149; Value: 1 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></td></tr></table></div>
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    <!-- Field: /Page --></ix:exclude>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001805" name="us-gaap:RelatedPartyTransactionsDisclosureTextBlock"><p id="xdx_80A_eus-gaap--RelatedPartyTransactionsDisclosureTextBlock_zhSC79aQnys9" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>7.
<span id="xdx_823_zZr2amcwoTZ">RELATED PARTY TRANSACTIONS</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)
Revenue &#8211; related parties</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
May 2017, the Company has entered into a series of contracts with Taoping New Media Co., Ltd. (TNM) and its affiliates for the sale of
the Company&#8217;s Cloud-Application-Terminal based digital ads display terminals, software and technical services. TNM was a related
party company controlled by Mr. Lin, the Company&#8217;s Chairman and Chief Executive Officer, until the Company&#8217;s completion of
the acquisition on June 9, 2021, after which date the related party transactions were eliminated in the Company&#8217;s consolidated
financial statements. For the years ended December 31, 2023, 2022 and 2021, revenues from related parties for sales of products, software,
and advertising were approximately $<span id="xdx_907_eus-gaap--Revenues_pn5n6_c20230101__20231231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_z64OKYimb6x7" title="Revenues from related parties"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2023-01-012023-12-31_custom_TaopingNewMediaCoLtdMember67980406" id="Fact001807" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.2</ix:nonFraction></span> million, $<span id="xdx_906_eus-gaap--Revenues_pn5n6_c20220101__20221231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_zHshzNiwoDT1" title="Revenues from related parties"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2022-01-012022-12-31_custom_TaopingNewMediaCoLtdMember67980421" id="Fact001809" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.1</ix:nonFraction></span> million and $<span id="xdx_90F_eus-gaap--Revenues_pn5n6_c20210101__20211231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_zmrBaGyu4is7" title="Revenues from related parties"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2021-01-012021-12-31_custom_TaopingNewMediaCoLtdMember67980421" id="Fact001811" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.1</ix:nonFraction></span> million, respectively. Accounts receivable from related parties,
net of allowance for credit losses, as of December 31, 2023, 2022 and 2021 were approximately $<span id="xdx_90B_eus-gaap--OtherReceivablesNetCurrent_iI_pn5n6_c20231231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_zX12ytnshAcc" title="Accounts receivable from related parties, net of allowance for credit losses"><ix:nonFraction name="us-gaap:OtherReceivablesNetCurrent" contextRef="AsOf2023-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001813" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.6</ix:nonFraction></span> million, $<span id="xdx_904_eus-gaap--OtherReceivablesNetCurrent_iI_pn5n6_c20221231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_zjbMiak2RDVl" title="Accounts receivable from related parties, net of allowance for credit losses"><ix:nonFraction name="us-gaap:OtherReceivablesNetCurrent" contextRef="AsOf2022-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001815" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.1</ix:nonFraction></span> million and $<span id="xdx_902_eus-gaap--OtherReceivablesNetCurrent_iI_pn5n6_c20211231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_zpwyfNoXf6af" title="Accounts receivable from related parties, net of allowance for credit losses"><ix:nonFraction name="us-gaap:OtherReceivablesNetCurrent" contextRef="AsOf2021-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001817" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.4</ix:nonFraction></span> million,
respectively. Advances received from related parties were approximately $<span id="xdx_900_eus-gaap--OtherReceivables_iI_pn5n6_c20231231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_zdkN4Lx1semg" title="Advances received from related parties"><ix:nonFraction name="us-gaap:OtherReceivables" contextRef="AsOf2023-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001819" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.1</ix:nonFraction></span> million, $<span id="xdx_904_eus-gaap--OtherReceivables_iI_pn5n6_c20221231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_z35br1s0qyY1" title="Advances received from related parties"><ix:nonFraction name="us-gaap:OtherReceivables" contextRef="AsOf2022-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001821" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.1</ix:nonFraction></span> million and $<span id="xdx_906_eus-gaap--OtherReceivables_iI_pn5n6_c20211231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_zOJXZ9XSdm9l" title="Advances received from related parties"><ix:nonFraction name="us-gaap:OtherReceivables" contextRef="AsOf2021-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001823" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.1</ix:nonFraction></span> million as of December 31,
2023, 2022 and 2021, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(b)
Other revenue &#8211; related parties</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the year ended December 31, 2021, the Company had a rental income of approximately $<span id="xdx_908_eus-gaap--RentalIncomeNonoperating_c20210101__20211231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_zfJdvWtv88j2" title="Rental income"><ix:nonFraction name="us-gaap:RentalIncomeNonoperating" contextRef="From2021-01-012021-12-31_custom_TaopingNewMediaCoLtdMember67980421" id="Fact001825" format="ixt:numdotdecimal" decimals="0" unitRef="USD">27,000</ix:nonFraction></span>, from TNM which was for the office lease between
TNM and the Company. Upon completion of the Company&#8217;s acquisition of TNM on June 9, 2021, the related party rental income was eliminated
in the Company&#8217;s consolidated financial statements thereafter. Other revenue generated from related parties also includes system
maintenance service provided to Taoping affiliate customers, which was approximately $<span id="xdx_90E_eus-gaap--OtherIncome_dxL_c20230101__20231231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingAffiliateCustomersMember__srt--ProductOrServiceAxis__custom--SystemMaintenanceServiceMember_zotrKHDs9ih" title="Other revenue related party::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1827">nil</span></span>, $<span id="xdx_908_eus-gaap--OtherIncome_c20220101__20221231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingAffiliateCustomersMember__srt--ProductOrServiceAxis__custom--SystemMaintenanceServiceMember_zqngKvKe2go8" title="Other revenue related party"><ix:nonFraction name="us-gaap:OtherIncome" contextRef="From2022-01-012022-12-31_custom_TaopingAffiliateCustomersMember_custom_SystemMaintenanceServiceMember" id="Fact001829" format="ixt:numdotdecimal" decimals="0" unitRef="USD">20,000</ix:nonFraction></span> and $<span id="xdx_906_eus-gaap--OtherIncome_c20210101__20211231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingAffiliateCustomersMember__srt--ProductOrServiceAxis__custom--SystemMaintenanceServiceMember_z8xdK04Ei6Xh" title="Other revenue related party"><ix:nonFraction name="us-gaap:OtherIncome" contextRef="From2021-01-012021-12-31_custom_TaopingAffiliateCustomersMember_custom_SystemMaintenanceServiceMember" id="Fact001831" format="ixt:numdotdecimal" decimals="0" unitRef="USD">49,000</ix:nonFraction></span>, for the years ended December
31, 2023, 2022 and 2021, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(c)
Amounts due to related parties</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023 and 2022, the amounts due to related parties was $<span id="xdx_904_eus-gaap--OtherLiabilities_iI_pn5n6_c20231231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_zvwBy2CmZ0ki" title="Due to related party"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2023-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001833" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">3.0</ix:nonFraction></span> million and $<span id="xdx_901_eus-gaap--OtherLiabilities_iI_pn5n6_c20221231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--TaopingNewMediaCoLtdMember_zzqbR5i0IaKl" title="Due to related party"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2022-12-31_custom_TaopingNewMediaCoLtdMember" id="Fact001835" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">3.3</ix:nonFraction></span> million, respectively, which included the
borrowing from the major shareholder, Mr. Jianghuai Lin (&#8220;Mr. Lin&#8221;), of approximately $<span id="xdx_90E_eus-gaap--OtherLiabilities_iI_pn5n6_c20231231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--RelatedCompanyOwnedByMrLinMember_zwKkG2Xxs5Ci" title="Due to related party"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2023-12-31_custom_RelatedCompanyOwnedByMrLinMember" id="Fact001837" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.9</ix:nonFraction></span> million and $<span id="xdx_90A_eus-gaap--OtherLiabilities_iI_pn5n6_c20221231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--RelatedCompanyOwnedByMrLinMember_zS98dFT5dCug" title="Due to related party"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2022-12-31_custom_RelatedCompanyOwnedByMrLinMember" id="Fact001839" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.4</ix:nonFraction></span> million, respectively,
for <span id="xdx_90F_eus-gaap--DebtInstrumentTerm_dtY_c20230101__20231231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--RelatedCompanyOwnedByMrLinMember_zNk8tAIOiM18" title="Debt term"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_RelatedCompanyOwnedByMrLinMember" format="ixt-sec:duryear" id="Fact001841" name="us-gaap:DebtInstrumentTerm">2</ix:nonNumeric></span> years without interest and matures on September 4, 2024, and a loan balance of approximately $<span id="xdx_907_eus-gaap--OtherLiabilities_iI_pn5n6_c20231231__srt--OwnershipAxis__custom--RelatedCompanyOwnedByMrLinMember_zQX1V55ZL0C3" title="Due to related party"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2023-12-31_custom_RelatedCompanyOwnedByMrLinMember67980562" id="Fact001843" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">2.1</ix:nonFraction></span> million (RMB<span id="xdx_903_eus-gaap--OtherLiabilities_iI_pn6n6_uRMB_c20231231__srt--OwnershipAxis__custom--RelatedCompanyOwnedByMrLinMember_zX0jjPsbBbEe" title="Due to related party"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2023-12-31_custom_RelatedCompanyOwnedByMrLinMember67980562" id="Fact001845" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="RMB">15</ix:nonFraction></span> million) and approximately
$<span id="xdx_905_eus-gaap--OtherLiabilities_iI_pn5n6_c20221231__srt--OwnershipAxis__custom--RelatedCompanyOwnedByMrLinMember_zeErJsRSRG3f" title="Due to related party"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2022-12-31_custom_RelatedCompanyOwnedByMrLinMember67980562" id="Fact001847" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">2.9</ix:nonFraction></span> million (RMB<span id="xdx_90B_eus-gaap--OtherLiabilities_iI_pn6n6_uRMB_c20221231__srt--OwnershipAxis__custom--RelatedCompanyOwnedByMrLinMember_zZhDTRtnlYfd" title="Due to related party"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2022-12-31_custom_RelatedCompanyOwnedByMrLinMember67980562" id="Fact001849" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="RMB">20</ix:nonFraction></span> million), respectively, from a related company <span id="xdx_908_eus-gaap--MinorityInterestOwnershipPercentageByParent_iI_pid_dp_uPure_c20231231__srt--OwnershipAxis__custom--RelatedCompanyOwnedByMrLinMember_z60gxhM6rfKe" title="Ownership percentage"><ix:nonFraction name="us-gaap:MinorityInterestOwnershipPercentageByParent" contextRef="AsOf2023-12-31_custom_RelatedCompanyOwnedByMrLinMember67980562" id="Fact001851" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% owned by Mr. Lin for <span id="xdx_906_eus-gaap--DebtInstrumentTerm_dtM_c20230101__20231231__srt--OwnershipAxis__custom--RelatedCompanyOwnedByMrLinMember_zi7r4RKnQsge" title="Debt instrument term"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_RelatedCompanyOwnedByMrLinMember67980593" format="ixt-sec:durmonth" id="Fact001853" name="us-gaap:DebtInstrumentTerm">12</ix:nonNumeric></span>-month at the interest of <span id="xdx_900_eus-gaap--DebtInstrumentInterestRateDuringPeriod_pid_dp_uPure_c20230101__20231231__srt--OwnershipAxis__custom--RelatedCompanyOwnedByMrLinMember_z8dzX6QAyOP4" title="Debt interest rate"><ix:nonFraction name="us-gaap:DebtInstrumentInterestRateDuringPeriod" contextRef="From2023-01-012023-12-31_custom_RelatedCompanyOwnedByMrLinMember67980593" id="Fact001855" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">5.85</ix:nonFraction></span>% per annum,
which matures on <span id="xdx_901_eus-gaap--DebtInstrumentMaturityDate_pid_c20230101__20231231__srt--OwnershipAxis__custom--RelatedCompanyOwnedByMrLinMember_zxHczPZpXk9h" title="Debt, maturity date"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_RelatedCompanyOwnedByMrLinMember67980593" format="ixt:datemonthdayyearen" id="Fact001857" name="us-gaap:DebtInstrumentMaturityDate">May 17, 2024</ix:nonNumeric></span>.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001859" name="us-gaap:InventoryDisclosureTextBlock"><p id="xdx_80D_eus-gaap--InventoryDisclosureTextBlock_zGQ75fgB3Qj3" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>8.
<span id="xdx_82A_z50Qc6hjB18f">INVENTORIES</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001861" name="us-gaap:ScheduleOfInventoryCurrentTableTextBlock"><p id="xdx_890_eus-gaap--ScheduleOfInventoryCurrentTableTextBlock_z7p77O04h1f6" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023 and 2022, inventories consist of:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_8B9_zOKjVb52xuRd" style="display: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">SCHEDULE
OF INVENTORIES</span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_495_20231231_zpI9PSm9oCvg" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_491_20221231_zrDd6icE1ycj" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr id="xdx_40B_eus-gaap--InventoryRawMaterialsAndSupplies_iI_pp0p0_maIGzdU1_zSuAGkhZpwQh" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 60%; text-align: left">Raw materials</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right"><ix:nonFraction name="us-gaap:InventoryRawMaterialsAndSupplies" contextRef="AsOf2023-12-31" id="Fact001863" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">3,379</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right"><ix:nonFraction name="us-gaap:InventoryRawMaterialsAndSupplies" contextRef="AsOf2022-12-31" id="Fact001864" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">3,472</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr id="xdx_40F_eus-gaap--InventoryFinishedGoods_iI_pp0p0_maIGzdU1_zHUNdjAbWO13" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Finished goods</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:InventoryFinishedGoods" contextRef="AsOf2023-12-31" id="Fact001866" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,336,771</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:InventoryFinishedGoods" contextRef="AsOf2022-12-31" id="Fact001867" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">510,733</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_406_eus-gaap--InventoryGross_iTI_pp0p0_mtIGzdU1_maINztF9_zrPDPYHJq2pj" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Inventories, gross</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction name="us-gaap:InventoryGross" contextRef="AsOf2023-12-31" id="Fact001869" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,340,150</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction name="us-gaap:InventoryGross" contextRef="AsOf2022-12-31" id="Fact001870" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">514,205</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40E_ecustom--AllowanceForSlowmovingOrObsoleteInventories_iI_pp0p0_maINztF9_zgvctBpiy275" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Allowance for slow-moving or obsolete inventories</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="TAOP:AllowanceForSlowmovingOrObsoleteInventories" contextRef="AsOf2023-12-31" id="Fact001872" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">89,583</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="TAOP:AllowanceForSlowmovingOrObsoleteInventories" contextRef="AsOf2022-12-31" id="Fact001873" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">157,847</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr id="xdx_400_eus-gaap--InventoryNet_iTI_pp0p0_mtINztF9_zmvfHHTT1Jvd" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 2.5pt">Inventories, net</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:InventoryNet" contextRef="AsOf2023-12-31" id="Fact001875" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,250,567</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:InventoryNet" contextRef="AsOf2022-12-31" id="Fact001876" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">356,358</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table>

</ix:nonNumeric><p id="xdx_8AE_z1PVPfbGhasg" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the year ended December 31, 2023, there was a reversal of impairments for obsolete inventories in the amount of approximately $<span id="xdx_900_eus-gaap--InventoryWriteDown_c20230101__20231231__us-gaap--IncomeStatementLocationAxis__us-gaap--GeneralAndAdministrativeExpenseMember_z6RDA2fNtAIa" title="Impairment of inventory"><ix:nonFraction name="us-gaap:InventoryWriteDown" contextRef="From2023-01-012023-12-31_us-gaap_GeneralAndAdministrativeExpenseMember" id="Fact001878" format="ixt:numdotdecimal" decimals="0" unitRef="USD">53,000</ix:nonFraction></span>.
For the year ended December 31, 2022, impairments expense for obsolete inventories were approximately $<span id="xdx_90B_eus-gaap--InventoryWriteDown_c20220101__20221231__us-gaap--IncomeStatementLocationAxis__us-gaap--GeneralAndAdministrativeExpenseMember_z7D7sU6i0Fui" title="Impairment of inventory"><ix:nonFraction name="us-gaap:InventoryWriteDown" contextRef="From2022-01-012022-12-31_us-gaap_GeneralAndAdministrativeExpenseMember" id="Fact001880" format="ixt:numdotdecimal" decimals="0" unitRef="USD">64,000</ix:nonFraction></span>. For the year ended December
31, 2021, there was a reversal of impairments for obsolete inventories in the amount of approximately $<span id="xdx_906_eus-gaap--InventoryWriteDown_c20210101__20211231__us-gaap--IncomeStatementLocationAxis__us-gaap--GeneralAndAdministrativeExpenseMember_z2fFN0ReS95" title="Impairment of inventory"><ix:nonFraction name="us-gaap:InventoryWriteDown" contextRef="From2021-01-012021-12-31_us-gaap_GeneralAndAdministrativeExpenseMember" id="Fact001882" format="ixt:numdotdecimal" decimals="0" unitRef="USD">214,000</ix:nonFraction></span>. Impairment charges on
inventories are included with administrative expenses.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 150; Value: 1 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></td></tr></table></div>
    <div style="break-before: page; margin-top: 6pt">&#160;</div>
    <!-- Field: /Page --></ix:exclude>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001884" name="us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock"><p id="xdx_80A_eus-gaap--PropertyPlantAndEquipmentDisclosureTextBlock_zyAR0xM5qgZ4" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>9.
<span id="xdx_821_zGEmxAJ6hoU4">PROPERTY, EQUIPMENT AND SOFTWARE</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001886" name="us-gaap:PropertyPlantAndEquipmentTextBlock"><p id="xdx_890_eus-gaap--PropertyPlantAndEquipmentTextBlock_zsPGIBetOLPg" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023 and 2022, property, equipment and software consist of:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_8BE_zWZ0k6tCWMOh" style="display: none">SCHEDULE
OF PROPERTY, EQUIPMENT AND SOFTWARE </span> &#160;</span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
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    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr id="xdx_40B_eus-gaap--PropertyPlantAndEquipmentGross_iI_hus-gaap--PropertyPlantAndEquipmentByTypeAxis__custom--ElectronicEquipmentFurnitureAndFixturesMember_z1Os61AXCRO7" style="vertical-align: bottom; background-color: White">
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  <tr id="xdx_402_eus-gaap--PropertyPlantAndEquipmentGross_iI_hus-gaap--PropertyPlantAndEquipmentByTypeAxis__custom--PurchasedSoftwareMember_zrR4H6tjQ8g" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr id="xdx_404_eus-gaap--PropertyPlantAndEquipmentGross_iI_maPPAENzDKT_zzdTdljYFC72" style="vertical-align: bottom; background-color: White">
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  <tr id="xdx_404_eus-gaap--PropertyPlantAndEquipmentNet_iTI_mtPPAENzDKT_zYNGw8QF6Zzd" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 2.5pt">Property, equipment and software, net</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
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</ix:nonNumeric><p id="xdx_8AF_ziACmwSoAFv9" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Depreciation
expense for the year ended December 31, 2023, 2022, and 2021 were approximately $<span id="xdx_90E_eus-gaap--Depreciation_pn5n6_c20230101__20231231__us-gaap--StatementOperatingActivitiesSegmentAxis__us-gaap--SegmentContinuingOperationsMember_zZAb9ru57ymk" title="Depreciation expenses"><ix:nonFraction name="us-gaap:Depreciation" contextRef="From2023-01-012023-12-31_us-gaap_SegmentContinuingOperationsMember" id="Fact001912" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">2.5</ix:nonFraction></span> million, $<span id="xdx_906_eus-gaap--Depreciation_pn5n6_c20220101__20221231__us-gaap--StatementOperatingActivitiesSegmentAxis__us-gaap--SegmentContinuingOperationsMember_zOUOl6kOQYpj" title="Depreciation expenses"><ix:nonFraction name="us-gaap:Depreciation" contextRef="From2022-01-012022-12-31_us-gaap_SegmentContinuingOperationsMember" id="Fact001914" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">3.5</ix:nonFraction></span> million and $<span id="xdx_90E_eus-gaap--Depreciation_pn5n6_c20210101__20211231__us-gaap--StatementOperatingActivitiesSegmentAxis__us-gaap--SegmentContinuingOperationsMember_zyLwKLKZLtE2" title="Depreciation expenses"><ix:nonFraction name="us-gaap:Depreciation" contextRef="From2021-01-012021-12-31_us-gaap_SegmentContinuingOperationsMember" id="Fact001916" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">2.2</ix:nonFraction></span> million for continuing
operations, and $<span id="xdx_909_eus-gaap--Depreciation_pn5n6_c20230101__20231231__us-gaap--StatementOperatingActivitiesSegmentAxis__us-gaap--SegmentDiscontinuedOperationsMember_z29jCFdFvGCc" title="Depreciation expenses"><ix:nonFraction name="us-gaap:Depreciation" contextRef="From2023-01-012023-12-31_us-gaap_SegmentDiscontinuedOperationsMember" id="Fact001918" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.5</ix:nonFraction></span> million, $<span id="xdx_90C_eus-gaap--Depreciation_pn5n6_c20220101__20221231__us-gaap--StatementOperatingActivitiesSegmentAxis__us-gaap--SegmentDiscontinuedOperationsMember_zpAvRUcX8ypj" title="Depreciation expenses"><ix:nonFraction name="us-gaap:Depreciation" contextRef="From2022-01-012022-12-31_us-gaap_SegmentDiscontinuedOperationsMember" id="Fact001920" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">3.7</ix:nonFraction></span> million and $<span id="xdx_901_eus-gaap--Depreciation_pn5n6_c20210101__20211231__us-gaap--StatementOperatingActivitiesSegmentAxis__us-gaap--SegmentDiscontinuedOperationsMember_zflHB6M685K1" title="Depreciation expenses"><ix:nonFraction name="us-gaap:Depreciation" contextRef="From2021-01-012021-12-31_us-gaap_SegmentDiscontinuedOperationsMember" id="Fact001922" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">1.5</ix:nonFraction></span> million for discontinued operations respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Management
regularly evaluates property, equipment and software for impairment, if an event occurs or circumstances change that would potentially
indicate that the carrying amount of the property, equipment and software exceeded its fair value. Management utilizes the discounted
cash flow method to estimate the fair value of the property, equipment and software.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Company&#8217;s
office buildings, with net carry value of approximately $<span id="xdx_906_eus-gaap--DebtInstrumentCollateralAmount_iI_pn5n6_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__srt--OfficeBuildingMember_z5XSSuDw4EN2" title="Asset collateral amount"><ix:nonFraction name="us-gaap:DebtInstrumentCollateralAmount" contextRef="AsOf2023-12-31_srt_OfficeBuildingMember" id="Fact001924" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">2.5</ix:nonFraction></span> million, are used as collateral for its short-term bank loan.</span></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001926" name="us-gaap:DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock"><p id="xdx_80F_eus-gaap--DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock_zMLCfSx4aUjj" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.
<span id="xdx_825_zgJZlC0Fvolb">DISCONTINUED OPERATIONS</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2022, the Company ceased its cryptocurrency mining business and entering into a series of contracts with certain third parties
to sell its cryptocurrency mining and related equipment, terminating the leases for both the office facility and the storage rooms for
most mining machines, and laying off relevant employees. As a result, the operations of Cryptocurrency mining business are reflected
within &#8220;discontinued operations&#8221; periods presented.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001928" name="us-gaap:ScheduleOfDisposalGroupsIncludingDiscontinuedOperationsIncomeStatementBalanceSheetAndAdditionalDisclosuresTextBlock"><p id="xdx_89F_eus-gaap--ScheduleOfDisposalGroupsIncludingDiscontinuedOperationsIncomeStatementBalanceSheetAndAdditionalDisclosuresTextBlock_z8oHSHrU9Vz4" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
significant items included within discontinued operations are as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_8B5_z7pkSCMsBnsf" style="display: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">SCHEDULE
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_493_20230101__20231231__us-gaap--StatementOperatingActivitiesSegmentAxis__us-gaap--SegmentDiscontinuedOperationsMember_zmqFQKNWHaCd" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="width: 60%; text-align: left">Revenue - Cryptocurrency mining</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1930">-</span></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 2%">&#160;</td>
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  <tr id="xdx_408_eus-gaap--CostOfRevenue_hsrt--ProductOrServiceAxis__custom--CryptocurrencyMiningMember_zF1yhsCoAC7g" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Cost - Cryptocurrency mining</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:CostOfRevenue" contextRef="From2022-01-012022-12-31_us-gaap_SegmentDiscontinuedOperationsMember_custom_CryptocurrencyMiningMember" id="Fact001934" format="ixt:numdotdecimal" decimals="0" unitRef="USD">3,898,171</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_401_ecustom--DisposalGroupIncludingDiscontinuedOperationAdministrativeExpenses_zRtCHj8JaZw8" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Administrative expenses</td><td>&#160;</td>
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  <tr id="xdx_407_eus-gaap--GainLossOnSaleOfInvestments_iN_di_hsrt--ProductOrServiceAxis__custom--CryptocurrencyMiningMember_zlldAFhvNi25" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">Operating (loss) from discontinued operations</td><td>&#160;</td>
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    <td style="text-align: left">Interest income</td><td>&#160;</td>
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    <td style="text-align: left; padding-bottom: 1.5pt">Interest expense</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: left">(Loss) from discontinued operations before income taxes</td><td>&#160;</td>
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    <td style="text-align: left; padding-bottom: 1.5pt">Income tax expense</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1967">-</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
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    <td style="text-align: left; padding-bottom: 2.5pt">Net (loss) from discontinued operations</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(<ix:nonFraction name="us-gaap:ProfitLoss" contextRef="From2023-01-012023-12-31_us-gaap_SegmentDiscontinuedOperationsMember" id="Fact001969" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">465,791</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
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  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 151; Value: 1 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></td></tr></table></div>
    <div style="break-before: page; margin-top: 6pt">&#160;</div>
    <!-- Field: /Page --></ix:exclude>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Assets
and liabilities of discontinued operations included within the Consolidated Balance Sheets are comprised of the following:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr id="xdx_409_eus-gaap--DisposalGroupIncludingDiscontinuedOperationCashAndCashEquivalents_iI_maCz467_maCzWsi_maACz3cX_zK5A7ZmVGl" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 60%; text-align: left">Cash and cash equivalents</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<span style="-sec-ix-hidden: xdx2ixbrl1972">-</span></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 2%">&#160;</td>
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    <td style="text-align: left">Other current assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1975">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:DisposalGroupIncludingDiscontinuedOperationOtherCurrentAssets" contextRef="AsOf2022-12-31_us-gaap_SegmentDiscontinuedOperationsMember" id="Fact001976" format="ixt:numdotdecimal" decimals="0" unitRef="USD">37,015</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1981">-</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:AssetsOfDisposalGroupIncludingDiscontinuedOperationCurrent" contextRef="AsOf2022-12-31_us-gaap_SegmentDiscontinuedOperationsMember" id="Fact001985" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,326,265</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">Accrued payroll and benefits</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1990">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:DisposalGroupIncludingDiscontinuedOperationAccruedLiabilitiesCurrent" contextRef="AsOf2022-12-31_us-gaap_SegmentDiscontinuedOperationsMember" id="Fact001991" format="ixt:numdotdecimal" decimals="0" unitRef="USD">3,065</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_402_eus-gaap--DisposalGroupIncludingDiscontinuedOperationOtherCurrentLiabilities_iI_maCz3Af_zfwRmpt9n7gc" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Other payables and accrued expenses</td><td>&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="width: 46%; font-weight: bold; text-align: left">Net cash provided by (used in) operating activities</td><td style="width: 2%">&#160;</td>
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  <tr id="xdx_403_eus-gaap--CashProvidedByUsedInInvestingActivitiesDiscontinuedOperations_zciXpJIIKzd6" style="vertical-align: bottom; background-color: White">
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</ix:nonNumeric><p id="xdx_8AE_zRoeZEO3Ujn4" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>CRYPTOCURRENCIES</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023 and 2022, no cryptocurrencies held by the Company.</span></p>
<!-- Field: Split-Segment; Name: 003 -->
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002010" name="us-gaap:DebtDisclosureTextBlock"><p id="xdx_805_eus-gaap--DebtDisclosureTextBlock_z6XrfjmPJy4c" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>11.
<span id="xdx_826_zlBfqwZ95xbd">BANK LOANS</span></b></span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002012" name="us-gaap:ScheduleOfShortTermDebtTextBlock"><p id="xdx_89B_eus-gaap--ScheduleOfShortTermDebtTextBlock_zrUo1UpgQP51" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_8B6_zGNzZ5ZDlxZi" style="display: none">SCHEDULE
OF SHORT-TERM BANK DEBT</span></span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" id="xdx_490_20221231_zWdQN2JmLwj6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr id="xdx_405_eus-gaap--SecuredDebt_iI_maSTBzXz8_zwmmO4cyMM7c" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 60%; text-align: left; padding-bottom: 1.5pt">Secured short-term loans</td><td style="width: 2%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 16%; text-align: right"><ix:nonFraction name="us-gaap:SecuredDebt" contextRef="AsOf2023-12-31" id="Fact002014" format="ixt:numdotdecimal" decimals="0" unitRef="USD">8,547,509</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="width: 2%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 16%; text-align: right"><ix:nonFraction name="us-gaap:SecuredDebt" contextRef="AsOf2022-12-31" id="Fact002015" format="ixt:numdotdecimal" decimals="0" unitRef="USD">7,203,762</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_405_eus-gaap--ShortTermBorrowings_iTI_mtSTBzXz8_zoKSCmr5vgch" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 2.5pt">Total short-term bank loans</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:ShortTermBorrowings" contextRef="AsOf2023-12-31" id="Fact002017" format="ixt:numdotdecimal" decimals="0" unitRef="USD">8,547,509</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:ShortTermBorrowings" contextRef="AsOf2022-12-31" id="Fact002018" format="ixt:numdotdecimal" decimals="0" unitRef="USD">7,203,762</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
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</ix:nonNumeric><p id="xdx_8AA_z1TUZ2yoOB69" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 152; Value: 1 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></td></tr></table></div>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002020" name="us-gaap:ScheduleOfDebtTableTextBlock"><p id="xdx_891_eus-gaap--ScheduleOfDebtTableTextBlock_z8esAslxfjKh" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Detailed
information of secured short-term loan balances as of December 31, 2023 and 2022 were as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_8B9_zenHGwHg1Ap1" style="display: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">SCHEDULE
OF SECURED SHORT-TERM BANK DEBT</span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" id="xdx_496_20221231_zwCOtNOcArh2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr id="xdx_401_eus-gaap--ShortTermBorrowings_iI_hus-gaap--ShortTermDebtTypeAxis__custom--BankLoanTwoMember_zXXqv5ZDFiU1" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 60%; text-align: left; padding-bottom: 1.5pt">Guaranteed by IST and Mr. Lin and Collateralized by the real property of ISIOT and equity investment of ISTIL</td><td style="width: 2%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 16%; text-align: right"><ix:nonFraction name="us-gaap:ShortTermBorrowings" contextRef="AsOf2023-12-31_custom_BankLoanTwoMember" id="Fact002022" format="ixt:numdotdecimal" decimals="0" unitRef="USD">8,547,509</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="width: 2%; padding-bottom: 1.5pt">&#160;</td>
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  <tr id="xdx_402_eus-gaap--ShortTermBorrowings_iI_zBUuqtsbuDPk" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 2.5pt">Total</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
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</ix:nonNumeric><p id="xdx_8A7_zUPjxPQZk4x9" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
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to the Company. The bank borrowings are in the form of credit facilities. Amounts available to the Company from the banks are based on
the amount of collateral pledged or the amount guaranteed by the Company&#8217;s subsidiaries. These borrowings bear fixed interest rates
ranging from <span id="xdx_907_eus-gaap--DebtInstrumentInterestRateDuringPeriod_pid_dp_uPure_c20230101__20231231__srt--RangeAxis__srt--MinimumMember_zwUTO7PPgtUj" title="Debt instrument interest rate"><ix:nonFraction name="us-gaap:DebtInstrumentInterestRateDuringPeriod" contextRef="From2023-01-012023-12-31_srt_MinimumMember" id="Fact002032" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">3.45</ix:nonFraction></span>% to <span id="xdx_905_eus-gaap--DebtInstrumentInterestRateDuringPeriod_pid_dp_uPure_c20230101__20231231__srt--RangeAxis__srt--MaximumMember_zAkL3OfsXP1e" title="Debt instrument interest rate"><ix:nonFraction name="us-gaap:DebtInstrumentInterestRateDuringPeriod" contextRef="From2023-01-012023-12-31_srt_MaximumMember" id="Fact002034" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">4.80</ix:nonFraction></span>% per annum. The weighted average interest rates on short term debts were approximately <span id="xdx_90A_eus-gaap--DebtWeightedAverageInterestRate_iI_pid_dp_uPure_c20231231_zZjZcVfNfJHa" title="Debt weiighted average interest rate"><ix:nonFraction name="us-gaap:DebtWeightedAverageInterestRate" contextRef="AsOf2023-12-31" id="Fact002036" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">4.15</ix:nonFraction></span>%, <span id="xdx_90B_eus-gaap--DebtWeightedAverageInterestRate_iI_pid_dp_uPure_c20221231_zBZ3xAlCfjfj" title="Debt weiighted average interest rate"><ix:nonFraction name="us-gaap:DebtWeightedAverageInterestRate" contextRef="AsOf2022-12-31" id="Fact002038" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">4.76</ix:nonFraction></span>% and <span id="xdx_90E_eus-gaap--DebtWeightedAverageInterestRate_iI_pid_dp_uPure_c20211231_zcbvw27H3715" title="Debt weiighted average interest rate"><ix:nonFraction name="us-gaap:DebtWeightedAverageInterestRate" contextRef="AsOf2021-12-31" id="Fact002040" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">5.38</ix:nonFraction></span>%
for the year ended December 31, 2023, 2022, and 2021, respectively. The interest expenses were approximately $<span id="xdx_908_eus-gaap--InterestExpenseDebt_pn5n6_c20230101__20231231_zuwTYOVrjaW6" title="Interest expense"><ix:nonFraction name="us-gaap:InterestExpenseDebt" contextRef="From2023-01-01to2023-12-31" id="Fact002042" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.4</ix:nonFraction></span> million, $<span id="xdx_902_eus-gaap--InterestExpenseDebt_pn5n6_c20220101__20221231_zgxxJkSg8Gzc" title="Interest expense"><ix:nonFraction name="us-gaap:InterestExpenseDebt" contextRef="From2022-01-012022-12-31" id="Fact002044" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.4</ix:nonFraction></span> million,
and $<span id="xdx_904_eus-gaap--InterestExpenseDebt_pn5n6_c20210101__20211231_zrtXP43E0lBg" title="Interest expense"><ix:nonFraction name="us-gaap:InterestExpenseDebt" contextRef="From2021-01-012021-12-31" id="Fact002046" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.4</ix:nonFraction></span> million, respectively, for the same periods, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002048" name="us-gaap:IncomeTaxDisclosureTextBlock"><p id="xdx_80A_eus-gaap--IncomeTaxDisclosureTextBlock_zeixRMQEoJB3" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>12.
<span id="xdx_821_zGR4fGUQOnEb">INCOME TAXES</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002050" name="us-gaap:ScheduleOfIncomeBeforeIncomeTaxDomesticAndForeignTableTextBlock"><p id="xdx_89A_eus-gaap--ScheduleOfIncomeBeforeIncomeTaxDomesticAndForeignTableTextBlock_zgxFFLs1WYd8" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pre-tax
(loss) income from continuing operations and discontinued operations for the year ended December 31, 2023, 2022, and 2021 in the following
jurisdictions:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_8B2_zVW8mcQaZax2" style="display: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">SCHEDULE
OF INCOME BEFORE INCOME TAXES</span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_49B_20230101__20231231_zSQ0VBciAs6f" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_497_20220101__20221231_zrRqpkQ5R1t5" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">(<ix:nonFraction name="TAOP:IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2022-01-012022-12-31_custom_PRCMember" id="Fact002053" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">4,284,019</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">(<ix:nonFraction name="TAOP:IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2021-01-012021-12-31_custom_PRCMember" id="Fact002054" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">8,287,495</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td></tr>
  <tr id="xdx_400_ecustom--IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest_hus-gaap--IncomeTaxAuthorityAxis__country--HK_zZeNyZiF3sV" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Hong Kong</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="TAOP:IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2023-01-012023-12-31_country_HK" id="Fact002056" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">123,008</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="TAOP:IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2022-01-012022-12-31_country_HK" id="Fact002057" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">1,384,286</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="TAOP:IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2021-01-012021-12-31_country_HK" id="Fact002058" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">876,289</ix:nonFraction></td><td style="text-align: left">)</td></tr>
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    <td style="text-align: left; padding-bottom: 1.5pt">BVI</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="TAOP:IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2023-01-012023-12-31_custom_BVIMember" id="Fact002060" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">3,336,033</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="TAOP:IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2022-01-012022-12-31_custom_BVIMember" id="Fact002061" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">1,343,473</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="TAOP:IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2021-01-012021-12-31_custom_BVIMember" id="Fact002062" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">755,754</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr id="xdx_400_ecustom--IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest_zNnc6NReHfbf" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 2.5pt">Total (loss) before income taxes</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(<ix:nonFraction name="TAOP:IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2023-01-01to2023-12-31" id="Fact002064" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">689,961</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(<ix:nonFraction name="TAOP:IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2022-01-012022-12-31" id="Fact002065" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">7,011,778</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(<ix:nonFraction name="TAOP:IncomeLossFromContinuingAndDiscontinuedOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2021-01-012021-12-31" id="Fact002066" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">9,919,538</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</td></tr>
  </table>

</ix:nonNumeric><p id="xdx_8AD_zVDBpssP7vj2" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">United
States</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
of the domestication transaction in 2012 by which CNIT BVI became the parent of our group, under Section 7874 of the Internal Revenue
Code of 1986, as amended, the Company is treated for U.S. federal tax purposes as a U.S. corporation and, among other consequences, is
subject to U.S. federal income tax on its worldwide income. It is management&#8217;s intention to reinvest all the income attributable
to the Company earned by its operations outside the United States.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the &#8220;Act&#8221;).
The Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate
tax rate from <span id="xdx_909_eus-gaap--EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate_pid_dp_uPure_c20230101__20231231__srt--StatementGeographicalAxis__country--US__srt--RangeAxis__srt--MaximumMember_zY43A1bnXY11" title="Corporate tax rate"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" contextRef="From2023-01-012023-12-31_country_US_srt_MaximumMember" id="Fact002068" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">35</ix:nonFraction></span> percent to <span id="xdx_900_eus-gaap--EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate_pid_dp_uPure_c20230101__20231231__srt--StatementGeographicalAxis__country--US__srt--RangeAxis__srt--MinimumMember_zXi5qU2q8yU4" title="Corporate tax rate"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" contextRef="From2023-01-012023-12-31_country_US_srt_MinimumMember" id="Fact002070" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">21</ix:nonFraction></span> percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of
foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a tax
on Global Intangible Low-Taxed Income (&#8220;GILTI&#8221;) which is a current inclusion in U.S. federal taxable income of certain earnings
of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (&#8220;AMT&#8221;) and changing how existing
AMT credits can be realized; (6) creating the base erosion anti-abuse tax (&#8220;BEAT&#8221;), a new minimum tax; (7) creating a new
limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards
created in tax years beginning after December 31, 2017.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
SEC staff issued Staff Accounting Bulletin 118, which provides guidance on accounting for the tax effects of the Act for which the accounting
under ASC 740, Income Taxes (&#8220;ASC 740&#8221;) is incomplete. To the extent that a company&#8217;s accounting for certain income
tax effects of the Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the
financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue
to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before enactment of the Act.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 153; Value: 1 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></td></tr></table></div>
    <div style="break-before: page; margin-top: 6pt">&#160;</div>
    <!-- Field: /Page --></ix:exclude>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company from time to time evaluates the tax effect of GILTI, and determined that there was no impact of GILTI tax to the Company&#8217;s
consolidated financial statements as of December 31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">BVI</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the current laws of the BVI, dividends and capital gains arising from the Company&#8217;s investments in the BVI and ordinary income,
if any, are not subject to income taxes.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Hong
Kong</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the current laws of Hong Kong, IST HK, TDAL, TDL and TCL are subject to a profit tax rate of <span id="xdx_906_eus-gaap--EffectiveIncomeTaxRateReconciliationForeignIncomeTaxRateDifferential_pid_dp_uPure_c20230101__20231231__us-gaap--IncomeTaxAuthorityAxis__country--HK_zeNjk0AM1iD8" title="Tax profits"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationForeignIncomeTaxRateDifferential" contextRef="From2023-01-012023-12-31_country_HK" id="Fact002072" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">16.5</ix:nonFraction></span>%.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">PRC</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002074" name="us-gaap:ScheduleOfComponentsOfIncomeTaxExpenseBenefitTableTextBlock"><p id="xdx_898_eus-gaap--ScheduleOfComponentsOfIncomeTaxExpenseBenefitTableTextBlock_z3qREsJxtPY2" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Income
tax expense (benefit) from continuing operations consists of the following:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_8B6_zSKX7KjlaBh3" style="display: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">SCHEDULE
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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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</ix:nonNumeric><p id="xdx_8AA_zFdZbaRVFw9a" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002084" name="us-gaap:ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock"><p id="xdx_894_eus-gaap--ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock_zYkzLXgg9Jo5" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Current
income tax expense (benefit) was recorded in 2023, 2022 and 2021 and was related to differences between the book and corporate income
tax returns.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_8BC_zPgvOSPlEnRh" style="display: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">SCHEDULE
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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="text-align: left">Expected income tax (benefit)</td><td>&#160;</td>
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    <td style="text-align: left">Permanent differences</td><td>&#160;</td>
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    <td style="text-align: left; padding-bottom: 1.5pt">Tax effect of tax losses unrecognized</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</ix:nonNumeric><p id="xdx_8AC_zMdXO9oFSgRc" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s tax loss carry forwards totaling RMB<span id="xdx_902_eus-gaap--OperatingLossCarryforwards_iI_pn5n6_uRMB_c20231231_zVVs6RE0Rnnj" title="Operating loss carry forwards, net"><ix:nonFraction name="us-gaap:OperatingLossCarryforwards" contextRef="AsOf2023-12-31" id="Fact002114" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="RMB">160.8</ix:nonFraction></span> million ($<span id="xdx_90C_eus-gaap--OperatingLossCarryforwards_iI_pn5n6_c20231231_z53PnzYgi5lb" title="Operating loss carryforwards"><ix:nonFraction name="us-gaap:OperatingLossCarryforwards" contextRef="AsOf2023-12-31" id="Fact002116" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">22.7</ix:nonFraction></span> million) as of December 31, 2023, substantially all of which
were from PRC subsidiaries and will expire on various dates through December 31, 2033. Deferred tax asset was not provided for respective
tax losses.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">IST
is approved as being high-technology enterprises and subject to PRC enterprise income tax rate (&#8220;EIT&#8221;) at <span id="xdx_905_eus-gaap--EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate_pid_dp_uPure_c20230101__20231231__dei--LegalEntityAxis__custom--HighTechnologyEnterpriseMember_zWrDQN8EmaGb" title="PRC statutory tax rate"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" contextRef="From2023-01-012023-12-31_custom_HighTechnologyEnterpriseMember" id="Fact002118" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">15</ix:nonFraction></span>%. For Biznest,
the income tax starts from the earning year, is tax exempt for the first two years and is subject to <span id="xdx_90B_eus-gaap--EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate_pid_dp_uPure_c20230101__20231231__dei--LegalEntityAxis__custom--BiznestMember_zLo8JVu7TE4j" title="PRC statutory tax rate"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" contextRef="From2023-01-012023-12-31_custom_BiznestMember" id="Fact002120" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">12.5</ix:nonFraction></span>% income tax rate for year 3-5.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company recognizes that virtually all tax positions in the PRC are not free of some degree of uncertainty due to tax law and policy changes
by the State. However, the Company cannot reasonably quantify political risk factors and thus must depend on guidance issued by current
State officials.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Based
on all known facts, circumstances, and current tax law, the Company has not recorded tax benefits from year 2021 to 2023. The Company
believes that there are no tax positions for which it is reasonably possible, based on current Chinese tax laws and policies, that the
unrecognized tax benefits will significantly increase or decrease over the next 12 months, individually or in the aggregate, and have
a material effect on the Company&#8217;s results of operations, financial condition or cash flows.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
Any accrued interest or penalties associated with any unrecognized tax benefits were not significant for the year ended December 31,
2023, 2022, and 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
the Company intends to reinvest its earnings to further expand its businesses in the PRC, the PRC subsidiaries do not intend to declare
dividends to their parent companies in the foreseeable future. The Company&#8217;s foreign subsidiaries are in a cumulative deficit position.
Accordingly, the Company has not recorded any deferred taxes on the cumulative amount of any undistributed deficit. It is impractical
to calculate the tax effect of the deficit at this time.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002122" name="us-gaap:OtherAssetsDisclosureTextBlock"><p id="xdx_80D_eus-gaap--OtherAssetsDisclosureTextBlock_zYVCRgjDq5f9" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>13.
<span id="xdx_825_zaFHE8C0Y0Ej">OTHER CURRENT AND NON-CURRENT ASSETS</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002124" name="us-gaap:ScheduleOfOtherCurrentAssetsTableTextBlock"><p id="xdx_89D_eus-gaap--ScheduleOfOtherCurrentAssetsTableTextBlock_zstS8GVKNIYk" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)
As of December 31, 2023 and 2022, other current assets consist of:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_8B2_zY0O1DqDh8M" style="display: none">SCHEDULE OF OTHER CURRENT ASSETS</span><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_495_20231231_z8oEtQoziksa" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_492_20221231_zsFbTfeDMKtb" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr id="xdx_403_ecustom--AdvancesToUnrelatedparties_iI_pp0p0_maOACzEPf_maOACzCLe_zhS82biKOnwa" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 60%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Advances to unrelated-parties <sup id="xdx_F40_zRjyl6RUxpfl">(i) </sup></span></td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right"><ix:nonFraction name="TAOP:AdvancesToUnrelatedparties" contextRef="AsOf2023-12-31" id="Fact002126" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,209,202</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 2%">&#160;</td>
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  <tr id="xdx_403_eus-gaap--OtherReceivables_iI_pp0p0_maOACzCLe_zqf43LHCUf13" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Advances to a related party</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:OtherReceivables" contextRef="AsOf2023-12-31" id="Fact002129" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">239,469</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:OtherReceivables" contextRef="AsOf2022-12-31" id="Fact002130" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">246,080</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_406_eus-gaap--OtherReceivablesNetCurrent_iI_pp0p0_maOACzCLe_zF8ZZUSV5fSi" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Advances to employees</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:OtherReceivablesNetCurrent" contextRef="AsOf2023-12-31" id="Fact002132" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">78,566</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left; padding-bottom: 1.5pt">Other current assets</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="TAOP:OtherCurrentAssets" contextRef="AsOf2023-12-31" id="Fact002135" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">112,833</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="TAOP:OtherCurrentAssets" contextRef="AsOf2022-12-31" id="Fact002136" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">161,456</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_40C_eus-gaap--OtherAssetsCurrent_iTI_pp0p0_mtOACzCLe_zGvnZm6jE6za" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 2.5pt"><span style="display: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">Total</span></td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:OtherAssetsCurrent" contextRef="AsOf2023-12-31" id="Fact002138" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,640,070</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:OtherAssetsCurrent" contextRef="AsOf2022-12-31" id="Fact002139" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,554,488</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in; text-align: left"><span id="xdx_F0E_zT25z6RMVcJ7" style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span id="xdx_F1E_zUx0Tyv7dzxd" style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:footnote id="Footnote002140" xml:lang="en-US">The
    advances to unrelated parties for business development are non-interest bearing and are due on demand.</ix:footnote></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
                                            of December 31, 2023, the balance included the amount due from a third-party vendor of approximately
                                            $<span id="xdx_903_eus-gaap--OtherReceivables_iI_pp0p0_c20231231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--RelatedPartyMember_zxbHAVvEXKWj" title="Due from related parties" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIE9USEVSIENVUlJFTlQgQVNTRVRTIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:OtherReceivables" contextRef="AsOf2023-12-31_us-gaap_RelatedPartyMember" id="Fact002142" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">383,000</ix:nonFraction></span><span style="color: red">. </span>According to the contract and its subsequent amendment,
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Based
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>
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    the Company&#8217;s revenue facilitated by the vendor does not reach certain threshold during specified periods, the contract could
    be terminated by the Company, and all funding with applicable interest, less any commissions and subcontractor fees payable to the
    vendor, shall be repaid to the Company within one month after the termination of the contract. If the two parties terminate the cooperation
    on the condition that the vendor meet the target, all funding without interest, shall be repaid.</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
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    RMB<span id="xdx_90B_eus-gaap--Revenues_pn5n6_uRMB_c20220101__20221231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--VendorMember_zUtCypgoSmW6" title="Revenues" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIE9USEVSIENVUlJFTlQgQVNTRVRTIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2022-01-012022-12-31_custom_VendorMember" id="Fact002160" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="RMB">7.5</ix:nonFraction></span> million (approximately USD $<span id="xdx_90F_eus-gaap--Revenues_pp0p0_c20220101__20221231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--VendorMember_zliRIBWEZMyd" title="Revenues" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIE9USEVSIENVUlJFTlQgQVNTRVRTIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2022-01-012022-12-31_custom_VendorMember" id="Fact002162" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,111,000</ix:nonFraction></span>). For the year ended December 31, 2023, revenue facilitated by the vendor has reached
    RMB<span id="xdx_90D_eus-gaap--Revenues_pn5n6_uRMB_c20230101__20231231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--VendorMember_z22y4vihflxa" title="Revenues" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIE9USEVSIENVUlJFTlQgQVNTRVRTIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2023-01-012023-12-31_custom_VendorMember" id="Fact002164" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="RMB">20.8</ix:nonFraction></span> million (approximately USD $<span id="xdx_905_eus-gaap--Revenues_pp0p0_c20230101__20231231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--VendorMember_z2yjHPSqBJgf" title="Revenues" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIE9USEVSIENVUlJFTlQgQVNTRVRTIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2023-01-012023-12-31_custom_VendorMember" id="Fact002166" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">2,947,000</ix:nonFraction></span>). The revenue facilitated by the vendor has fulfilled the revenue threshold and no
    event occurs or circumstance changes that would potentially indicate that the carrying amount of the receivable was impaired.</span></p></td></tr>
  </table>
</ix:nonNumeric><p id="xdx_8AD_zb5nMeaLlFg9" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 155; Value: 1 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->35<!-- Field: /Sequence --></td></tr></table></div>
    <div style="break-before: page; margin-top: 6pt">&#160;</div>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002168" name="us-gaap:ScheduleOfOtherAssetsNoncurrentTextBlock"><p id="xdx_890_eus-gaap--ScheduleOfOtherAssetsNoncurrentTextBlock_zZzW0FTqBLUk" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(b)
As of December 31, 2023 and 2022, Other assets, non-current consist of:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;<span id="xdx_8B2_z9bduheqgLqd" style="display: none">SCHEDULE OF OTHER NON-CURRENT ASSETS</span></span></span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_499_20231231_z9qWv5IPQ9fe" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_492_20221231_zWlrZNhAlL64" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr id="xdx_401_ecustom--OtherNoncurrentAssets_iI_pp0p0_maOANz5nh_zQ0BWAYFOh2h" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 60%; text-align: left; padding-bottom: 1.5pt">Other assets, non-current, net</td><td style="width: 2%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 16%; text-align: right"><ix:nonFraction name="TAOP:OtherNoncurrentAssets" contextRef="AsOf2023-12-31" id="Fact002170" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">811,026</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="width: 2%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 16%; text-align: right"><ix:nonFraction name="TAOP:OtherNoncurrentAssets" contextRef="AsOf2022-12-31" id="Fact002171" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,775,540</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_403_eus-gaap--OtherAssetsNoncurrent_iTI_pp0p0_mtOANz5nh_zuBtzVkHh2w5" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 2.5pt"><span style="display: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">Total</span></td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:OtherAssetsNoncurrent" contextRef="AsOf2023-12-31" id="Fact002173" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">811,026</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:OtherAssetsNoncurrent" contextRef="AsOf2022-12-31" id="Fact002174" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,775,540</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
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</ix:nonNumeric><p id="xdx_8A8_zvZqSpf24ZJ6" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">During
2019 and 2020, the Company advanced RMB <span id="xdx_909_eus-gaap--OtherLiabilities_iI_pn6n6_uRMB_c20191231__srt--StatementGeographicalAxis__country--US__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--RelatedPartyMember_zDmaeDfwo6H4" title="Due to related parties"><span id="xdx_90D_eus-gaap--OtherLiabilities_iI_pn6n6_uRMB_c20201231__srt--StatementGeographicalAxis__country--US__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--RelatedPartyMember_z55DYLcSKrYk" title="Due to related parties"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2019-12-31_country_US_us-gaap_RelatedPartyMember" id="Fact002176" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="RMB"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2020-12-31_country_US_us-gaap_RelatedPartyMember" id="Fact002178" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="RMB">30</ix:nonFraction></ix:nonFraction></span></span> million (USD $<span id="xdx_904_eus-gaap--OtherLiabilities_iI_pn5n6_c20191231__srt--StatementGeographicalAxis__country--US__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--RelatedPartyMember_z3PZPcdccK94" title="Due to related parties"><span id="xdx_901_eus-gaap--OtherLiabilities_iI_pn5n6_c20201231__srt--StatementGeographicalAxis__country--US__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--RelatedPartyMember_z5wafNNOCzla" title="Due to related parties"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2019-12-31_country_US_us-gaap_RelatedPartyMember" id="Fact002180" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD"><ix:nonFraction name="us-gaap:OtherLiabilities" contextRef="AsOf2020-12-31_country_US_us-gaap_RelatedPartyMember" id="Fact002182" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">4.2</ix:nonFraction></ix:nonFraction></span></span> million) to a vendor, whom the Company has contracted to develop a vehicular
IOT smart advertising software (&#8220;Internet of Vehicle&#8221; or &#8220;IOV&#8221; software) to interconnect to the Company&#8217;s
new media advertising sharing platform expanding its advertising capability to people riding in motor vehicles. According to the contract
and its subsequent amendment, total commitment of the funding was RMB <span id="xdx_90E_eus-gaap--OtherCommitment_iI_pn6n6_uRMB_c20191231_zAeUE90LcDpk" title="Other commitment"><span id="xdx_90D_eus-gaap--OtherCommitment_iI_pn6n6_uRMB_c20201231_zxp7fdeoiH84" title="Other commitment"><ix:nonFraction name="us-gaap:OtherCommitment" contextRef="AsOf2019-12-31" id="Fact002184" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="RMB"><ix:nonFraction name="us-gaap:OtherCommitment" contextRef="AsOf2020-12-31" id="Fact002186" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="RMB">30</ix:nonFraction></ix:nonFraction></span></span> million (USD $<span id="xdx_90A_eus-gaap--OtherCommitment_iI_pn5n6_c20191231_zBIvL2fVocLa" title="Other commitment"><span id="xdx_903_eus-gaap--OtherCommitment_iI_pn5n6_c20201231_zKcGFrVc4Sjc" title="Other commitment"><ix:nonFraction name="us-gaap:OtherCommitment" contextRef="AsOf2019-12-31" id="Fact002188" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD"><ix:nonFraction name="us-gaap:OtherCommitment" contextRef="AsOf2020-12-31" id="Fact002190" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">4.2</ix:nonFraction></ix:nonFraction></span></span> million). The vendor is solely responsible
for hardware and software development and marketing the vehicular terminal. The Company financially supports development cost of IOV
software in exchange for advertising revenue generated from the software for four years of the contract term.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Based
on the amendment of the contract, if the Company&#8217;s new media advertising revenue generated from IOV software does not reach certain
threshold during specified period, the contract could be terminated by the Company, and all funding with applicable interest, and less
the revenue generated from the IOV software shall be repaid to the Company within one half year after the termination of the contract.
Before the full repayment of the funding, the Company owns <span id="xdx_90C_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20231231__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--IOVSoftwareMember_zGqJKeKGDzk9" title="Equity investment ownership percentage"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-12-31_custom_IOVSoftwareMember" id="Fact002192" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% of the title of the IOV software and related equipment, which will be
transferred to the vendor upon its repayment of the total funding plus applicable interest.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Starting
in October 2020, IOV software revenue will be divided into eight periods. The first period as specified was from October 1, 2020 to April
30, 2021 with a threshold advertising revenue from IOV software of RMB <span id="xdx_903_eus-gaap--RevenueFromContractWithCustomerExcludingAssessedTax_i01_pn6n6_uRMB_c20201001__20210430__srt--StatementGeographicalAxis__country--US__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember_zidlhhN8sMj4" title="Revenue"><ix:nonFraction name="us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax" contextRef="From2020-10-012021-04-30_country_US_us-gaap_AdvertisingMember" id="Fact002194" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="RMB">3</ix:nonFraction></span> million (approximately USD $<span id="xdx_901_eus-gaap--RevenueFromContractWithCustomerExcludingAssessedTax_pp0p0_c20201001__20210430__srt--StatementGeographicalAxis__country--US__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember_zyOdVSC66D1c" title="Revenue"><ix:nonFraction name="us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax" contextRef="From2020-10-012021-04-30_country_US_us-gaap_AdvertisingMember" id="Fact002196" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">462,000</ix:nonFraction></span>). <span id="xdx_90D_eus-gaap--DebtInstrumentCovenantDescription_c20201001__20210430_zPkVlL7u7l63" title="Debt instrument covenant description"><ix:nonNumeric contextRef="From2020-10-012021-04-30" id="Fact002198" name="us-gaap:DebtInstrumentCovenantDescription">The revenue is to increase
incrementally by 15% in every six months going forward until the contract expires four years after the commencing date of the operation.</ix:nonNumeric></span>
The first period as specified was from October 1, 2020 to April 30, 2021 with advertising revenue from IOV software of RMB <span id="xdx_906_ecustom--IncreaseInRevenue_pn6n6_uRMB_c20201001__20210430__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember__srt--StatementGeographicalAxis__country--US_zKkWQJGJBHZ4" title="Increase in revenue"><ix:nonFraction name="TAOP:IncreaseInRevenue" contextRef="From2020-10-012021-04-30_country_US_us-gaap_AdvertisingMember" id="Fact002200" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="RMB">3</ix:nonFraction></span> million
(approximately USD $<span id="xdx_903_ecustom--IncreaseInRevenue_pp0p0_c20201001__20210430__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember__srt--StatementGeographicalAxis__country--US_zYG2IpofwO5f" title="Increase in revenue"><ix:nonFraction name="TAOP:IncreaseInRevenue" contextRef="From2020-10-012021-04-30_country_US_us-gaap_AdvertisingMember" id="Fact002202" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">462,000</ix:nonFraction></span>). The second period as specified was from May 1, 2021 to November 30, 2021 with advertising revenue from
IOV software of RMB <span id="xdx_905_ecustom--IncreaseInRevenue_pn5n6_uRMB_c20210501__20211130__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember__srt--StatementGeographicalAxis__country--US_zm09uM5QJ9cl" title="Increase in revenue"><ix:nonFraction name="TAOP:IncreaseInRevenue" contextRef="From2021-05-012021-11-30_us-gaap_AdvertisingMember_country_US" id="Fact002204" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="RMB">3.3</ix:nonFraction></span> million (approximately USD $<span id="xdx_901_ecustom--IncreaseInRevenue_pp0p0_c20210501__20211130__srt--StatementGeographicalAxis__country--US__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember_zigwLQLcDZzk" title="Increase in revenue"><ix:nonFraction name="TAOP:IncreaseInRevenue" contextRef="From2021-05-012021-11-30_us-gaap_AdvertisingMember_country_US" id="Fact002206" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">510,000</ix:nonFraction></span>). The third period as specified was from December 1, 2021 to May 30, 2022
with advertising revenue from IOV software of RMB <span id="xdx_902_ecustom--IncreaseInRevenue_pn5n6_uRMB_c20211201__20220530__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember__srt--StatementGeographicalAxis__country--US_zUujtMhYtCea" title="Increase in revenue"><ix:nonFraction name="TAOP:IncreaseInRevenue" contextRef="From2021-12-012022-05-30_us-gaap_AdvertisingMember_country_US" id="Fact002208" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="RMB">3.4</ix:nonFraction></span> million (approximately USD $<span id="xdx_907_ecustom--IncreaseInRevenue_pp0p0_c20211201__20220530__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember__srt--StatementGeographicalAxis__country--US_zwLfmzkS7Gl" title="Increase in revenue"><ix:nonFraction name="TAOP:IncreaseInRevenue" contextRef="From2021-12-012022-05-30_us-gaap_AdvertisingMember_country_US" id="Fact002210" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">531,000</ix:nonFraction></span>). The fourth period as specified was from June
1, 2022 to November 30, 2022 with advertising revenue from IOV software of RMB <span id="xdx_905_ecustom--IncreaseInRevenue_pn5n6_uRMB_c20220601__20221130__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember__srt--StatementGeographicalAxis__country--US_zKMoGBWDwk87" title="Increase in revenue"><ix:nonFraction name="TAOP:IncreaseInRevenue" contextRef="From2022-06-012022-11-30_us-gaap_AdvertisingMember_country_US" id="Fact002212" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="RMB">14.1</ix:nonFraction></span> million (approximately USD $<span id="xdx_90A_ecustom--IncreaseInRevenue_pp0p0_c20220601__20221130__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember__srt--StatementGeographicalAxis__country--US_zyucWxwQDyUl" title="Increase in revenue"><ix:nonFraction name="TAOP:IncreaseInRevenue" contextRef="From2022-06-012022-11-30_us-gaap_AdvertisingMember_country_US" id="Fact002214" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">2,285,000</ix:nonFraction></span>). The fifth
period as specified was from December 1, 2022 to May 30, 2023 with advertising revenue from IOV software of RMB <span id="xdx_909_ecustom--IncreaseInRevenue_pn5n6_uRMB_c20221201__20230530__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember__srt--StatementGeographicalAxis__country--US_zUjbRXRYgcxa" title="Increase in revenue"><ix:nonFraction name="TAOP:IncreaseInRevenue" contextRef="From2022-12-012023-05-30_us-gaap_AdvertisingMember_country_US" id="Fact002216" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="RMB">3.9</ix:nonFraction></span> million (approximately
USD $<span id="xdx_90C_ecustom--IncreaseInRevenue_pp0p0_c20221201__20230530__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember__srt--StatementGeographicalAxis__country--US_ztLm1SwtIdui" title="Increase in revenue"><ix:nonFraction name="TAOP:IncreaseInRevenue" contextRef="From2022-12-012023-05-30_us-gaap_AdvertisingMember_country_US" id="Fact002218" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">562,000</ix:nonFraction></span>). The sixth period as specified was from June 1, 2023 to November 30, 2023 with advertising revenue from IOV software of
RMB <span id="xdx_90A_ecustom--IncreaseInRevenue_pn5n6_uRMB_c20230601__20231130__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember__srt--StatementGeographicalAxis__country--US_zJMOu4WQcKV9" title="Increase in revenue"><ix:nonFraction name="TAOP:IncreaseInRevenue" contextRef="From2023-06-012023-11-30_us-gaap_AdvertisingMember_country_US" id="Fact002220" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="RMB">18.3</ix:nonFraction></span> million (approximately USD $<span id="xdx_909_ecustom--IncreaseInRevenue_pp0p0_c20230601__20231130__srt--ProductOrServiceAxis__us-gaap--AdvertisingMember__srt--StatementGeographicalAxis__country--US_z1CxUySyYr6g" title="Increase in revenue"><ix:nonFraction name="TAOP:IncreaseInRevenue" contextRef="From2023-06-012023-11-30_us-gaap_AdvertisingMember_country_US" id="Fact002222" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">2,581,000</ix:nonFraction></span>). In 2024, The Company will continue to monitor advertising revenue generation from the
IOV software and evaluate for impairment, if an event occurs or circumstance changes that would potentially indicate that the carrying
amount of the asset exceeded its fair value. The vendor will own the title of the IOV software upon its fulfillment of the contract obligations
after three years.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
development of IOV software was completed by September 30, 2020. Since the Company has the right to use the IOV software under the contract
term, software was capitalized as &#8220;other assets, non-current, net&#8221; and started to amortize from October 1, 2020 over the
<span id="xdx_902_ecustom--ContractTerms_dtxL_c20201001__20201002_zkyYMpHl7rjh" title="Contract terms::XDX::P4Y"><span style="-sec-ix-hidden: xdx2ixbrl2224">four</span></span>-year contract term. As of December 31, 2023 and December 31, 2022, the balance of &#8220;other assets, non-current, net&#8221; was
$<span id="xdx_904_eus-gaap--OtherAssetsNoncurrent_iI_pp0p0_c20231231_zuNJpQmnO342" title="Other assets non current"><ix:nonFraction name="us-gaap:OtherAssetsNoncurrent" contextRef="AsOf2023-12-31" id="Fact002226" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">811,026</ix:nonFraction></span> and $<span id="xdx_905_eus-gaap--OtherAssetsNoncurrent_iI_pp0p0_c20221231_znx6e79Nyod1" title="Other assets non current"><ix:nonFraction name="us-gaap:OtherAssetsNoncurrent" contextRef="AsOf2022-12-31" id="Fact002228" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,775,540</ix:nonFraction></span>, respectively. The reduction of the amount receivable was approximately $<span id="xdx_901_eus-gaap--CostOfGoodsAndServicesSoldAmortization_pn5n6_c20230101__20231231_zjgnhTW9mWG7" title="Cost of goods and services"><ix:nonFraction name="us-gaap:CostOfGoodsAndServicesSoldAmortization" contextRef="From2023-01-01to2023-12-31" id="Fact002230" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.9</ix:nonFraction></span> million and $<span id="xdx_900_eus-gaap--CostOfGoodsAndServicesSoldAmortization_pn5n6_c20220101__20221231_zdPOFU1id1Ld" title="Cost of goods and services"><ix:nonFraction name="us-gaap:CostOfGoodsAndServicesSoldAmortization" contextRef="From2022-01-012022-12-31" id="Fact002232" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">1.2</ix:nonFraction></span> million for the
years ended December 31, 2023 and 2022, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
full repayment is achieved within the contract term, the Company might be charged to continue using the software and related equipment,
depending on both parties&#8217; future agreement.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 156; Value: 1 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></td></tr></table></div>
    <div style="break-before: page; margin-top: 6pt">&#160;</div>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002234" name="us-gaap:LesseeOperatingLeasesTextBlock"><p id="xdx_80C_eus-gaap--LesseeOperatingLeasesTextBlock_zwYZ6t5yYh58" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>14.
<span id="xdx_82B_zrzFTcfFMRpl">OPERATING LEASES</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition to the lease with a related party for computing server room in Dongguan City, commenced in April 2021, and terminated in March
2022, the Company leased an office space, three server rooms, and a dormitory in Hong Kong for executing the Blockchain business strategy,
and the Company also leased an office space in Zhenjiang commenced in October 2021. The office space and two of the server rooms in Hong
Kong were terminated in September 2022, and November 2022, respectively. The remaining server room and dormitory in Hong Kong were terminated
in April 2023. The fixed monthly lease payment for the Zhenjiang office space is $<span id="xdx_90A_eus-gaap--PaymentsForRent_pp0p0_c20230101__20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--OfficeSpaceMember_z8dTYApijWZ5" title="Payments for rent"><ix:nonFraction name="us-gaap:PaymentsForRent" contextRef="From2023-01-012023-12-31_custom_OfficeSpaceMember" id="Fact002236" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">2,528</ix:nonFraction></span> (RMB <span id="xdx_906_eus-gaap--PaymentsForRent_pp0p0_uRMB_c20230101__20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--OfficeSpaceMember_zWWSH725MpS2" title="Payments for rent"><ix:nonFraction name="us-gaap:PaymentsForRent" contextRef="From2023-01-012023-12-31_custom_OfficeSpaceMember" id="Fact002238" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="RMB">17,882</ix:nonFraction></span>) with a lease term of <span id="xdx_902_eus-gaap--LesseeOperatingLeaseRemainingLeaseTerm_iI_dc_c20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--OfficeSpaceMember_zmUFSKvQvVqh" title="Operating lease term"><ix:nonNumeric contextRef="AsOf2023-12-31_custom_OfficeSpaceMember" format="ixt-sec:durwordsen" id="Fact002240" name="us-gaap:LesseeOperatingLeaseRemainingLeaseTerm">three years</ix:nonNumeric></span>
ending September 30, 2024, with a rental free period from October 1, 2021 to March 31, 2022. The Zhenjiang office was terminated in September
2023. The fixed monthly lease payment for the remaining server room is $<span id="xdx_905_eus-gaap--PaymentsForRent_pp0p0_c20230101__20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--ServerRoomsMember_zbl8ntxLkESh" title="Payments for rent"><ix:nonFraction name="us-gaap:PaymentsForRent" contextRef="From2023-01-012023-12-31_custom_ServerRoomsMember" id="Fact002242" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">5,656</ix:nonFraction></span> (HKD <span id="xdx_90C_eus-gaap--PaymentsForRent_pp0p0_uHKD_c20230101__20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--ServerRoomsMember_znh7eCY2xVKh" title="Payments for rent"><ix:nonFraction name="us-gaap:PaymentsForRent" contextRef="From2023-01-012023-12-31_custom_ServerRoomsMember" id="Fact002244" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="HKD">40,000</ix:nonFraction></span>) with a lease term of <span id="xdx_908_eus-gaap--LesseeOperatingLeaseRemainingLeaseTerm_iI_dc_c20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--ServerRoomsMember_zwr9xqbPSHfb" title="Operating lease term"><ix:nonNumeric contextRef="AsOf2023-12-31_custom_ServerRoomsMember" format="ixt-sec:durwordsen" id="Fact002246" name="us-gaap:LesseeOperatingLeaseRemainingLeaseTerm">three years</ix:nonNumeric></span> ending January
15, 2025, which terminated in April 2023. The fixed monthly lease payment for the dormitory is $<span id="xdx_90A_eus-gaap--PaymentsForRent_pp0p0_c20230101__20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--DormitoryLeaseMember_zikXRuH9pnd5" title="Payments for rent"><ix:nonFraction name="us-gaap:PaymentsForRent" contextRef="From2023-01-012023-12-31_custom_DormitoryLeaseMember" id="Fact002248" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">4,807</ix:nonFraction></span> (HKD <span id="xdx_906_eus-gaap--PaymentsForRent_pp0p0_uHKD_c20230101__20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--DormitoryLeaseMember_zrc079N58iXl" title="Payments for rent"><ix:nonFraction name="us-gaap:PaymentsForRent" contextRef="From2023-01-012023-12-31_custom_DormitoryLeaseMember" id="Fact002250" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="HKD">34,000</ix:nonFraction></span>) including rental and
management fee with a lease term of <span id="xdx_901_eus-gaap--LesseeOperatingLeaseRemainingLeaseTerm_iI_dc_c20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--DormitoryLeaseMember_zsalEDOrP8w7" title="Operating lease term"><ix:nonNumeric contextRef="AsOf2023-12-31_custom_DormitoryLeaseMember" format="ixt-sec:durwordsen" id="Fact002252" name="us-gaap:LesseeOperatingLeaseRemainingLeaseTerm">two years</ix:nonNumeric></span> ending April 19, 2023. All lease agreements have no variable lease payment nor option to
purchase the underlying assets. There was no initial direct cost associated with the office space lease agreement. The initial direct
costs associated with the lease for the remaining server room and dormitory is $<span id="xdx_904_eus-gaap--OperatingLeaseInitialDirectCostExpenseOverTerm_c20230101__20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--ServerRoomsMember_zyi9lljKAkia" title="Operating lease initial direct costs"><ix:nonFraction name="us-gaap:OperatingLeaseInitialDirectCostExpenseOverTerm" contextRef="From2023-01-012023-12-31_custom_ServerRoomsMember" id="Fact002254" format="ixt:numdotdecimal" decimals="0" unitRef="USD">5,656</ix:nonFraction></span> (HKD <span id="xdx_904_eus-gaap--OperatingLeaseInitialDirectCostExpenseOverTerm_uHKD_c20230101__20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--ServerRoomsMember_zT5CW8oD3v5f" title="Operating lease initial direct costs"><ix:nonFraction name="us-gaap:OperatingLeaseInitialDirectCostExpenseOverTerm" contextRef="From2023-01-012023-12-31_custom_ServerRoomsMember" id="Fact002256" format="ixt:numdotdecimal" decimals="0" unitRef="HKD">40,000</ix:nonFraction></span>), and $<span id="xdx_90F_eus-gaap--OperatingLeaseInitialDirectCostExpenseOverTerm_c20230101__20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--DormitoryLeaseMember_zVwI0lYxspS1" title="Operating lease initial direct costs"><ix:nonFraction name="us-gaap:OperatingLeaseInitialDirectCostExpenseOverTerm" contextRef="From2023-01-012023-12-31_custom_DormitoryLeaseMember" id="Fact002258" format="ixt:numdotdecimal" decimals="0" unitRef="USD">2,404</ix:nonFraction></span> (HKD <span id="xdx_908_eus-gaap--OperatingLeaseInitialDirectCostExpenseOverTerm_pp0p0_uHKD_c20230101__20231231__us-gaap--FiniteLivedIntangibleAssetsByMajorClassAxis__custom--DormitoryLeaseMember_zMk7T6YlRTgj" title="Operating lease initial direct costs"><ix:nonFraction name="us-gaap:OperatingLeaseInitialDirectCostExpenseOverTerm" contextRef="From2023-01-012023-12-31_custom_DormitoryLeaseMember" id="Fact002260" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="HKD">17,000</ix:nonFraction></span>), respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has also leased specific and identifiable wall spaces with a certain dimension in commercial and residential building lobbies,
inside elevators, elevator waiting areas, and various places to install the new media advertising display terminals without substitution
for purpose of broadcasting advertisements paid by the customers to promote their businesses or special events. The lease terms with
negotiated payment terms range from <span id="xdx_904_eus-gaap--LesseeOperatingLeaseRemainingLeaseTerm_iI_dxL_c20231231__srt--RangeAxis__srt--MinimumMember_zpwukjFCKgu4" title="Operating lease term::XDX::P1Y"><span style="-sec-ix-hidden: xdx2ixbrl2262">one</span></span> year to <span id="xdx_905_eus-gaap--LesseeOperatingLeaseRemainingLeaseTerm_iI_dxL_c20231231__srt--RangeAxis__srt--MaximumMember_zokWOm4HuUEg" title="Operating lease term::XDX::P3Y"><span style="-sec-ix-hidden: xdx2ixbrl2264">three</span></span> years, and the rental costs vary depending on the number of spots where the display
terminals are installed and the duration of the leases.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company incurred rent expenses of approximately $<span id="xdx_90E_eus-gaap--AccruedRentCurrent_iI_pp0p0_c20231231__us-gaap--StatementOperatingActivitiesSegmentAxis__us-gaap--SegmentContinuingOperationsMember_zu1GhcHF4hB6" title="Accrued rent"><ix:nonFraction name="us-gaap:AccruedRentCurrent" contextRef="AsOf2023-12-31_us-gaap_SegmentContinuingOperationsMember" id="Fact002266" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">13,000</ix:nonFraction></span> for continuing operations and $<span id="xdx_902_eus-gaap--AccruedRentCurrent_iI_pp0p0_c20231231__us-gaap--StatementOperatingActivitiesSegmentAxis__us-gaap--SegmentDiscontinuedOperationsMember_zArnFey4kLod" title="Accrued rent"><ix:nonFraction name="us-gaap:AccruedRentCurrent" contextRef="AsOf2023-12-31_us-gaap_SegmentDiscontinuedOperationsMember" id="Fact002268" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">25,000</ix:nonFraction></span> for discontinued operations for the year
ended December 31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
was no remaining lease term as of December 31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002270" name="us-gaap:InvestmentTextBlock"><p id="xdx_80B_eus-gaap--InvestmentTextBlock_zczST5s9YKce" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>15.
<span id="xdx_826_zgXAcicfLf0i">LONG-TERM INVESTMENTS</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023, the carrying value of the Company&#8217;s equity investments were $<span id="xdx_907_eus-gaap--EquityMethodInvestments_iI_pp0p0_c20231231_z9Txq1kKh6Bd" title="Equity method investments"><ix:nonFraction name="us-gaap:EquityMethodInvestments" contextRef="AsOf2023-12-31" id="Fact002272" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">86,889</ix:nonFraction></span>, which consisted of the followings:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)
Equity method investments:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002274" name="us-gaap:EquityMethodInvestmentsTextBlock"><p id="xdx_890_eus-gaap--EquityMethodInvestmentsTextBlock_zk4BO1fYDEnl" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023, the Company&#8217;s equity method investments had a carrying value of $<span id="xdx_90C_eus-gaap--EquityMethodInvestmentUnderlyingEquityInNetAssets_iI_pp0p0_dxL_c20231231_zVE0ZT4mOMd1" title="Equity method investment carrying value::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl2276">nil</span></span> which were as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_8BD_zx9IP2YjDd5j" style="display: none">SCHEDULE OF EQUITY METHOD INVESTMENTS</span><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; text-align: center">Investees</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: center">Abbreviation</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center">% of Ownership</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center">Carrying value</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 30%; text-align: left">Qingdao Taoping IoT Co., Ltd.</td><td style="width: 2%">&#160;</td>
    <td style="width: 28%; text-align: right">QD Taoping, or QD</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td id="xdx_98D_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20231231__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--QingdaoTaopingIoTCoLtdMember__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_z3ikyYfjqW68" title="Ownership percentage" style="width: 16%; text-align: right"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-12-31_custom_QingdaoTaopingIoTCoLtdMember_us-gaap_EquityMethodInvestmentsMember" id="Fact002278" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">47</ix:nonFraction></td><td style="width: 1%; text-align: left">%</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td id="xdx_98E_eus-gaap--EquityMethodInvestmentUnderlyingEquityInNetAssets_iI_pp0p0_c20231231__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--QingdaoTaopingIoTCoLtdMember__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_zkomFsoxGnbd" title="Carrying value" style="width: 16%; text-align: right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<span style="-sec-ix-hidden: xdx2ixbrl2280">-</span></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Yunnan Taoping IoT Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: right">YN Taoping, or YN</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_988_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20231231__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--YunnanTaopingIoTCoLtdMember__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_zxIscnunPcoj" title="Ownership percentage" style="text-align: right"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-12-31_custom_YunnanTaopingIoTCoLtdMember_us-gaap_EquityMethodInvestmentsMember" id="Fact002282" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">40</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_989_eus-gaap--EquityMethodInvestmentUnderlyingEquityInNetAssets_iI_pp0p0_c20231231__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--YunnanTaopingIoTCoLtdMember__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_zVLZr1tmqkKi" title="Carrying value" style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl2284">-</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Jiangsu Taoping IoT Technology Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: right">JS Taoping, or JS</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_987_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20231231__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--JiangsuTaopingIoTTechnologyCoLtdMember__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_zZ3RZOBVbzla" title="Ownership percentage" style="text-align: right"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-12-31_custom_JiangsuTaopingIoTTechnologyCoLtdMember_us-gaap_EquityMethodInvestmentsMember" id="Fact002286" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">25</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_986_eus-gaap--EquityMethodInvestmentUnderlyingEquityInNetAssets_iI_pp0p0_c20231231__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--JiangsuTaopingIoTTechnologyCoLtdMember__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_zDlePy3O0EPc" title="Carrying value" style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl2288">-</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Jiangsu Taoping New Media Co., Ltd</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: right; padding-bottom: 1.5pt">JS New Media, or JN</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_985_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20231231__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--JiangsuTaopingNewMediaCoLtdMember__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_zF00vqnDrAP" title="Ownership percentage" style="text-align: right"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2023-12-31_custom_JiangsuTaopingNewMediaCoLtdMember_us-gaap_EquityMethodInvestmentsMember" id="Fact002290" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">21</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">%</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td id="xdx_983_eus-gaap--EquityMethodInvestmentUnderlyingEquityInNetAssets_iI_pp0p0_c20231231__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--JiangsuTaopingNewMediaCoLtdMember__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_zcHXTL2KZpEe" title="Carrying value" style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl2292">-</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 2.5pt">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="text-align: right; padding-bottom: 2.5pt">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td id="xdx_986_eus-gaap--EquityMethodInvestmentUnderlyingEquityInNetAssets_iI_pp0p0_c20231231__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_z9rD25UgcUM5" title="Carrying value" style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl2294">-</span></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table>

</ix:nonNumeric><p id="xdx_8A5_zrLMjyjq64E6" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s initial investments in the above equity method investments were approximately $<span id="xdx_908_eus-gaap--EquityMethodInvestmentOtherThanTemporaryImpairment_pn5n6_c20230101__20231231_zYhUwmUsmUQ4" title="Equity method investments, other than temporary impairment"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOtherThanTemporaryImpairment" contextRef="From2023-01-01to2023-12-31" id="Fact002296" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">1.9</ix:nonFraction></span> million. The Company recognized losses
from equity method investments of approximately $<span id="xdx_902_eus-gaap--IncomeLossFromEquityMethodInvestments_pn4n6_c20230101__20231231__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_zcpxH3Zg2cch" title="Recognized loss from equity method investments"><ix:nonFraction name="us-gaap:IncomeLossFromEquityMethodInvestments" contextRef="From2023-01-012023-12-31_us-gaap_EquityMethodInvestmentsMember" id="Fact002298" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">0.01</ix:nonFraction></span> million and <span id="xdx_903_eus-gaap--AssetImpairmentCharges_dxL_c20230101__20231231__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_z7w0sRph439e" title="Impairment charges::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl2300">no</span></span> impairment on equity method investments for the year ended December
31, 2023. The Company recognized losses from equity method investments of approximately $<span id="xdx_903_eus-gaap--IncomeLossFromEquityMethodInvestments_pn5n6_c20220101__20221231__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_zMPnNHQdPZM3" title="Recognized loss from equity method investments"><ix:nonFraction name="us-gaap:IncomeLossFromEquityMethodInvestments" contextRef="From2022-01-012022-12-31_us-gaap_EquityMethodInvestmentsMember" id="Fact002302" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.3</ix:nonFraction></span> million and <span id="xdx_903_eus-gaap--AssetImpairmentCharges_do_c20220101__20221231__us-gaap--FairValueByAssetClassAxis__us-gaap--EquityMethodInvestmentsMember_zvSQmcxURB4e" title="Impairment charges"><ix:nonFraction name="us-gaap:AssetImpairmentCharges" contextRef="From2022-01-012022-12-31_us-gaap_EquityMethodInvestmentsMember" id="Fact002304" format="ixt-sec:numwordsen" decimals="0" unitRef="USD">no</ix:nonFraction></span> impairment on equity method
investments for the year ended December 31, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)
Equity investments without readily determinable fair value that is not accounted for under equity method accounting:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
accordance with ASC 321, the Company elected to use the measurement alternative to measure such investments at cost, less any impairment,
plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same
issuer, if any.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023, the carrying value for the equity investments without readily determinable fair value was $<span id="xdx_904_eus-gaap--EquitySecuritiesWithoutReadilyDeterminableFairValueAmount_iI_pp0p0_c20231231_zlWOfymI82Wc" title="Equity investments without readily determinable fair value"><ix:nonFraction name="us-gaap:EquitySecuritiesWithoutReadilyDeterminableFairValueAmount" contextRef="AsOf2023-12-31" id="Fact002306" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">86,889</ix:nonFraction></span>. The total initial
investments to the equity investments without readily determinable fair value were approximately $<span id="xdx_90A_ecustom--InitialInvestmentEquitySecuritiesWithoutReadilyDeterminableFairValueAmount_iI_pp0p0_c20231231_z42HEb3pOoIg" title="Initial investment equity investments without readily determinable fair value"><ix:nonFraction name="TAOP:InitialInvestmentEquitySecuritiesWithoutReadilyDeterminableFairValueAmount" contextRef="AsOf2023-12-31" id="Fact002308" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">711,000</ix:nonFraction></span>. Impairment of approximately
$ <span id="xdx_904_ecustom--ImpairmentChargesOnEquityMethodInvestments_dxL_c20230101__20231231_zZH9xZf4X2Qk" title="Impairment charges of equity method investments::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl2310">nil</span></span> for continuing operations was recognized for year ended December 31, 2023. Impairment of approximately $<span id="xdx_903_ecustom--ImpairmentOfContinuingOperations_pn5n6_c20220101__20221231_zRI3GHHfpVAc" title="Impairment of investments from continuing operations"><ix:nonFraction name="TAOP:ImpairmentOfContinuingOperations" contextRef="From2022-01-012022-12-31" id="Fact002312" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.1</ix:nonFraction></span> million for continuing
operations and $<span id="xdx_900_ecustom--ImpairmentOfDiscontinuedOperations_pn5n6_c20220101__20221231_zMYv0qJqTTw3" title="Impairment of investments from discontinued operations"><ix:nonFraction name="TAOP:ImpairmentOfDiscontinuedOperations" contextRef="From2022-01-012022-12-31" id="Fact002314" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.2</ix:nonFraction></span> million for discontinued operations were recognized for year ended December 31, 2022.</span></p>
<!-- Field: Split-Segment; Name: 004 -->
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002316" name="TAOP:ConvertibleNotePayableTextBlock"><p id="xdx_80F_ecustom--ConvertibleNotePayableTextBlock_z00rnL8H1Crd" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>16.
<span id="xdx_82F_zzEQNW1XwX06">CONVERTIBLE NOTE PAYABLE</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
October 2019, March 2020, and September 2020, the Company issued Convertible Promissory Notes with principal amount of $<span id="xdx_903_eus-gaap--DebtInstrumentFaceAmount_iI_pn4n6_c20191031__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteOneMember_z84CDPXduVHj" title="Debt instrument face amount"><ix:nonFraction name="us-gaap:DebtInstrumentFaceAmount" contextRef="AsOf2019-10-31_custom_ConvertiblePromissoryNoteOneMember" id="Fact002318" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">1.04</ix:nonFraction></span> million,
$<span id="xdx_902_eus-gaap--DebtInstrumentFaceAmount_iI_pn4n6_c20200331__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteTwoMember_zWtvTXPWrfv6" title="Debt instrument face amount"><ix:nonFraction name="us-gaap:DebtInstrumentFaceAmount" contextRef="AsOf2020-03-31_custom_ConvertiblePromissoryNoteTwoMember" id="Fact002320" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">1.48</ix:nonFraction></span> million and $<span id="xdx_90C_eus-gaap--DebtInstrumentFaceAmount_iI_pn4n6_c20200930__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zEIRUai2fvJg" title="Debt instrument face amount"><ix:nonFraction name="us-gaap:DebtInstrumentFaceAmount" contextRef="AsOf2020-09-30_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002322" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">1.48</ix:nonFraction></span> million, respectively (Note-1, Note-2, and Note-3, collectively &#8220;Notes&#8221;). <span id="xdx_904_eus-gaap--DebtInstrumentMaturityDateDescription_c20191001__20200930__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNotesMember_zulIuFgG2tI1" title="Debt instrument maturity date description"><ix:nonNumeric contextRef="From2019-10-012020-09-30_custom_ConvertiblePromissoryNotesMember" id="Fact002324" name="us-gaap:DebtInstrumentMaturityDateDescription">All three Notes mature
in 12 months from the issue dates of the Notes</ix:nonNumeric></span> (the &#8220;Maturity Dates&#8221;), carrying an interest rate of <span id="xdx_900_eus-gaap--DebtInstrumentInterestRateDuringPeriod_pid_dp_uPure_c20191001__20200930__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNotesMember_z28rVUOQllvf" title="Debt instrument interest rate"><ix:nonFraction name="us-gaap:DebtInstrumentInterestRateDuringPeriod" contextRef="From2019-10-012020-09-30_custom_ConvertiblePromissoryNotesMember" id="Fact002326" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">5</ix:nonFraction></span>% per annum and an original
issue discount (OID) to cover investors&#8217; transaction costs of the Notes. As of December 31, 2021, there was <span id="xdx_90C_eus-gaap--DebtInstrumentUnamortizedDiscount_iI_do_c20211231__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zccjAwvWVlR" title="Unamortized debt discount"><ix:nonFraction name="us-gaap:DebtInstrumentUnamortizedDiscount" contextRef="AsOf2021-12-31_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002328" format="ixt-sec:numwordsen" decimals="0" unitRef="USD">no</ix:nonFraction></span> outstanding balance
and unamortized debt issuance cost of Note-1, Note-2 and Note-3.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
conjunction with issuance of the Notes, the Company also issued the holders of the Notes warrants to purchase <span id="xdx_900_eus-gaap--ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights_iI_pid_c20191031__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteOneMember_zmt1Hb6aoD55" title="Warrant issued to purchase shares"><ix:nonFraction name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" contextRef="AsOf2019-10-31_custom_ConvertiblePromissoryNoteOneMember" id="Fact002330" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">2,667</ix:nonFraction></span>, <span id="xdx_90A_eus-gaap--ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights_iI_pid_c20200331__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteTwoMember_zS6W9gCpl5ub" title="Warrant issued to purchase shares"><ix:nonFraction name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" contextRef="AsOf2020-03-31_custom_ConvertiblePromissoryNoteTwoMember" id="Fact002332" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">5,334</ix:nonFraction></span>, and <span id="xdx_905_eus-gaap--ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights_iI_pid_c20200930__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zrrmUXg0orha" title="Warrant issued to purchase shares"><ix:nonFraction name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" contextRef="AsOf2020-09-30_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002334" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">5,334</ix:nonFraction></span>
ordinary shares of the Company, at an exercise price of $<span id="xdx_902_eus-gaap--ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1_iI_pid_c20200930__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zN1UtgDu3Qk2" title="Warrant exercise price"><ix:nonFraction name="us-gaap:ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1" contextRef="AsOf2020-09-30_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002336" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">90.0</ix:nonFraction></span> with a cashless-exercise option. The warrants will expire in three years
from the dates of issuance, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
June 2021, the investor of Note-3 converted $<span id="xdx_903_eus-gaap--DebtConversionConvertedInstrumentAmount1_pp0p0_c20210601__20210630__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zIiqdujhZy01" title="Debt conversion, converted instrument, amount"><ix:nonFraction name="us-gaap:DebtConversionConvertedInstrumentAmount1" contextRef="From2021-06-012021-06-30_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002338" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">740,000</ix:nonFraction></span> of principal amount of the convertible note along with accrued interest of $<span id="xdx_902_eus-gaap--DebtConversionOriginalDebtAmount1_pp0p0_c20210601__20210630__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zDch7nNWt1Rg" title="Debt conversion, converted instrument, accrued interest"><ix:nonFraction name="us-gaap:DebtConversionOriginalDebtAmount1" contextRef="From2021-06-012021-06-30_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002340" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">26,208</ix:nonFraction></span>
into <span id="xdx_909_eus-gaap--DebtConversionConvertedInstrumentSharesIssued1_pp0p0_c20210601__20210630__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zGqiQj8T2gw9" title="Debt conversion, converted instrument, shares issued"><ix:nonFraction name="us-gaap:DebtConversionConvertedInstrumentSharesIssued1" contextRef="From2021-06-012021-06-30_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002342" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="Shares">29,871</ix:nonFraction></span> ordinary shares of the Company with no par value at a conversion price of $<span id="xdx_90B_eus-gaap--DebtInstrumentConvertibleConversionPrice1_iI_pid_c20210630__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zUoWgNOWxSX6" title="Debt instrument convertible conversion price"><ix:nonFraction name="us-gaap:DebtInstrumentConvertibleConversionPrice1" contextRef="AsOf2021-06-30_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002344" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">25.65</ix:nonFraction></span>. In October 2021, a total of $<span id="xdx_907_eus-gaap--RepaymentsOfConvertibleDebt_pp0p0_c20211001__20211031__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zjcCLkJBXbQl" title="Repayment of convertible notes payable"><ix:nonFraction name="us-gaap:RepaymentsOfConvertibleDebt" contextRef="From2021-10-012021-10-31_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002346" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">777,000</ix:nonFraction></span> including
outstanding principal amount of $<span id="xdx_901_eus-gaap--RepaymentsOfConvertibleDebt_pp0p0_c20211001__20211031__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember__us-gaap--FinancialInstrumentAxis__custom--PrincipalAmountMember_zvO8RIz2vdnd" title="Repayments of convertible debt"><ix:nonFraction name="us-gaap:RepaymentsOfConvertibleDebt" contextRef="From2021-10-012021-10-31_custom_ConvertiblePromissoryNoteThreeMember_custom_PrincipalAmountMember" id="Fact002348" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">740,000</ix:nonFraction></span> and accrued interest of $<span id="xdx_904_eus-gaap--RepaymentsOfConvertibleDebt_pp0p0_c20211001__20211031__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember__us-gaap--FinancialInstrumentAxis__custom--AccruedInterestMember_z1nhBe1Ze1Rl" title="Repayments of convertible debt"><ix:nonFraction name="us-gaap:RepaymentsOfConvertibleDebt" contextRef="From2021-10-012021-10-31_custom_ConvertiblePromissoryNoteThreeMember_custom_AccruedInterestMember" id="Fact002350" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">37,000</ix:nonFraction></span> of Note-3 was repaid to the investor. As a result, the outstanding
balance of Note-3 was $<span id="xdx_907_eus-gaap--ConvertibleNotesPayable_iI_dxL_c20211231__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zHUrj6gi1wCe" title="Convertible notes payable::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl2352">nil</span></span> as of December 31, 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company recognized interest expense of approximately $<span id="xdx_90F_eus-gaap--InterestExpenseDebt_pp0p0_c20210101__20211231__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteOneMember_zYSTa9KWreN1" title="Interest expense"><ix:nonFraction name="us-gaap:InterestExpenseDebt" contextRef="From2021-01-012021-12-31_custom_ConvertiblePromissoryNoteOneMember" id="Fact002354" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">354,000</ix:nonFraction></span> for Note-3 including interest relating to contractual interest obligation
of $<span id="xdx_907_eus-gaap--ContractualObligation_iI_pp0p0_c20211231__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteOneMember_z3HNWywWSI4a" title="Contractual obligation"><ix:nonFraction name="us-gaap:ContractualObligation" contextRef="AsOf2021-12-31_custom_ConvertiblePromissoryNoteOneMember" id="Fact002356" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">55,000</ix:nonFraction></span> and amortization of debt discount of $<span id="xdx_907_eus-gaap--AmortizationOfDebtDiscountPremium_pp0p0_c20210101__20211231__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteTwoMember_zQZ3zgqbJH8h" title="Amortization of debt discounts"><ix:nonFraction name="us-gaap:AmortizationOfDebtDiscountPremium" contextRef="From2021-01-012021-12-31_custom_ConvertiblePromissoryNoteTwoMember" id="Fact002358" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">299,000</ix:nonFraction></span> for the year ended December 31, 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
September 27, 2023, the Company issued a Convertible Promissory Note (&#8220;Note&#8221;) in a private placement in aggregate
principal amount of $<span id="xdx_908_eus-gaap--DebtInstrumentFaceAmount_iI_c20230927__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteOneMember_z9Hz4IqIEz92" title="Debt instrument face amount"><ix:nonFraction name="us-gaap:DebtInstrumentFaceAmount" contextRef="AsOf2023-09-27_custom_ConvertiblePromissoryNoteOneMember" id="Fact002360" format="ixt:numdotdecimal" decimals="0" unitRef="USD">609,000</ix:nonFraction></span>. <span id="xdx_901_eus-gaap--DebtInstrumentMaturityDateDescription_c20230927__20230927__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNotesMember_zWl6MYbpDIih" title="Debt instrument maturity date description"><ix:nonNumeric contextRef="From2023-09-272023-09-27_custom_ConvertiblePromissoryNotesMember" id="Fact002362" name="us-gaap:DebtInstrumentMaturityDateDescription">The
Note matures in 12 months from the issue date of the Note</ix:nonNumeric></span> (the &#8220;Maturity Date&#8221;), with an annual interest rate of <span id="xdx_903_eus-gaap--DebtInstrumentInterestRateDuringPeriod_pid_dp_uPure_c20230927__20230927__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNotesMember_zZ60lli4i7p2" title="Debt instrument interest rate"><ix:nonFraction name="us-gaap:DebtInstrumentInterestRateDuringPeriod" contextRef="From2023-09-272023-09-27_custom_ConvertiblePromissoryNotesMember" id="Fact002364" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">8</ix:nonFraction></span>%.
The Note carries an original issue discount of $<span id="xdx_90A_eus-gaap--DebtInstrumentUnamortizedDiscount_iI_c20230927__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zoGl8qVR3Kbe" title="Unamortized debt discount"><ix:nonFraction name="us-gaap:DebtInstrumentUnamortizedDiscount" contextRef="AsOf2023-09-27_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002366" format="ixt:numdotdecimal" decimals="0" unitRef="USD">44,000</ix:nonFraction></span>.
In addition, the Company agrees to pay $<span id="xdx_90E_ecustom--TransactionCosts_c20230901__20230927__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zdERAvJO33Hl" title="Transaction costs"><ix:nonFraction name="TAOP:TransactionCosts" contextRef="From2023-09-012023-09-27_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002368" format="ixt:numdotdecimal" decimals="0" unitRef="USD">15,000</ix:nonFraction></span>
to cover the transaction costs incurred in connection with the purchase and sale of this Note (&#8220;Transaction Expense
Amount&#8221;). Thus, the net proceeds of the Note were $<span id="xdx_909_eus-gaap--ProceedsFromIssuanceOfCommonStock_c20230901__20230927__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zWVlClUX3Du1" title="Proceeds from issuance of common stock"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfCommonStock" contextRef="From2023-09-012023-09-27_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002370" format="ixt:numdotdecimal" decimals="0" unitRef="USD">550,000</ix:nonFraction></span>.
The Note is convertible into the Company&#8217;s ordinary shares at $<span id="xdx_90B_eus-gaap--DebtInstrumentConvertibleConversionPrice1_iI_pid_c20230927__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteOneMember_zE7sIrSvLr0f" title="Debt instrument conversion price"><ix:nonFraction name="us-gaap:DebtInstrumentConvertibleConversionPrice1" contextRef="AsOf2023-09-27_custom_ConvertiblePromissoryNoteOneMember" id="Fact002372" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">8.0</ix:nonFraction></span>
per share or at a price equal to 80% multiplied by the lowest daily volume-weighted average price during the 10 trading days
immediately preceding the applicable redemption, subject to certain adjustments and limitations, at the holder&#8217;s option at any
time after six months from the issue date. On the Maturity Date, the holder of the Note has the right to convert all of the
outstanding balance of the Note at a price of no less than $<span id="xdx_903_eus-gaap--DebtInstrumentConvertibleConversionPriceIncrease_pid_c20230901__20230927__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteOneMember_z3B5eDPTHHWe" title="Debt instrument conversion price"><ix:nonFraction name="us-gaap:DebtInstrumentConvertibleConversionPriceIncrease" contextRef="From2023-09-012023-09-27_custom_ConvertiblePromissoryNoteOneMember" id="Fact002374" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">2.0</ix:nonFraction></span>
per share (&#8220;Floor Price&#8221;), which is subject to adjustment by consents of both parties.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the holder of the Note, conversion price results in beneficial conversion feature (BCF) that is separated as an equity component and
assigned a value of $<span id="xdx_902_eus-gaap--DebtInstrumentFaceAmount_iI_c20231231__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteOneMember_zkcMxhf7AdTc" title="Debt instrument face amount"><ix:nonFraction name="us-gaap:DebtInstrumentFaceAmount" contextRef="AsOf2023-12-31_custom_ConvertiblePromissoryNoteOneMember" id="Fact002376" format="ixt:numdotdecimal" decimals="0" unitRef="USD">156,440</ix:nonFraction></span>, which is the intrinsic value of the BCF that is measured by difference between the effective conversion
price based on the proceeds allocated to the convertible instrument and the conversion prices that are most beneficial to the Note holder
and assigned to the equity component and recorded as a debt discount. Debt discount is amortized using the effective interest rate method
over the period from the issuance date through the stated maturity date.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Note is recognized initially at fair value, net of debt discounts including original issue discount, Transaction Expense Amount, and
allocation of proceeds to beneficial conversion feature, in the amount of $<span id="xdx_908_ecustom--TransactionCosts_c20230101__20231231__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zMsm2du01bk2" title="Transaction costs"><ix:nonFraction name="TAOP:TransactionCosts" contextRef="From2023-01-012023-12-31_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002378" format="ixt:numdotdecimal" decimals="0" unitRef="USD">215,440</ix:nonFraction></span>. As of December 31, 2023, the remaining unamortized
debt discount was $<span id="xdx_906_eus-gaap--DebtInstrumentUnamortizedDiscount_iI_c20231231__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteThreeMember_zpvijpJY8Jy" title="Unamortized debt discount"><ix:nonFraction name="us-gaap:DebtInstrumentUnamortizedDiscount" contextRef="AsOf2023-12-31_custom_ConvertiblePromissoryNoteThreeMember" id="Fact002380" format="ixt:numdotdecimal" decimals="0" unitRef="USD">159,785</ix:nonFraction></span>, and will be amortized through September 27, 2024. Issuance costs and other Discounts accretion are recorded
as interest expense in the consolidated statement of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company recognized interest expense of approximately $<span id="xdx_90E_eus-gaap--InterestExpenseDebt_pp0p0_c20230101__20231231__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteOneMember_zsPex2ZuTub9" title="Interest expense"><ix:nonFraction name="us-gaap:InterestExpenseDebt" contextRef="From2023-01-012023-12-31_custom_ConvertiblePromissoryNoteOneMember" id="Fact002382" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">68,000</ix:nonFraction></span> for the year ended December 31, 2023 including interest relating to contractual
interest obligation approximately of $<span id="xdx_90E_eus-gaap--ContractualObligation_iI_pp0p0_c20231231__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteOneMember_zAfhslHlWO07" title="Contractual obligation"><ix:nonFraction name="us-gaap:ContractualObligation" contextRef="AsOf2023-12-31_custom_ConvertiblePromissoryNoteOneMember" id="Fact002384" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">13,000</ix:nonFraction></span> and amortization of the discounts and debt issuance cost approximately of $<span id="xdx_906_eus-gaap--PaymentsOfDebtIssuanceCosts_pp0p0_c20230101__20231231__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteOneMember_zX7zSoE90nOb" title="Debt issuance costs"><ix:nonFraction name="us-gaap:PaymentsOfDebtIssuanceCosts" contextRef="From2023-01-012023-12-31_custom_ConvertiblePromissoryNoteOneMember" id="Fact002386" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">55,000</ix:nonFraction></span>. As a
result of discounts accretion and amortization, the Note was in the carrying value of $<span id="xdx_905_eus-gaap--AmortizationOfDebtDiscountPremium_pp0p0_c20230101__20231231__us-gaap--DebtInstrumentAxis__custom--ConvertiblePromissoryNoteTwoMember_zRswRNeJCX1k" title="Amortization of debt discounts"><ix:nonFraction name="us-gaap:AmortizationOfDebtDiscountPremium" contextRef="From2023-01-012023-12-31_custom_ConvertiblePromissoryNoteTwoMember" id="Fact002388" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">449,215</ix:nonFraction></span> as of December 31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002390" name="us-gaap:OtherLiabilitiesDisclosureTextBlock"><p id="xdx_807_eus-gaap--OtherLiabilitiesDisclosureTextBlock_z61LsZJPtNyc" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>17.
<span id="xdx_821_zlE0syuTyijg">OTHER PAYABLES AND ACCRUED EXPENSES</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002392" name="us-gaap:OtherLiabilitiesTableTextBlock"><p id="xdx_89C_eus-gaap--OtherLiabilitiesTableTextBlock_zcS1ptOHgk98" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023 and 2022, other payables and accrued expenses consist of:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;<span id="xdx_8B3_zxlby8caA3Dk" style="display: none">SCHEDULE OF OTHER PAYABLE AND ACCRUED EXPENSES</span></span></span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_492_20231231_zNDtDqXU9n04" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_496_20221231_z9V4VvyhCsJi" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr id="xdx_40B_ecustom--AdvancesFromUnrelatedThirdparties_iI_maOPAAEz1G1_zC735lGMI9Le" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 60%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Advances from unrelated third-parties <sup id="xdx_F4D_zLFgCbPvYikh">(i) </sup></span></td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right"><ix:nonFraction name="TAOP:AdvancesFromUnrelatedThirdparties" contextRef="AsOf2023-12-31" id="Fact002394" format="ixt:numdotdecimal" decimals="0" unitRef="USD">621,146</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 2%">&#160;</td>
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  <tr id="xdx_401_ecustom--OtherTaxesPayable_iI_maOPAAEz1G1_zxxFQUq6bZqg" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other taxes payable <sup id="xdx_F49_zeIv7E2LB6af">(ii) </sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="TAOP:OtherTaxesPayable" contextRef="AsOf2023-12-31" id="Fact002397" format="ixt:numdotdecimal" decimals="0" unitRef="USD">4,133,972</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="TAOP:OtherTaxesPayable" contextRef="AsOf2022-12-31" id="Fact002398" format="ixt:numdotdecimal" decimals="0" unitRef="USD">4,216,786</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40F_eus-gaap--AccruedProfessionalFeesCurrentAndNoncurrent_iI_maOPAAEz1G1_zOgIMKgQNZC3" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccruedProfessionalFeesCurrentAndNoncurrent" contextRef="AsOf2022-12-31" id="Fact002401" format="ixt:numdotdecimal" decimals="0" unitRef="USD">215,889</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_409_ecustom--AmountDueToEmployees_iI_maOPAAEz1G1_z67ldwCOJMud" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left; padding-bottom: 1.5pt">Others</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:AccountsPayableOtherCurrent" contextRef="AsOf2022-12-31" id="Fact002407" format="ixt:numdotdecimal" decimals="0" unitRef="USD">126,528</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_40D_eus-gaap--AccountsPayableAndOtherAccruedLiabilities_iTI_mtOPAAEz1G1_zBS1Bm4pdkMj" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 2.5pt"><span style="font-family: Times New Roman, Times, Serif"><span style="display: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
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    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:AccountsPayableAndOtherAccruedLiabilities" contextRef="AsOf2023-12-31" id="Fact002409" format="ixt:numdotdecimal" decimals="0" unitRef="USD">5,224,225</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="us-gaap:AccountsPayableAndOtherAccruedLiabilities" contextRef="AsOf2022-12-31" id="Fact002410" format="ixt:numdotdecimal" decimals="0" unitRef="USD">4,996,344</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in; text-align: left"><span id="xdx_F01_zZTTjpkW0NG4" style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)
    </span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span id="xdx_F13_zV2uAlPGwipa" style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:footnote id="Footnote002411" xml:lang="en-US">The
    advances from unrelated parties are non-interest bearing and due on demand.</ix:footnote></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span id="xdx_F0E_zkpu5JU726rc" style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(ii)
    </span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span id="xdx_F18_zPd1utn4Ttql" style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:footnote id="Footnote002412" xml:lang="en-US">The
    other taxes payable were the amounts due to the value added tax, business tax, city maintenance and construction tax, and individual
    income tax. </ix:footnote></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span id="xdx_F08_zsMsyjwtrPCj" style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)
    </span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span id="xdx_F1A_zowOnoxGjTra" style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:footnote id="Footnote002413" xml:lang="en-US">The
    amounts due to employees were pertaining to employees&#8217; out-of-pocket expenses for travel and meal allowance, etc.</ix:footnote></span></td></tr>
  </table>
</ix:nonNumeric><p id="xdx_8A7_zM0bx2aUwoif" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 158; Value: 1 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->38<!-- Field: /Sequence --></td></tr></table></div>
    <div style="break-before: page; margin-top: 6pt">&#160;</div>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002415" name="TAOP:StatutoryReserveAndDistributionOfProfitTextBlock"><p id="xdx_80B_ecustom--StatutoryReserveAndDistributionOfProfitTextBlock_zTki8YK7QyZi" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>18.
<span id="xdx_82E_zFSGUmre7TH7">RESERVE AND DISTRIBUTION OF PROFIT</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
accordance with relevant PRC regulations and the Articles of Association of our PRC subsidiaries, our PRC subsidiaries are required to
allocate at least <span id="xdx_909_ecustom--PercentageOfAnnualTaxProfits_iI_pid_dp_c20231231_z92FcgN1UOb6" title="Annual tax profits percentage"><ix:nonFraction name="TAOP:PercentageOfAnnualTaxProfits" contextRef="AsOf2023-12-31" id="Fact002417" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">10</ix:nonFraction></span>% of their annual after-tax profits determined in accordance with PRC statutory financial statements to a statutory
general reserve fund until the amounts in said fund reaches <span id="xdx_90B_ecustom--StatutoryReservePercentage_iI_pid_dp_uPure_c20231231_zxiM7oFHopX3" title="Statutory reserve percentage"><ix:nonFraction name="TAOP:StatutoryReservePercentage" contextRef="AsOf2023-12-31" id="Fact002419" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">50</ix:nonFraction></span>% of their registered capital. As of December 31, 2023 and 2022, the balance
of general reserve was $<span id="xdx_906_ecustom--GeneralReserve_iI_pn5n6_c20231231_zHKzR6YXeZSh" title="General reserve"><ix:nonFraction name="TAOP:GeneralReserve" contextRef="AsOf2023-12-31" id="Fact002421" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">10.2</ix:nonFraction></span> million and $<span id="xdx_905_ecustom--GeneralReserve_iI_pn5n6_c20221231_zWXOGVXEu6vi" title="General reserve"><ix:nonFraction name="TAOP:GeneralReserve" contextRef="AsOf2022-12-31" id="Fact002423" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">10.2</ix:nonFraction></span> million, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the applicable PRC regulations, the Company may pay dividends only out of the accumulated profits, if any, determined in accordance with
the PRC accounting standards and regulations. The statutory reserve funds can only be used for specific purposes under the PRC laws and
regulations. The general reserves are not distributable as cash dividends.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
after-tax profits or losses with respect to the payment of dividends out of accumulated profits and the annual appropriation of after-tax
profits as calculated pursuant to the PRC accounting standards and regulations do not result in significant differences as compared to
after-tax earnings as presented in our consolidated financial statements. However, there are certain differences between the PRC accounting
standards and regulations and the U.S. generally accepted accounting principles, arising from different treatment of items such as amortization
of intangible assets and change in fair value of contingent consideration arising from business combinations.</span></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002425" name="us-gaap:StockholdersEquityNoteDisclosureTextBlock"><p id="xdx_807_eus-gaap--StockholdersEquityNoteDisclosureTextBlock_zict0U9oAz06" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>19.
<span id="xdx_820_zh95MTKUFtBa">EQUITY</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)
Ordinary shares</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company is authorized to issue <span id="xdx_90B_eus-gaap--CommonStockSharesAuthorized_iI_pid_c20231231_zKIDaKjcUw1a" title="Ordinary shares, authorized"><ix:nonFraction name="us-gaap:CommonStockSharesAuthorized" contextRef="AsOf2023-12-31" id="Fact002427" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">100,000,000</ix:nonFraction></span> ordinary shares at no par value.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2020, the holders of the convertible notes issued in March 2020 converted all principal balance of the notes and accrued interests
to the Company&#8217;s ordinary shares in an aggregate of <span id="xdx_906_eus-gaap--DebtConversionConvertedInstrumentSharesIssued1_c20201201__20201231__us-gaap--ShortTermDebtTypeAxis__us-gaap--ConvertibleNotesPayableMember_z3yba2CZsGo4" title="Number of ordinary shares on convertible notes"><ix:nonFraction name="us-gaap:DebtConversionConvertedInstrumentSharesIssued1" contextRef="From2020-12-012020-12-31_us-gaap_ConvertibleNotesPayableMember" id="Fact002429" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">29,932</ix:nonFraction></span> ordinary shares, which were not issued until February 2021. The total
amount of principal and accrued interest was approximately $<span id="xdx_903_eus-gaap--DebtConversionConvertedInstrumentAmount1_pn5n6_c20210201__20210228__us-gaap--ShortTermDebtTypeAxis__us-gaap--ConvertibleNotesPayableMember_z9M7G7xrb63b" title="Number of ordinary shares value on convertible notes"><ix:nonFraction name="us-gaap:DebtConversionConvertedInstrumentAmount1" contextRef="From2021-02-012021-02-28_us-gaap_ConvertibleNotesPayableMember" id="Fact002431" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.8</ix:nonFraction></span> million, which was converted into the ordinary shares in February 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
January 2021, the Company issued a total of <span id="xdx_906_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20210101__20210131__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_zWevxntO8ur9" title="Number of shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2021-01-012021-01-31_us-gaap_InvestorMember" id="Fact002433" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">74,074</ix:nonFraction></span> ordinary shares to certain individual investors at $<span id="xdx_902_eus-gaap--SharesIssuedPricePerShare_iI_c20210131__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_zWedTKAuvIzf" title="Shares issued price per share"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2021-01-31_us-gaap_InvestorMember" id="Fact002435" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">27.0</ix:nonFraction></span> per share, which generated
approximately $<span id="xdx_90E_eus-gaap--ProceedsFromIssuanceOfCommonStock_pn4n6_c20210101__20210131__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_zyG0wBQYz44l"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfCommonStock" contextRef="From2021-01-012021-01-31_us-gaap_InvestorMember" id="Fact002436" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">1.99</ix:nonFraction></span> million net proceeds for the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
January 2021, the Company issued <span id="xdx_90F_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20210101__20210131__srt--TitleOfIndividualAxis__custom--ConsultantMember_zeqFQ5hT8GY8" title="Number of shares issued for services, shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2021-01-012021-01-31_custom_ConsultantMember" id="Fact002438" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">700</ix:nonFraction></span> ordinary shares with fair value of approximately $<span id="xdx_904_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_pp0p0_c20210101__20210131__srt--TitleOfIndividualAxis__custom--ConsultantMember_zpmGKj60KXDb" title="Number of shares issued for services, value"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2021-01-012021-01-31_custom_ConsultantMember" id="Fact002440" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">21,840</ix:nonFraction></span> to a consultant as compensation for the
consulting service.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
February 2021, the Company issued a total of <span id="xdx_900_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20210201__20210228__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_zhNSWEBNZFg2"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2021-02-012021-02-28_us-gaap_InvestorMember" id="Fact002441" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">190,000</ix:nonFraction></span> ordinary shares to certain institutional and individual investors at $<span id="xdx_908_eus-gaap--SharesIssuedPricePerShare_iI_c20210228__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_z4tzwENPbHG"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2021-02-28_us-gaap_InvestorMember" id="Fact002442" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">40.8</ix:nonFraction></span> per share,
resulting in approximately $<span id="xdx_90C_eus-gaap--ProceedsFromIssuanceOfCommonStock_pn4n6_c20210201__20210228__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_z2eq94trezp3"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfCommonStock" contextRef="From2021-02-012021-02-28_us-gaap_InvestorMember" id="Fact002443" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">7.74</ix:nonFraction></span> million net proceeds for the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
March 2021, the Company issued <span id="xdx_907_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20210301__20210331__srt--TitleOfIndividualAxis__custom--EmployeesMember_zGgO6QUIOKs4" title="Number of shares issued for services, shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2021-03-012021-03-31_custom_EmployeesMember" id="Fact002445" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">20,000</ix:nonFraction></span> ordinary shares with fair value of approximately $<span id="xdx_909_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_pp0p0_c20210301__20210331__srt--TitleOfIndividualAxis__custom--EmployeesMember_zQPoMO8qxLpc" title="Number of shares issued for services, value"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2021-03-012021-03-31_custom_EmployeesMember" id="Fact002447" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">2,792,000</ix:nonFraction></span> to certain employees for their job
performance.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
March 2021, the Company issued <span id="xdx_908_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20210301__20210331__us-gaap--SubsidiarySaleOfStockAxis__custom--DirectOfferingMember_ztQc8cfkD7ii" title="Number of shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2021-03-012021-03-31_custom_DirectOfferingMember" id="Fact002449" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">50,000</ix:nonFraction></span> ordinary shares in the registered direct offering at the offering price of $<span id="xdx_904_eus-gaap--SharesIssuedPricePerShare_iI_c20210331__us-gaap--SubsidiarySaleOfStockAxis__custom--DirectOfferingMember_z6tUmqoPkct9" title="Shares issued price per share"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2021-03-31_custom_DirectOfferingMember" id="Fact002451" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">67.0</ix:nonFraction></span> per share resulting
in approximately $<span id="xdx_90F_eus-gaap--ProceedsFromIssuanceOfCommonStock_pn4n6_c20210301__20210331__us-gaap--SubsidiarySaleOfStockAxis__custom--DirectOfferingMember_z0GQvVudCBy6" title="Number of shares issued, value"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfCommonStock" contextRef="From2021-03-012021-03-31_custom_DirectOfferingMember" id="Fact002453" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">3.34</ix:nonFraction></span> million net proceeds for the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
June 2021, the Company issued <span id="xdx_90B_eus-gaap--StockIssuedDuringPeriodSharesRestrictedStockAwardGross_c20210601__20210630__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zZYBHlk32Ud4" title="Number of shares restricted"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardGross" contextRef="From2021-06-012021-06-30_custom_TaopingNewMediaCoLtdMember" id="Fact002455" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">121,363</ix:nonFraction></span> ordinary shares with 6 months restricted period upon the closing of acquisition of Taoping New
Media Co., Ltd (&#8220;TNM&#8221;), at unit price of $<span id="xdx_90E_eus-gaap--SharesIssuedPricePerShare_iI_pid_c20210630__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zYZaFoVEFeWe" title="Share issued price per share"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2021-06-30_custom_TaopingNewMediaCoLtdMember" id="Fact002457" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">52.7</ix:nonFraction></span> per share with discounts for lack of marketability as the consideration equivalent
to approximately $<span id="xdx_905_eus-gaap--BusinessCombinationConsiderationTransferred1_pn5n6_c20210601__20210630__us-gaap--BusinessAcquisitionAxis__custom--TaopingNewMediaCoLtdMember_zoXCviZpC3Vc" title="Business combination, consideration transferred"><ix:nonFraction name="us-gaap:BusinessCombinationConsiderationTransferred1" contextRef="From2021-06-012021-06-30_custom_TaopingNewMediaCoLtdMember" id="Fact002459" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">5.4</ix:nonFraction></span> million for acquiring <span id="xdx_901_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20210630__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--TaopingNewMediaCoLtdMember_zlNO3asGWcfk" title="Equity interest"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2021-06-30_custom_TaopingNewMediaCoLtdMember67989203" id="Fact002461" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% equity interest of TNM.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 159; Value: 1 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->39<!-- Field: /Sequence --></td></tr></table></div>
    <div style="break-before: page; margin-top: 6pt">&#160;</div>
    <!-- Field: /Page --></ix:exclude>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
June 2021, the holder of the convertible note issued in September 2020 converted <span id="xdx_90B_eus-gaap--DebtConversionConvertedInstrumentRate_pid_dp_uPure_c20210601__20210630__srt--TitleOfIndividualAxis__custom--HolderMember_z9t6QQSAtnD9" title="convertible note interest rate"><ix:nonFraction name="us-gaap:DebtConversionConvertedInstrumentRate" contextRef="From2021-06-012021-06-30_custom_HolderMember" id="Fact002463" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">50</ix:nonFraction></span>% principal balance of the note and accrued interests
to the Company&#8217;s ordinary shares in an aggregate of <span id="xdx_909_eus-gaap--DebtConversionConvertedInstrumentSharesIssued1_c20210601__20210630__srt--TitleOfIndividualAxis__custom--HolderMember_zeR5I8MLbVO2" title="Debt conversion shares issued"><ix:nonFraction name="us-gaap:DebtConversionConvertedInstrumentSharesIssued1" contextRef="From2021-06-012021-06-30_custom_HolderMember" id="Fact002465" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">29,871</ix:nonFraction></span> ordinary shares (see Note 16). The total amount of principal and accrued
interest converted into the ordinary shares was approximately $<span id="xdx_908_eus-gaap--DebtConversionConvertedInstrumentAmount1_c20210601__20210630__srt--TitleOfIndividualAxis__custom--HolderMember_z0wny90AjHL8"><ix:nonFraction name="us-gaap:DebtConversionConvertedInstrumentAmount1" contextRef="From2021-06-012021-06-30_custom_HolderMember" id="Fact002466" format="ixt:numdotdecimal" decimals="0" unitRef="USD">766,000</ix:nonFraction></span>.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
July 2021, the Company issued a total of <span id="xdx_901_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20210701__20210731__us-gaap--SubsidiarySaleOfStockAxis__custom--DirectOfferingMember_zeROJiLjewmh" title="Number of shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2021-07-012021-07-31_custom_DirectOfferingMember" id="Fact002468" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">120,000</ix:nonFraction></span> ordinary shares in a registered direct offering at $<span id="xdx_90E_eus-gaap--SharesIssuedPricePerShare_iI_c20210731__us-gaap--SubsidiarySaleOfStockAxis__custom--DirectOfferingMember_zzHukXYZCQq5" title="Shares issued price per share"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2021-07-31_custom_DirectOfferingMember" id="Fact002470" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">41.5</ix:nonFraction></span> per share, which generated
approximately $<span id="xdx_90F_eus-gaap--ProceedsFromIssuanceOfCommonStock_pn5n6_c20210701__20210731__us-gaap--SubsidiarySaleOfStockAxis__custom--DirectOfferingMember_zHHKbaStXuve" title="Proceeds from issuance of common stock"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfCommonStock" contextRef="From2021-07-012021-07-31_custom_DirectOfferingMember" id="Fact002472" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">4.7</ix:nonFraction></span> million net proceeds for the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
September 2021, the Company issued <span id="xdx_900_eus-gaap--StockIssuedDuringPeriodSharesRestrictedStockAwardGross_c20210901__20210930__us-gaap--BusinessAcquisitionAxis__custom--IASPECTechnologyCoLtdMember_zibROvxZvmXj"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardGross" contextRef="From2021-09-012021-09-30_custom_IASPECTechnologyCoLtdMember" id="Fact002473" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">61,225</ix:nonFraction></span> ordinary shares at a price of $<span id="xdx_901_eus-gaap--SharesIssuedPricePerShare_iI_c20210930__us-gaap--BusinessAcquisitionAxis__custom--IASPECTechnologyCoLtdMember_zwj216YzylH1" title="Shares issued price per share"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2021-09-30_custom_IASPECTechnologyCoLtdMember" id="Fact002475" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">26.0</ix:nonFraction></span> per share with discounts for lack of marketability, as
the consideration of approximately $<span id="xdx_90B_eus-gaap--BusinessCombinationConsiderationTransferred1_pn5n6_c20210901__20210930__us-gaap--BusinessAcquisitionAxis__custom--IASPECTechnologyCoLtdMember_zFFH3fYqFLk9" title="Business combination, consideration transferred"><ix:nonFraction name="us-gaap:BusinessCombinationConsiderationTransferred1" contextRef="From2021-09-012021-09-30_custom_IASPECTechnologyCoLtdMember" id="Fact002477" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">1.8</ix:nonFraction></span> million for acquiring <span id="xdx_906_eus-gaap--EquityMethodInvestmentOwnershipPercentage_iI_pid_dp_uPure_c20210930__srt--ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis__custom--IASPECTechnologyGroupCoLtdiASPECMember_z3bDsbvyried"><ix:nonFraction name="us-gaap:EquityMethodInvestmentOwnershipPercentage" contextRef="AsOf2021-09-30_custom_IASPECTechnologyGroupCoLtdiASPECMember" id="Fact002478" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% equity interest of iASPEC.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
November 2021, the Company issued <span id="xdx_905_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20211101__20211130__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--FinancialIntermediaryServiceOrganizationMember_zLmHFzYCLbP5" title="Number of shares issued for services, shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2021-11-012021-11-30_custom_FinancialIntermediaryServiceOrganizationMember" id="Fact002480" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">4,500</ix:nonFraction></span> restricted shares with a fair value of $<span id="xdx_90E_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20211101__20211130__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--FinancialIntermediaryServiceOrganizationMember_zwbEmtkIcDB9" title="Number of shares issued for services, value"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2021-11-012021-11-30_custom_FinancialIntermediaryServiceOrganizationMember" id="Fact002482" format="ixt:numdotdecimal" decimals="0" unitRef="USD">136,350</ix:nonFraction></span> to a financial intermediary service organization
as a compensation for the intermediary service.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2021, the Company issued <span id="xdx_90E_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20211201__20211231__srt--TitleOfIndividualAxis__custom--ConsultantsMember_z1ZbZCPdEqId" title="Number of shares issued for services, shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2021-12-012021-12-31_custom_ConsultantsMember" id="Fact002484" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">1,000</ix:nonFraction></span> ordinary shares with a fair value of $<span id="xdx_900_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20210101__20211231__srt--TitleOfIndividualAxis__custom--ConsultantsMember_zLhZpzL6F1ra" title="Number of shares issued for services, value"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2021-01-012021-12-31_custom_ConsultantsMember" id="Fact002486" format="ixt:numdotdecimal" decimals="0" unitRef="USD">29,200</ix:nonFraction></span> to a consultant as a compensation for his service.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
February 2022, the Company issued the first phase of approximately <span id="xdx_903_eus-gaap--StockIssuedDuringPeriodSharesRestrictedStockAwardGross_c20220201__20220228_zAdCLl5ehm7e" title="Number of restricted shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardGross" contextRef="From2022-02-012022-02-28" id="Fact002488" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">6,718</ix:nonFraction></span> restricted ordinary shares with a fair value of approximately
$<span id="xdx_902_eus-gaap--StockIssuedDuringPeriodValueRestrictedStockAwardGross_c20220201__20220228_zpgEC9PMPTVk" title="Number of restricted shares issued, value"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueRestrictedStockAwardGross" contextRef="From2022-02-012022-02-28" id="Fact002490" format="ixt:numdotdecimal" decimals="0" unitRef="USD">118,000</ix:nonFraction></span>, for the acquisition of ZJIOT. The Company agreed to issue to the shareholders of ZJIOT a total of approximately <span id="xdx_903_eus-gaap--StockIssuedDuringPeriodSharesRestrictedStockAwardGross_c20220201__20220228__us-gaap--RelatedPartyTransactionAxis__custom--ShareholdersMember_z4IJWBQXIgt2" title="Number of restricted shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardGross" contextRef="From2022-02-012022-02-28_custom_ShareholdersMember" id="Fact002492" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">20,154</ix:nonFraction></span> restricted
ordinary shares in three phases, conditioned upon the satisfaction of certain performance targets.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
March 2022 and July 2022, the Company issued <span id="xdx_90A_eus-gaap--StockIssuedDuringPeriodSharesRestrictedStockAwardGross_c20220301__20220331__srt--TitleOfIndividualAxis__custom--ConsultantMember_zGZdNiePZfSa" title="Number of restricted shares issued"><span id="xdx_904_eus-gaap--StockIssuedDuringPeriodSharesRestrictedStockAwardGross_c20220701__20220731__srt--TitleOfIndividualAxis__custom--ConsultantMember_zlBzHrqWMWhi" title="Number of restricted shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardGross" contextRef="From2022-03-012022-03-31_custom_ConsultantMember" id="Fact002494" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardGross" contextRef="From2022-07-012022-07-31_custom_ConsultantMember" id="Fact002496" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">2,000</ix:nonFraction></ix:nonFraction></span></span> ordinary shares with a fair value of $<span id="xdx_90B_eus-gaap--StockIssuedDuringPeriodValueRestrictedStockAwardGross_pp0p0_c20220301__20220331__srt--TitleOfIndividualAxis__custom--ConsultantMember_zdJwMjZtzng4" title="Number of restricted shares issued, value"><span id="xdx_90E_eus-gaap--StockIssuedDuringPeriodValueRestrictedStockAwardGross_pp0p0_c20220701__20220731__srt--TitleOfIndividualAxis__custom--ConsultantMember_zuLXFgPLsokh" title="Number of restricted shares issued, value"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueRestrictedStockAwardGross" contextRef="From2022-03-012022-03-31_custom_ConsultantMember" id="Fact002498" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueRestrictedStockAwardGross" contextRef="From2022-07-012022-07-31_custom_ConsultantMember" id="Fact002500" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">23,100</ix:nonFraction></ix:nonFraction></span></span> to a consultant as a compensation for
his service.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
April 2023, the Company issued the second phase of approximately <span id="xdx_905_eus-gaap--StockIssuedDuringPeriodSharesRestrictedStockAwardGross_c20230401__20230430__us-gaap--BusinessAcquisitionAxis__custom--ZhengjiangTaopingMember_zr6M0rrGknz6" title="Restricted award shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardGross" contextRef="From2023-04-012023-04-30_custom_ZhengjiangTaopingMember" id="Fact002502" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">6,718</ix:nonFraction></span> restricted ordinary shares with a fair value of approximately
$<span id="xdx_902_eus-gaap--StockIssuedDuringPeriodValueRestrictedStockAwardGross_c20230401__20230430__us-gaap--BusinessAcquisitionAxis__custom--ZhengjiangTaopingMember_zRkNTjRFzBgi" title="Restricted award, value"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueRestrictedStockAwardGross" contextRef="From2023-04-012023-04-30_custom_ZhengjiangTaopingMember" id="Fact002504" format="ixt:numdotdecimal" decimals="0" unitRef="USD">49,000</ix:nonFraction></span>, for the acquisition of ZJIOT, upon the satisfaction of certain performance targets.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
May 2023, the Company issued <span id="xdx_90B_eus-gaap--StockIssuedDuringPeriodSharesRestrictedStockAwardGross_c20230501__20230531__us-gaap--AwardTypeAxis__custom--ServiceCompensationMember_z5nPxLp4ddj" title="Restricted award shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardGross" contextRef="From2023-05-012023-05-31_custom_ServiceCompensationMember" id="Fact002506" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">50,000</ix:nonFraction></span> restricted shares to a consultant as its service compensation for the service period from May 26,
2023 to May 25, 2024. The fair value of the <span id="xdx_90A_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20230501__20230531__us-gaap--AwardTypeAxis__custom--ServiceCompensationMember_zj9iuLTb4eMd" title="Number of shares issued for services"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2023-05-012023-05-31_custom_ServiceCompensationMember" id="Fact002508" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">50,000</ix:nonFraction></span> ordinary shares was $<span id="xdx_901_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20230501__20230531__us-gaap--AwardTypeAxis__custom--ServiceCompensationMember_zwaAHNrLGmP7" title="Issued for services, value"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2023-05-012023-05-31_custom_ServiceCompensationMember" id="Fact002510" format="ixt:numdotdecimal" decimals="0" unitRef="USD">340,000</ix:nonFraction></span>, which was amortized over the service period.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
May 2023, the Company issued <span id="xdx_906_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_pid_c20230501__20230531__srt--TitleOfIndividualAxis__custom--DirectorsExecutiveOffcersEmployeeMember_zUokyBep0x3d" title="Stock issued during period shares issued for services"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2023-05-012023-05-31_custom_DirectorsExecutiveOffcersEmployeeMember" id="Fact002512" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">200,000</ix:nonFraction></span> ordinary shares with fair value of approximately $<span id="xdx_908_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20230501__20230531__srt--TitleOfIndividualAxis__custom--DirectorsExecutiveOffcersEmployeeMember_z0LfEQd6eUxb" title="Stock issued during period value issued for services"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2023-05-012023-05-31_custom_DirectorsExecutiveOffcersEmployeeMember" id="Fact002514" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,360,000</ix:nonFraction></span> to certain directors, executive officers,
and employees as compensations for their services.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
July 2023, the Company issued <span id="xdx_908_eus-gaap--StockIssuedDuringPeriodSharesOther_c20230701__20230731__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--InvestorMember__us-gaap--TypeOfArrangementAxis__custom--PublicStandbyEquityPurchaseAgreementMember_zwOxYIVMxKqk" title="Number of ordinary shares as commitment fees"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesOther" contextRef="From2023-07-012023-07-31_us-gaap_InvestorMember_custom_PublicStandbyEquityPurchaseAgreementMember" id="Fact002516" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">4,339</ix:nonFraction></span> and <span id="xdx_904_eus-gaap--StockIssuedDuringPeriodSharesOther_c20230701__20230731__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--InvestorMember__us-gaap--TypeOfArrangementAxis__custom--PrivateStandbyEquityPurchaseAgreementMember_zVNNeY9ubaic" title="Number of ordinary shares as commitment fees"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesOther" contextRef="From2023-07-012023-07-31_us-gaap_InvestorMember_custom_PrivateStandbyEquityPurchaseAgreementMember" id="Fact002518" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">43,394</ix:nonFraction></span> ordinary shares, as commitment fee shares to an investor, with fair value of approximately
$<span id="xdx_905_eus-gaap--StockIssuedDuringPeriodValueOther_c20230701__20230731__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--InvestorMember__us-gaap--TypeOfArrangementAxis__custom--PublicStandbyEquityPurchaseAgreementMember_zduPsJHfieSj" title="Number of ordinary share value as commitment fees"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueOther" contextRef="From2023-07-012023-07-31_us-gaap_InvestorMember_custom_PublicStandbyEquityPurchaseAgreementMember" id="Fact002520" format="ixt:numdotdecimal" decimals="0" unitRef="USD">23,000</ix:nonFraction></span> and $<span id="xdx_906_eus-gaap--StockIssuedDuringPeriodValueOther_c20230701__20230731__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__us-gaap--InvestorMember__us-gaap--TypeOfArrangementAxis__custom--PrivateStandbyEquityPurchaseAgreementMember_zXjgvPjbXz8f" title="Number of ordinary share value as commitment fees"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueOther" contextRef="From2023-07-012023-07-31_us-gaap_InvestorMember_custom_PrivateStandbyEquityPurchaseAgreementMember" id="Fact002522" format="ixt:numdotdecimal" decimals="0" unitRef="USD">230,000</ix:nonFraction></span>, respectively, pursuant to a public standby equity purchase agreement and a private standby equity purchase agreement.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
August 2023, the Company issued <span id="xdx_903_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_pid_c20230801__20230831__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_zYEyMBfQdhY8" title="Number of shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2023-08-012023-08-31_us-gaap_InvestorMember" id="Fact002524" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">80,000</ix:nonFraction></span> ordinary shares to a certain investor at $<span id="xdx_901_eus-gaap--SharesIssuedPricePerShare_iI_pid_c20230831__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_zPyXH1RbLxGd" title="Shares issued price per share"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2023-08-31_us-gaap_InvestorMember" id="Fact002526" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">4.626</ix:nonFraction></span> per share, which generated net proceeds of $<span id="xdx_907_eus-gaap--ProceedsFromIssuanceOfCommonStock_c20230801__20230831__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_z8W1RYOvSvK5" title="Proceeds from issuance of common stock"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfCommonStock" contextRef="From2023-08-012023-08-31_us-gaap_InvestorMember" id="Fact002528" format="ixt:numdotdecimal" decimals="0" unitRef="USD">370,080</ix:nonFraction></span>
for the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
October 2023, the Company issued a total of <span id="xdx_909_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_pid_c20231001__20231031__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_zXYdgAy96eMg" title="Number of shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2023-10-012023-10-31_us-gaap_InvestorMember" id="Fact002530" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">300,000</ix:nonFraction></span> ordinary shares to a certain investor at $<span id="xdx_905_eus-gaap--SharesIssuedPricePerShare_iI_pid_c20231031__srt--TitleOfIndividualAxis__us-gaap--InvestorMember__srt--RangeAxis__srt--MaximumMember_zYOUo3KVRluk" title="Shares issued price per share"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2023-10-31_us-gaap_InvestorMember_srt_MaximumMember" id="Fact002532" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1.97</ix:nonFraction></span> and $<span id="xdx_90A_eus-gaap--SharesIssuedPricePerShare_iI_pid_c20231031__srt--TitleOfIndividualAxis__us-gaap--InvestorMember__srt--RangeAxis__srt--MinimumMember_z3Q4032NF2n8" title="Shares issued price per share"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2023-10-31_us-gaap_InvestorMember_srt_MinimumMember" id="Fact002534" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1.84</ix:nonFraction></span> per share, which generated
net proceeds of $<span id="xdx_902_eus-gaap--ProceedsFromIssuanceOfCommonStock_c20231001__20231031__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_zwhKr5nGAcZ3" title="Proceeds from issuance of common stock"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfCommonStock" contextRef="From2023-10-012023-10-31_us-gaap_InvestorMember" id="Fact002536" format="ixt:numdotdecimal" decimals="0" unitRef="USD">570,200</ix:nonFraction></span> for the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
November 2023, the Company issued <span id="xdx_902_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_pid_c20231101__20231130__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_zSe5IDI20wmb" title="Number of shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2023-11-012023-11-30_us-gaap_InvestorMember" id="Fact002538" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">200,000</ix:nonFraction></span> ordinary shares to a certain investor at $<span id="xdx_90B_eus-gaap--SharesIssuedPricePerShare_iI_pid_c20231130__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_zR8ZX9ITp11a" title="Shares issued price per share"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2023-11-30_us-gaap_InvestorMember" id="Fact002540" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1.37</ix:nonFraction></span> per share, which generated net proceeds of $<span id="xdx_900_eus-gaap--ProceedsFromIssuanceOfCommonStock_c20231101__20231130__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_zmC5MZCMRv59" title="Proceeds from issuance of common stock"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfCommonStock" contextRef="From2023-11-012023-11-30_us-gaap_InvestorMember" id="Fact002542" format="ixt:numdotdecimal" decimals="0" unitRef="USD">274,000</ix:nonFraction></span>
for the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2023, the Company issued a total of <span id="xdx_905_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_pid_c20231201__20231231__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_z1ux6iIh02Uj" title="Number of shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2023-12-012023-12-31_us-gaap_InvestorMember" id="Fact002544" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">420,000</ix:nonFraction></span> ordinary shares to a certain investor at $<span id="xdx_907_eus-gaap--SharesIssuedPricePerShare_iI_pid_c20231231__srt--TitleOfIndividualAxis__us-gaap--InvestorMember__srt--RangeAxis__srt--MaximumMember_zfdksqaWMv44" title="Shares issued price per share"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2023-12-31_us-gaap_InvestorMember_srt_MaximumMember" id="Fact002546" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1.24</ix:nonFraction></span> and $<span id="xdx_90B_eus-gaap--SharesIssuedPricePerShare_iI_pid_c20231231__srt--TitleOfIndividualAxis__us-gaap--InvestorMember__srt--RangeAxis__srt--MinimumMember_z4m7OXYkWCp5" title="Shares issued price per share"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2023-12-31_us-gaap_InvestorMember_srt_MinimumMember" id="Fact002548" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1.11</ix:nonFraction></span> per share, respectively,
which generated net proceeds of $<span id="xdx_901_eus-gaap--ProceedsFromIssuanceOfCommonStock_c20231201__20231231__srt--TitleOfIndividualAxis__us-gaap--InvestorMember_zAJp2fiPy8ca" title="Proceeds from issuance of common stock"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfCommonStock" contextRef="From2023-12-012023-12-31_us-gaap_InvestorMember" id="Fact002550" format="ixt:numdotdecimal" decimals="0" unitRef="USD">494,800</ix:nonFraction></span> for the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 160; Value: 1 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->40<!-- Field: /Sequence --></td></tr></table></div>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(b)
Stock-based compensation</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002552" name="us-gaap:DisclosureOfShareBasedCompensationArrangementsByShareBasedPaymentAwardTextBlock"><p id="xdx_892_eus-gaap--DisclosureOfShareBasedCompensationArrangementsByShareBasedPaymentAwardTextBlock_zWrTzBSIbPy6" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table provides the details of the share-based payments expense during the year ended December 31, 2023, 2022, and 2021:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8B1_zLHRtltgRADd" style="display: none">SCHEDULE OF SHARE BASED PAYMENTS EXPENSE</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_499_20230101__20231231_zWQvwjB7Lr05" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_493_20220101__20221231_zd6YOsVsCwH4" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_497_20210101__20211231_zkmvSWaaVL52" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
<tr style="vertical-align: bottom">
    <td style="text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the Year Ended</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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    <td style="width: 41%; text-align: left">Employees and directors share-based payments</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right"><ix:nonFraction name="us-gaap:EmployeeServiceShareBasedCompensationAllocationOfRecognizedPeriodCostsCapitalizedAmount" contextRef="From2023-01-01to2023-12-31" id="Fact002554" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,360,000</ix:nonFraction></td><td style="width: 2%; text-align: left">(a)</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl2555">-</span></td><td style="width: 2%; text-align: left">&#160;</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right"><ix:nonFraction name="us-gaap:EmployeeServiceShareBasedCompensationAllocationOfRecognizedPeriodCostsCapitalizedAmount" contextRef="From2021-01-012021-12-31" id="Fact002556" format="ixt:numdotdecimal" decimals="0" unitRef="USD">2,950,000</ix:nonFraction></td><td style="width: 4%; text-align: left">(a)(c)</td></tr>
  <tr id="xdx_405_ecustom--SharesIssuedForServices_iN_di_msSBCzIQA_zPwozEWnOcd" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Shares issued for services</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="TAOP:SharesIssuedForServices" contextRef="From2023-01-01to2023-12-31" id="Fact002558" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">204,000</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">(a)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="TAOP:SharesIssuedForServices" contextRef="From2022-01-012022-12-31" id="Fact002559" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">23,100</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">(a)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="TAOP:SharesIssuedForServices" contextRef="From2021-01-012021-12-31" id="Fact002560" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">187,000</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">(a)</td></tr>
  <tr id="xdx_400_ecustom--ShareBasedCompensationExpenses_iT_pp0p0_mtSBCzIQA_zgVvGW77UOrj" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 2.5pt"><span style="display: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">Total
    share based payments expenses&#160;</span><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="TAOP:ShareBasedCompensationExpenses" contextRef="From2023-01-01to2023-12-31" id="Fact002562" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,564,000</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="TAOP:ShareBasedCompensationExpenses" contextRef="From2022-01-012022-12-31" id="Fact002563" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">23,100</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><ix:nonFraction name="TAOP:ShareBasedCompensationExpenses" contextRef="From2021-01-012021-12-31" id="Fact002564" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">3,137,000</ix:nonFraction></td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
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</ix:nonNumeric><p id="xdx_8A5_z4WFz4LiIQJg" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(c)
Stock options to employees and directors</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
May 9, 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan, or the 2016 Plan. Pursuant to the 2016 Plan
and its amendment in May 2021, the Company may offer up to five hundred thousand ordinary shares as equity incentives to its directors,
employees and consultants. Such number of shares is subject to adjustment in the event of certain reorganizations, mergers, business
combinations, recapitalizations, stock splits, stock dividends, or other change in the corporate structure of the Company affecting the
issuable shares under the 2016 Plan. The Company accounts for its stock option awards to employees and directors pursuant to the provisions
of ASC 718, Compensation &#8211; Stock Compensation. The fair value of each option award is estimated on the date of grant using the
Black-Scholes Merton valuation model. The Company recognizes the fair value of each option as compensation expense ratably using the
straight-line attribution method over the service period, which is generally the vesting period.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 24, 2020, the Company granted options to employees and directors to purchase an aggregate of <span id="xdx_90D_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross_c20200723__20200724__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--EmployeesAndDirectorsMember_zeVYcVKEtsnc"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross" contextRef="From2020-07-232020-07-24_custom_TwoThousandSixteenEquityIncentivePlanMember_custom_EmployeesAndDirectorsMember" id="Fact002565" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">33,335</ix:nonFraction></span> ordinary shares under the 2016
Plan. The fair value of these options was approximately $<span id="xdx_903_ecustom--FairValueOfStockOptionGrant_pn5n6_c20200723__20200724__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--EmployeesAndDirectorsMember_zxvf5Gs9iqn3" title="Fair value of stock option grant"><ix:nonFraction name="TAOP:FairValueOfStockOptionGrant" contextRef="From2020-07-232020-07-24_custom_TwoThousandSixteenEquityIncentivePlanMember_custom_EmployeesAndDirectorsMember" id="Fact002567" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="Shares">0.3</ix:nonFraction></span> million at the date of the grant, of which approximately $<span id="xdx_90F_eus-gaap--ShareBasedCompensation_c20210101__20211231__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--EmployeesAndDirectorsMember__us-gaap--IncomeStatementLocationAxis__us-gaap--SellingGeneralAndAdministrativeExpensesMember_zj0O2ZBfFTxb" title="Share based compensation"><ix:nonFraction name="us-gaap:ShareBasedCompensation" contextRef="From2021-01-012021-12-31_custom_TwoThousandSixteenEquityIncentivePlanMember_custom_EmployeesAndDirectorsMember_us-gaap_SellingGeneralAndAdministrativeExpensesMember" id="Fact002569" format="ixt:numdotdecimal" decimals="0" unitRef="USD">160,000</ix:nonFraction></span> and $<span id="xdx_90E_eus-gaap--ShareBasedCompensation_c20200101__20201231__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--EmployeesAndDirectorsMember__us-gaap--IncomeStatementLocationAxis__us-gaap--SellingGeneralAndAdministrativeExpensesMember_zx32RtwUWKli" title="Share based compensation"><ix:nonFraction name="us-gaap:ShareBasedCompensation" contextRef="From2020-01-012020-12-31_custom_TwoThousandSixteenEquityIncentivePlanMember_custom_EmployeesAndDirectorsMember_us-gaap_SellingGeneralAndAdministrativeExpensesMember" id="Fact002571" format="ixt:numdotdecimal" decimals="0" unitRef="USD">140,000</ix:nonFraction></span>
was recorded as compensation and included in administrative expenses in the consolidated statements of operations for the services provided
for the year ended December 31, 2021, and 2020 respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002573" name="us-gaap:ScheduleOfShareBasedCompensationStockOptionsActivityTableTextBlock"><p id="xdx_891_eus-gaap--ScheduleOfShareBasedCompensationStockOptionsActivityTableTextBlock_zZhkNcoZvie2" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Stock
option activity for the year ended December 31, 2023, 2022 and 2021 is summarized as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8B6_zBywG8KiE0o4" style="display: none">SUMMARY OF STOCK OPTION ACTIVITY</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: left">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center"/><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center"><p style="margin-top: 0; margin-bottom: 0">Weighted</p>
                                                                  <p style="margin-top: 0; margin-bottom: 0">Average</p>
                                                                  <p style="margin-top: 0; margin-bottom: 0">Remaining</p></td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td id="xdx_98D_eus-gaap--StockIssuedDuringPeriodSharesStockOptionsExercised_c20210101__20211231__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_fKg_____zeXs2V1nmea3" title="Option Outstanding, Exercised" style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl2585">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Granted</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_987_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross_c20220101__20221231__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_fKg_____zNDZJAIOuI51" title="Option Outstanding, Granted" style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl2599">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Exercised</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_988_eus-gaap--StockIssuedDuringPeriodSharesStockOptionsExercised_c20220101__20221231__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_fKg_____zsaamj8022o1" title="Option Outstanding, Exercised" style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl2601">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Canceled</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td id="xdx_986_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsForfeituresInPeriod_iN_di_c20220101__20221231__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_fKg_____zztkl8kqOyGd" title="Option Outstanding, Canceled" style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsForfeituresInPeriod" contextRef="From2022-01-012022-12-31_us-gaap_StockOptionMember" id="Fact002603" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">1,518</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Outstanding at December 31, 2022</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_981_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber_iS_c20230101__20231231__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_fKg_____zn09aPOQpZ75" title="Option Outstanding, Ending Balance" style="text-align: right"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber" contextRef="AsOf2022-12-31_us-gaap_StockOptionMember" id="Fact002607" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">28,250</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span id="xdx_907_ecustom--SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTerm1_dtY_c20220101__20221231__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_zifwyliRsxik" title="Weighted Average Remaining Contractual Life (Year), Ending"><ix:nonNumeric contextRef="From2022-01-012022-12-31_us-gaap_StockOptionMember" format="ixt-sec:duryear" id="Fact002611" name="TAOP:SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTerm1">0.6</ix:nonNumeric></span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_98E_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingIntrinsicValue_iS_pp0p0_c20230101__20231231__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_z76vR7nt8qf6" title="Aggregated Intrinsic Value, Outstanding Ending" style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl2613">-</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Granted</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_987_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross_c20230101__20231231__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_fKg_____zlLYg6L6mrS7" title="Option Outstanding, Granted" style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl2615">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Exercised</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_985_eus-gaap--StockIssuedDuringPeriodSharesStockOptionsExercised_c20230101__20231231__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_fKg_____ziRBfkbNkr0i" title="Option Outstanding, Exercised" style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl2617">-</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Canceled</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_98C_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsForfeituresInPeriod_iN_di_c20230101__20231231__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_fKg_____zXaNtk0vy0Q2" title="Option Outstanding, Canceled" style="text-align: right">(<ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsForfeituresInPeriod" contextRef="From2023-01-012023-12-31_us-gaap_StockOptionMember" id="Fact002619" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">400</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td id="xdx_98C_eus-gaap--ShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsForfeituresInPeriodWeightedAverageExercisePrice_c20230101__20231231__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_fKg_____z3MDlyINd9W3" title="Weighted Average Exercise Price, Canceled" style="text-align: right"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsForfeituresInPeriodWeightedAverageExercisePrice" contextRef="From2023-01-012023-12-31_us-gaap_StockOptionMember" id="Fact002621" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">24.0</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Expired</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</ix:nonNumeric><p id="xdx_8A5_zotce5KZqAq9" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 161; Value: 1 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
were <span id="xdx_907_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross_do_c20230101__20231231__srt--TitleOfIndividualAxis__custom--EmployeeMember_zmJqMp23ZhKe" title="Stock option granted"><span id="xdx_90C_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross_do_c20220101__20221231__srt--TitleOfIndividualAxis__custom--EmployeeMember_zmPq2UdMjwi4" title="Stock option granted"><span id="xdx_90B_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross_do_c20210101__20211231__srt--TitleOfIndividualAxis__custom--EmployeeMember_zJlNZuCK5by2" title="Stock option granted"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross" contextRef="From2023-01-012023-12-31_custom_EmployeeMember" id="Fact002633" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross" contextRef="From2022-01-012022-12-31_custom_EmployeeMember" id="Fact002635" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross" contextRef="From2021-01-012021-12-31_custom_EmployeeMember" id="Fact002637" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares">no</ix:nonFraction></ix:nonFraction></ix:nonFraction></span></span></span> stock options granted to employees during the year ended December 31, 2023, 2022 and 2021. There was <span id="xdx_90C_eus-gaap--StockIssuedDuringPeriodSharesStockOptionsExercised_do_c20230101__20231231__srt--TitleOfIndividualAxis__custom--EmployeeMember_zUTdbe0eelrl" title="Stock options exercised"><span id="xdx_90F_eus-gaap--StockIssuedDuringPeriodSharesStockOptionsExercised_do_c20220101__20221231__srt--TitleOfIndividualAxis__custom--EmployeeMember_zIFyD5hl0ECl" title="Stock options exercised"><span id="xdx_90A_eus-gaap--StockIssuedDuringPeriodSharesStockOptionsExercised_do_c20210101__20211231__srt--TitleOfIndividualAxis__custom--EmployeeMember_z6JfZMzmzSC6" title="Stock options exercised"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesStockOptionsExercised" contextRef="From2023-01-012023-12-31_custom_EmployeeMember" id="Fact002639" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesStockOptionsExercised" contextRef="From2022-01-012022-12-31_custom_EmployeeMember" id="Fact002641" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesStockOptionsExercised" contextRef="From2021-01-012021-12-31_custom_EmployeeMember" id="Fact002643" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares">no</ix:nonFraction></ix:nonFraction></ix:nonFraction></span></span></span> option exercised during
the years ended December 31, 2023, 2022 and 2021. The Company did not receive any proceeds related to the cashless exercise of stock
options from employees for the years ended December 31, 2023, 2022 and 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023 and 2022, <span id="xdx_905_eus-gaap--EmployeeServiceShareBasedCompensationNonvestedAwardsTotalCompensationCostNotYetRecognized_iI_do_c20231231_zbOy5miRlZqc" title="Unrecognized compensation expense related to non-vested share options"><span id="xdx_905_eus-gaap--EmployeeServiceShareBasedCompensationNonvestedAwardsTotalCompensationCostNotYetRecognized_iI_do_c20221231_z785VTZAFIh2" title="Unrecognized compensation expense related to non-vested share options"><ix:nonFraction name="us-gaap:EmployeeServiceShareBasedCompensationNonvestedAwardsTotalCompensationCostNotYetRecognized" contextRef="AsOf2023-12-31" id="Fact002645" format="ixt-sec:numwordsen" decimals="0" unitRef="USD"><ix:nonFraction name="us-gaap:EmployeeServiceShareBasedCompensationNonvestedAwardsTotalCompensationCostNotYetRecognized" contextRef="AsOf2022-12-31" id="Fact002647" format="ixt-sec:numwordsen" decimals="0" unitRef="USD">no</ix:nonFraction></ix:nonFraction></span></span> unrecognized compensation expense related to non-vested share options expected to be recognized. The
total fair value of options vested during the year ended December 31, 2023, 2022 and 2021 was approximately $ <span id="xdx_904_eus-gaap--SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsVestedInPeriodFairValue1_dxL_c20230101__20231231_zJ63pXiXDvBd" title="Fair value of stock option vested::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl2649">nil</span></span>, $ <span id="xdx_907_eus-gaap--SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsVestedInPeriodFairValue1_dxL_c20220101__20221231_zNhfrBj0sNtj" title="Fair value of stock option vested::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl2651">nil</span></span> and $<span id="xdx_90A_eus-gaap--SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsVestedInPeriodFairValue1_pn5n6_c20210101__20211231_z6ZdII3LdZA1" title="Fair value of stock option vested"><ix:nonFraction name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsVestedInPeriodFairValue1" contextRef="From2021-01-012021-12-31" id="Fact002653" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.2</ix:nonFraction></span> million,
respectively. To the extent the actual forfeiture rate is different from what the Company has anticipated; stock-based compensation related
to these awards will be different from its expectations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in; text-align: justify"><span id="xdx_F09_zjebEJCAEED1" style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span id="xdx_F13_zxFTX3sjaAda" style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:footnote id="Footnote002654" xml:lang="en-US">On
    August 1, 2023, the Company implemented a one-for-ten reverse stock split of the Company&#8217;s issued and outstanding ordinary
    shares. Except shares authorized, all share and per share information has been retroactively adjusted to give effect to the reverse
    stock split for all periods presented, unless otherwise indicated.</ix:footnote></span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(d)
Stock options and warrants to non-employees</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Company&#8217;s 2016 Equity Incentive Plan and its amendment, in July 2020, the Company granted options to certain consultants
to purchase an aggregate of <span id="xdx_905_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross_c20200701__20200731__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--ConsultantsMember_zF4y62MfpBMi"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross" contextRef="From2020-07-012020-07-31_custom_TwoThousandSixteenEquityIncentivePlanMember_custom_ConsultantsMember" id="Fact002655" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">5,737</ix:nonFraction></span> ordinary shares of the Company with an exercise price at $<span id="xdx_908_eus-gaap--ShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsExercisesInPeriodWeightedAverageExercisePrice_c20200701__20200731__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--ConsultantsMember_zfM9uhbQpna6" title="Exercise price"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsExercisesInPeriodWeightedAverageExercisePrice" contextRef="From2020-07-012020-07-31_custom_TwoThousandSixteenEquityIncentivePlanMember_custom_ConsultantsMember" id="Fact002657" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">26.4</ix:nonFraction></span> per share. The options were fully vested
at the grant date as a rewarding for the past service of the consultants. For the years ended December 31, 2023, 2022 and 2021, the Company
issued <span id="xdx_908_eus-gaap--ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights_iI_dxL_c20231231__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--ConsultantsMember_zLg5yRQXOku9" title="::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl2658">nil</span></span>, <span id="xdx_90B_eus-gaap--ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights_iI_dxL_c20221231__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--ConsultantsMember_zhMYeA9pz5ij" title="::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl2659">nil</span></span> and <span id="xdx_901_eus-gaap--ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights_iI_c20211231__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--ConsultantsMember_zXdZrkJ8vAuh"><ix:nonFraction name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" contextRef="AsOf2021-12-31_custom_TwoThousandSixteenEquityIncentivePlanMember_custom_ConsultantsMember" id="Fact002660" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">191,500</ix:nonFraction></span> warrants to consultants, respectively. The Company expensed to administrative expense approximately $<span id="xdx_909_eus-gaap--GeneralAndAdministrativeExpense_dxL_c20230101__20231231__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--ConsultantsMember_z3ySruUJp0uj" title="Administrative expense::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl2662">nil</span></span>,
$<span id="xdx_903_eus-gaap--GeneralAndAdministrativeExpense_dxL_c20220101__20221231__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--ConsultantsMember_zZZWWP8y3V0l" title="Administrative expense::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl2664">nil</span></span> and $<span id="xdx_909_eus-gaap--GeneralAndAdministrativeExpense_c20210101__20211231__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--ConsultantsMember_zkJUNftwdlVd" title="Administrative expense"><ix:nonFraction name="us-gaap:GeneralAndAdministrativeExpense" contextRef="From2021-01-012021-12-31_custom_TwoThousandSixteenEquityIncentivePlanMember_custom_ConsultantsMember" id="Fact002666" format="ixt:numdotdecimal" decimals="0" unitRef="USD">77,000</ix:nonFraction></span> for the years ended December 31, 2023, 2022 and 2021, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify; text-indent: 174.55pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
issuance of warrants to purchase up to <span id="xdx_900_eus-gaap--ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights_iI_c20211231__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--ConsultantsMember__us-gaap--AwardDateAxis__custom--FebruaryTwoThousandTwentyOneMember__srt--RangeAxis__srt--MaximumMember_z7zi6gRaM8ac"><ix:nonFraction name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" contextRef="AsOf2021-12-31_custom_TwoThousandSixteenEquityIncentivePlanMember_custom_ConsultantsMember_custom_FebruaryTwoThousandTwentyOneMember_srt_MaximumMember" id="Fact002667" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">100,000</ix:nonFraction></span> and <span id="xdx_90B_eus-gaap--ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights_iI_c20221231__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--ConsultantsMember__us-gaap--AwardDateAxis__custom--FebruaryTwoThousandTwentyOneMember__srt--RangeAxis__srt--MaximumMember_zgOBVBnARPW1"><ix:nonFraction name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" contextRef="AsOf2022-12-31_custom_TwoThousandSixteenEquityIncentivePlanMember_custom_ConsultantsMember_custom_FebruaryTwoThousandTwentyOneMember_srt_MaximumMember" id="Fact002668" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">1,500</ix:nonFraction></span> ordinary shares to certain consultants in February 2021 has been expired as
of December 31, 2021 and December 31, 2022, respectively. The issuance of warrants to purchase up to <span id="xdx_907_eus-gaap--ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights_iI_c20211231__us-gaap--PlanNameAxis__custom--TwoThousandSixteenEquityIncentivePlanMember__srt--TitleOfIndividualAxis__custom--ConsultantsMember__us-gaap--AwardDateAxis__custom--AprilTwoThousandTwentyOneMember__srt--RangeAxis__srt--MaximumMember_zoDITIAkxZd9" title="Warrant, shares"><ix:nonFraction name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" contextRef="AsOf2021-12-31_custom_TwoThousandSixteenEquityIncentivePlanMember_custom_ConsultantsMember_custom_AprilTwoThousandTwentyOneMember_srt_MaximumMember" id="Fact002670" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">90,000</ix:nonFraction></span> ordinary shares to certain
consultants in April 2021 has been cancelled as of December 31, 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2022, the exercise price for the stock options issued to non-employees was $<span id="xdx_900_eus-gaap--ShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsExercisesInPeriodWeightedAverageExercisePrice_c20220101__20221231__srt--TitleOfIndividualAxis__custom--NonEmployeesMember_zA1zPUKlyPUa" title="Exercise price"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsExercisesInPeriodWeightedAverageExercisePrice" contextRef="From2022-01-012022-12-31_custom_NonEmployeesMember" id="Fact002672" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">26.4</ix:nonFraction></span> and remaining life was <span id="xdx_908_eus-gaap--SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTerm2_dtY_c20220101__20221231__srt--TitleOfIndividualAxis__custom--NonEmployeesMember_zz81tExjra6c" title=" Remaining contractual term"><ix:nonNumeric contextRef="From2022-01-012022-12-31_custom_NonEmployeesMember" format="ixt-sec:duryear" id="Fact002674" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTerm2">0.6</ix:nonNumeric></span> years. The
stock options granted to non-employees were expired in three years after the grant date. The following table outlines the options outstanding
and exercisable as of December 31, 2022:</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002676" name="us-gaap:ScheduleOfStockholdersEquityNoteWarrantsOrRightsTextBlock"><p id="xdx_899_eus-gaap--ScheduleOfStockholdersEquityNoteWarrantsOrRightsTextBlock_zpxVF4INdqwi" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8B1_zXz3IkWusbF" style="display: none">SCHEDULE OF WARRANT OUTSTANDING AND EXERCISABLE</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
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    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">Number of</td><td style="font-weight: bold">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
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  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td colspan="2" id="xdx_490_20210101__20211231_zclHxLNlJylk" style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2021</b></span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: #CCEEFF">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(Loss)
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr id="xdx_400_eus-gaap--OperatingIncomeLoss_hus-gaap--StatementBusinessSegmentsAxis__custom--TITSegmentMember_zaIvN7L5oEE6" style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: white">
    <td style="font: 10pt Times New Roman, Times, Serif; padding-left: 10pt; width: 46%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">TIT
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    <td style="font: 10pt Times New Roman, Times, Serif; width: 2%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 14%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:OperatingIncomeLoss" contextRef="From2023-01-012023-12-31_custom_TITSegmentMember" id="Fact002710" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">110,113</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 2%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 14%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:OperatingIncomeLoss" contextRef="From2022-01-012022-12-31_custom_TITSegmentMember" id="Fact002711" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">617,180</ix:nonFraction></span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; width: 2%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr id="xdx_409_eus-gaap--OperatingIncomeLoss_hus-gaap--StatementBusinessSegmentsAxis__custom--CBTSegmentMember_zm8pDVE6zuN9" style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: #CCEEFF">
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction name="us-gaap:OperatingIncomeLoss" contextRef="From2023-01-012023-12-31_custom_CBTSegmentMember" id="Fact002714" format="ixt:numdotdecimal" decimals="0" unitRef="USD">2,838,305</ix:nonFraction>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:OperatingIncomeLoss" contextRef="From2022-01-012022-12-31_custom_CBTSegmentMember" id="Fact002715" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">181,454</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:OperatingIncomeLoss" contextRef="From2021-01-012021-12-31_custom_CBTSegmentMember" id="Fact002716" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">7,668,616</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr id="xdx_407_eus-gaap--OperatingIncomeLoss_hus-gaap--StatementBusinessSegmentsAxis__custom--CorporateAndOthersMember_z5PCUbM4AkY5" style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: white">
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:OperatingIncomeLoss" contextRef="From2023-01-012023-12-31_custom_CorporateAndOthersMember" id="Fact002718" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">2,925,890</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:OperatingIncomeLoss" contextRef="From2022-01-012022-12-31_custom_CorporateAndOthersMember" id="Fact002719" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">2,367,003</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:OperatingIncomeLoss" contextRef="From2021-01-012021-12-31_custom_CorporateAndOthersMember" id="Fact002720" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">3,042,360</ix:nonFraction></span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: #CCEEFF">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<b>Loss)
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td id="xdx_986_eus-gaap--OperatingIncomeLoss_c20230101__20231231_zNbuzTiR3Wr9" title="(Loss) income from operations" style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(<ix:nonFraction name="us-gaap:OperatingIncomeLoss" contextRef="From2023-01-01to2023-12-31" id="Fact002722" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">197,698</ix:nonFraction></b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>)</b></span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>)</b></span></td></tr>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr id="xdx_407_eus-gaap--InvestmentIncomeInterest_zq88xYHZ0Ls7" style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: #CCEEFF">
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr id="xdx_402_eus-gaap--InterestExpense_iN_di_z0o5MRn4vFF6" style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: white">
    <td style="font: 10pt Times New Roman, Times, Serif; padding-left: 10pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Corporate
    interest expense</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:InterestExpense" contextRef="From2022-01-012022-12-31" id="Fact002737" format="ixt:numdotdecimal" decimals="0" unitRef="USD">556,434</ix:nonFraction></span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:InterestExpense" contextRef="From2021-01-012021-12-31" id="Fact002738" format="ixt:numdotdecimal" decimals="0" unitRef="USD">928,352</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr id="xdx_407_eus-gaap--IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest_zLZjpZcf0dB4" style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: #CCEEFF">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(Loss)
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2023-01-01to2023-12-31" id="Fact002740" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">224,170</ix:nonFraction></b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>)</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2022-01-012022-12-31" id="Fact002741" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">512,502</ix:nonFraction></b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>)</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2021-01-012021-12-31" id="Fact002742" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">11,757,164</ix:nonFraction></b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>)</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: white">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr id="xdx_40F_eus-gaap--IncomeTaxExpenseBenefit_iN_di_zIR8Dvqu25rg" style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: #CCEEFF">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Income
    tax (expense) benefit</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:IncomeTaxExpenseBenefit" contextRef="From2023-01-01to2023-12-31" id="Fact002744" format="ixt:numdotdecimal" decimals="0" unitRef="USD">7,980</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:IncomeTaxExpenseBenefit" contextRef="From2022-01-012022-12-31" id="Fact002745" format="ixt:numdotdecimal" decimals="0" unitRef="USD">69,869</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:IncomeTaxExpenseBenefit" contextRef="From2021-01-012021-12-31" id="Fact002746" format="ixt:numdotdecimal" decimals="0" unitRef="USD">5,321</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr id="xdx_400_eus-gaap--IncomeLossFromContinuingOperationsIncludingPortionAttributableToNoncontrollingInterest_zbBAMIbAGiw2" style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: white">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsIncludingPortionAttributableToNoncontrollingInterest" contextRef="From2023-01-01to2023-12-31" id="Fact002748" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">232,150</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsIncludingPortionAttributableToNoncontrollingInterest" contextRef="From2022-01-012022-12-31" id="Fact002749" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">582,371</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsIncludingPortionAttributableToNoncontrollingInterest" contextRef="From2021-01-012021-12-31" id="Fact002750" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">11,762,485</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr id="xdx_405_eus-gaap--DiscontinuedOperationIncomeLossFromDiscontinuedOperationDuringPhaseOutPeriodNetOfTax_zh09yl805Qo6" style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: #CCEEFF">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:DiscontinuedOperationIncomeLossFromDiscontinuedOperationDuringPhaseOutPeriodNetOfTax" contextRef="From2023-01-01to2023-12-31" id="Fact002752" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">465,791</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction name="us-gaap:DiscontinuedOperationIncomeLossFromDiscontinuedOperationDuringPhaseOutPeriodNetOfTax" contextRef="From2022-01-012022-12-31" id="Fact002753" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">6,499,276</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction name="us-gaap:DiscontinuedOperationIncomeLossFromDiscontinuedOperationDuringPhaseOutPeriodNetOfTax" contextRef="From2021-01-012021-12-31" id="Fact002754" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,837,626</ix:nonFraction></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td></tr>
  <tr id="xdx_407_eus-gaap--ProfitLoss_zq5IXmjM0tXe" style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: white">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Net
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(<ix:nonFraction name="us-gaap:ProfitLoss" contextRef="From2023-01-01to2023-12-31" id="Fact002756" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">697,941</ix:nonFraction></b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>)</b></span></td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


<ix:exclude><!-- Field: Page; Sequence: 164; Value: 1 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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    <td style="font-weight: bold; text-align: left">Provisions for allowance for credit losses on accounts receivable, other receivable and advances to suppliers:</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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    <td style="font-weight: bold; text-align: left">Inventory obsolescence provision:</td><td>&#160;</td>
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    <td style="padding-left: 10pt; width: 46%; text-align: left">TIT Segment</td><td style="width: 2%">&#160;</td>
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    <td style="padding-left: 10pt; text-align: left; padding-bottom: 1.5pt">CBT Segment</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Total
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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</ix:nonNumeric><p id="xdx_8A0_zd63KVwcbqSa" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify">&#160;</p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TAOPING
INC.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002857" name="us-gaap:CommitmentsAndContingenciesDisclosureTextBlock"><p id="xdx_805_eus-gaap--CommitmentsAndContingenciesDisclosureTextBlock_zEANlU41ZUsi" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>21.
<span id="xdx_82B_zIJXpsiWHuEf">COMMITMENTS AND CONTINGENCIES</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company may from time to time be subject to legal proceedings, investigations, and claims incidental to conduct of our business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
September 2023, Guangdong Zexun Advertising Co., Ltd. filed a lawsuit against the Company which claimed a payment of RMB <span id="xdx_900_eus-gaap--LegalFees_uRMB_c20230901__20230930_z414g4w2x5s" title="Paymemnt of legal fees"><ix:nonFraction name="us-gaap:LegalFees" contextRef="From2023-09-012023-09-30" id="Fact002859" format="ixt:numdotdecimal" decimals="0" unitRef="RMB">231,866</ix:nonFraction></span> (approximately
$<span id="xdx_90A_eus-gaap--LegalFees_c20230901__20230930_zfrGdvGvARRf" title="Paymemnt of legal fees"><ix:nonFraction name="us-gaap:LegalFees" contextRef="From2023-09-012023-09-30" id="Fact002861" format="ixt:numdotdecimal" decimals="0" unitRef="USD">32,200</ix:nonFraction></span>) from the Company resulted from its failure of performance for a business subcontract agreement signed by both parties in 2017.
The Company anticipated an unfavorable outcome from the lawsuit and accrued a contingent liability of $<span id="xdx_903_eus-gaap--LossContingencyAccrualAtCarryingValue_iI_c20231231_z945RKVwfaH9" title="Contingency liability"><ix:nonFraction name="us-gaap:LossContingencyAccrualAtCarryingValue" contextRef="AsOf2023-12-31" id="Fact002863" format="ixt:numdotdecimal" decimals="0" unitRef="USD">32,200</ix:nonFraction></span> for probable loss in 2023.
The lawsuit was settled in a court mediation on January 30, 2024, and the Company agreed to pay the above claimed amount in three installments
in 2024.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company received a notification from Nasdaq Listing Qualifications on September 16, 2022, as announced in a report on Form 6-K filed
with the SEC on September 16, 2022, that the Company was not in compliance with the minimum bid price requirements set forth in Nasdaq
Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. On March 16, 2023, the Company received a letter from The
Nasdaq Stock Market LLC confirming the Company has been granted an additional 180 calendar day period for compliance under its minimum
bid price requirement through September 11, 2023. On August 15, 2023, the Company regained compliance with the NASDAQ listing requirements,
after the one-for-ten reverse stock split effective on August 1, 2023, according to the NASDAQ notice.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002865" name="us-gaap:ConcentrationRiskDisclosureTextBlock"><p id="xdx_804_eus-gaap--ConcentrationRiskDisclosureTextBlock_z3kofXGgURQk" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>22.
<span id="xdx_82D_zqb5TBiEkLK2">CONCENTRATIONS</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the year ended December 31, 2023, 2022 and 2021, the revenue from cryptocurrency mining consisted -<span id="xdx_90E_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20230101__20231231__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--CustomerMember_zIVG6eSw50wb"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2023-01-012023-12-31_us-gaap_SalesRevenueNetMember_us-gaap_CustomerConcentrationRiskMember_custom_CustomerMember" id="Fact002866" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">0</ix:nonFraction></span>-%, <span id="xdx_909_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20220101__20221231__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--CustomerMember_zVISOJyzBrsi"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2022-01-012022-12-31_us-gaap_SalesRevenueNetMember_us-gaap_CustomerConcentrationRiskMember_custom_CustomerMember" id="Fact002867" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">14</ix:nonFraction></span>% and <span id="xdx_907_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20210101__20211231__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--CustomerMember_zLsgOk3At4Ce"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2021-01-012021-12-31_us-gaap_SalesRevenueNetMember_us-gaap_CustomerConcentrationRiskMember_custom_CustomerMember" id="Fact002868" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">22</ix:nonFraction></span>% of total revenues,
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revenues in 2022 and 2021. For the year ended December 31, 2023, 2022 and 2021, the Company&#8217;s top five customers accounted for
<span id="xdx_900_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20230101__20231231__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--TopFiveCustomerMember_zGgZPQZ6muzf"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2023-01-012023-12-31_us-gaap_SalesRevenueNetMember_us-gaap_CustomerConcentrationRiskMember_custom_TopFiveCustomerMember" id="Fact002875" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">30</ix:nonFraction></span>%, <span id="xdx_90A_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20220101__20221231__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--TopFiveCustomerMember_zvnRsTAj6rk"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2022-01-012022-12-31_us-gaap_SalesRevenueNetMember_us-gaap_CustomerConcentrationRiskMember_custom_TopFiveCustomerMember" id="Fact002876" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">24</ix:nonFraction></span>% and <span id="xdx_906_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20210101__20211231__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--TopFiveCustomerMember_zcObgZiGKte2"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2021-01-012021-12-31_us-gaap_SalesRevenueNetMember_us-gaap_CustomerConcentrationRiskMember_custom_TopFiveCustomerMember" id="Fact002877" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">29</ix:nonFraction></span>% of the Company&#8217;s revenues of continuing operations, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s top five accounts receivable accounted for <span id="xdx_905_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20230101__20231231__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--AccountsReceivableMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--TopFiveReceivablesMember_zPnccMTtRRHk" title="Concentration of risk percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2023-01-012023-12-31_us-gaap_AccountsReceivableMember_us-gaap_CustomerConcentrationRiskMember_custom_TopFiveReceivablesMember" id="Fact002879" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">48</ix:nonFraction></span>% and <span id="xdx_904_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20220101__20221231__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--AccountsReceivableMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--TopFiveReceivablesMember_zOV7mH7nq7j2" title="Concentration of risk percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2022-01-012022-12-31_us-gaap_AccountsReceivableMember_us-gaap_CustomerConcentrationRiskMember_custom_TopFiveReceivablesMember" id="Fact002881" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">30</ix:nonFraction></span>% of accounts receivable as of December 31, 2023 and 2022, respectively.
One customer each accounted for greater than <span id="xdx_907_eus-gaap--ConcentrationRiskPercentage1_dp_uPure_c20230101__20231231__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--AccountsReceivableMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--CustomerOneMember_zzWNsl47c2Yk" title="Concentration of risk percentage"><span id="xdx_90B_eus-gaap--ConcentrationRiskPercentage1_dp_uPure_c20220101__20221231__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--AccountsReceivableMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--CustomerOneMember_zKBC13PHQfWf" title="Concentration of risk percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2023-01-012023-12-31_us-gaap_AccountsReceivableMember_us-gaap_CustomerConcentrationRiskMember_custom_CustomerOneMember" id="Fact002883" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2022-01-012022-12-31_us-gaap_AccountsReceivableMember_us-gaap_CustomerConcentrationRiskMember_custom_CustomerOneMember" id="Fact002885" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">10</ix:nonFraction></ix:nonFraction></span></span>% of accounts receivable as of December 31, 2023 and 2022, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the year ended December 31, 2023, 2022 and 2021, approximately <span id="xdx_90D_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20230101__20231231__us-gaap--ConcentrationRiskByBenchmarkAxis__custom--PurchasesMember__us-gaap--ConcentrationRiskByTypeAxis__custom--SuppliersConcentrationRiskMember__srt--MajorCustomersAxis__custom--FiveUnrelatedSuppliersMember_zXzk3Rmmdxra" title="Concentration of risk percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2023-01-012023-12-31_custom_PurchasesMember_custom_SuppliersConcentrationRiskMember_custom_FiveUnrelatedSuppliersMember" id="Fact002887" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">59</ix:nonFraction></span>%, <span id="xdx_90B_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20220101__20221231__us-gaap--ConcentrationRiskByBenchmarkAxis__custom--PurchasesMember__us-gaap--ConcentrationRiskByTypeAxis__custom--SuppliersConcentrationRiskMember__srt--MajorCustomersAxis__custom--FiveUnrelatedSuppliersMember_zEOv4SFTDYxd" title="Concentration of risk percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2022-01-012022-12-31_custom_PurchasesMember_custom_SuppliersConcentrationRiskMember_custom_FiveUnrelatedSuppliersMember" id="Fact002889" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">37</ix:nonFraction></span>% and <span id="xdx_90B_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20210101__20211231__us-gaap--ConcentrationRiskByBenchmarkAxis__custom--PurchasesMember__us-gaap--ConcentrationRiskByTypeAxis__custom--SuppliersConcentrationRiskMember__srt--MajorCustomersAxis__custom--FiveUnrelatedSuppliersMember_zrAl1xjZp8ml" title="Concentration of risk percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2021-01-012021-12-31_custom_PurchasesMember_custom_SuppliersConcentrationRiskMember_custom_FiveUnrelatedSuppliersMember" id="Fact002891" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">69</ix:nonFraction></span>%, respectively, of total inventory purchases were from
five unrelated suppliers. Two supplier each accounted for greater than <span id="xdx_90F_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20230101__20231231__us-gaap--ConcentrationRiskByBenchmarkAxis__custom--PurchasesMember__us-gaap--ConcentrationRiskByTypeAxis__custom--SuppliersConcentrationRiskMember__srt--MajorCustomersAxis__custom--SupplierTwoMember_zjjfMWqZ66hc" title="Concentration of risk percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2023-01-012023-12-31_custom_PurchasesMember_custom_SuppliersConcentrationRiskMember_custom_SupplierTwoMember" id="Fact002893" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">10</ix:nonFraction></span>% of total inventory purchases in 2023, one and three suppliers
each accounted for greater than <span id="xdx_903_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20220101__20221231__us-gaap--ConcentrationRiskByBenchmarkAxis__custom--PurchasesMember__us-gaap--ConcentrationRiskByTypeAxis__custom--SuppliersConcentrationRiskMember__srt--MajorCustomersAxis__custom--SupplierOneMember_zGYDOqwGrH9" title="Concentration of risk percentage"><span id="xdx_905_eus-gaap--ConcentrationRiskPercentage1_pid_dp_uPure_c20210101__20211231__us-gaap--ConcentrationRiskByBenchmarkAxis__custom--PurchasesMember__us-gaap--ConcentrationRiskByTypeAxis__custom--SuppliersConcentrationRiskMember__srt--MajorCustomersAxis__custom--SupplierThreeMember_zZs1otDDz67g" title="Concentration of risk percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2022-01-012022-12-31_custom_PurchasesMember_custom_SuppliersConcentrationRiskMember_custom_SupplierOneMember" id="Fact002895" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2021-01-012021-12-31_custom_PurchasesMember_custom_SuppliersConcentrationRiskMember_custom_SupplierThreeMember" id="Fact002897" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">10</ix:nonFraction></ix:nonFraction></span></span>% of total inventory purchases in 2022 and 2021, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact002899" name="us-gaap:SubsequentEventsTextBlock"><p id="xdx_80E_eus-gaap--SubsequentEventsTextBlock_zmQzhkVWlQj1" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>23.
<span id="xdx_820_zHwaXgpFzyz7">SUBSEQUENT EVENTS</span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
January 2, 2024, January 11, 2024, February 27, 2024, February 28, 2024, March 7, 2024, March 18, 2024, and March 28, 2024, the Company
issued <span id="xdx_909_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20240102__20240102__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__dei--LegalEntityAxis__custom--ShanjingCapitalGroupCoLtdMember_z6HWnZOT7eb6" title="Number of ordinary shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2024-01-022024-01-02_us-gaap_SubsequentEventMember_custom_ShanjingCapitalGroupCoLtdMember" id="Fact002901" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">280,000</ix:nonFraction></span>, <span id="xdx_902_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20240111__20240111__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__dei--LegalEntityAxis__custom--ShanjingCapitalGroupCoLtdMember_zCFlTAcPtXv7" title="Number of ordinary shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2024-01-112024-01-11_us-gaap_SubsequentEventMember_custom_ShanjingCapitalGroupCoLtdMember" id="Fact002903" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">300,000</ix:nonFraction></span>, <span id="xdx_903_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20240227__20240227__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__dei--LegalEntityAxis__custom--ShanjingCapitalGroupCoLtdMember_zlXKE7Zb7rG4" title="Number of ordinary shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2024-02-272024-02-27_us-gaap_SubsequentEventMember_custom_ShanjingCapitalGroupCoLtdMember" id="Fact002905" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">150,000</ix:nonFraction></span>, <span id="xdx_90F_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20240228__20240228__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__dei--LegalEntityAxis__custom--ShanjingCapitalGroupCoLtdMember_z3O3KRubFYA5" title="Number of ordinary shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2024-02-282024-02-28_us-gaap_SubsequentEventMember_custom_ShanjingCapitalGroupCoLtdMember" id="Fact002907" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">160,000</ix:nonFraction></span>, <span id="xdx_90E_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20240307__20240307__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__dei--LegalEntityAxis__custom--ShanjingCapitalGroupCoLtdMember_zuaT9HM3y3Ze" title="Number of ordinary shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2024-03-072024-03-07_us-gaap_SubsequentEventMember_custom_ShanjingCapitalGroupCoLtdMember" id="Fact002909" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">160,000</ix:nonFraction></span>, <span id="xdx_90E_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20240318__20240318__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__dei--LegalEntityAxis__custom--ShanjingCapitalGroupCoLtdMember_zynZCZtj1K6g" title="Number of ordinary shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2024-03-182024-03-18_us-gaap_SubsequentEventMember_custom_ShanjingCapitalGroupCoLtdMember" id="Fact002911" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">180,000</ix:nonFraction></span>, and <span id="xdx_901_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20240328__20240328__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__dei--LegalEntityAxis__custom--ShanjingCapitalGroupCoLtdMember_zkFfwuC2zfz9" title="Number of ordinary shares issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2024-03-282024-03-28_us-gaap_SubsequentEventMember_custom_ShanjingCapitalGroupCoLtdMember" id="Fact002913" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">250,000</ix:nonFraction></span> ordinary shares, respectively, to SHANJING CAPITAL GROUP CO.,
LTD (the &#8220;Investor&#8221;) at a price of approximately $<span id="xdx_908_eus-gaap--SharesIssuedPricePerShare_iI_c20240102__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__us-gaap--TypeOfArrangementAxis__custom--StandbyEquityPurchaseAgreementMember_zJOjQMS0Ip4j" title="Share price"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2024-01-02_us-gaap_SubsequentEventMember_custom_StandbyEquityPurchaseAgreementMember" id="Fact002915" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1.21</ix:nonFraction></span>, $<span id="xdx_904_eus-gaap--SharesIssuedPricePerShare_iI_c20240111__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__us-gaap--TypeOfArrangementAxis__custom--StandbyEquityPurchaseAgreementMember_zjEKr4BzjNSh" title="Share price"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2024-01-11_us-gaap_SubsequentEventMember_custom_StandbyEquityPurchaseAgreementMember" id="Fact002917" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1.06</ix:nonFraction></span>, $<span id="xdx_905_eus-gaap--SharesIssuedPricePerShare_iI_c20240227__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__us-gaap--TypeOfArrangementAxis__custom--StandbyEquityPurchaseAgreementMember_zBkS68O9eKgj" title="Share price"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2024-02-27_us-gaap_SubsequentEventMember_custom_StandbyEquityPurchaseAgreementMember" id="Fact002919" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1.09</ix:nonFraction></span>. $<span id="xdx_90A_eus-gaap--SharesIssuedPricePerShare_iI_c20240228__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__us-gaap--TypeOfArrangementAxis__custom--StandbyEquityPurchaseAgreementMember_zJN8LWjYMdy2" title="Share price"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2024-02-28_us-gaap_SubsequentEventMember_custom_StandbyEquityPurchaseAgreementMember" id="Fact002921" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1.08</ix:nonFraction></span>, $<span id="xdx_90B_eus-gaap--SharesIssuedPricePerShare_iI_c20240307__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__us-gaap--TypeOfArrangementAxis__custom--StandbyEquityPurchaseAgreementMember_zbsDpHpG9xX3" title="Share price"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2024-03-07_us-gaap_SubsequentEventMember_custom_StandbyEquityPurchaseAgreementMember" id="Fact002923" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1.06</ix:nonFraction></span>, $<span id="xdx_909_eus-gaap--SharesIssuedPricePerShare_iI_c20240318__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__us-gaap--TypeOfArrangementAxis__custom--StandbyEquityPurchaseAgreementMember_zsiqD5t8zpX7" title="Share price"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2024-03-18_us-gaap_SubsequentEventMember_custom_StandbyEquityPurchaseAgreementMember" id="Fact002925" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">0.99</ix:nonFraction></span>, and $<span id="xdx_908_eus-gaap--SharesIssuedPricePerShare_iI_c20240328__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__us-gaap--TypeOfArrangementAxis__custom--StandbyEquityPurchaseAgreementMember_zn7LHJhRzJyf" title="Share price"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2024-03-28_us-gaap_SubsequentEventMember_custom_StandbyEquityPurchaseAgreementMember" id="Fact002927" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">0.945</ix:nonFraction></span> per share, respectively,
pursuant to a Standby Equity Purchase Agreement (the &#8220;Private SEPA&#8221;). The total proceeds the Company received from the above
sales of the shares are $<span id="xdx_908_eus-gaap--ProceedsFromIssuanceOfCommonStock_c20240102__20240328__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__dei--LegalEntityAxis__custom--ShanjingCapitalGroupCoLtdMember_zFqWX7rUQlud" title="Proceeds from sales of shares"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfCommonStock" contextRef="From2024-01-022024-03-28_us-gaap_SubsequentEventMember_custom_ShanjingCapitalGroupCoLtdMember" id="Fact002929" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,577,150</ix:nonFraction></span>. These shares were issued as part of the commitment by Investor to purchase from time to time, at
our option, up the Company&#8217;s $<span id="xdx_90E_eus-gaap--SaleOfStockConsiderationReceivedOnTransaction_c20230719__20230719__us-gaap--TypeOfArrangementAxis__custom--PrivateStandbyEquityPurchaseAgreementMember__dei--LegalEntityAxis__custom--ShanjingCapitalGroupCoLtdMember_z2uXX9ZZreAg" title="Consideration received on sale of stock"><ix:nonFraction name="us-gaap:SaleOfStockConsiderationReceivedOnTransaction" contextRef="From2023-07-192023-07-19_custom_PrivateStandbyEquityPurchaseAgreementMember_custom_ShanjingCapitalGroupCoLtdMember" id="Fact002931" format="ixt:numdotdecimal" decimals="0" unitRef="USD">10,000,000</ix:nonFraction></span> of our ordinary shares pursuant to the Private SEPA, as described in the Form 6-K dated
July 19, 2023.</span></p>

</ix:nonNumeric><p id="xdx_813_zJa7KEyfP5B3" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"></p>
</body>
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[{"type": "20-F", "sequence": "1", "filename": "form20-f.htm", "secsgml_size_bytes": 3155245}]
{"company-data": {"conformed-name": "Taoping Inc.", "cik": "0001552670", "assigned-sic": "7372", "organization-name": "06 Technology", "irs-number": "000000000", "state-of-incorporation": "D8", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "20-F", "act": "34", "file-number": "001-35722", "film-number": "24877076"}, "business-address": {"street1": "21ST FLOOR, EVERBRIGHT BANK BUILDING", "street2": "ZHUZILIN, FUTIAN DISTRICT, GUANGDONG", "city": "SHENZHEN", "state": "F4", "zip": "518040", "phone": "(86) 755-8831-9888"}, "mail-address": {"street1": "21ST FLOOR, EVERBRIGHT BANK BUILDING", "street2": "ZHUZILIN, FUTIAN DISTRICT, GUANGDONG", "city": "SHENZHEN", "state": "F4", "zip": "518040"}, "former-company": {"former-conformed-name": "China Information Technology, Inc.", "date-changed": "20120620"}}
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
20-F
(Mark
One)
☐
REGISTRATION
    STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended
December 31
,
2023
OR
☐
TRANSITION
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ___________ to __________
_
OR
☐
SHELL
    COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date
of event requiring this shell company report _________________________
Commission
file number:
001-35722
TAOPING
INC.
(Exact
Name of Registrant as Specified in Its Charter)
Not
Applicable
(Translation
of Registrant's Name Into English)
British
Virgin Islands
(Jurisdiction
of Incorporation or Organization)
21st
Floor, Everbright Bank Building
Zhuzilin,
Futian District
Shenzhen,
Guangdong
518040
People's
Republic of
China
(Address
of Principal Executive Offices)
Mr.
Jianghuai Lin, Chief Executive Officer
21st
Floor, Everbright Bank Building
Zhuzilin,
Futian District
Shenzhen,
Guangdong
518040
People's
Republic of
China
Tel:
+86
-
755-88319888
Fax:
+ 86-755-83709333
(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities
registered or to be registered pursuant to Section 12(b) of the Act:
Title
    of Each Class
Trading
    Symbol(s)
Name
    of Each Exchange On Which Registered
Ordinary
    Shares, no par value
TAOP
NASDAQ
Capital Market
Securities
registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title
of Class)
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title
of Class)
Indicate
the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered
by the annual report (December 31, 2023):
2,891,822
ordinary shares, no par value
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
No
☒
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐
No
☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes
☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See definition of "large accelerated filer, "accelerated filer," and "emerging growth company"
in Rule 12b-2 of the Exchange Act.
Large
    Accelerated Filer ☐
Accelerated
    Filer ☐
Non-Accelerated
    Filer
☒
Emerging
    growth company
☐
If
an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
†
The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards
Board to its Accounting Standards Codification after April 5, 2012.
Indicate
by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
☒
International
    Financial Reporting ☐
Other
    ☐
Standards
    as issued by the International
Accounting
    Standards Board
If
"Other" has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow. ☐ Item 17 ☐ Item 18
If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No
☒
Annual
Report on Form 20-F
Year
Ended December 31, 2023
TABLE
OF CONTENTS
PART I
3
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
3
A. Directors and Senior Management
3
B. Advisers
3
C. Auditors
3
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
3
A. Offer Statistics
3
B. Method and Expected Timetable
3
ITEM 3. KEY INFORMATION
3
A. [Reserved]
12
B. Capitalization and Indebtedness
12
C. Reasons for the Offer and Use of Proceeds
12
D. Risk Factors
12
ITEM 4. INFORMATION ON THE COMPANY
39
A. History and Development of the Company
39
B. Business Overview
42
C. Organizational Structure
67
D. Property, Plant and Equipment
67
ITEM 4A. UNRESOLVED STAFF COMMENTS
67
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
67
A. Operating Results
67
B. Liquidity and Capital Resources
74
C. Research and Development, Patents and Licenses, Etc.
78
D. Trend Information
78
E. Critical Accounting Estimates.
79
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
83
A. Directors and Senior Management
83
B. Compensation
85
C. Board Practices
87
D. Employees
90
E. Share Ownership
90
i
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
91
A. Major Shareholders
91
B. Related Party Transactions
92
C. Interests of Experts and Counsel
92
ITEM 8. FINANCIAL INFORMATION
93
A. Consolidated Statements and Other Financial Information
93
B. Significant Changes
93
ITEM 9. THE OFFER AND LISTING
93
A. Offer and Listing Details
93
B. Plan of Distribution
93
C. Markets
93
D. Selling Shareholders
93
E. Dilution
93
F. Expenses of the Issue
93
ITEM 10. ADDITIONAL INFORMATION
94
A. Share Capital
94
B. Memorandum and Articles of Association
94
C. Material Contracts
102
D. Exchange Controls
102
E. Taxation
104
F. Dividends and Paying Agents
109
G. Statement by Experts
109
H. Documents on Display
109
I. Subsidiary Information
109
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
109
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
110
A. Debt Securities
110
B. Warrants and Rights
110
C. Other Securities
110
D. American Depositary Shares
110
PART II
111
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
111
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF PROCEEDS
111
ITEM 15. CONTROLS AND PROCEDURES
111
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
112
ITEM 16B. CODE OF ETHICS
112
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
112
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
113
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
113
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
113
ITEM 16G. CORPORATE GOVERNANCE
113
ITEM 16H. MINE SAFETY DISCLOSURE
114
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
114
ITEM 16J. INSIDER TRADING POLICIES
114
ITEM 16K. CYBERSECURITY
114
PART III
116
ITEM 17. FINANCIAL STATEMENTS
116
ITEM 18. FINANCIAL STATEMENTS
116
ITEM 19. EXHIBITS
116
ii
INTRODUCTORY
NOTES
Use
of Certain Defined Terms
Except
as otherwise indicated by the context and for the purposes of this report only, references in this report to:
●
"Taoping"
    or "the Company" are to Taoping Inc., a British Virgin Islands business company, which has no business operations of
    its own;
●
"We,"
    "us," "our" and "our company" are to the combined business of Taoping and its subsidiaries;
●
"Taoping
    Holdings" and "THL" are to Taoping Holdings Limited, a BVI subsidiary of Taoping;
●
"Taoping
    Group" and "IST HK" are to Taoping Group (China) Ltd., a Hong Kong company;
●
"TopCloud"
    are to TopCloud Software (China) Co., Ltd., a PRC company;
●
"IST"
    are to Information Security Tech. (China) Co., Ltd., a PRC company;
●
"ISIOT"
    are to Information Security IoT Tech. Co., Ltd., a PRC company;
●
"Biznest"
    are to Biznest Internet Technology Co., Ltd., a PRC company;
●
"Bocom"
    are to iASPEC Bocom IoT Technology Co. Ltd., a PRC company;
●
"BVI"
    are to the British Virgin Islands;
●
"BVI
    Act" are to the BVI Business Companies Act (as amended);
●
"Hong
    Kong" are to the Hong Kong Special Administrative Region of the People's Republic of China;
●
"PRC"
    and "China" are to the People's Republic of China;
●
"SEC"
    are to the Securities and Exchange Commission;
●
"Exchange
    Act" are to the Securities Exchange Act of 1934, as amended;
●
"Securities
    Act" are to the Securities Act of 1933, as amended;
●
"Renminbi"
    and "RMB" are to the legal currency of China; and
●
"U.S.
    dollars," "dollars" and "$" are to the legal currency of the United States.
On
July 31, 2023, we completed a share combination of Taoping's ordinary shares at a ratio of one-for-ten. This share combination
did not change the maximum number of shares the Company is authorised to issue or the par value of the ordinary shares. Accordingly,
except as otherwise indicated, all share and per share information contained in this annual report has been restated to retroactively
show the effect of the share combination.
1
Forward-Looking
Information
In
addition to historical information, this annual report contains forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. We have attempted to identify forward-looking statements by terminology including "anticipates,"
"believes," "can," "continue," "could," "estimates," "expects,"
"intends," "may," "plans," "potential," "predicts," "should,"
or "will" or the negative of these terms or other comparable terminology. Such statements include, among others, those concerning
market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue,
margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; and any
statements regarding future economic conditions or performance, as well as all assumptions, expectations, predictions, intentions or
beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the
results of the Company to differ materially from those expressed or implied by such forward-looking statements. Potential risks and uncertainties
include, among other things, the effects of the global Covid-19 pandemic, the emergence of additional competing technologies, changes
in domestic and foreign laws, regulations and taxes, uncertainties related to China's legal system and economic, political and
social events in China, the volatility of the securities markets; and other risks including, but not limited to, those that we discussed
or referred to in Item 3 "Key information-D. Risk Factors" and elsewhere in this annual report.
Readers
are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These
reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of
operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation,
except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations
or future events.
2
PART
I
Taoping
is not an operating company but rather a holding company incorporated in the BVI. Because Taoping has no business operations of its own,
we conduct our business through Taoping's operating subsidiaries, primarily in China. This structure involves unique risks to investors
and you may never directly hold equity interests in Taoping's operating entities. You are specifically cautioned that there are
significant legal and operational risks associated with being based in or having the majority of operations in China, including that
changes in the legal, political and economic policies of the Chinese government, the relations between China and the United States, or
Chinese or United States regulations may materially and adversely affect our business, financial condition, results of operations and
the market price of Taoping's securities. Moreover, the Chinese government may exercise significant oversight and discretion over
the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in
our operations and/or the value of Taoping's securities or could significantly limit or completely hinder our ability to offer
or continue to offer Taoping securities to investors and cause the value of such securities to significantly decline or be worthless.
For a detailed description of risks related to the holding corporate structure, see Item 3 "Key Information-D. Risk Factors-Risks
Related to Doing Business in China".
ITEM
1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A.
Directors and Senior Management
Not
applicable.
B.
Advisers
Not
applicable.
C.
Auditors
Not
applicable.
ITEM
2. OFFER STATISTICS AND EXPECTED TIMETABLE
A.
Offer Statistics
Not
applicable.
B.
Method and Expected Timetable
Not
applicable.
ITEM
3. KEY INFORMATION
Taoping
was incorporated in the BVI under the BVI Act on June 18, 2012. Taoping is not an operating company but rather a holding company conducting
its operations through Taoping's operating subsidiaries, primarily in China. This structure involves unique risks to investors
and you may never directly hold equity interests in Taoping's operating entities. Between July 2007 and September 2021, Taoping
employed a variable interest entity structure where the operating entities were controlled and consolidated based on contractual agreements,
rather than direct ownership, due to restrictions on foreign investment in value-added telecommunication business in China. Taoping dissolved
such variable interest entity structure in September 2021 and ceased the e-commerce and related businesses which had constituted an insignificant
portion of its consolidated revenue prior to such dissolution. See "Regulatory Permissions to Operate Business" below for
more information. Since then, Taoping has been owning all of the operating entities through one or more subsidiaries. While the variable
interest entity structure was in place, Taoping did not experience any difficulty in controlling the operating entities through contractual
arrangements and the terms of the contractual agreements relating to the variable interest entity structure had been complied with by
the parties of such agreements.
3
However,
you are specifically cautioned that there are significant legal and operational risks associated with being based in or having the majority
of operations in China. Specifically, the PRC government recently initiated a series of regulatory actions and made a number of public
statements on the regulation of business operations in China, including cracking down on illegal activities in the securities market,
enhancing supervision over China-based companies listed overseas using a variable interest entity structure, adopting new measures to
extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement. We do not believe that our subsidiaries
in China are directly subject to these regulatory actions or statements, as we have not carried out any monopolistic behavior and our
business does not involve the collection of personal information or implicate national security. We also dissolved the variable interest
entity structure in 2021 as our business does not involve any type of restricted industry.
On
February 17, 2023, the China Securities Regulatory Commission (the "CSRC") promulgated the Trial Administrative Measures
of Overseas Securities Offering and Listing by Domestic Companies (the "Trial Measures") and five supporting listing
guidelines (the "Listing Guidelines"), which came into effect on March 31, 2023. On February 24, 2023, the CSRC, together with several other governmental authorities jointly revised the Provisions on
Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing (the "Revised
Provisions"). The Revised Provisions came into effect on March 31, 2023 together with the Trial Measures. Given
the recent nature of the introduction of the above Trial Measures, the Listing Guidelines and Revised Provisions, there remains
significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas
securities offerings and other capital markets activities. Notwithstanding the foregoing, as of the date of this report, we are not
aware of any PRC laws or regulations in effect requiring that we obtain permission from any PRC authorities to issue securities to
foreign investors, other than the filing requirements under the Trial Measures, and we have not received any inquiry, notice,
warning, or sanction from the CSRC or any other PRC authorities that have jurisdiction over our operations. See "Regulatory
Permissions to Operate Business and for the Offering of Securities to Foreign Investors" below.
In
addition, pursuant to the Holding Foreign Companies Accountable Act (the "HFCA Act") enacted in 2020, if the auditor of a
U.S. listed company's financial statements is not subject to Public Company Accounting Oversight Board (the "PCAOB")
inspections for three consecutive "non-inspection" years, the SEC is required to prohibit the securities of such issuer from
being traded on a U.S. national securities exchange, such as NYSE and Nasdaq, or in U.S. over-the-counter markets. On June 22, 2021,
the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, legislation entitled "Consolidated
Appropriations Act, 2023" (the "Consolidated Appropriations Act") was signed into law, which contained, among other
things, an identical provision to the Accelerating Holding Foreign Companies Accountable Act and amended the HFCA Act by requiring the
SEC to prohibit an issuer's securities from trading on any U.S. stock exchanges or over-the-counter markets if its auditor is not
subject to PCAOB inspections for two consecutive years instead of three. On December 16, 2021, the PCAOB issued a Determination Report
finding that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China
and Hong Kong because of a position taken by one or more authorities in such jurisdictions, and identified specific registered public
accounting firms subject to this determination. Our current registered public accounting firm, PKF Littlejohn LLP ("PKF"),
or our former registered public accounting firm, UHY LLP, is not headquartered in mainland China or Hong Kong and was not identified
in this report as a firm subject to the PCAOB's determination. They both are subject to full inspection by the PCAOB and the PCAOB
is able to inspect the audit workpapers of our subsidiaries in China, as such workpapers are electronic files possessed by our registered
public accounting firms. On August 26, 2022, the CSRC, the Ministry of Finance of the PRC (the "MOFCOM"), and the PCAOB signed
a Statement of Protocol (the "Protocol") governing inspections and investigations of accounting firms based in mainland China
and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms
headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB
shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer
information to the SEC. On December 15, 2022, the PCAOB made a statement announcing that it was able, in 2022, to inspect and investigate
completely issuer audit engagements of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong. However,
uncertainties still exist as to whether the PCAOB will have continued access for complete inspections and investigations in the future.
The PCAOB has indicated that it will act immediately to consider the need to issue new determinations under the HFCA Act if needed. If
the PCAOB determines in the future that it cannot inspect or fully investigate our auditor at such future time, trading in the Company's
securities would be prohibited under the HFCA Act. See "Risk Factor-Risks Related to Doing Business in China-The recent joint statement
by the SEC, proposed rule changes submitted by Nasdaq, and the HFCA Act, all call for additional and more stringent criteria to be applied
to U.S.-listed companies with significant operations in China. These developments could add uncertainties to our continued listing, future
offerings, business operations share price and reputation."
4
Cash
is transferred through our organization in the following manner:
●
Our
    equity structure is a direct holding structure, that is, Taoping, the BVI entity listed in the U.S., controls its operating subsidiaries
    in China, through Taoping Holdings, a BVI subsidiary of Taoping. See Item 4. "Information of the Company-A. History and Development
    of the Company-Corporate Structure" for more details.
●
As
    of the date of this report, neither Taoping nor any of its subsidiaries have paid dividends or made distributions to U.S. investors.
●
Within
    our direct holding structure, the cross-border transfer of funds from Taoping to its Chinese subsidiaries is legal and compliant
    with the laws and regulations of China. Taoping is permitted to provide funding to its subsidiaries in mainland China in the form
    of shareholder loans or capital contributions, subject to satisfaction of applicable government registration, approval and filing
    requirements of the respective jurisdiction. There are no quantity limits on Taoping's ability to make capital contributions
    to its subsidiaries in mainland China under the PRC regulations. Historically, cash proceeds raised from overseas financing activities
    by Taoping have been first transferred to its BVI subsidiary, Taoping Holdings. Whenever we need to make capital contributions to
    either of our PRC subsidiaries by contributing any of such net proceeds, and convert the contributed proceeds into RMB, we will need
    to increase the PRC subsidiary's registered capital by registering and/or filing the increase with the Ministry of Commerce
    or one of its local branches, the State Administration of Foreign Exchange ("SAFE") or one of its local branches, or
    an authorized bank. If we transfer any of the proceeds to one of our PRC subsidiaries through loans, under current PRC law we will
    also need to register such loans with the SAFE or one of its local branches, and the amount that we may convert into RMB and loan
    to one of these entities will be limited by applicable SAFE regulations, in the case of a loan to one of our PRC subsidiaries, to
    the greater of (i) the difference between the subsidiary's approved total investment and the subsidiary's total registered
    capital and (ii) two times the PRC subsidiary's net assets.
●
As
    a holding company, Taoping relies on dividends and other distributions on equity paid by its operating subsidiaries in China for
    cash requirements, including the funds necessary to pay dividends and other cash distributions to its shareholders or to any service
    expenses it may incur. For operating subsidiaries in mainland China, they will first transfer funds to Taoping Group in accordance
    with applicable laws and regulations of China, and then to Taoping through Taoping Holdings. Taoping will then distribute dividends
    to its shareholders in proportion to their respective shareholding, regardless of whether the shareholders are U.S. investors or
    investors in other countries or regions. As of the date of this report, none of our subsidiaries has made any transfers, dividends
    or other distributions to Taoping, the holding company. We intend to retain most, if not all, of our available funds and any future
    earnings to the development and growth of our business in China and do not expect to pay dividends in the foreseeable future.
●
The
    ability of our subsidiaries in mainland China to distribute dividends is based upon their distributable earnings. Current PRC regulations
    permit these subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined
    in accordance with PRC accounting standards and regulations. In addition, each of our subsidiaries in mainland China is required
    to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50%
    of its registered capital. These reserves are not distributable as cash dividends. In addition, if any of our operating subsidiaries
    incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to Taoping.
    We believe, other than above, current PRC regulations do not prohibit or limit using cash generated from one subsidiary to fund another
    subsidiary's operations. We currently do not have our own cash management policy and procedures that dictate how funds are
    transferred.
5
The
table below presents the cash flows between our subsidiaries for the fiscal years ended December 31, 2023 and 2022.
Years
Ended December 31,
Cash
    Flows Between Subsidiaries
2023
2022
Advances between
    subsidiaries
(1)
1,281,636
3,713,393
Settlement of trade credits
    between subsidiaries
(2)
-
-
Additional paid-in capital
    by immediate parent company
401,804
2,200,000
Intercompany
    dividends or other distributions
-
-
(1)
Represent the sum of advances among offshore subsidiaries (including then-existing BVI subsidiary, Hong Kong subsidiaries and Kazakhstan
subsidiaries), and between such offshore subsidiaries and PRC subsidiaries in mainland China. These advances were made in the ordinary
course of business, payable on demand and interest free.
(2)
The trade credits extended between subsidiaries primarily related to provision of technical services, sales of products, and sublease
of office between PRC subsidiaries. For the years ended December 31, 2023 and 2022, the trade credits between subsidiaries amounted to
$1,140,536 and $1,287,328, respectively. The Company's subsidiaries only record but do not settle the trade credits in cash between
them, which is allowed under the PRC laws.
Restrictions
on Cash Transfers
We
face various restrictions and limitations on foreign exchange, our ability to transfer cash between entities, across borders and to U.S.
investors, and our ability to distribute earnings from our subsidiaries to Taoping and holders of our ordinary shares. If our subsidiaries
incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.
In addition, our PRC subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in
accordance with PRC accounting standards and regulations. Pursuant to laws applicable to entities incorporated in the PRC, our subsidiaries
in the PRC must make appropriations from after-tax profit to non-distributable reserve funds. These reserve funds include one or more
of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund. Subject to certain
cumulative limits, the general reserve fund requires an annual appropriation of 10% of after-tax profit (as determined under accounting
principles generally accepted in the PRC at each year-end) until the accumulative amount of such reserve fund reaches 50% of its registered
capital; the other fund appropriations are at the subsidiaries' discretion. These reserve funds can only be used for the specific
purposes of enterprise expansion, staff bonus and welfare, and are not distributable as cash dividends. Also, due to restrictions on
the distribution of share capital from our PRC subsidiaries, the share capital of our PRC subsidiaries, is considered restricted.
Due
to various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we
may not be able to obtain the necessary government approvals or complete the necessary government registrations or other procedures on
a timely basis, or at all, with respect to future loans or capital contributions by us to our PRC subsidiaries. This may delay or prevent
us from using our offshore funds to make loans or capital contribution to our PRC subsidiaries, and thus may restrict our ability to
execute our business strategy, and materially and adversely affect our liquidity and our ability to fund and expand our business.
Furthermore,
due to restrictions on foreign exchange placed on our PRC subsidiaries by the PRC government under PRC laws and regulations, to the extent
cash is located in the PRC or within a PRC domiciled entity and may need to be used to fund our operations outside of the PRC, the funds
may not be available due to such limitations unless and until related approvals and registrations are obtained. Under regulations of
the SAFE of China, the Renminbi is not convertible into foreign currencies for capital account items, such as loans, repatriation of
investments and investments outside of China, unless the prior approval of the SAFE is obtained and prior registration with the SAFE
is made.
6
Regulatory
Permissions to Operate Business and for the Offering of Securities to Foreign Investors
The
establishment, operation and management of corporate entities in mainland China are governed by the Company Law of the People's
Republic of China, or the China Company Law, which was adopted by the Standing Committee of the National People's Congress ("SCNPC")
in December 1993, implemented in July 1994, and subsequently amended in December 1999, August 2004, October 2005, December 2013 and October
2018. Under the China Company Law, companies are generally classified into two categories: limited liability companies and companies
limited by shares. The China Company Law applies to both domestic and foreign-invested companies.
Investment
activities in mainland China by foreign investors are governed by the Guiding Foreign Investment Direction, which was promulgated by
the State Council on February 11, 2002, and came into effect on April 1, 2002, and the latest Special Administrative Measures (Negative
List) for Foreign Investment Access (2022), or the Negative List, which was promulgated by the MOFCOM and the National Development and
Reform Commission ("NDRC") on March 12, 2022, and took effect on the same date. The Negative List sets out in a unified manner
the restrictive measures, such as the requirements on shareholding percentages and management, for the access of foreign investments,
and the industries that are prohibited for foreign investment. Any field not falling in the Negative List shall be administered under
the principle of equal treatment to domestic and foreign investment.
The
Foreign Investment Law of the People's Republic of China, or the Foreign Investment Law was promulgated by the NPC in March 2019
and become effective in January 2020. The investment activities of foreign natural persons, enterprises or other organizations (hereinafter
referred to as foreign investors) directly or indirectly within the territory of mainland China are governed by the Foreign Investment
Law, including: 1) establishing by foreign investors of foreign-invested enterprises in mainland China alone or jointly with other investors;
2) acquiring by foreign investors of shares, equity, property shares, or other similar interests of Chinese domestic enterprises; 3)
investing by foreign investors in new projects in mainland China alone or jointly with other investors; and 4) other forms of investment
prescribed by laws, administrative regulations or the State Council.
In
December 2019, the State Council issued the Regulations on Implementing the Foreign Investment Law, which came into effect in January
2020. After the Regulations on Implementing the Foreign Investment Law came into effect, the Regulation on Implementing the Law on Sino-foreign
Equity Joint Ventures, Provisional Regulations on the Duration of Sino-Foreign Equity Joint Ventures, the Regulations on Implementing
the Law on Wholly Foreign-Owned Enterprises and the Regulations on Implementing the Law on Sino-Foreign Cooperative Joint Ventures have
been repealed simultaneously.
In
December 2019, the MOFCOM and the State Administration for Market Regulation ("SAMR") issued the Measures for the Reporting
of Foreign Investment Information, which came into effect in January 2020. After the Measures for the Reporting of Foreign Investment
Information came into effect, the Interim Measures on the Administration of Filing for Establishment and Change of Foreign Invested Enterprises
has been repealed simultaneously. Since January 1, 2020, for foreign investors carrying out investment activities directly or indirectly
in mainland China, the foreign investors or foreign-invested enterprises shall submit investment information to the relevant commerce
administrative authorities pursuant to these measures.
In
light of the above restrictions and requirements, prior to the dissolution of our VIE structure in September 2021, we had conducted our
value-added telecommunications businesses through our then consolidated VIEs. As a result of the dissolution of our VIE structure, we
ceased the e-commerce and related businesses which had constituted a minor portion of our consolidated revenue. Based on the legal analysis
of the Company's in-house legal counsel, who is a licensed attorney in the PRC, we believe that none of our PRC subsidiaries'
current business is stipulated on the Negative List.
As
a result, according to the laws and regulations currently in effect, our PRC subsidiaries are able to conduct their business without
being subject to restrictions imposed by the foreign investment laws and regulations of the PRC and none of Taoping or our subsidiaries
is required to obtain additional licenses or permits beyond a regular business license for each PRC subsidiary's operations. Each
of our PRC subsidiaries is required to obtain and has obtained such regular business license from the local branch of the SAMR. No application
for any such license has been denied.
7
However,
we cannot assure you that our PRC subsidiaries are always able to successfully update or renew the licenses or permits required for the
relevant business in a timely manner or that these licenses or permits are sufficient to conduct all of our present or future business.
If our PRC subsidiaries (i) do not receive or maintain required permissions or approvals, (ii) inadvertently conclude that such permissions
or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and our PRC subsidiaries are required
to obtain such permissions or approvals in the future, we could be subject to fines, legal sanctions or an order to suspend our PRC operating
subsidiaries' business, which may materially and adversely affect the business, financial condition and results of operations of
us. See "Risk Factors-Risks Related to Doing Business in China-Uncertainties exist with respect to the interpretation and implementation
of PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business
operations" on
page 27.
In
connection with our previous issuance of securities, under current PRC laws, regulations and regulatory rules, as of the date of this
annual report, we believe that we and our PRC subsidiaries, (i) are not required to obtain permissions from the CSRC, (ii) are not required
to go through cybersecurity review by the Cyberspace Administration of China (the "CAC"), and (iii) have not received or
were denied such requisite permissions by any PRC authority. We cannot guarantee that the regulators will agree with us. As of the date
hereof, we have not been involved in any investigations for cybersecurity review made by the CAC, and we have not received any inquiry,
notice, warning, or sanctions in such respect.
However,
the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas
and/or foreign investment in China-based issuers. The CSRC published the Trial Measures and the Listing Guidelines on February 17,
2023, designed to regulate overseas securities offerings by PRC domestic companies. On February 24, 2023, the CSRC, together with
several other governmental authorities jointly enacted the Revised Provisions. The Revised Provisions were issued under the title the "Provisions on
Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,"
and came into effect on March 31, 2023 together with the Trial Measures. See "Risk Factor-Risks Related to Doing Business in
China-The PRC government has increasingly strengthened oversight in offerings conducted overseas or on foreign investment in
China-based issuers, which could result in a material change in our operations and our ordinary shares could decline in value or
become worthless." on page 19.
Given
the recent nature of the introduction of the above Trial Measures, Listing Guidelines, and Revised Provisions, there remains significant
uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings
and other capital markets activities. Notwithstanding the foregoing, as of the date of this report, other than the filing requirements
mandated by the Trial Measures, we are not aware of any PRC laws or regulations in effect requiring that we obtain permission from any
PRC authorities to issue securities to foreign investors, and we have not received any inquiry, notice, warning, or sanction from the
CSRC, the CAC, or any other PRC authorities that have jurisdiction over our operations.
Enforceability
of Civil Liabilities
British
Virgin Islands
There
is no statutory enforcement in the BVI of judgments obtained in the U.S., however, the courts of the BVI will in certain circumstances
recognize such a foreign judgment and treat it as a cause of action in itself which may be sued upon as a debt at common law so that
no retrial of the issues would be necessary, provided that:
●
the
    U.S. court issuing the judgment had jurisdiction in the matter and the company either submitted to such jurisdiction or was resident
    or carrying on business within such jurisdiction and was duly served with process;
8
●
the
    judgment is final and for a liquidated sum;
●
the
    judgment given by the U.S. court was not in respect of penalties, taxes, fines or similar fiscal or revenue obligations of the company;
●
in
    obtaining judgment there was no fraud on the part of the person in whose favor judgment was given or on the part of the court;
●
recognition
    or enforcement of the judgment in the BVI would not be contrary to public policy; and
●
the
    proceedings pursuant to which judgment was obtained were not contrary to natural justice.
The
BVI courts are unlikely:
●
to
    recognise or enforce against the Company, judgments of courts of the U.S. predicated upon the civil liability provisions of the securities
    laws of the U.S.; and
●
to
    impose liabilities against the Company, predicated upon the certain civil liability provisions of the securities laws of the U.S.
    so far as the liabilities imposed by those provisions are penal in nature.
Substantially
all of our assets are located outside the United States. In addition, a majority of our directors and officers are nationals or residents
of jurisdictions other than the United States and all or a substantial portion of their assets are located outside the United States.
As a result, it may be difficult for investors to effect service of process within the United States upon us or these persons.
Hong
Kong
Currently
judgment of U.S. courts will not be directly enforced in Hong Kong. There are currently no treaties or other arrangements providing for
reciprocal enforcement of foreign judgments between Hong Kong and the U.S. However, a judgment of a court in the U.S. predicated upon
U.S. federal or state securities laws may be enforced in Hong Kong at common law by bringing an action in a Hong Kong court on that judgment
for the amount due thereunder, and then seeking summary judgment on the strength of the foreign judgment, provided that the foreign judgment,
among other things, is (1) for a debt or a definite sum of money (not being taxes or similar charges to a foreign government taxing authority
or a fine or other penalty) and (2) final and conclusive on the merits of the claim, but not otherwise. Such a judgment may not, in any
event, be so enforced in Hong Kong if (a) it was obtained by fraud; (b) the proceedings in which the judgment was obtained were opposed
to natural justice; (c) its enforcement or recognition would be contrary to the public policy of Hong Kong; (d) the court of the United
States was not jurisdictionally competent; or (e) the judgment was in conflict with a prior Hong Kong judgment.
China
There
is uncertainty as to whether the courts of China would (1) recognize or enforce judgments of United States courts obtained against us
or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state
in the United States; or (2) entertain original actions brought in each respective jurisdiction against us or our directors or officers
predicated upon the securities laws of the United States or any state in the United States.
The
recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce
foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the
jurisdiction where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other
form of reciprocity with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition,
according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers
if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a
result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States. Under
the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law against us in the PRC for disputes if they
can establish sufficient nexus to the PRC for a PRC court to have jurisdiction, and meet other procedural requirements, including, among
others, the plaintiff must have a direct interest in the case, and there must be a concrete claim, a factual basis and a cause for the
suit.
Summary
of Risk Factors
There
are a number of risks that you should consider and understand before making an investment decision regarding our securities.
You
should carefully consider all of the information set forth in this report and, in particular, the specific factors set forth in the section
titled "Risk Factors" below. These risks include, but are not limited to:
●
As
    of the date of this report, based on the legal analysis of the Company's in-house legal counsel, who is a licensed attorney in
    the PRC, other than the filing requirements mandated by the Trial Measures, we believe that we are not required to obtain any
    approval or prior permission to offer securities to foreign investors from the CSRC or any other Chinese regulatory authority under
    the Chinese laws and regulations currently in effect. If a domestic company fails to complete required filing procedures or conceals
    any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative
    penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly
    in charge, and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. There
    remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to
    overseas securities offerings and other capital markets activities. The risks arising from the legal system in China include risks
    and uncertainties regarding the enforcement of laws and that rules and regulations in China can change quickly with little, if any,
    advance notice. As a result, there can be no assurance that we will not be subject to such requirements, approvals or permissions in
    the future. For additional information, see Item 3 "
Key Information-D. Risk Factors-Risks Relating to Doing Business in
    China
-
The PRC government has increasingly strengthened oversight in offerings conducted overseas or on foreign investment in
    China-based issuers, which could result in a material change in our operations and our ordinary shares could decline in value or
    become worthless.
" on pages 19 and "
Key Information-D. Risk Factors-Risks Related to Doing Business in
    China
-
The PRC government exerts substantial influence over the manner in which we conduct our business activities. Its
    oversight and discretion over our business could result in a material adverse change in our operations and the value of our ordinary
    shares. Changes in laws, regulations and policies in China and uncertainties with respect to the PRC legal system could materially
    and adversely affect us. In addition, rules and regulations in China can change quickly with little advance notice
." on
    pages 19.
9
●
There
    are significant legal and operational risks associated with having significant business operations in China, including those changes
    in the legal, political and economic policies of the Chinese government, the relations between China and the United States, or Chinese
    or United States regulations may materially and adversely affect our business, financial condition, results of operations and the
    value of the Company's securities. Any such changes may take place quickly and with very little notice and as a result, could
    significantly limit or completely hinder our ability to offer or continue to offer Taoping's securities to investors, and could
    cause the value of Taoping's securities to significantly decline or become worthless. Recent statements made and regulatory
    actions undertaken by China's government, such as those related to data security or anti-monopoly concerns and any other future
    laws and regulations may require us to incur significant expenses and could materially affect our ability to conduct our business
    or accept foreign investments. For additional information, see Item 3 "
Key Information-D. Risk Factors-Risks Related to
    Doing Business in China-Changes in U.S. and Chinese regulations or in relations between the United States and China may adversely
    impact our business, our operating results, our ability to raise capital and the value of the securities that we are registering.
    Any such changes may take place quickly and with very little notice
" on pages 21.
●
The
    increased regulatory scrutiny focusing on U.S.-listed companies with significant operations in China in the U.S. could add uncertainties
    to our business operations, share price and reputation. In recent years, as part of increased regulatory focus in the United States
    on access to audit information, the United States enacted the HFCA Act in December 2020. On June 22, 2021, the U.S. Senate passed
    the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, legislation entitled "Consolidated Appropriations
    Act, 2023" was signed into law, which contained an identical provision to the Accelerating Holding Foreign Companies Accountable
    Act and amended the HFCA Act by requiring the SEC to prohibit an issuer's securities from trading on any U.S. stock exchange
    or over-the-counter markets if its auditor is not subject to PCAOB inspections for two consecutive years instead of three. On December
    16, 2021, the PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public
    accounting firms headquartered in mainland China and Hong Kong, because of positions taken by authorities in the jurisdictions, and
    the PCAOB included in the report of its determination a list of the accounting firms that are headquartered in mainland China or
    Hong Kong. Our current registered public accounting firm, PKF, or our former registered public accounting firm, UHY LLP, is not headquartered
    in mainland China or Hong Kong and was not identified in this report as a firm subject to the PCAOB's determination. They both
    are subject to full inspection by the PCAOB and the PCAOB is able to inspect the audit workpapers of our subsidiaries in China, as
    such workpapers are electronic files possessed by our registered public accounting firms. On August 26, 2022, CSRC, the MOFCOM, and
    the PCAOB signed the Protocol, governing inspections and investigations of audit firms based in China and Hong Kong. The Protocol
    remains unpublished and is subject to further explanation and implementation. Pursuant to the fact sheet with respect to the Protocol
    disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and
    has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB made a statement announcing that it
    was able, in 2022, to inspect and investigate completely issuer audit engagements of PCAOB-registered public accounting firms headquartered
    in China and Hong Kong. However, uncertainties still exist as to whether the PCAOB will have continued access for complete inspections
    and investigations in the future. When the PCAOB reassesses its determinations in the future, it could still determine that it is
    unable to inspect and investigate completely accounting firms based in mainland China and Hong Kong. The PCAOB has also indicated
    that it will act immediately to consider the need to issue new determinations under the HFCA Act if needed. There can be no assurance
    that we will continue to be able to comply with requirements imposed by U.S. regulators if the PCAOB is not able to fully inspect
    any component of our auditor's work papers in the future. Delisting of the Company's ordinary shares would force holders
    to sell their shares. The market price of Taoping's ordinary shares could be adversely affected as a result of anticipated
    negative impacts of these executive or legislative actions, regardless of whether these executive or legislative actions are implemented
    and regardless of our actual operating performance. See Item 3 "
Key Information-D. Risk Factors-Risks Related to Doing Business
    in China-The recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and the HFCA Act, all call for additional
    and more stringent criteria to be applied to U.S.-listed companies with significant operations in China. These developments could
    add uncertainties to our continued listing, future offerings, business operations share price and reputation
" on page 26.
10
●
As
    of the date of this report, based on the legal analysis of the Company's in-house legal counsel, who is a licensed attorney
    in the PRC, we believe, according to the laws and regulations currently in effect, our PRC subsidiaries are able to conduct their
    business without being subject to restrictions imposed by the foreign investment laws and regulations of the PRC and none of Taoping
    or our subsidiaries is required to obtain additional licenses or permits beyond a regular business license for each PRC subsidiary's
    operations. Each of our PRC subsidiaries is required to obtain and has obtained such regular business license. However, we cannot
    assure you that our PRC subsidiaries are always able to successfully update or renew the licenses or permits required for the relevant
    business in a timely manner or that these licenses or permits are sufficient to conduct all of our present or future business. If
    our PRC subsidiaries (i) do not receive or maintain required permissions or approvals, (ii) inadvertently conclude that such permissions
    or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and our PRC subsidiaries are required
    to obtain such permissions or approvals in the future, we could be subject to fines, legal sanctions or an order to suspend our PRC
    operating subsidiaries' business, which may materially and adversely affect the business, financial condition and results of
    operations of us. For additional information, see Item 3 "
Key Information-D. Risk Factors-Risks Related to Doing Business
    in China- Uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may
    impact the viability of our current corporate structure, corporate governance and business operations
" on pages 27.
●
There
    are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations. For additional information. For
    additional information, see Item 3 "
Key Information-D. Risk Factors-Risks Related to Doing Business in China-There are uncertainties
    regarding the interpretation and enforcement of PRC laws, rules and regulations
" on pages 22.
●
We
    have a limited operating history of selling cloud-based products and services and may be unable to achieve or sustain profitability
    or reasonably predict our future results. For additional information, see Item 3 "
Key Information-D. Risk Factors-Risks
    Relating to Our Business-We have a limited operating history of selling cloud-based products and services and may be unable to achieve
    or sustain profitability or reasonably predict our future results"
on page 13.
●
Our
    independent registered auditors have expressed substantial doubt about our ability to continue as a going concern. For additional
    information, see Item 3 "
Key Information-D. Risk Factors-Risks Relating to Our Business-Our independent registered auditors
    have expressed substantial doubt about our ability to continue as a going concern"
on page 14.
●
If
    we fail to comply with the continued listing requirements of NASDAQ, we would face possible delisting, which would result in a limited
    public market for our shares and make obtaining future debt or equity financing more difficult for us. For additional information,
    see Item 3 "
Key Information-D. Risk Factors-Risks Relating to Our Securities-If we fail to comply with the continued listing
    requirements of NASDAQ, we would face possible delisting, which would result in a limited public market for our shares and make obtaining
    future debt or equity financing more difficult for us"
on page 33.
11
●
The
    trading price of Taoping's ordinary shares has been and likely continue to be highly volatile, which could result in significant
    losses to holders of the ordinary shares. For additional information, see Item 3 "
Key Information-D. Risk Factors-Risks
    Relating to Our Securities-The trading price of the Company's ordinary shares is highly volatile, leading to the possibility
    of their value being depressed at a time when you want to sell your holdings
" on pages 34-35.
●
Because
    we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of your shares for return on your
    investment. For additional information, see Item 3 "
Key Information-D. Risk Factors-Risks Relating to Our Securities-We
    do not intend to pay dividends for the foreseeable future
" on page 36.
●
You
    may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because
    we are incorporated under BVI law and a significant majority of our current business operations are conducted in the PRC. For additional
    information, see Item 3 "
Key Information-D. Risk Factors-Risks Relating to Our Securities
-
You may have difficulty
    enforcing judgments obtained against us or our directors and officers
" on page 37 and "
Key Information-D. Risk
    Factors
-
Risks Relating to Our Securities
-
We are a BVI company and, because judicial precedent regarding the rights
of shareholders is more limited under BVI law than that under U.S. law, you may have less protection for your shareholder rights than
you would under U.S. law
"
    on pages 37.
●
Taoping
    is a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
    applicable to U.S. domestic public companies. For additional information, see Item 3 "
Key Information-D. Risk Factors-Risks
    Relating to Our Securities
-
We are a "foreign private issuer" and have disclosure obligations that are different
    than those of U.S. domestic reporting companies. Therefore, you should not expect to receive the same information about us as a U.S.
    domestic reporting company may provide. Furthermore, if we lose our status as a foreign private issuer, we would be required to fully
    comply with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers and incur significant operational,
    administrative, legal, and accounting costs that we would not incur as a foreign private issuer
" on pages 36.
●
As
                                            a foreign private issuer, Taoping is permitted to rely on exemptions from certain Nasdaq
                                            corporate governance standards applicable to domestic U.S. issuers. This may afford less
                                            protection to holders of Taoping's securities. For additional information, see Item
                                            3 "
Key Information-D. Risk Factors-Risks Relating to Our Securities
-
As a
                                            foreign private issuer, we are permitted to rely on exemptions from certain NASDAQ corporate
                                            governance standards applicable to domestic U.S. issuers. This may afford less protection
                                            to holders of the Company's securities"
on page 36.
A.
[Reserved]
B.
Capitalization and Indebtedness
Not
applicable.
C.
Reasons for the Offer and Use of Proceeds
Not
applicable.
D.
Risk Factors
An
investment in the Company's securities involves a high degree of risk.
INVESTORS PURCHASING OUR SECURITIES ARE PURCHASING SECURITIES
OF TAOPING INC., THE BVI HOLDING COMPANY RATHER THAN SECURITIES OF TAOPING INC.'S SUBSIDIARIES THAT HAVE SUBSTANTIVE BUSINESS OPERATIONS
IN CHINA AND OTHER COUNTRIES.
You should carefully consider the risks described below, together with all of the other information
included in this annual report, before making an investment decision. If any of the following risks actually occurs, our business, financial
condition or results of operations could suffer. In that case, the value of the Company's securities could significantly decline
or be worthless and you may lose all or part of your investment.
12
Risks
Relating to our Business
A
sustained outbreak of the COVID-19 pandemic could have a material adverse impact on our business, operating results and financial condition.
The
COVID-19 outbreak has led governments across the globe to impose a series of measures intended to contain its spread, including border
closures, travel bans, quarantine measures, social distancing, and restrictions on business operations and large gatherings. The outbreak
of COVID-19 has caused companies like us and our business partners to implement temporary adjustments to work schedules and travel plans,
mandating employees to work from home and collaborate remotely. As a result, we may have experienced lower efficiency and productivity,
internally and externally, which may adversely affect our service quality. Moreover, our business depends on our employees. If any of
our employees has contracted or is suspected of having contracted COVID-19, these employees will be required to be quarantined and they
could pass it to other of our employees, potentially resulting in severe disruption to our business.
Most
of the restrictive measures previously adopted by the Chinese governments at various levels to control the spread of the COVID-19 virus
have been revoked or replaced with more flexible measures since December 2022. The revocation or replacement of the restrictive measures
to contain the COVID-19 pandemic could have a positive impact on our normal operations. However, the extent to which the COVID-19 pandemic
may continue to impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date
of this report, including the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge
concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Given the general
slowdown in economic conditions globally, volatility in the capital markets as well as the general negative impact of the COVID-19 outbreak
on the global market, we cannot assure you that we will be able to maintain the growth rate we have experienced or projected.
We
have a limited operating history of selling cloud-based products and services and may be unable to achieve or sustain profitability or
reasonably predict our future results.
In
early 2013, we made a strategic decision to transform our business from servicing the public sector to focusing on the private sector.
Leveraging our experience and expertise in handling large-scale IT projects for the public sector, we started investing in research and
development to develop software products for the private sector. In 2014, continuing our business transition from the public sector to
the private sector, we identified and provided cloud-based ecosystem solutions to four core markets including new media, healthcare,
education, and residential community management. Underpinning our ecosystems are our industry-specific integrated technology platform,
resource exchange, and big data services. In 2014, we predominately sold our cloud-based solutions to the Chinese new media industry.
Starting from 2015, we further expanded the customer base of cloud-based solutions to education, government, and residential community
management. In 2016, we expanded our business from the industry-specific integrated technology platform, resource exchange, and big data
services into the elevator IoT sectors. From May 2017, we have focused our business to provide products and services on Cloud-App-Terminal
(CAT) and IoT technology based digital advertising distribution networks and new media resource sharing platforms in the out-of-home
adverting market in China. As such, we have a limited operating history of selling our cloud-based products and professional services
to the private sector, which makes it difficult to evaluate our current business and future prospects and may increase the risk of your
investment. In 2023, 2022 and 2021, we generated approximately $38.4 million, $24.0 million and $18.8 million in revenue, respectively,
from our cloud-based technology (CBT) segment for customers in the education, new media, and out-of-home advertising market sectors.
We expect to have significant operating expenses in the future to further support and grow our business, including expanding the scope
of our customer base, expanding our direct and indirect selling capabilities, pursuing acquisitions of complementary businesses, investing
in our data storage and analysis infrastructure, and research and development, and increasing our international presence.
13
Our
independent registered auditors have expressed substantial doubt about our ability to continue as a going concern.
Our
independent auditors have added an explanatory paragraph to their audit opinion issued in connection with our financial statements included
in this report which states that the financial statements were prepared assuming that we would continue as a going concern.
Due
to the unfavorable macro-economic environment and the slowdown of the out-of-home advertising market in China, we incurred net loss of
approximately $9.9 million in 2021, $7.1 million in 2022 and $0.7 million in 2023. However, the Company will aggressively develop domestic
and international markets to develop new customers and new product offerings through potential acquisitions and strategic collaborations
with our business partners. There can be no assurance that we will be successful in achieving the goals set forth in our new business
strategy and business model.
Unfavorable
economic conditions may affect the level of the out-of-home advertising and information technology spending by our customers which could
cause the demand for our products and services to decline.
The
revenue growth and profitability of our business rely on the overall demand by our customers for out-of-home digital advertising, display
technology products, and internet related services. Our business is sensitive to the overall economy in China and the economic and business
conditions within our respective product and service sectors. The growth rate of the Chinese economy has been slowing since 2010 and
the Chinese population began to decline in 2022. The Federal Reserve and other central banks outside of China have raised interest rates.
The Russia-Ukraine conflict, the Hamas-Israel conflict and the attacks on shipping in the Red Sea have heightened geopolitical tensions
across the world. The impact of the Russia-Ukraine conflict on Ukraine food exports has contributed to increases in food prices and thus
to inflation more generally. There have also been concerns about the relationship between China and other countries which may potentially
have economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China
with respect to a wide range of issues including trade policies, treaties, government regulations and tariffs. Economic conditions in
China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or
perceived overall economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economy could materially and
adversely affect our business, results of operations, and financial condition. Additionally, a reduction in out-of-home advertising and
information technology spending by our customers could harm our business in several ways, including longer sales cycles and lower prices
for our products and services. These events could have a material
effect on our future revenues and earnings.
Our
periodic operating results are difficult to predict and could fall below investors' expectations or estimates by securities research
analysts, which may cause the trading price of our ordinary shares to decline.
Our
revenues and operating results can vary significantly from a filing period to the next due to a number of factors, many of which are
beyond our control, such as public health pandemic, fluctuations in the volume of purchase by our customers as a result of changes in
their operations, their decisions to purchase our products and services, as well as currency fluctuations. Our revenues and operating
results could also be affected by delays or difficulties in expanding our geographical presence and infrastructure, changes to our pricing
strategies due to a competitive business environment and underestimates of resources and time required to complete ongoing projects.
Our first-quarter revenues may be relatively low compared to that of the other quarters due to the Chinese New Year holiday. Moreover,
our operating and financial results may fluctuate as a result of our dependency on our customers' budgets and spending patterns.
Therefore, we may not be able to accurately forecast the demand for our products and services beyond the current calendar year, which
could adversely affect our business, operating results, and financial condition. In addition, sales volumes from specific customers are
likely to vary from year to year, and a major customer in one year may not remain as a major customer in the subsequent years.
These
fluctuations are likely to continue in the future and operating results for any period may not be indicative of our performance in any
future period. If our operating results for any filing period fall below investors' expectations or estimates by securities research
analysts, the trading price of our ordinary shares may decline.
14
We
face risks associated with new businesses or assets acquired through mergers or acquisitions, and the acquired companies may not perform
to our expectations, which may adversely affect our results of operations.
We
face risks when we acquire other businesses. These risks include:
●
difficulties
    in the integration of acquired operations and retention of personnel,
●
unforeseen
    or hidden liabilities,
●
relevant
    tax, regulatory and accounting matters, and
●
inability
    to generate sufficient revenues to offset acquisition costs.
Acquired
companies may not perform to our expectations for various reasons, including the departure of key personnel and loss of customers. Therefore,
we may not realize the benefits we have previously anticipated. If we fail to integrate acquired businesses or realize expected benefits,
we may not gain anticipated economic returns on investments in these mergers and acquisitions and incur substantial transaction costs,
causing our operating results to be materially and adversely affected.
If
we are unable to secure additional financing or identify suitable merger or acquisition targets, we may be unable to implement our long-term
business plan, develop or enhance our products and services, take advantage of future opportunities, or respond to competitive pressures
on a timely manner.
Our
long-term business plan includes the identification of suitable targets for horizontal or vertical mergers or acquisitions, so as to
enhance overall productivity and to benefit from economies of scale. Due to the recent uncertainties in the global economic outlook and
financial market stability, we may not be able to secure an adequate level of additional financing, whether through equity financing,
debt financing or other sources. To raise additional capital, we may need to issue new securities, which could result in further dilution
to our shareholders and significant dilution to our earnings per share. Issuance of new securities with registration rights or covenants
through additional financings may be superior to the current ones that would restrict our operations and strategies. If we are unable
to raise additional financing, we may be unable to implement our long-term business plan, develop or enhance our products and services,
take advantage of future opportunities, or respond to competitive pressures on a timely basis, if at all. In addition, lack of additional
capital could force us to substantially curtail or even cease operations.
We
also may not be able to identify merger or acquisition targets. We may not be able to successfully integrate the targeted business or
operations with ours after a merger or acquisition. Such failure to execute our long-term business plan likely will negatively impact
results of our operations.
We
generally do not have exclusive agreements with our customers and we may lose their contracts if they are not satisfied with our products
and services or for other reasons.
We
generally do not have exclusive agreements with our customers. As a result, we must rely on the quality of our products and services,
our reputation in the industry, and favorable pricing terms to attract and retain customers. There is no assurance that we will be able
to maintain and retain our relationships with current and or future customers. Our customers may choose to terminate their relationships
with us if they are not satisfied with our services or the prices of our competitors' offerings are lower. If a substantial number
of our customers choose not to continue to purchase products and services from us, it would materially and adversely affect our business
and results of operations.
The
markets for out-of-home digital advertising and digital security systems in China are highly competitive. If we are unable to develop
and offer competitive new products and services, our future operations could be adversely affected.
The
markets for out-of-home digital advertising and digital security information systems in China are intensely competitive and are characterized
by frequent technological changes, evolving industry standards, and changing in customer demands. We face competition from multiple domestic
competitors in each segment and increased competition may result in price reductions, reduced margins, and inability to gain or hold
market share.
Our
future revenue stream, to a large degree, depends on our ability to capitalize on our technology strength and capabilities to offer new
software applications and services to a broader client base. We must make investments in research and development to continue developing
and offering new software applications and internet related products and services, and to enhance our existing software applications
and internet related services to maintain market acceptance of our products and services. We may encounter challenges in innovation and
introduction of new products and services. Our software applications under development may not be successfully completed or, if developed,
may not achieve significant customer acceptance. If we are unable to successfully define, develop, introduce competitive new software
applications, and enhance the existing ones, our future operating results would be adversely affected. The timeline for software developments
is difficult to predict. Timely launch of new applications and their acceptance by customers are important to our future success. A delay
in the development or introduction of new applications could have a significantly adverse impact on our results of operations.
15
Our
software applications may contain defects or errors, which could decrease sales, damage our reputation, or delay deliveries of our products.
Our
software products are complex and must meet the stringent technical requirements requested by our customers. In order to keep pace with
the current technologies and the rapid changes in the industry standards, we must accelerate new product developments and enhancements
for our existing products. Because of the complex designs and the expeditious development cycles, we cannot assure that our software
products are free of errors, especially for the newly released software applications and the updates for the existing software products.
If our software is not free of errors, this could potentially result in litigation, declining sales, increasing product returns, product
warranty costs, and damage to our reputation, which would adversely affect our business.
Our
technology may become obsolete, which could materially adversely affect our ability to sell our products and services.
Our
industry is known for rapid changes in technology, frequent introductions of new applications, quick evolution of industry
standards, and changes in customer demands.
If our
technology, products and services become obsolete, our business operations would be materially and adversely affected. These market
characteristics can cause the existing products to be obsolete and unmarketable. Our future success depends upon our ability to
timely address the increasingly sophisticated requests from our customers to support the existing and new hardware, software,
database, and networking platforms. Failure to achieve market acceptance of our existing products and services or to launch new
products could materially and adversely affect our business and results of operations. As a result, we have to invest in research
and development in order to succeed in this competitive industry and timely satisfy market demands. Our research and development
expenses from continuing operations were approximately $3.0 million, $3.6 million and $4.5 million for the years ended December 31,
2023, 2022, and 2021, respectively.
We
face the risk of systems interruptions and capacity constraints, possibly resulting in adverse publicity, revenue loss and erosion of
customer trust.
The
satisfactory performance, reliability, and availability of our network infrastructure are critical to our reputation and our ability
to attract and retain customers and to maintain adequate customer service levels. We may experience temporary service interruptions for
a variety of reasons, including telecommunications or power failures, fire, water damage, vandalism, computer bugs, or viruses or hardware
failures. We may not be able to correct a problem in a timely manner. Any service interruption that results in the unavailability of
our system or reduces its capacity could result in real or perceived public safety issues that may affect customer confidence in our
services and afflict negative publicity that could cause us to lose customer accounts or fail to obtain new accounts. Any inability to
scale our systems may cause unanticipated system disruptions, slower response times, degradation in quality of customer service, or impaired
performance and speed of transaction processing. We are not certain that we will be able to project the rate or timing of increases,
if any, in the use of our services to permit us to upgrade and expand our systems effectively or to efficiently integrate any newly developed
or purchased modules with our existing systems.
We
have a limited history with our pricing models for our CBT products and services and, as a result, we may be forced to change the prices
we charge for our applications or the pricing models upon which they are based.
We
have limited experience with respect to determining the optimal prices and pricing models for certain of our CBT products and services
and certain geographic markets. As the markets for our applications mature, or as competitors introduce products or services that compete
with ours, including bundling competing offerings with additional products or services, we may be unable to attract new customers at
the same price or based on the same pricing models as we have used historically. As a result, in the future we may be required to reduce
our prices, which could adversely affect our financial performance. In addition, we may offer volume price discounts based on the number
of products or services purchased by a customer or the number of our applications purchased by a customer, which would effectively reduce
the prices we charge for our products and services. Also, we may be unable to renew existing customer agreements or enter into new customer
agreements at the same prices or upon the same terms that we have historically, which could have a material and adverse effect on our
financial position.
16
Security
breaches may harm our business.
Our
cloud-based applications involve the storage and transmission of our customers' proprietary and confidential information. Any security
breaches, unauthorized access, unauthorized usage, virus or similar breach or disruption could result in loss of confidential information,
damage to our reputation, early termination of our contracts, litigation, regulatory investigations, indemnity obligations, or other
liabilities. If our security measures are breached as a result of third-party action, employee error, malfeasance or otherwise and, as
a result, someone obtains unauthorized access to customer data, our reputation will be damaged, our business may suffer and we could
incur significant liability. Because the techniques used to obtain unauthorized access or sabotage computer systems change frequently,
and generally are not identified until they are launched against a target, we may be unable to anticipate these hacking techniques or
implement adequate preventative measures. Any or all of these concerns could negatively affect our ability to attract new customers and
cause existing customers to elect not to renew or upgrade their subscriptions, or subject us to third-party lawsuits, regulatory fines,
or other action or liability, which could adversely affect our operating results.
If
we are not able to adequately secure and protect our patents, trademarks and other proprietary rights, our business may be materially
affected.
To
protect our intellectual properties, we rely on a combination of copyright, trademark, and trade secret laws. We also rely on non-disclosure
agreements and other confidentiality procedures and contractual provisions to protect our intellectual property rights. Some of these
technologies are critical to our business but are not protected by copyrights or patents. It may be possible for unauthorized third parties
to copy or reverse engineer our products, or otherwise obtain and use information that we regard as proprietary. Further, third parties
could challenge the scope or enforceability of our copyrights. In certain other jurisdictions, including China where we operate, the
laws do not protect our proprietary rights to the same extent as the laws of the United States. Any misappropriation of our intellectual
property could have a material and adverse effect on our business and results of operations. We cannot assure you that the measures we
take to protect our proprietary rights are adequate.
Claims
that we infringe the proprietary rights of third parties could result in significant expenses or restrictions on our ability to sell
our products and services.
Third
parties may claim that our products or services infringe their proprietary rights. Any infringement claim, with or without merit, would
be time-consuming and expensive to litigate or settle and could divert our management's attention from our core business. In the
event of a successful infringement claim against us, we may have to pay significant damages, incur substantial legal fees, develop costly
non-infringing technology, or enter into license agreements that require us to pay substantial royalties that may not be available on
terms acceptable to us, if at all.
A
significant portion of our sales are derived from a limited number of customers or related parties, and results from operations could
be adversely affected and shareholder value harmed if we lose any of these customers.
Historically,
a significant portion of our revenues have been derived from a limited number of customers or related parties. For the year ended December
31, 2023, we generated about $0.2 million of revenue from related parties. For the years ended December 31, 2023, 2022 and 2021, approximately
30%, 24% and 29%, respectively, of our revenues of continuing operations were derived from our five largest customers, including related
parties. The loss of any of these significant customers and related parties would adversely affect our revenues and shareholder value.
We
have limited insurance coverage for our operations in China.
The
insurance industry in China is still in the early stage of development. Insurance companies in China offer limited insurance products.
We have determined that the risks of disruption or liability from our business, the loss or damage to our property, including our facilities,
equipment and office furniture, the cost of insuring these risks, and the difficulties associated with acquiring such insurance on commercially
reasonable terms make it impractical for us to have such insurance. As a result, we do not have any business liability, disruption, litigation
or property insurance coverage for our operations in China, except for insurance on some company owned vehicles. Any occurrence of uninsured
loss or damage to property, or litigation, or business disruption may result in substantial costs and diversion of resources, which could
have an adverse effect on our operating results.
17
We
do not have insurance coverage against damages or losses of our products. Defects in our products could result in a loss of customers
and decrease in revenue, unexpected expenses and a loss of market share.
We
have not purchased product liability insurance to provide against any claims against us based on our product quality. As a result, defects
in our products could result in a loss of customers and decrease in revenue, unexpected expenses and a loss of market share, and any
of our products are found to have reliability, quality or compatibility problems, we will be required to accept returns, provide replacements,
provide refunds, or pay damages. We may be required to incur substantial amounts to indemnify our customers in respect of their product
quality claims against us, which would materially and adversely affect the results of our operations and severely damage our reputation.
We
depend heavily on key personnel, and turnover of key employees and senior management could harm our business.
Our
future business and results of operations significantly depend upon continuous contributions by key technical and senior management personnel,
including Jianghuai Lin, Chairman and Chief Executive Officer, Zhiqiang Zhao, President and Director, Liqiong (Iris) Yan, the Chief Financial
Officer, Zhixiong Huang, Chief Operating Officer and Guangzeng Chen, Chief Technology Officer. The success of our business also depends
in significant part upon our ability to attract and retain additional qualified management, technical, marketing, sales, and support
personnel for our operations. If we lose a key employee, or if we are not able to attract and retain skilled employees as needed, our
business could suffer. Significant turnover in our senior management could largely deplete our institutional knowledge held by our existing
senior management team. We depend on the skills and abilities of these key employees in managing technical, marketing, and sales aspects
of our business, any part of which could be harmed by future turnover.
We
may be exposed to potential risks relating to our internal controls over financial reporting.
Companies
that file reports with the SEC, including us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX
404. SOX 404 requires management to establish and maintain a system of internal control over financial reporting, and annual reports
on Form 10-K or Form 20-F filed under the Exchange Act are required to contain a report by management assessing the effectiveness of
a company's internal control over financial reporting. Separately, under SOX 404, as amended by the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010, public companies that are large accelerated or accelerated filers, other than emerging growth companies
or smaller reporting companies, must include in their annual reports on Form 10-K or Form 20-F an attestation report of their auditors'
attesting to and reporting on the management's assessment of internal control over financial reporting. Non-accelerated filers
and emerging growth companies are not required to include an attestation report of their auditors in the annual reports.
A
report of our management is included under Item 15 "Controls and Procedures" of this report. We are a non-accelerated filer
and not required to include an attestation report of our auditor in this annual report. Management believes that our internal control
over financial reporting has continued to improve in 2023 to minimize material weaknesses identified in Item 15 of this report. Although
we have made improvements to overcome such concern, we can provide no assurance that these material weaknesses will be entirely remediated
in a timely manner. As a result, investors and others may lose confidence in the reliability of our financial statements.
We
face risks associated with maintaining and expanding our international operations, including unfavorable and uncertain regulatory, political,
economic, tax and labor conditions.
We
are subject to legal and regulatory requirements, political uncertainty and social, environmental and economic conditions in multiple
jurisdictions, over which we have little control and which are inherently unpredictable. Our operations in such jurisdictions, particularly
as a company based in the PRC, create risks relating to, among others, compliance; organizing local operating entities; establishing,
staffing and managing foreign business locations; navigating foreign government taxes, regulations and permit requirements; enforceability
of our contractual rights; trade restrictions or exchange controls. Such conditions may increase our costs, impact our operations and
business plans and require significant management attention, and may harm our business if we unable to manage them effectively.
18
Risks
Relating to Doing Business in China
The
PRC government exerts substantial influence over the manner in which we conduct our business activities. Its oversight and discretion
over our business could result in a material adverse change in our operations and the value of our ordinary shares. Changes in laws,
regulations and policies in China and uncertainties with respect to the PRC legal system could materially and adversely affect us. In
addition, rules and regulations in China can change quickly with little advance notice.
A
substantial portion of our operations are conducted in the PRC. Accordingly, our financial condition and results of operations are affected
to a significant extent by the economic, political and legal developments in the PRC. The PRC economy differs from the economies of most
developed countries in many respects, including the extent of government involvement, level of development, growth rate, and control
of foreign exchange and allocation of resources. The PRC government has implemented various measures to encourage economic growth and
to guide the allocation of resources. Some of these measures may benefit the overall PRC economy but may also have a negative effect
on us. Our financial condition and results of operations could be materially and adversely affected by government control over capital
investments or changes in tax regulations that are applicable to us.
The
Chinese government recently has published new policies that significantly affected certain industries such as the education and internet
industries, and we cannot rule out the possibility that it will not in the future release regulations or policies regarding our industry
that could require us or our PRC subsidiaries to seek permission from Chinese authorities to continue to operate our business in China,
which may adversely affect our business, financial condition and results of operations. Furthermore, recent statements made by the Chinese
government have indicated an intent to increase the government's oversight and control over offerings of companies with significant
operations in China that are to be conducted in foreign markets, as well as foreign investment in China-based issuers like us. Any such
action, once taken by the Chinese government, could significantly limit or completely hinder our ability to offer our securities, and
could cause the value of such securities to significantly decline or become worthless.
For
example, in July 2021, the Chinese government provided new guidance on China-based companies raising capital outside of China, including
through arrangements via VIEs. In light of such developments, the SEC has imposed enhanced disclosure requirements on China-based companies
seeking to register securities with the SEC. Although we dissolved the VIE structure in September 2021 and our business in China currently
does not involve any type of restricted industry under Chinese regulations, any future Chinese, U.S. or other rules and regulations that
place restrictions on capital raising or other activities by companies with extensive operations in China could adversely affect our
business. If the business environment in China deteriorates from the perspective of domestic or international investment, or if relations
between China and the United States or other governments deteriorate, the Chinese government may intervene with our operations, and our
business in China, as well as the value of our securities, may also be adversely affected.
The
PRC government has increasingly strengthened oversight in offerings conducted overseas or on foreign investment in China-based issuers,
which could result in a material change in our operations and our ordinary shares could decline in value or become worthless.
The
PRC government has recently indicated an intent to take actions to exert more oversight and control over offerings that are conducted
overseas and/or foreign investment in China-based issuers. For example, on July 6, 2021, the relevant PRC government authorities made
public the Opinions on Strictly Scrutinizing Illegal Securities Activities in Accordance with the Law, or the Opinions. These Opinions
emphasized the need to strengthen the administration over illegal securities activities and the supervision of overseas listings by China-based
companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the
risks and incidents faced by China-based over-seas-listed companies.
On
December 24, 2021, the CSRC issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing
by Domestic Companies (Draft for Comments) and the Administrative Measures for the Filing of Overseas Securities Offering and Listing
by Domestic Companies (Draft for Comments), collectively the Draft Overseas Listing Regulations, for public comment until January 23,
2022.
19
Following
issuance of the Draft Overseas Listing Regulations, on February 17, 2023, the CSRC issued the Notice on Filing Arrangements for Overseas
Securities Offering and Listing by Domestic Companies (the "CSRC Filing Notice"), stating that the CSRC has published the
Trial Measures, and Listing Guidelines, collectively the Trial Measures and Listing Guidelines. Among others, the Trial Measures and
Listing Guidelines provide that overseas offerings and listings by PRC domestic companies shall:
(i)
require
    submission of relevant materials that contain a filing report and a legal opinion, providing truthful, accurate and complete information
    on matters including but not limited to the shareholders of the issuer. Where the filing documents are complete and in compliance
    with stipulated requirements, the CSRC shall, within 20 working days after receipt of filing documents, conclude the filing procedure
    and publish filing results on the CSRC website. Where filing documents are incomplete or do not conform to stipulated requirements,
    the CSRC shall request supplementation and amendment thereto within five working days after receipt of the filing documents. The
    issuer should then complete supplementation and amendment within 30 working days;
(ii)
abide
    by laws, administrative regulations and relevant state rules concerning foreign investment in China, state-owned asset administration,
    industry regulation and outbound investment, and shall not disrupt the PRC domestic market order, harm state or public interests
    or undermine the lawful rights and interests of PRC domestic investors;
(iii)
abide
    by national secrecy laws and relevant provisions. Necessary measures shall be taken to fulfill confidentiality obligations. Divulgence
    of state secrets or working secrets of government agencies is strictly prohibited. Provision of personal information and important
    data, etc., to overseas parties in relation to overseas offering and listing of PRC domestic companies shall be in compliance with
    applicable laws, administrative regulations and relevant state rules; and
(iv)
be
    made in strict compliance with relevant laws, administrative regulations and rules concerning national security in the spheres of
    foreign investment, cybersecurity, data security, etc., and issuers shall duly fulfill their obligations to protect national security.
    If the intended overseas offering and listing necessitates a national security review, relevant security review procedures shall
    be completed according to the law before the application for such offering and listing is sub-mitted to any overseas parties such
    as securities regulatory agencies and trading venues;
The
Trial Measures came into effect on March 31, 2023. PRC domestic companies seeking to offer and list securities (which, for the purposes
of the Trial Measures, are defined thereunder as equity shares, depository receipts, corporate bonds convertible to equity shares, and
other equity securities that are offered and listed overseas, either directly or indirectly, by PRC domestic companies) in overseas markets,
either via direct or indirect means, must file with the CSRC within three working days after their application for an overseas listing
is submitted.
The
Trial Measures provide that where a PRC domestic company seeks to indirectly offer and list securities in overseas markets, the issuer
shall designate a major domestic operating entity, which shall, as the domestic entity responsible, file with the CSRC. The Trial Measures
stipulate that an overseas listing will be determined as "indirect" if the issuer meets both of the following conditions:
(1) 50% or more of any of the issuer's operating revenue, total profit, total assets or net assets as documented in its audited
consolidated financial statements for the most recent accounting year are accounted for by PRC domestic companies (Condition I), and
(2) the main parts of the issuer's business activities are conducted in the PRC, or its main places of business are located in
the PRC, or the senior managers in charge of its business operations and management are mostly Chinese citizens or domiciled in the PRC
(Condition II); whether Chinese citizens from Taiwan, Hong Kong, and Macau are included in the foregoing specification is not specified.
The determination as to whether or not an overseas offering and listing by PRC domestic companies is indirect shall be made on a "substance
over form" basis; the Listing Guidelines further stipulate that if an issuer not satisfying Condition I submits an application
for issuance and listing in overseas markets in accordance with relevant non-PRC issuance regulations requiring such issuer to disclose
risk factors mainly related to the PRC, the securities firm(s) and the issuer's PRC counsel should follow the principle of "substance
over form" in order to identify and argue whether the issuer should complete a filing under the Trial Measures. Subsequent securities
offerings of an issuer in (i) the same overseas market where it has previously offered and listed securities, and (ii) an overseas market
other than one where the issuer has previously offered and listed securities shall be filed with the CSRC within three working days after
offerings are completed. Additionally, the Trial Measures stipulate that after an issuer has offered and listed securities in an overseas
market, the issuer shall submit a report to the CSRC within three working days after the occurrence and public disclosure of (i) a change
of control thereof, (ii) investigations of or sanctions imposed on the issuer by overseas securities regulators or relevant competent
authorities, (iii) changes of listing status or transfers of listing segment, and (iv) a voluntary or mandatory delisting.
20
The
CSRC Filing Notice states that, beginning from March 31, 2023, PRC domestic enterprises which have already issued and listed securities
overseas and fall within the scope of filing under the Trial Measures shall be considered "existing enterprises" ("Existing
Listed Enterprises"). Existing Listed Enterprises are not required to complete filings immediately; rather, Existing Listed Enterprises
should complete filings if they are subsequently involved in matters require filings, such as follow-on financing activities, in accordance
with the Trial Measures.
There
is a possibility that we may be deemed as an Existing Listed Enterprise as defined under the CSRC Filing Notice, and that future offerings
of listed securities or listings outside China by us may be subject to CSRC filing requirements in accordance with the Trial Measures.
On
February 24, 2023, the CSRC, together with several other governmental authorities jointly enacted the Revised Provisions. The Revised Provisions were issued under the title the "Provisions
on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,"
and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding
their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require
that, among other things, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly
disclose or provide to relevant individuals or entities, including securities companies, securities service providers, and overseas regulators,
any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent
authorities according to law, and file with the secrecy administrative department at the same level; and (b) a domestic company that
plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and
entities, including securities companies, securities service providers, and overseas regulators, any other documents and materials that,
if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable
national regulations. Any failure or perceived failure by our Company, or our PRC subsidiaries to comply with the above confidentiality
and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities
being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected
of committing a crime.
Given
that the Trial Measures, Listing Guidelines and Revised Provisions have been introduced recently, and that there remain substantial uncertainties
surrounding the enforcement thereof, we cannot assure you that, if required, we would be able to complete the filings and fully comply
with the relevant new rules on a timely basis, if at all. Further, as of the date of this report, the aforementioned Provisions of the
State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) issued on
December 24, 2021 remain in draft form and final and effective versions are yet to be published.
Changes
in U.S. and Chinese regulations or in relations between the United States and China may adversely impact our business, our operating
results, our ability to raise capital and the value of the securities that we are registering. Any such changes may take place quickly
and with very little notice.
The
U.S. government, including the SEC, has made statements and taken certain actions that led to changes to United States and international
relations, and will impact companies with connections to the United States or China. The SEC has issued statements primarily focused
on companies with significant China-based operations, such as us. For example, on July 30, 2021, Gary Gensler, Chairman of the SEC, issued
a Statement on Investor Protection Related to Recent Developments in China, pursuant to which Chairman Gensler stated that he has asked
the SEC staff to engage in targeted additional reviews of filings for companies with significant China-based operations. The statement
also addressed risks inherent in companies with VIE structures. We have dissolved our VIE structure and are not in any industry that
is subject to foreign ownership limitations by China. However, it is possible that the Company's filings with the SEC may be subject
to enhanced review by the SEC and this additional scrutiny could affect our ability to effectively raise capital in the United States.
21
In
response to the SEC's July 30, 2021 statement, the CSRC announced on August 1, 2021, that "it is our belief that Chinese
and U.S. regulators shall continue to enhance communication with the principle of mutual respect and cooperation, and properly address
the issues related to the supervision of China-based companies listed in the U.S. so as to form stable policy expectations and create
benign rules framework for the market." While the CSRC will continue to collaborate "closely with different stakeholders
including investors, companies, and relevant authorities to further promote transparency and certainty of policies and implementing measures,"
it emphasized that it "has always been open to companies' choices to list their securities on international or domestic markets
in compliance with relevant laws and regulations." If any new legislation, executive orders, laws and/or regulations are implemented,
if the U.S. or Chinese governments take retaliatory actions due to the recent U.S.-China tension or if the Chinese government exerts
more oversight and control over securities offerings that are conducted in the United States, such changes could have an adverse effect
on our business, financial condition and results of operations, our ability to raise capital and the value of the securities that we
are registering.
In
August 2023, an executive order was issued by the Biden administration to restrict U.S. investments in sensitive technologies in the
Chinese mainland, Hong Kong, and Macau, such as advanced computing chips, quantum technology, and artificial intelligence. As of the
date of this annual report, the final rules implementing the order have not become effective yet, and the scope of the review program
may be materially different from what is currently contemplated by the advance notice. Therefore, there are substantial uncertainties
on whether the outbound foreign direct investment review program will have a material impact on our business, results of operations,
financial condition, and prospects.
There
are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.
A
significant portion of our operations are conducted in the PRC, and are governed by PRC laws, rules and regulations. Our PRC subsidiaries
are subject to laws, rules and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based
on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.
In 1979, the PRC government began to promulgate a comprehensive system of laws, rules and regulations governing economic matters in general.
The overall effect of legislation over the past four decades has significantly enhanced the protections afforded to various forms of
foreign investment in China. However, China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations
may not sufficiently cover all aspects of economic activities in China or may be subject to significant degrees of interpretation by
PRC regulatory agencies. In particular, because these laws, rules and regulations, especially those relating to the internet, are relatively
new, and because of the limited number of published decisions and the nonbinding nature of such decisions, and because the laws, rules
and regulations often give the relevant regulator significant discretion in how to enforce them, the interpretation and enforcement of
these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable. In addition, the PRC legal system
is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, and may have
a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the
violation. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources
and management attention.
Our
business is subject to complex and evolving laws and regulations regarding privacy and data protection. Compliance with China's
new Data Security Law, Cybersecurity Review Measures, Personal Information Protection Law, Regulations on Network Data Security (draft
for public comments), as well as additional laws, regulations and guidelines that the Chinese government promulgates in the future may
entail significant expenses and could materially affect our business.
Regulatory
authorities in China have implemented and are considering further legislative and regulatory proposals concerning data protection. China's
new Data Security Law went into effect on September 1, 2021. The Data Security Law provides that the data processing activities must
be conducted based on "data classification and hierarchical protection system" for the purpose of data protection and prohibits
entities in China from transferring data stored in China to foreign law enforcement agencies or judicial authorities without prior approval
by the Chinese government. The Data Security Law sets forth the legal liabilities of entities and individuals found to be in violation
of their data protection obligations, including rectification order, warning, fines of up to RMB5 million, suspension of relevant business,
and revocation of business permits or licenses. On July 7, 2022, CAC promulgated the Security Assessment Measures for Outbound Data Transfers,
or the "Measures," which became effective on September 1, 2022. The Measures applies to the security assessment of critical
data and personal information collected and generated by a data processor in its operation in the PRC, which are to be provided abroad.
Article 4 of the Measures stipulates that a data processor shall declare security assessment for its outbound data transfer to the CAC
through the local cyberspace administration at the provincial level if the data processor provide data abroad under any of the following
circumstances: (i) where a data processor provides critical data abroad; (ii) where a critical information infrastructure operator or
a data processor processing the personal information of more than one million people provides personal information abroad; (iii) where
a data processor has provided personal information of 100,000 people or sensitive personal information of 10,000 people in total abroad
since January 1 of the previous year; and (iv) other circumstances prescribed by the CAC for which declaration for security assessment
for outbound data transfers is required.
22
On
November 7, 2016, the SCNPC promulgated the Cybersecurity Law of the PRC which came into effect on June 1, 2017 and applies to the construction,
operation, maintenance and use of networks as well as the supervision and administration of cybersecurity in China. The PRC Cybersecurity
Law defines "network operators" as owners and administrators of networks and network service providers, are subject to various
security protection-related obligations, including: (i) complying with security protection obligations under graded system for cybersecurity
protection requirements, which include formulating internal security management rules and operating instructions, appointing cybersecurity
responsible personnel and their duties, adopting technical measures to prevent computer viruses, cyber-attack, cyber-intrusion and other
activities endangering cybersecurity, adopting technical measures to monitor and record network operation status and cybersecurity events;
(ii) formulating a emergency plan and promptly responding and handling security risks, initiating the emergency plans, taking appropriate
remedial measures and reporting to regulatory authorities in the event comprising cybersecurity threats; and (iii) providing technical
assistance and support to public security and national security authorities for protection of national security and criminal investigations
in accordance with the law.
On
July 10, 2021, the CAC issued the Cybersecurity Review Measures (revised draft for public comments), which took effect on February 15,
2022. The revised Cybersecurity Review Measures authorize the CAC to conduct cybersecurity review on a range of activities that affect
or may affect national security. The PRC National Security Law defines various types of national security, including technology security
and information security. The revised Cybersecurity Review Measures expands the cybersecurity review to data processing operators in
possession of personal information of over 1 million users if the operators intend to list their securities in a foreign country. Under
the revised Cybersecurity Review Measures, the scope of entities required to undergo cybersecurity review to assess national security
risks that arise from data processing activities would be expanded to include all critical information infrastructure operators who purchase
network products and services and all data processors carrying out data processing activities that affect or may affect national security.
In addition, the revised Cybersecurity Review Measures provide that all such entities that maintain or store the personal information
of more than 1 million users and undertake a public listing of securities in a foreign country would be required to pass cybersecurity
review, which would focus on the potential risk of core data, important data, or a large amount of personal information being stolen,
leaked, destroyed, illegally used or exported out of China, or critical information infrastructure being affected, controlled or maliciously
used by foreign governments after such a listing. An operator that violates these Measures shall be dealt with in accordance with the
provisions of the PRC Cybersecurity Law and the PRC Data Security Law.
On
November 14, 2021, the CAC released the Regulations on Network Data Security (draft for public comments) and accepted public comments
until December 13, 2021. The draft Regulations on Network Data Security provide more detailed guidance on how to implement the general
legal requirements under legislations such as the Cybersecurity Law, Data Security Law and the Personal Information Protection Law. The
draft Regulations on Network Data Security follow the principle that the state will regulate based on a data classification and multi-level
protection scheme, under which data is largely classified into three categories: general data, important data and core data. Personal
data and important data will be subject to "key" protection and core data to "strict" protection. We believe
that the data we access falls within the category of "general data," because such data is data of our member merchants, does
not involve personal information and is not large in volume. Further, when we conduct advertising data collection and analysis, such
data is only related to the placement and delivery of ads, which does not involve any personal information. However, we may constitute
an online platform operator under the draft Regulations on Network Data Security, which is defined as a platform that provides information
publishing, social network, online transaction, online payment and online audio/video services, because our PRC subsidiary Biznest is
operating a smart cloud platform that publishes commercial ads of our advertiser clients. Online platform operator under the draft Regulations
will be required, among other things, to disclose terms and privacy policies and the algorithms they use. Where there are any changes
that would result in significant impacts on users' rights and interests, online platform operators will be required to seek public
comments for at least 30 business days and publish how the public comments have been considered and incorporated into the final versions
and why other comments are rejected. The draft Regulations also set forth procedures for reporting data breach incidents. In the event
that a data breach incident has caused harm to any individuals or organizations, a data processor should notify the relevant individuals
and organizations within 3 business days, unless such notices are not required under applicable laws or regulations. Additionally, if
we are deemed as a data processor listed overseas under the draft Regulations, we will be required to carry out an annual data security
assessment on our own or by engaging a third party data security services institution and submit a data security assessment report for
the prior year to the local cyberspace affairs administration department before January 31 of each year. The Regulations on Network Data
Security (draft for public comments) were released for public comments and subject to further changes.
23
On
August 20, 2021, the SCNPC promulgated the Personal Information Protection Law which became effective on November 1, 2021. The Personal
Information Protection Law provides a comprehensive set of data privacy and protection requirements that apply to the processing of personal
information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations
and individuals in China, and the processing of personal information of persons in China outside of China if such processing is for purposes
of providing products and services to, or analyzing and evaluating the behavior of, persons in China. The Personal Information Protection
Law also provides that critical information infrastructure operators and personal information processing entities who process personal
information meeting a volume threshold to be set by Chinese cyberspace regulators are also required to store in China personal information
generated or collected in China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such
personal information. Lastly, the Personal Information Protection Law contains proposals for significant fines for serious violations
of up to RMB 50 million or 5% of annual revenues from the prior year and may also be ordered to suspend any related activity by competent
authorities.
As
our smart cloud platform is engaged in the advertising business, the advertising industry is not subject to any foreign investment restrictions
and our smart cloud platform does not collect any personal information, we believe that we will be able to comply with the requirements
of the PRC Cybersecurity Law, the PRC Data Security Law and related implementing regulations. However, interpretation, application and
enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation,
amendments to existing legislation or changes in enforcement. Compliance with the PRC Cybersecurity Law and the PRC Data Security Law
could increase the cost to us in providing our services, require changes to our operations or may prevent us from providing certain services.
On
February 25, 2023, the SAMR released the Administrative Measures for Internet Advertising, which came into effect on May 1, 2023 and
replaced Interim Measures for the Administration of Internet Advertising. The Administrative Measures for Internet Advertising further
strengthen the responsibilities of Internet platform operators and enhance their review obligation in Internet advertising activities.
Any failure to comply with the Administrative Measures for Internet Advertising may result in administrative liabilities, including warnings,
public denouncement, fines, enforcement orders requiring us to correct, suspension of business or even criminal liabilities, all of which
may materially and adversely affect our business and results of operations. Our smart cloud platform, currently engaged in the advertising
business, complies with the requirements of the Administrative Measures for Internet Advertising.
PRC
laws and regulations establish complex procedures in connection with certain acquisitions of China-based companies by foreign investors,
which could make it more difficult for us to pursue growth through acquisitions or mergers in China.
On
August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State-Owned Assets Supervision and Administration Commission,
the State Administration of Taxation, the State Administration for Industry and Commerce, the CSRC, and the SAFE, jointly adopted the
Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which came into effect on
September 8, 2006 and were amended on June 22, 2009. The M&A Rules include, among other things, provisions that purport to require
that an offshore special purpose vehicle formed for the purpose of an overseas listing of securities of a PRC company obtain the approval
of the CSRC prior to the listing and trading of such special purpose vehicle's securities on an overseas stock exchange. On September
21, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings through special purpose vehicles.
However, substantial uncertainty remains regarding the scope and applicability of the M&A Rules to offshore special purpose vehicles.
The
regulations also established additional procedures and requirements that are expected to make merger and acquisition activities in China
by foreign investors more time consuming and complex, including requirements in some instances that the MOFCOM be notified in advance
of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, or that the approval from
the MOFCOM be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire affiliated
domestic companies.
24
Moreover,
according to the Anti-Monopoly Law of the People's Republic of China promulgated on August 30, 2007 and the Provisions on Thresholds
for Reporting of Concentrations of Undertakings (the "Prior Reporting Rules") issued by the State Council in August 2008
and amended in September 2018, the concentration of business undertakings by way of mergers, acquisitions or contractual arrangements
that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance
to the anti-monopoly enforcement agency of the State Council when the applicable threshold is crossed and such concentration shall not
be implemented without the clearance of prior reporting. In addition, the Regulations on Implementation of Security Review System for
the Merger and Acquisition of Domestic Enterprise by Foreign Investors (the "Security Review Rules") issued by the MOFCOM
that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise "national defense
and security" concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic
enterprises that raise "national security" concerns are subject to strict review by the MOFCOM, and the rules prohibit any
activities attempting to bypass a security review by structuring the transaction through, among other things, trusts, entrustment or
contractual control arrangements.
We
may grow our business in part by acquiring other companies operating in our industry. Compliance with the requirements of the regulations
to complete such transactions could be time-consuming, and any required approval processes, including approval from the MOFCOM, may delay
or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
PRC
regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion
may restrict or prevent Taoping from making additional capital contributions or loans to its PRC subsidiaries.
Taoping,
as an offshore holding company, is permitted under PRC laws and regulations to provide funding to its PRC subsidiaries through loans
or capital contributions. However, loans by Taoping to its PRC subsidiaries to finance their activities cannot exceed statutory limits
i.e., the difference between its total amount of investment and its registered capital, or certain amount calculated based on elements
including capital or net assets, the cross-border financing leverage ratio and the macro prudential coefficient ("Macro-prudential
Management Mode") and must be registered with the local counterpart of the SAFE and capital contributions to its PRC subsidiaries
are subject to the requirement of making necessary filings in the Foreign Investment Comprehensive Management Information System, and
registration with other governmental authorities in China. According to the Circular of the People's Bank of China and the State
Administration of Foreign Exchange on Upregulating the Macro-prudent Adjustment Parameter for Cross-border Financing issued on July 20,
2023, the limit for the total amount of foreign debt under the Macro-prudential Management Mode is adjusted to three times of their respective
net assets.
The
SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement
of Capital of Foreign-invested Enterprises, or Circular 19, effective on June 1, 2015, in replacement of the Circular on the Relevant
Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-
Invested Enterprises, the Notice from the State Administration of Foreign Exchange on Relevant Issues Concerning Strengthening the Administration
of Foreign Exchange Businesses, and the Circular on Further Clarification and Regulation of the Issues Concerning the Administration
of Certain Capital Account Foreign Exchange Businesses. According to Circular 19, the flow and use of the RMB capital converted from
foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital may not be used for
the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of bank loans that have been transferred
to a third party. Although Circular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested
enterprise to be used for equity investments within the PRC, it also reiterates the principle that RMB converted from the foreign currency-denominated
capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear
whether the SAFE will permit such capital to be used for equity investments in the PRC in actual practice. The SAFE promulgated the Notice
of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital
Account, or Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in Circular 19, but changes the prohibition
against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted
loans to a prohibition against using such capital to grant loans to non-associated enterprises. Violations of Circular 19 and Circular
16 could result in administrative penalties. Circular 19 and Circular 16 may significantly limit our ability to transfer any foreign
currency Taoping holds to its PRC subsidiaries, which may adversely affect our liquidity and our ability to fund and expand our business
in the PRC.
25
In
light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding
companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government
approvals on a timely basis, if at all, with respect to future loans or future capital contributions by us to our PRC subsidiaries. As
a result, uncertainties exist as to our ability to provide prompt financial support to our PRC subsidiaries when needed. If we fail to
complete such registrations or obtain such approvals, our ability to use foreign currency and to capitalize or otherwise fund our PRC
operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our
business.
The
recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and the HFCA Act, all call for additional and more stringent
criteria to be applied to U.S.-listed companies with significant operations in China. These developments could add uncertainties to our
continued listing, future offerings, business operations share price and reputation.
U.S.
public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative
publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative
publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial
accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud.
On
December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting the continued challenges faced by the U.S. regulators in
their oversight of financial statement audits of U.S.-listed companies with significant operations in HK SAR. On April 21, 2020, SEC
Chairman Jay Clayton and former PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting
the risks associated with investing in companies based in or have substantial operations in emerging markets including HK SAR, reiterating
past SEC and PCAOB statements on matters including the difficulty associated with inspecting accounting firms and audit work papers in
HK SAR and higher risks of fraud in emerging markets and the difficulty of bringing and enforcing SEC, Department of Justice and other
U.S. regulatory actions, including in instances of fraud, in emerging markets generally.
On
May 20, 2020, the U.S. Senate passed the HFCA Act requiring a foreign company to certify it is not owned or controlled by a foreign government
if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. In addition,
if the PCAOB is unable to inspect the company's auditors for three consecutive years, the issuer's securities are prohibited
to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCA Act and it was signed into
law on December 18, 2020.
On
May 21, 2021, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating
in a "Restrictive Market", (ii) prohibit Restrictive Market companies from directly listing on Nasdaq Capital Market, and
only permit them to list on Nasdaq Global Select or Nasdaq Global Market in connection with a direct listing and (iii) apply additional
and more stringent criteria to an applicant or listed company based on the qualifications of the company's auditors.
On
June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, legislation
entitled "Consolidated Appropriations Act, 2023" was signed into law, which contained, among other things, an identical provision
to the Accelerating Holding Foreign Companies Accountable Act and amended the HFCA Act by requiring the SEC to prohibit an issuer's
securities from trading on any U.S. stock exchanges or over-the-counter markets if its auditor is not subject to PCAOB inspections for
two consecutive years instead of three.
On
September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining,
as contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms
located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
26
On
December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act.
The rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public
accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate ("Commission-Identified
Issuers"). The final amendments require Commission-Identified Issuers to submit documentation to the SEC establishing that, if
true, it is not owned or controlled by a governmental entity in the public accounting firm's foreign jurisdiction. The amendments
also require that a Commission-Identified Issuer that is a "foreign issuer," as defined in Exchange Act Rule 3b-4, provide
certain additional disclosures in its annual report for itself and any of its consolidated foreign operating entities. A Commission-Identified
Issuer will be required to comply with the submission and disclosure requirements in the annual report for each year in which it was
identified.
On
December 16, 2021, pursuant to the HFCA Act, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect
or investigate completely registered public accounting firms headquartered in mainland China of the People's Republic of China
and Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in such
jurisdictions. In addition, the PCAOB's report identified specific registered public accounting firms which are subject to these
determinations. Our current registered public accounting firm, PKF, or our former registered public accounting firm, UHY LLP, is not
headquartered in mainland China or Hong Kong and was not identified in this report as a firm subject to the PCAOB's determination.
Our current auditor, PKF, is a UK-based accounting firm that is registered with the PCAOB and can be inspected by the PCAOB. We have
no current intention of engaging any auditor not subject to regular inspection by the PCAOB. Furthermore, the PCAOB is able to inspect
the audit workpapers of our PRC subsidiaries, as such workpapers are electronic files possessed by our registered public accounting firms.
However, if the PCAOB determines in the future that it cannot inspect or fully investigate our auditor at such future time, trading in
our securities would be prohibited under the HFCA Act.
On
August 26, 2022, CSRC, the MOFCOM, and the PCAOB signed the Protocol, governing inspections and investigations of audit firms based in
China and Hong Kong. The Protocol remains unpublished and is subject to further explanation and implementation. Pursuant to the fact
sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for
inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB made a
statement announcing that it was able, in 2022, to inspect and investigate completely issuer audit engagements of PCAOB-registered public
accounting firms headquartered in China and Hong Kong. However, uncertainties still exist as to whether the PCAOB will have continued
access for complete inspections and investigations in the future. When the PCAOB reassesses its determinations in the future, it could
still determine that it is unable to inspect and investigate completely accounting firms based in mainland China and Hong Kong. The PCAOB
has also indicated that it will act immediately to consider the need to issue new determinations under the HFCA Act if needed. There
can be no assurance that we will continue to be able to comply with requirements imposed by U.S. regulators if the PCAOB is not able
to fully inspect any component of our auditor's work papers in the future. Delisting of the Company's ordinary shares would
force holders to sell their shares. The market price of Taoping's ordinary shares could be adversely affected as a result of anticipated
negative impacts of these executive or legislative actions, regardless of whether these executive or legislative actions are implemented
and regardless of our actual operating performance.
Uncertainties
exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact the viability of our
current corporate structure, corporate governance and business operations.
On
March 15, 2019, the SCNPC approved the Foreign Investment Law, which took effect on January 1, 2020. The Foreign Investment Law embodies
an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice
and the legislative efforts to unify the corporate legal requirements for both foreign and domestic invested enterprises in China. The
Foreign Investment Law establishes the basic framework for the access to, and the promotion, protection and administration of foreign
investments in view of investment protection and fair competition.
According
to the Foreign Investment Law, the State Council will publish or approve to publish a "negative list" for special administrative
measures concerning foreign investment. The latest Negative List, which was promulgated by the MOFCOM and the NDRC on March 12, 2022,
and took effect on the same date. The Negative List set out in a unified manner the restrictive measures, such as the requirements on
shareholding percentages and management, for the access of foreign investments, and the industries that are prohibited for foreign investment.
Any field not falling in the Negative List shall be administered under the principle of equal treatment to domestic and foreign investment.
27
Based
on the legal analysis of the Company's in-house legal counsel, who is a licensed attorney in the PRC, we believe that none of our
PRC subsidiaries' current business is stipulated on the Negative List. As a result, according to the laws and regulations currently
in effect, our PRC subsidiaries are able to conduct their business without being subject to restrictions imposed by the foreign investment
laws and regulations of the PRC and none of Taoping or our subsidiaries is required to obtain additional licenses or permits beyond a
regular business license for each PRC subsidiary's operations. Each of our PRC subsidiaries is required to obtain and has obtained
such regular business license from the local branch of the SAMR. No application for any such license has been denied.
However,
we cannot assure you that our current operations or any newly-developed business in the future will still deemed to be "permitted"
in the "negative list", which may be promulgated or be amended from time to time by the MOFCOM and the NDRC. As a result,
we cannot assure you that our PRC subsidiaries are always able to successfully update or renew the licenses or permits required for the
relevant business in a timely manner or that these licenses or permits are sufficient to conduct all of our present or future business.
If our PRC subsidiaries (i) do not receive or maintain required permissions or approvals, (ii) inadvertently conclude that such permissions
or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and our PRC subsidiaries are required
to obtain such permissions or approvals in the future, we could be subject to fines, legal sanctions or an order to suspend our PRC operating
subsidiaries' business, which may materially and adversely affect the business, financial condition and results of operations of
us.
Restrictions
on currency exchange may limit our ability to receive and use our income effectively.
The
majority of our sales will be settled in RMB, and any future restrictions on currency exchanges may limit our ability to use revenue
generated in RMB to fund any future business activities outside of China or to make dividend or other payments in U.S. dollars. Although
the conversion of RMB into foreign currency for current account transactions, such as interest payments, profit distributions, and trade
or service related transactions, can be made without prior governmental approval, significant restrictions still remain, including primarily
the restriction that FIEs may only buy, sell, or remit foreign currencies after providing valid commercial documents to certain banks
in China authorized to conduct foreign exchange business. In addition, conversion of RMB for capital account items, including direct
investment and loans, are subject to governmental approval in China, and requires companies to open and maintain separate foreign exchange
accounts for capital account items. We cannot be certain that the Chinese regulatory authorities will not impose more stringent restrictions
on the convertibility of the RMB.
Failure to make adequate contributions to
various employee benefit plans as required by PRC regulations may subject us to penalties.
Companies operating in China are required to participate
in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment
obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our
employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The
requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels
of economic development in different locations. The government authorities may examine whether an employer has made adequate payments
of the requisite employee benefit payments, and employers who fail to make adequate payments may be subject to late payment fees, fines
and/or other penalties. Although we believe all of our PRC subsidiaries are in material compliance with relevant laws and regulations,
we cannot assure you that we are able to make adequate contribution in a timely manner at all time. If we are subject to late fees or
fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.
Fluctuations
in exchange rates could adversely affect our business and the value of our securities.
The
value of our ordinary shares will be indirectly affected by the foreign exchange rate between the U.S. dollar and RMB, and between the
two currencies and other currencies in which our sales may be denominated. Appreciation or depreciation in the value of RMB relative
to the U.S. dollar would affect our financial results reported in U.S. dollar without giving effect to any underlying change in our business
or results of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue that will be
exchanged into U.S. dollars, as well as earnings from any U.S. dollar-denominated investments we make in the future.
Since
July 2005, the RMB has no longer been pegged to the U.S. dollar. Although the People's Bank of China regularly intervenes in the
foreign exchange market to prevent significant short-term fluctuations in the exchange rate, RMB may appreciate or depreciate significantly
in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions
on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.
Very
limited hedging transactions are available in China to reduce our exposure to the exchange rate fluctuations. To date, we have not entered
into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these
transactions may be limited. We may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange
losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.
28
Restrictions
under PRC law on our PRC subsidiaries' ability to make dividends and other distributions could materially and adversely affect
our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct
our business.
Substantially
all of our revenues are earned by our PRC subsidiaries. However, PRC regulations restrict the ability of our PRC subsidiaries to make
dividends and other payments to their offshore parent companies. PRC legal restrictions permit payments of dividends by our PRC subsidiaries
only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our
PRC subsidiaries are also required under PRC laws and regulations to allocate at least 10% of their annual after-tax profits determined
in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said reserve fund reach 50% of the company's
registered capital. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us
in the form of loans, advances, or cash dividends. Any limitations on the ability of our PRC subsidiaries to transfer funds to us could
materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends
and otherwise fund and conduct our business.
PRC
regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRC
subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary or limit our PRC subsidiary's
ability to increase their registered capital or distribute profits.
The
SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Offshore Investment
and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the former
circular commonly known as "SAFE Circular 75" promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents
to register with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore entity,
for the purpose of overseas investment and financing, with such PRC residents' legally owned assets or equity interests in domestic
enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a "special purpose vehicle." SAFE Circular
37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle,
such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material
event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration,
the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from
carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to
contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described
above could result in liability under PRC law for evasion of foreign exchange controls. According to the Notice on Further Simplifying
and Improving Policies for the Foreign Exchange Administration of Direct Investment released on February 13, 2015 by SAFE, local banks
will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration
and amendment registration, under SAFE Circular 37 from June 1, 2015.
According
to SAFE Circular 37, our shareholders or beneficial owners, who are PRC residents, are subject to SAFE Circular 37 or other foreign exchange
administrative regulations in respect of their investment in our company. We have notified substantial beneficial owners of ordinary
shares who we know are PRC residents of their filing obligations. Nevertheless, we may not be aware of the identities of all of our beneficial
owners who are PRC residents. We do not have control over our beneficial owners and there can be no assurance that all of our PRC-resident
beneficial owners will comply with SAFE Circular 37 and subsequent implementation rules, and there is no assurance that the registration
under SAFE Circular 37 and any amendment will be completed in a timely manner, or will be completed at all. The failure of our beneficial
owners who are PRC residents to register or amend their foreign exchange registrations in a timely manner pursuant to SAFE Circular 37
and subsequent implementation rules, or the failure of future beneficial owners of our company who are PRC residents to comply with the
registration procedures set forth in SAFE Circular 37 and subsequent implementation rules, may subject such beneficial owners or our
PRC subsidiaries to fines and legal sanctions. Such failure to register or comply with relevant requirements may also limit our ability
to contribute additional capital to our PRC subsidiaries and limit our PRC subsidiaries' ability to distribute dividends to us.
These risks may have a material adverse effect on our business, financial condition and results of operations.
Furthermore,
it is uncertain how SAFE Circular 37, and any future regulation concerning offshore or cross-border transactions, will be interpreted,
amended and implemented by the relevant PRC government authorities, and we cannot predict how these regulations will affect our business
operations or future strategy. Failure to register or comply with relevant requirements may also limit our ability to contribute additional
capital to our PRC subsidiaries and limit our PRC subsidiaries' ability to distribute dividends to us. These risks could in the
future have a material adverse effect on our business, financial condition and results of operations.
29
Any
failure to comply with PRC regulations regarding employee share incentive plans may subject the PRC plan participants or us to fines
and other legal or administrative sanctions.
Pursuant
to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may submit applications
to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies. In the meantime,
directors, executive officers and other employees who are PRC citizens or who are non-PRC residents residing in the PRC for a continuous
period of not less than one year, subject to limited exceptions, and who have been granted restricted shares, options or restricted share
units, or RSUs may follow the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating
in Stock Incentive Plan of Overseas Publicly Listed Company, issued by SAFE in February 2012, to apply for the foreign exchange registration.
According to those regulations, employees, directors and other management members participating in any stock incentive plan of an overseas
publicly listed company who are PRC citizens or who are non-PRC citizens residing in China for a continuous period of not less than one
year, subject to limited exceptions, are required to register with SAFE through a domestic qualified agent, which may be a PRC subsidiary
of the overseas listed company, and complete certain other procedures. Failure to complete the SAFE registrations may subject them to
fines and legal sanctions and may also limit their ability to make payment under the relevant equity incentive plans or receive dividends
or sales proceeds related thereto in foreign currencies, or our ability to contribute additional capital into our subsidiaries in China
and limit our PRC subsidiaries' ability to distribute dividends to us. We also face regulatory uncertainties under PRC law that
could restrict our ability to adopt additional equity incentive plans for our directors, officers and employees who are PRC citizens
or who are non-PRC residents residing in the PRC for a continuous period of not less than one year, subject to limited exceptions.
In
addition, the State Administration of Taxation has issued circulars concerning employee share options, restricted shares or RSUs. Under
these circulars, employees working in the PRC who exercise share options, or whose restricted shares or RSUs vest, will be subject to
PRC individual income tax. The PRC subsidiaries of an overseas listed company have obligations to file documents related to employee
share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees related to
their share options, restricted shares or RSUs. Although we currently withhold income tax from our PRC employees in connection with their
exercise of options and the vesting of their restricted shares and RSUs, if the employees fail to pay, or the PRC subsidiaries fail to
withhold, their income taxes according to relevant laws, rules and regulations, the PRC subsidiaries may face sanctions imposed by the
tax authorities.
Under
the Enterprise Income Tax Law, we may be classified as a "resident enterprise" of China. Such classification will likely
result in unfavorable tax consequences to us and our non-PRC shareholders.
On
March 16, 2007, the SCNPC passed a new Enterprise Income Tax Law, or the EIT Law. On November 28, 2007, the State Council of China passed
its implementing rules, which took effect on January 1, 2008. Under the EIT Law, an enterprise established outside of China with "de
facto management bodies" within China is considered a "resident enterprise," meaning that it can be treated in a manner
similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto management
as "substantial and overall management and control over the production and operations, personnel, accounting, and properties"
of the enterprise.
On
April 22, 2009, the State Administration of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment
Controlled Enterprises Incorporated Offshore as Resident Enterprises, or the Notice, also referred to as SAT Circular 82. The Notice
further interprets the application of the EIT Law and its implementation rules to non-Chinese enterprise or group controlled offshore
entities. Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group
will be classified as a "non-domestically incorporated resident enterprise" if (i) its senior management in charge of daily
operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or
persons in China; (iii) its substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept
in China; and (iv) at least half of its directors with voting rights or senior management habitually reside in China. A resident enterprise
would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10%, when
paying dividends to its non-PRC shareholders. However, it remains unclear as to whether the Notice is applicable to an offshore enterprise
controlled by Chinese natural persons. It is unclear how tax authorities will determine tax residency based on the facts of each case.
30
We
may be deemed to be a resident enterprise by Chinese tax authorities. If the PRC tax authorities determine that we are a "resident
enterprise" for the PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may
be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting
obligations, which would materially reduce our net income. Second, although, under the EIT Law and its implementing rules, dividends
paid to us from our PRC subsidiaries would qualify as "tax-exempt income," we cannot guarantee that such dividends will not
be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet
issued a guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for the
PRC enterprise income tax purposes. It is possible that future guidance issued with respect to the new "resident enterprise"
classification could result in a situation, where a 10% withholding tax is imposed on dividends we pay to our shareholders that are non-resident
enterprises and with respect to gains derived by said shareholders from transferring our shares. Finally, if we are deemed a PRC resident
enterprise, dividends paid to our non-PRC individual shareholders and any gain realized on the transfer of our shares by such shareholders
may be subject to PRC tax at a rate of 20%, if such income is deemed to be from PRC sources.
If
we were treated as a "resident enterprise" by the PRC tax authorities, we would be subject to taxation in both the U.S. and
China, and we may not be able to claim our PRC tax as a credit to reduce our U.S. tax.
We
and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises or other assets
attributed to a Chinese establishment of a non-Chinese company, or immovable properties located in China owned by non-Chinese companies.
In
October 2017, the State Administration of Taxation issued the Bulletin on Issues Concerning the Withholding of Non-PRC Resident Enterprise
Income Tax at Source, or Bulletin 37, which replaced the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers
by Non-PRC Resident Enterprises issued by the State Administration of Taxation on December 10, 2009, and partially replaced and supplemented
rules under the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or Bulletin
7, issued by the State Administration of Taxation on February 3, 2015. Pursuant to Bulletin 7, an "indirect transfer" of
PRC assets, including a transfer of equity interests in an unlisted non-PRC holding company of a PRC resident enterprise, by non-PRC
resident enterprises may be re-characterized and treated as a direct transfer of the underlying PRC assets, if such arrangement does
not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result,
gains derived from such indirect transfer may be subject to PRC enterprise income tax. According to Bulletin 7, "PRC taxable assets"
include assets attributed to an establishment in China, immoveable properties located in China, and equity investments in PRC resident
enterprises and any gains from the transfer of such asset by a direct holder, who is a non-PRC resident enterprise, would be subject
to PRC enterprise income taxes. When determining whether there is a "reasonable commercial purpose" of the transaction arrangement,
factors to be taken into consideration include: whether the main value of the equity interest of the relevant offshore enterprise derives
from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China
or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable
assets have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the business
model and organizational structure; the replicability of the transaction by direct transfer of PRC taxable assets; and the tax situation
of such indirect transfer and applicable tax treaties or similar arrangements. In the case of an indirect offshore transfer of assets
of a PRC establishment, the resulting gain is to be included with the enterprise income tax filing of the PRC establishment or place
of business being transferred, and may consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer
relates to immoveable properties located in China or to equity investments in a PRC resident enterprise, which is not related to a PRC
establishment or place of business of a non-resident enterprise, a PRC enterprise income tax of 10% would apply, subject to available
preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer
payments has the withholding obligation. Pursuant to Bulletin 37, the withholding agent shall declare and pay the withheld tax to the
competent tax authority in the place where such withholding agent is located within 7 days from the date of occurrence of the withholding
obligation, while the transferor is required to declare and pay such tax to the competent tax authority within the statutory time limit
according to Bulletin 7. Late payment of applicable tax will subject the transferor to default interest charges. Both Bulletin 37 and
Bulletin 7 do not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired
from a transaction through a public stock exchange.
31
There
is uncertainty as to the application of Bulletin 37 or previous rules under Bulletin 7. We face uncertainties as to the reporting and
other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale
of the shares in our offshore subsidiaries or investments. Our company may be subject to filing obligations or taxes if our company is
transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under
Bulletin 37 and Bulletin 7. For transfer of shares in our company by investors that are non-PRC resident enterprises, our PRC subsidiary
may be requested to assist in the filing under Bulletin 37 and Bulletin 7. As a result, we may be required to expend valuable resources
to comply with Bulletin 37 and Bulletin 7 or to request the relevant transferors from whom we purchase taxable assets to comply with
these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect
on our financial condition and results of operations.
We
may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that we
violated these laws could have a material adverse effect on our business.
We
are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign
governments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining
or retaining business. We have operations, agreements with third parties, and make most of our sales in China. The PRC also strictly
prohibits bribery of government officials. Our activities in China create the risk of unauthorized payments or offers of payments by
the employees, consultants, sales agents, or distributors of our Company to government officials or political parties, even though they
may not always be subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However,
our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents,
or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption
laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our
business, operating results and financial condition. In addition, the U.S. government may seek to hold our Company liable for FCPA violations
committed by companies in which we invest or that we acquire.
If
we become directly subject to the scrutiny, criticism, and negative publicity involving U.S.-listed Chinese companies, we may have to
expend significant resources to investigate and resolve the matter, which could harm our business operations, stock price, and reputation.
It could result in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved favorably.
In
the past few years, U.S. publicly traded companies that have substantially all of their operations in China, particularly companies like
us have been the subject of intense scrutiny, criticism, and negative publicity by investors, financial commentators, and regulatory
agencies, such as the SEC. Much of the scrutiny, criticism, and negative publicity has centered around financial and accounting irregularities
and mistakes, lack of effective internal controls over financial accounting, inadequate corporate governance policies or lack of adherence
thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism, and negative publicity, the publicly traded
stocks of many U.S. listed Chinese companies have sharply decreased in value and, in some cases, have become virtually worthless. Many
of these companies are now subject to shareholder lawsuits and SEC enforcement actions, and are conducting internal and external investigations
into the allegations. It is not clear the effect of this sector-wide scrutiny, criticism, and negative publicity will have on our Company,
our business, and our stock price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be
true or untrue, we will have to expend significant resources to investigate such allegations defending our Company. This situation will
be costly, time-consuming, and distract our management from growing our company.
32
Risks
Relating to Our Securities
If
we fail to comply with the continued listing requirements of NASDAQ, we would face possible delisting, which would result in a limited
public market for our shares and make obtaining future debt or equity financing more difficult for us.
Our
ordinary shares are traded and listed on the Nasdaq Capital Market under the symbol of "TAOP." We received a notification
from Nasdaq Listing Qualifications on September 16, 2022, as announced in a report with the SEC on a 6-K Form filed on September 16,
2022, that we were not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued
listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00
per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency
continues for a period of 30 consecutive business days. Based on the closing bid price of the Company's ordinary shares for the
30 consecutive business days prior to the date of the notification letter from Nasdaq, the Company no longer satisfied the minimum bid
price requirement. The notification letter provided that the Company had 180 calendar days, or until March 15, 2023, to regain compliance
with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the Company's ordinary shares must have a closing bid price of at least
$1.00 per share for a minimum of 10 consecutive business days (Nasdaq may monitor the price for as long as 20 consecutive business days
prior to making a final compliance determination). In the event the Company does not regain compliance with the minimum bid price requirement
by March 15, 2023, the Company may be eligible for an additional 180 calendar day grace period. On March 16, 2023, we received a second
notice from the Nasdaq Listing Qualifications, in which Nasdaq granted us an additional 180 days, or until September 11, 2023, to regain
compliance, because the Company met the continued listing requirement for public float and other applicable requirements, except the
bid price requirement, and the Company had indicated its intention of curing the deficiency by effecting a share combination, if necessary.
On July 31, 2023, the board of directors of the Company approved a one-for-ten share combination of the Company's issued and outstanding
ordinary shares, no par value. The share combination was intended to increase the per share trading price of the ordinary shares to satisfy
the $1.00 minimum bid price requirement for continued listing on the NASDAQ Stock Market. On August 15, 2023, we received a notice from
the Nasdaq Listing Qualifications, in which Nasdaq determined that for the last 10 consecutive business days, from August 1 through 14,
2023, the closing bid price of the Company's ordinary shares stock had been at $1.00 per share or greater. Accordingly, the Company
has regained compliance with Listing Rule 5550(a)(2) and this matter was closed.
However,
there is no assurance that we will be able to continue to maintain our compliance with the NASDAQ continued listing requirements. If
we fail to so, the Company's ordinary shares may lose their status on NASDAQ Capital Market and they would likely be traded on
the over-the-counter markets, including the Pink Sheets market. As a result, selling the Company's ordinary shares could be more
difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and security analysts'
coverage of us may be reduced. In addition, in the event that the Company's ordinary shares are delisted, broker dealers would
bear certain regulatory burdens which may discourage broker dealers from effecting transactions in the Company's ordinary shares
and further limit the liquidity of the Company's shares. These factors could result in lower prices and larger spreads in the bid
and ask prices for the Company's ordinary shares. Such delisting from NASDAQ and continued or further declines in the Company's
ordinary share price could also greatly impair our ability to raise additional necessary capital through equity or debt financing and
could significantly increase the ownership dilution to shareholders caused by the Company's issuing equity in financing or other
transactions.
If
we were delisted from NASDAQ, we may become subject to the trading complications experienced by "Penny Stocks" in the over-the-counter
market.
Delisting
from NASDAQ may cause the Company's shares to become subject to the SEC's "penny stock" rules. The SEC generally
defines a penny stock as an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exemptions. One such exemption is to be listed on NASDAQ. Therefore, were we to be delisted from NASDAQ,
the Company's ordinary shares may become subject to the SEC's "penny stock" rules. These rules require, among
other things, that any broker engaging in a purchase or sale of the Company's securities provide its customers with: (i) a risk
disclosure document, (ii) disclosure of market quotations, if any, (iii) disclosure of the compensation of the broker and its salespersons
in the transaction, and (iv) monthly account statements showing the market values of the Company's securities held in the customer's
accounts. A broker would be required to provide the bid and offer quotations and compensation information before effecting the transaction.
This information must be contained on the customer's confirmation. Generally, brokers are less willing to effect transactions in
penny stocks due to these additional delivery requirements. These requirements may make it more difficult for shareholders to purchase
or sell the Company's ordinary shares. Since the broker, not us, prepares this information, we would not be able to assure that
such information is accurate, complete or current.
33
We
have issued convertible notes that contains variable conversion prices which could result in substantial dilution to the Company's
existing shareholders.
On
September 27, 2023, we entered into a securities purchase agreement to an investor, pursuant to which we sold to the investor an unsecured
convertible promissory note with a 12-month maturity. The note has the original principal amount of $609,000. The investor may, at any time after six months from the issue date, convert
all or any part of the outstanding balance of the note, at a conversion price of $8.00 per share. In addition, at any time after six months from the issue date, the investor may redeem all or any portion of the note, subject to a maximum amount of $150,000 per month, into ordinary
shares of the Company at a price equal to 80% multiplied by the lowest daily volume-weighted average price during the 10 trading
days immediately preceding the applicable redemption, subject to certain adjustments and limitations. The investor also has the
right, on any trading day and the following trading day, that any intraday trade price of the ordinary shares is 10% greater than
the previous measurement period's closing trade price (as defined in the note), to redeem all or any portion of the
outstanding balance of the note into ordinary shares.
Therefore,
if the investor elects to convert the then-outstanding balance of the note into the Company ordinary shares at or prior to maturity,
such conversion may be made at a significant discount to the then market price of the Company's shares. In the event that the investor
converts any or all of the above note, the Company's existing shareholders will experience immediate dilution in their ownership
of the Company's shares, as a result of the discounted price at which the note may be converted.
The
trading price of the Company's ordinary shares is highly volatile, leading to the possibility of their value being depressed at
a time when you want to sell your holdings.
The
market price of the Company's ordinary shares is volatile, and this volatility may continue. Numerous factors, many of which are
beyond our control, may cause the market price of the Company's ordinary shares to fluctuate significantly. These factors include:
●
our
    earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the
    expectations of financial market analysts and investors;
●
changes
    in financial estimates by us or by any securities analysts who might cover the Company's shares;
●
speculations
    about our business in the press or the investment community;
●
significant
    developments relating to our relationships with our customers or suppliers;
●
stock
    market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industries;
●
customer
    demand for our products;
●
investor
    perceptions of our industry in general and our company in particular;
●
the
    operating and stock performance of comparable companies;
●
general
    economic conditions and trends;
●
major
    catastrophic events;
●
announcements
    by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures;
●
changes
    in accounting standards, policies, guidance, interpretation or principles;
●
loss
    of external funding sources;
●
sales
    of the Company's ordinary shares, including sales by our directors, officers or significant shareholders; and
●
additions
    or departures of key personnel.
In
the past, shareholders of a public company often brought securities class action suits against the company following periods of instability
in the market price of that company's securities. If we were involved in a class action suit, it could divert a significant amount
of our management's attention and other resources from our business and operations, which could harm our results of operations
and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our
reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be
required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
34
The
Company's outstanding warrants and convertible notes may adversely affect the market price of the Company's ordinary shares.
As
of the date of this report, there are warrants outstanding to purchase 36,000 ordinary shares of the Company. These warrants are exercisable
for 36,000 ordinary shares at an exercise price of $45.6 per share. These warrants can only be exercised in cash. We also sold to the
investor an unsecured convertible promissory note with a 12-month maturity on September 27, 2023. The investor may, at any time after
six months from the issue date, convert all or any part of the outstanding balance of the note.
The sale or possibility of sale of the shares underlying the warrants and the conversion or possibility of conversion of the note could
have an adverse effect on the market price of our ordinary shares or our ability to obtain future financing. If and to the extent these
warrants and convertible note are exercised or converted, as the case may be, you may experience dilution to your holdings.
Techniques
employed by short sellers may drive down the market price of the Company's ordinary shares.
Short
selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention
of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value
of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects
to pay less in that purchase than it received in the sale. As it is in the short seller's interest for the price of the security
to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business
prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short
attacks have, in the past, led to selling of shares in the market.
Public
companies that have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative
publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting
irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations
of fraud. As a result, a number of targets of such efforts are now conducting internal and external investigations into the allegations
and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions.
If
we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have
to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would vigorously defend
against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller
by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and
time-consuming, and could distract our management from growing our business. Even if such allegations are ultimately proven to be groundless,
allegations against us could severely impact our business operations, and any investment in the Company's ordinary shares could
be greatly reduced or even rendered worthless.
If
securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market
price and trading volume for the Company's shares could decline.
The
trading market for the Company's ordinary shares will depend in part on the research and reports that securities or industry analysts
publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of
the analysts who covers us downgrades the Company's ordinary shares or publishes inaccurate or unfavorable research about our business,
the market price for the Company's ordinary shares would likely decline. If one or more of these analysts cease coverage of the
Company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the
market price or trading volume for the Company's ordinary shares to decline.
35
We
do not intend to pay dividends for the foreseeable future.
For
the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and do not anticipate
paying any cash dividends on the Company's shares. Accordingly, investors must be prepared to rely on sales of their shares after
price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase the Company's
shares. Any determination to pay dividends in the future will be made at the discretion of our Board of Directors, and will depend on
our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable laws, and other factors
our board deems relevant.
The
Company's outstanding voting securities may be concentrated in a few shareholders.
As
of April 24, 2024, our officers, directors and beneficially own or control, directly or indirectly, approximately 13.9% of our
outstanding ordinary shares. As a result, they possess significant influence over our company. These persons will be able to significantly
influence, though not independently determine, the outcome of matters required to be submitted to our shareholders for approval, including
significant corporate actions such as mergers, consolidations, sales of all or substantially all of our assets, election of directors
and other significant corporate actions. They may take actions that are not in the best interest of the Company or our other shareholders. This
concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders
of an opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of the ordinary shares.
These actions may be taken even if they are opposed by our other shareholders. In addition, the significant concentration of ownership
may adversely affect the trading price of the ordinary shares due to investors' perception that conflicts of interest may exist
or arise.
We are a
"foreign private issuer" and have disclosure obligations that are different than those of U.S. domestic reporting companies.
Therefore, you should not expect to receive the same information about us as a U.S. domestic reporting company may provide. Furthermore,
if we lose our status as a foreign private issuer, we would be required to fully comply with the reporting requirements of the Exchange
Act applicable to U.S. domestic issuers and incur significant operational, administrative, legal, and accounting costs that we would
not incur as a foreign private issuer.
We
are a foreign private issuer. As a result, we are not subject to certain of the requirements imposed upon U.S. domestic issuers by the
SEC. For example, we are not required by the SEC or the federal securities laws to issue quarterly reports or file proxy statements with
the SEC. We are also allowed to file our annual report with the SEC within four months of our fiscal year end. We are also not required
to disclose certain detailed information regarding executive compensation that is required from U.S. domestic issuers. Further, our directors
and executive officers are not required to report equity holdings under Section 16 of the Securities Act. As a foreign private issuer,
we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, aim to ensure that select groups of investors
are not privy to specific information about an issuer before other investors. We are, however, still subject to the anti-fraud and anti-manipulation
rules of the SEC, such as Rule 10b-5. Since many of the disclosure obligations required of us as a foreign private issuer are different
than those required by U.S. domestic reporting companies, our shareholders should not expect to receive all of the same types of information
about us and at the same time as information is received from, or provided by, U.S. domestic reporting companies. We are liable for violations
of the rules and regulations of the SEC, which do apply to us as a foreign private issuer. Violations of these rules could affect our
business, results of operations, and financial condition.
As
a foreign private issuer, we are permitted to rely on exemptions from certain NASDAQ corporate governance standards applicable to domestic
U.S. issuers and are subject to reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. issuer.
This may afford less protection to holders of the Company's securities.
We
are exempted from certain corporate governance requirements of the Nasdaq Capital Market by virtue of being a foreign private issuer.
As a foreign private issuer, we are permitted to follow the governance practices of our home country, the BVI in lieu of certain corporate
governance requirements of the Nasdaq Capital Market. As a result, the standards applicable to us are considerably different than the
standards applied to domestic U.S. issuers. For instance, we are not required to:
●
have
    a majority of the board be independent (although all of the members of the audit committee must be independent under the Exchange
    Act);
●
have
    a compensation committee and a nominating committee to be comprised solely of "independent directors"; and
●
hold
    an annual meeting of shareholders no later than one year after the end of the Company's fiscal year-end.
36
The
information we are required to file with or furnish to the SEC will be less extensive and less timely as compared to that required to
be filed with the SEC by U.S. domestic issuers. Certain corporate governance practices in the BVI, which is our home country, may differ
significantly from the NASDAQ Capital Market corporate governance listing standards.
As
a result, you may not have the same protections afforded to shareholders of companies that are subject to all of the Nasdaq corporate
governance requirements.
You
may have difficulty enforcing judgments obtained against us or our directors and officers.
Taoping
is a BVI company with substantially all of our assets and operations located outside of the United States. In addition, all of Taoping's
directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of
these persons is also located outside the United States. As a result, it may be difficult for you to effect service of process within
the United States upon us or these persons. As a result, it may be difficult or impossible for you to bring an action against us or against
these individuals in the United States. It may also be difficult for you to enforce the U.S. courts judgments obtained in U.S. courts
including judgments based on the civil liability provisions of the U.S. federal securities laws against us or our officers and directors.
In addition, there is uncertainty as to whether the courts of the BVI or Hong Kong would (i) recognize or enforce judgments of United
States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws
of the United States or any state in the United States or (ii) entertain original actions brought in the BVI or Hong Kong against us
or our directors or officers predicated upon the securities laws of the United States or any state in the United States. The courts of
the BVI or Hong Kong may enforce a foreign judgment subject to various conditions, including but not limited to, that the foreign judgment
is a final judgment conclusive upon the merits of the claim, the judgment is for a liquidated amount in a civil matter and not in respect
of taxes, fines, penalties, or similar charges, the proceedings in which the judgment was obtained were not contrary to natural justice,
and the enforcement of the judgment is not contrary to public policy of the BVI or Hong Kong.
The
recognition and enforcement of foreign judgments in mainland China are provided for under the PRC Civil Procedures Law. PRC courts may
recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties
between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any
treaties or other forms of reciprocity with the United States that provide for the reciprocal recognition and enforcement of foreign
judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our
director and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or
public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the
United States.
We
are a BVI company and, because judicial precedent regarding the rights of shareholders is more limited under BVI law than that under
U.S. law, you may have less protection for your shareholder rights than you would under U.S. law.
Our
corporate affairs are governed by our memorandum and articles of association, as amended and restated from time to time, the BVI Act
and the common law of the BVI. The rights of shareholders to take action against the directors, actions by minority shareholders and
the fiduciary responsibilities of our directors to us under BVI law are to a large extent governed by the common law of the BVI. The
common law of the BVI is derived in part from comparatively limited judicial precedent in the BVI as well as that from English common
law, which has persuasive, but not binding, authority on a court in the BVI. The rights of our shareholders and the fiduciary responsibilities
of our directors under BVI law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions
in the U.S. In particular, the BVI has a less exhaustive body of securities laws than the U.S. In addition, some U.S. states, such as
Delaware, have more fully developed and judicially interpreted bodies of corporate law than the BVI. There is no statutory recognition
in the BVI of judgments obtained in the U.S., although the courts of the BVI will in certain circumstances recognize and enforce a non-penal
judgment of a foreign court of competent jurisdiction without retrial on the merits.
37
Under
the laws of most jurisdictions in the United States, majority and controlling shareholders generally have certain fiduciary responsibilities
to the minority shareholders. Shareholders' actions must be taken in good faith and any unreasonable actions by controlling shareholders
may be declared null and void. BVI law protecting the interests of minority shareholders may not be as vigorous in all circumstances
as the law protecting minority shareholders in United States or other jurisdictions. Although a shareholder of a BVI company may sue
the company derivatively, the procedures and defenses available to the company may result in the rights of shareholders of a BVI company
being more limited than those of shareholders of a company organized in the United States. Furthermore, our directors have the power
to take certain actions without shareholders' approval, which would require shareholders' approval under the laws of most
United States or other jurisdictions. The directors of a BVI company, subject in certain cases to the court's approval but without
shareholders' approval, may implement a reorganization, merger or consolidation, or sale of assets, property, business or securities
of the company which sale is subject to a limit of up to 50% in total value of the company. The ability of our board of directors to
create new classes or series of shares and the rights attached by amending the Company's memorandum and articles of association
could have the effect of delaying, deterring or preventing a change in our control, including a tender offer to purchase the Company's
ordinary shares at a premium over then market prices.
As
a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken
by management, members of the board of directors or controlling shareholders than they would as shareholders of a U.S. public company.
General
Risk Factors
We
are subject to changing law and regulations regarding regulatory matters, corporate governance and public disclosure that have increased
both our costs and the risk of non-compliance.
We
are subject to rules and regulations by various governing bodies, including, for example, the SEC, which are charged with the protection
of investors and the oversight of companies whose securities are publicly traded, and to new and evolving regulatory measures under applicable
law, including the laws of the BVI. Our efforts to comply with new and changing laws and regulations have resulted in and are likely
to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating
activities to compliance activities.
Moreover,
because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time
as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs
necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations
and any subsequent changes, we may be subject to penalty and our business may be harmed.
Taoping
employs a mail forwarding service, which may delay or disrupt our ability to receive mail in a timely manner.
Mail
addressed to Taoping and received at its registered office in the BVI will be forwarded unopened to the forwarding address supplied by
Taoping to be dealt with. None of Taoping, its directors, officers, advisors or service providers (including the organization which provides
registered office services in the BVI) will bear any responsibility for any delay howsoever caused in mail reaching the forwarding address,
which may impair your ability to communicate with us.
Political
risks associated with conducting business in Hong Kong.
Our
current corporate structure includes certain Hong Kong subsidiaries. Accordingly, our business operation could be affected by the political
and legal developments in Hong Kong. Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding
Hong Kong are reflected in the Basic Law, namely, Hong Kong's constitutional document, which provides Hong Kong with a high degree
of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of "one
country, two systems". However, there is no assurance that there will not be any changes in the economic, political and legal environment
in Hong Kong in the future.
38
Under
the Basic Law of the Hong Kong Special Administrative Region of the PRC, Hong Kong is exclusively in charge of its internal affairs and
external relations, while the government of the PRC is responsible for its foreign affairs and defense. As a separate customs territory,
Hong Kong maintains and develops relations with foreign states and regions. Based on certain recent development including the Law of
the People's Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region issued by the SCNPC
in June 2020, the U.S. State Department has indicated that the United States no longer considers Hong Kong to have significant autonomy
from PRC and President Trump signed an executive order and Hong Kong Autonomy Act, or HKAA, to remove Hong Kong's preferential
trade status and to authorize the U.S. administration to impose blocking sanctions against individuals and entities who are determined
to have materially contributed to the erosion of Hong Kong's autonomy. The United States may impose the same tariffs and other
trade restrictions on exports from Hong Kong that it places on goods from mainland China. These and other recent actions may represent
an escalation in political and trade tensions involving the U.S., mainland China and Hong Kong, which could potentially harm our business.
Given
the relatively small geographical size of Hong Kong, any of such incidents may have a widespread effect on our business operations, which
could in turn adversely and materially affect our business, results of operations and financial condition. It is difficult to predict
the full impact of the HKAA on Hong Kong and companies with operations in Hong Kong like us. Furthermore, legislative or administrative
actions in respect of China-U.S. relations could cause investor uncertainty for affected issuers, including us, and the market price
of the Company's ordinary shares could be adversely affected.
Adverse
developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance
by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our
financial condition and results of operations.
Actual
events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional
counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors
about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.
For example, on March 10, 2023, Silicon Valley Bank failed and was taken into receivership by the U.S. Federal Deposit Insurance Corporation;
on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership; the following week, a syndicate of
U.S. banks infused $30 billion in First Republic Bank; and later that same week, the Swiss Central Bank provided $54 billion in covered
loan and short-term liquidity facilities to Credit Suisse Group AG, all in an attempt to reassure depositors and calm fears of a banking
contagion. Our ability to effectively run our business could be adversely affected by general conditions in the global economy and in
the financial services industry. Various macroeconomic factors could adversely affect our business, including fears concerning the banking
sector, changes in inflation, interest rates and overall economic conditions and uncertainties. A severe or prolonged economic downturn
could result in a variety of risks, including our ability to raise additional funding on a timely basis or on acceptable terms. A weak
or declining economy could also impact third parties upon whom we depend to run our business. Increasing concerns over bank failures
and bailouts and their potential broader effects and potential systemic risk on the global banking sector generally and its participants
may adversely affect our access to capital and our business and operations more generally.
Currently,
we do not have a business relationship with any of the banking institutions mentioned above, and our cash, cash equivalents and short
term investments that are mostly concentrated in China have been unaffected by the turmoil in the financial industry in the US and Europe;
however, we cannot guarantee that the banking institution with which we do business will not face similar circumstances in the future,
or that the third parties with whom we do business will not be negatively affected by such circumstances.
ITEM
4. INFORMATION ON THE COMPANY
A.
History and Development of the Company
General
Information
The
current legal and commercial name of the Company is Taoping Inc. Taoping Inc. was incorporated in the BVI under the BVI Act on June 18,
2012. The address of our principal place of business is 21
st
Floor, Everbright Bank Building, Zhuzilin, Futian District, Shenzhen
518040 Guangdong China. Our telephone number is 86-755-83708333. Taoping's registered agent in the BVI is Maples Corporate Services
(BVI) Limited of Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands.
39
Corporate
History
Taoping
Inc.'s predecessor company was originally organized under the laws of the State of Florida on September 19, 1979 under the name
Mark Thomas Publishing Inc. On April 29, 2003, we changed our name to Irish Mag, Inc. From our inception through October 8, 2006, we
provided consulting services in the offset printing industry, targeting individual retail consumers as well as small to medium sized
companies.
On
April 7, 2008, we re-incorporated in the State of Nevada by merging into China Information Security Technology, Inc., a subsidiary that
we established in Nevada to effect the re-incorporation. As a result, the Company's name was changed to China Information Security
Technology, Inc. and we became a Nevada corporation.
On
August 26, 2010, the Company changed its name to China Information Technology, Inc., or CITN.
On
October 31, 2012, we completed a corporate reorganization, whereby the Company, which was established as a subsidiary of CITN under the
laws of the BVI to effect the reorganization, became the parent company of a publicly held entity. Consequently, CITN became a wholly-owned
subsidiary of the Company. In connection with the reorganization, each outstanding share of the common stock of CITN was converted into
the right to receive one ordinary share of the Company. The ordinary shares of the Company were listed on the NASDAQ Global Select Market
under the trading symbol of "CNIT," the same symbol under which the common stock of CITN were listed. Prior to the reorganization,
shares of CITN's common stock were registered pursuant to Section 12(b) of the Exchange Act. On October 31, 2012, the Company filed
a Form 8-K12B under cover of a Form 6-K to establish the Company as the successor issuer to CITN pursuant to Rule 12g-3 under the Exchange
Act. Pursuant to Rule 12g-3(a) under the Exchange Act, the ordinary shares of the Company, as successor issuer, were deemed registered
under Section 12(b) of the Exchange Act. On November 13, 2012, CITN filed a Form 15 with the SEC to terminate the registration of the
shares of its common stock and suspend its reporting obligations under Sections 13 and 15(d) of the Exchange Act. On November 19, 2012,
we changed the name of CITN to China Information Technology (Nevada), Inc., which was liquidated and dissolved in July 2014.
At
the Company's 2017 Annual Meeting of Members, which was held on September 19, 2017, the shareholders of the Company approved an
amendment to the Company's Memorandum and Articles of Association to remove the par value of the Company's ordinary shares.
On October 12, 2017, the Company filed an amended and restated Memorandum and Articles of Association with the Registrar of Corporate
Affairs in the BVI, pursuant to which the par value per share of the Company's ordinary shares has been removed.
On
May 25, 2018, the Company held its 2018 Annual Meeting of Members and its shareholders approved the change of company name to "Taoping
Inc." and an amendment and restatement of its Memorandum and Articles of Association to reflect such change of name. In connection
with the name change, the trading symbol of its ordinary shares was changed to "TAOP," effective on June 1, 2018.
On
July 30, 2020, Taoping completed a share combination of the Company's ordinary shares at a ratio of one-for-six, which decreased
its outstanding ordinary shares to approximately 7,332,434 shares. This share combination did not change the maximum number of shares
Taoping is authorised to issue or the par value of its ordinary shares.
On
August 1, 2023, Taoping completed a share combination of the Company's ordinary shares at a ratio of one-for-ten, which decreased
its outstanding ordinary shares to approximately 1,864,554 shares. This share combination did not change the maximum number of shares
Taoping is authorised to issue or the par value of its ordinary shares. Accordingly, except as otherwise indicated, all share and per
share information contained in this annual report has been restated to retroactively show the effect of the share combination.
40
Management
Services Agreement
On
July 1, 2007, our subsidiary IST entered into a management services agreement, or MSA, with iASPEC and its shareholders. Pursuant to
the MSA, iASPEC granted IST an exclusive, royalty-free, transferable, worldwide license to use and install certain iASPEC software, along
with copies of source and object codes relating to such software in any manner permitted by applicable laws for ten years. Under the
MSA, IST was entitled to receive 100% of the modified net profit of iASPEC, and would reimburse iASPEC for all net losses incurred. In
connection with the MSA, IST also entered into a purchase option agreement, or Option Agreement, with iASPEC and its shareholders, effective
as of July 1, 2007. Pursuant to the Option Agreement, the iASPEC shareholders granted IST, or its designee(s), an exclusive, irrevocable
option to purchase from the iASPEC shareholders, from time to time, all or part of iASPEC's shares, according to an equity transfer
agreement, or to purchase all or part of iASPEC's assets, according to an asset purchase and transfer agreement. Under the terms
of the Option Agreement, the option is immediately exercisable at an exercise price of $1,800,000, in the aggregate, which is subject
to regulatory approval.
As
a result of the relationship with iASPEC, iASPEC became a variable interest entity of the Company.
On
July 1, 2008, our Chairman and Chief Executive Officer, Mr. Jianghuai Lin, entered into an Equity Transfer Agreement with Mr. Jin Zhu
Cai, the owner of a 24% minority interest in iASPEC. Pursuant to the Agreement, Mr. Lin purchased Mr. Cai's minority interest for
a total consideration of RMB 60 million (approximately $8.7 million). As a result of the Equity Transfer Agreement, Mr. Lin holds 100%
of the equity interests of iASPEC.
On
December 13, 2009, IST, iASPEC and Mr. Lin, as the sole shareholder of iASPEC, amended and restated the MSA, pursuant to which IST would
continue to provide management and consulting services to iASPEC.
Dissolution
of the Variable Interest Entity Structure
In
September 2021, we dissolved the VIE structure by exercising the purchase option under the Option Agreement to purchase all of the equity
interests in iASPEC at an aggregate exercise price of $1,800,000. On September 18, 2021, Taoping and IST entered into an equity transfer
agreement with iASPEC and iASPEC's then sole shareholder, Mr. Lin, under which Mr. Lin sold and transferred to IST all of the equity
interests in and any and all rights and benefits relating thereto of iASPEC in exchange for 61,225 unregistered ordinary shares of Taoping
as determined by dividing $1,800,000 by the volume-weighted average closing price of ordinary shares for the consecutive five (5) trading
days immediately prior to September 18, 2021. The parties thereafter completed the equity transfer through applicable PRC governmental
registration(s).
Upon
the closing of the equity transfer, the Company's variable interest entity structure was dissolved and iASPEC became a wholly owned
indirect subsidiary of the Company. The amended and restated MSA was automatically terminated.
In
June 2022, as a result of the Company's business transformation and its exit from the TIT business, the Company disposed of 100%
equity interests of iASPEC (excluding iASPEC's subsidiaries) which mainly conducted the Company's TIT business to an unrelated
third party for nil consideration.
41
Corporate
Structure
The
following diagram illustrates our corporate structure as of the date of this report.
The
Securities and Exchange Commission, or SEC, maintains an Internet site that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC at http://www.sec.gov.
Our
web site address is http://www.taop.com. Information contained on, or that can be accessed through, our website does not constitute a
part of this Annual Report.
Principal
Capital Expenditures and Divestitures
For
the year ended December 31, 2023, our total capital expenditures and divestitures were $1.2 million and $0 million, respectively. For
the year ended December 31, 2022, our total capital expenditures and divestitures were $1.8 million and $0 million, respectively. For
the year ended December 31, 2021, our total capital expenditures and divestitures were $11.3 million and $0 million, respectively. Such
expenditures and divestitures were primarily related to the purchase and sale of long-lived assets and business acquisitions. These capital
expenditures were mainly funded by our operating cash flow.
B.
Business Overview
General
Executive
Offices of the Company are located in Shenzhen, China. As of December 31, 2023, we had approximately 56 full-time employees.
We
are a provider of cloud-app technologies for Smart City IoT platforms, digital advertising delivery, and other internet-based information
distribution systems in China. Our Internet ecosystem enables all participants of the new media community to efficiently promote branding,
disseminate information, and exchange resources. In addition, we provide a broad portfolio of software and hardware with fully integrated
solutions, including Information Technology infrastructure, Internet-enabled display technologies, and IoT platforms to customers in
government, education, residential community management, media, transportation, and other private sectors.
Prior
to 2014, we generated the majority of our revenues through selling our products and services mostly to the public service entities to
help them improve their operational efficiency and service quality. Our representative customers included the China Ministry of Public
Security, provincial bureaus of public security, fire departments, traffic bureaus, police stations, human resource departments, urban
planning boards, civic administrations, land resource administrations, mapping and surveying bureaus, and the Shenzhen General Station
of Immigration Frontier Inspection.
42
Since
2014, we have expanded and diversified our customer base into the private sector as well. Our customers in the private sector include,
among others, elevator maintenance companies, residential community management, advertising agencies, auto dealerships, and educational
institutes. Our new corporate mission is to make publicity accessible and affordable for businesses of all sizes.
We
generated revenues from sales of hardware products, software products, system integration services, and related maintenance and support
services. In 2015, with the introduction of our cloud-based software as a service (SaaS) offering, we expected to generate additional
recurring monthly revenues from SaaS fees. In 2019 and 2020, only a very small portion of our revenue was generated from SaaS, which
is expected to increase in the coming years with the nationwide roll-out of our cloud-based ad display terminal network.
In
May 2017, we completed our transformation to a provider of CAT and IoT technology based digital advertising distribution network and
new media resource sharing platform, and offered an end-to-end digital advertising solution enabling customers to efficiently and cost-effectively
direct advertisements to specific interactive ad display terminals in the out-of-home advertising market across China. In 2017, we became
profitable as a result of a successful transition of our business model. We continued to improve our financial position in 2018. However,
as a result of the outbreak of Covid-19 pandemic in 2020, our business was negatively impacted from 2020 to 2022, and experienced certain
recovery in 2023 with rebounded customer demands of our products. We had net loss of approximately $0.7 million, $7.1 million and $9.9
million respectively in 2023, 2022, and 2021. For years going forward, we intend to continue to execute our business plan of expanding
our cloud-based and AI-related product offerings and building a nationwide cloud-based ad terminal network by penetrating into more cities
throughout China, which is expected to generate recurring service revenue for the Company, in addition to equipment sales.
On
June 9, 2021, the Company consummated an acquisition of 100% of the equity interest of Taoping New Media Co., Ltd ("TNM"),
a leading media operator in China's out-of-home digital advertising industry. Mr. Jianghuai Lin, the Chairman and CEO of the Company,
who owns approximately 27.1% of total shares outstanding of the Company, owned approximately 51% of TNM. TNM focuses on digital life
scenes and mainly engaged in selling out-of-home advertising time slots on its networked smart digital advertising display terminals
with artificial intelligence and big data technologies. The acquisition of TNM is expected to enhance the Company's presence in
the new media and advertising sectors.
In
2021, the Company ventured into blockchain related business through the launch of cryptocurrency mining operations and established new
subsidiaries in Hong Kong to diversity revenue streams, following a decline in its Traditional Information Technology (TIT) business
segment.
In
September 2021, the Company and the Company's wholly owned subsidiary, Information Security Technology (China) Co., Ltd. ("IST")
entered into an equity transfer agreement with Mr. Jianghuai Lin, the sole shareholder of iASPEC. Upon closing of the equity transfer,
the Company's existing variable interest entity structure was dissolved and iASPEC became a wholly owned indirect subsidiary of
the Company.
In
January 2022, the Company completed the acquisition of 100% equity interest of ZJIOT, aiming to accelerate the Company's smart
charging pile and digital new media businesses in East China.
In
December 2022, the Company entered into a series of contracts with certain third parties to sell its cryptocurrency mining and
related equipment for a total sale price of approximately $1.08 million. The Company also terminated the leases for both the office
facility and the storage rooms, which were previously used to house most of its mining machines for its cryptocurrency mining
operations, and laid off relevant employees. As a result, the Company had ceased its cryptocurrency mining business by December 31,
2022. The Company disposed of 100% equity interests of Taoping Digital Assets (Hong Kong) Limited to an unrelated third
party for nil consideration on September 6, 2023, and disposed of 100% equity interests of Taoping Digital Assets (Asia) Limited and Taoping
Capital Limited (including their respective subsidiary) to an unrelated third party for nil consideration on October 27, 2023.
In
May 2023, the Company established a subsidiary Taoping EP Holdings (Shenzhen) Co., Ltd. with a majority stake of 51%, to explore the new off-grid wastewater treatment business line.
43
In
September 2023, the Company acquired 80% equity from other shareholders of Fujian Taoping Investment Co., Ltd. with nil consideration,
to expand its digital advertising and other businesses in Fujian Province. As a result of the acquisition, the Company currently owns
100% of Fujian Taoping Investment Co, Ltd.
In
November 2023, the Company established a subsidiary Taoping (Guangxi) EP Tech Co., Ltd. to expand its wastewater treatment business in
Guangxi Province.
We
report financial and operational information in the following three segments:
(
1)
Cloud-based
    Technology (CBT) segment - It includes the Company's cloud-based products, high-end data storage servers and related services
    sold to private sectors including new media, healthcare, education and residential community management, and among other industries
    and applications. In this segment, the Company generates revenues from the sales of hardware and software total solutions with proprietary
    software and content as well as from designing and developing software products specifically customized for private sector customers'
    needs for a fixed price. The Company includes the revenue and cost of revenue of high-end data storage servers in the CBT segment.
    Advertising services is included in the CBT segment, after the Company consummated the acquisition of TNM. Advertisements are delivered
    to the ads display terminals and vehicular ads display terminals through the Company's cloud-based new media sharing platform.
    Incorporation of advertising services complements the Company's out-of-home advertising business strategy.
(2)
Blockchain
    Technology (BT) segment - The BT segment is the Company's newly formed business sector. Cryptocurrency mining is the first
    initiative implemented in the BT segment. However, due to the decreased output and the highly volatile cryptocurrency market, the
    Company had ceased the operation of the BT segment by December 2022.
(3)
Traditional
    Information Technology (TIT) segment -The TIT segment includes the Company's project-based technology products and services
    sold to the public sector. The solutions the Company has sold primarily include Geographic Information Systems (GIS), Digital Public
    Security Technology (DPST), and Digital Hospital Information Systems (DHIS). In this segment, the Company generates revenues from
    sales of hardware and system integration services. As a result of the business transformation, the TIT segment is gradually being
    phased out in 2021.
Industry
Overview
General
Urbanization
is the primary driver for the demand of our Cloud-based solutions for advertising placement and public information dissemination. China's
urbanization rate has accelerated in the past 30 years. The Chinese urban population has grown to more than 1 billion in 2023. According
to Chinese Social Development Research, approximately 70% of the Chinese population is expected to live in urban areas by 2035. Urban
lifestyle revolves around consumption of information, goods, and services that necessitates advertising and public information dissemination.
At the same time, urbanization has imposed considerable pressure on land use, environment protection, and municipal infrastructure. Urbanization
has also led to increasing demands for equitable treatment for all dwellers in the cities.
In
the first quarter of 2014, China's State Council unveiled a new urbanization plan for the period from 2014 to 2020 in an effort
to steer the country onto a more humanistic and environmentally friendly urbanization path. The plan increases the country's investment
in urban infrastructure, public service facilities, and affordable housing constructions. It also calls for closer coordination between
urban and rural developments, optimization of city planning, and tighter integration of environmental protection measures into urbanization
efforts. The plan also projects new construction of 20,000 to 50,000 skyscrapers around the country, as well as implementation of mass
transit systems in more than 170 cities by 2025. In addition, it requires construction of regular railways to connect all medium sized
cities of over 200,000 in population and high-speed railways to connect large cities of over 500,000 in population by 2020. Also, it
plans to expand the nation's civil aviation network to cover 90 percent of its total population.
44
According
to the new urbanization implementation plan during the 14th Five-Year Plan period (2021-2025), China will further focus on high-quality
urbanization. The plan regards transforming the urban development mode as top priority and takes institutional innovation as a fundamental
driving force. Meeting people's growing expectations for a better life will be the plan's final goal. The plan is supposed
to promote a people-centered new urbanization strategy and continue to grant permanent urban residency to the agricultural migrant population.
An upgraded urbanization pattern featuring coordinated development in all sizes of cities will be built. The plan should also promote
healthy, livable and safe urban development, further modernize urban governance systems and capabilities, and promote integrated urban
and rural development.
Out-of-Home
Digital Advertising Market in China
Rising
urbanization has resulted in prevalent traffic congestions throughout China. In medium to large sized cities, people on an average spend
39 minutes of commuting time to work. According to China New-type Urbanization Report (2014-2018), in densely populated tier one cities
including Beijing, Guangzhou, and Shanghai, it costs commuters 14, 12, and 11 minutes every day in traffic jams, respectively. In Beijing,
a megacity of over 21 million residents, the daily commute takes 45 minutes, the worst of all Chinese cities.
While
traffic jams are a headache for urban commuters and city planners, they present revenue generating opportunities for out-of-home advertisers,
who seek attentive audience in high traffic areas. According to China Industry Information Net, the estimated total market size of China's
out-of-home advertising is expected to reach RMB 295 billion in 2023, with a CAGR of 14%. Cosmetics, beverage, and financial service
companies are ranked as top spenders consistently. Internet and real estate companies also increased their advertisement spending significantly.
The
growth, starting in 2013, can be attributed to three factors: 1) macroeconomic recovery in China has encouraged businesses to increase
their advertising spending; 2) industry leaders have led consolidation in the out-of-home advertising market and grown their market share
in tier one cities like Beijing, Guangzhou, Shanghai, and Shenzhen; 3) rapid advancement in Internet and mobile technologies has resulted
in new O2O (offline-to-online) advertising opportunities.
Over
50% of the advertisers rated commercial buildings and public transportation hubs as the top two prime locations for advertisement placement.
There are over 200 million people riding elevators every day in China. The number of advertisers opting for residential buildings also
increased considerably. Precision advertisement uses digital technologies, such as internet-based ads management and distribution and
big data analysis, to target its audience, and continues to be the advertisers' focal point, which resulted in the increasing demands
for digital advertising.
Market
Trends
In
addition to urbanization, two technological developments further accelerate the demand for our CBT products and services: 1) offline-to-online
migration of display terminals and 2) adoption of Quick Response (QR) codes.
Currently,
most of the advertising display terminals in China are not connected to any network. Consequently, updating their media contents requires
onsite manual operation through flash drives or other means. They also tend to have low asset utilization rates. Based on our own primary
research, we have estimated that offline terminals have an average asset utilization rate of 40% in tier-one cities, 30% in tier-two
cities, and 20% in tier-three and smaller cities. In comparison, content on cloud-based terminals can be remotely uploaded, updated,
and managed resulting in substantial labor cost savings for terminal operators, i.e. advertising agencies. In addition, cloud-based terminals
offer advertising agencies the flexibility of fine-tuning advertisement schedules on the fly and customizing advertisement content at
each location as specific as one single office building. More importantly, idle time slots on cloud-based terminals can be discovered
and sold on Taoping, an online resource exchange platform of ours that was released in the fourth quarter of 2015 as a module of our
Yunfa Net (www.pubds.com), an information distribution and advertising delivery system. Therefore, asset utilization rate of advertising
agencies can be greatly improved. As a result, there is a growing demand to convert offline terminals into networked terminals using
our CBT products and services. In January 2018, we separated Taoping module from Yunfa Net and officially launched the Taoping Net (www.taoping.cn)
and Taoping App. Taoping Net provides an advertising-resources trading service platform which connects screen owners, advertisers and
consumers. Taoping Net integrates nationwide high-quality screen resources of Taoping Alliance, a new media operating organization founded
by us and Taoping New Media Co., Ltd. ("TNM"), a company controlled by Mr. Jianghuai Lin and was then acquired by the Company
in June 2021. Taoping App, which enables customers to distribute and manage ads from mobile terminals, effectively satisfies the need
to distribute fragmented ads. Using Taoping App, anyone can buy and distribute real-time ads to designated terminals.
45
Furthermore,
the wide adoption of QR codes is also positively impacting the demand for our cloud-based products and services. A QR code is a digital
barcode that contains merchants' information. By incentivizing consumers to scan the QR code embedded in advertisement, advertising
agencies can analyze the effectiveness of their advertisements and adjust their sales and marketing tactics on a real-time basis. In
China, the application of QR codes is permeating from tier-one cities to the rest of the country. Although QR codes have frequently appeared
in print ads as well as in digital ads displayed on offline terminals, the codes can be changed only as frequently as the advertisement
itself. The data brought in to advertising agencies by the QR codes cannot be segmented by precise locations or time slots, and thus
can generate only limited insight into viewer behavior. In contrast, individualized QR codes embedded in advertisement displayed on networked
terminals can vary by location and time slot, and offer advertising agencies deeper insights at a much higher precision than offline
terminals or print ads. Consequently, the adoption of QR codes is further driving the demand for our cloud-based ad display terminals.
In
recent years, artificial intelligence (AI) has garnered substantial attention in the global advertising sector, and this focus is expected
to increase significantly as technology continues to advance.
The
most used functionalities of AI in advertising and marketing are:
●
Recommendations:
By
utilizing predictive analytics, advertising agencies can offer more accurate recommendations to their clients, enabling them to fully
leverage the services and products available. This approach leads to stronger customer satisfaction and value proposition.
●
Programmatic
                                            advertising:
In
ad targeting, a key challenge for advertisers selling ad clips is ensuring the right ads reach the right customers at the right time.
With the incorporation of artificial intelligence technologies, such as programmatic advertising, many advertising agencies have managed
to automate the process of buying and selling advertising space by combining the power of AI and real-time bidding on mobile, video and
social channels. This AI technology effectively analyzes a visitor's behavior and enables real-time campaign optimization for an audience
that is likely to convert.
●
The
                                            use of artificial intelligence and machine learning to purchase advertising in real time,
                                            rather than through human negotiations and pre-set prices, is a key component of programmatic
                                            advertising.
In
response to the adoption of AI technology in the out-of-home advertising industry, in 2023 we started the development of Cloud Nest AI,
a powerful generative AI system across the Cloud to accelerate growth. Cloud Nest AI will leverage the Company's existing cloud-based
technology and applications and integrate AI with intelligent Cloud platform technology and product capabilities. End users are empowered
with smart scene terminals, that deeply integrate numerous industry-specific application scenarios across all major industries and subsegments.
Our industry specific applications for different scenarios based on the Cloud Nest AI system are expected to provide multi-dimensional
empowerment for various industries from multiple perspectives, such as content generation, human-computer interaction, visual perception,
and cognitive decision-making. In the field of advertising media, Taoping's cloud platform enables advertisers to upload creative content,
including graphics, videos, and texts, for specific promotional strategies. Artificial intelligence then effectively utilizes this content
to develop mixed-media promotions.
Our
Products and Services
In
the CBT segment, we provide cloud-based ecosystem solutions mainly to the new media in out-of-home digital advertising customers. Underpinning
our ecosystems are our industry-specific integrated advertisement display terminal product, digital advertising distribution technology
platform, resource exchange and sharing, and big data analysis services. In 2014, we sold our cloud-based solutions predominately to
the Chinese new media industry. Starting from 2016, we have also focused our efforts in selling IoT ads display terminal hardware and
providing digital ads distribution and resource sharing services for out-of-home advertising market. As a result of COVID-19 pandemic
in 2020, city lockdowns, travel restrictions, and other preventive measures and persistent outbreaks of infection in regional localities
through 2021 had negatively impacted on the China out-of-home advertising business and significantly dampened customers' demand
for ads display terminals. Nevertheless, mandatory home stays and work from remote locations triggered a steep surge in on-line gaming,
on-line shopping, on-line entertainment, and electronic communication that created a great demand for high-end data storage servers to
accommodate internet information transmission. We have stabilized supply chains for the high-end data storage server to meet market demands
supplementing the declining revenue from ads display terminals and included the revenue and cost of revenue of high-end data storage
servers in the CBT segment. Starting from late 2022, due to reopening of China to the world and the recovery of macro market conditions
and customer demands, we experienced significant recovery of revenue in our existing business lines as well as our newly expanded AI
related products and solutions.
46
For
the out-of-home new media industry, we provide our software as a service to automate the entire interactive workflows between advertising
agencies and their customers, including, among others, establishing new advertising projects, submitting advertisement proposals, revising
and approving advertising proposals, processing payment online, remotely uploading advertisement content, and tracking and analyzing
performance data.
Our
Technology Platform
The
foundation of our product offerings is our proprietary technology platform called Cloud-Application-Terminal (CAT). Its trademark has
been registered in PRC. Our CAT platform includes three layers of technology: 1) cloud infrastructure, 2) software application, and 3)
high-definition digital display terminals ranging from 18.5 to 84 inches in display size. Bundled together, three layers of technology
serve as a turnkey solution for our customers to improve their operational efficiency and maximize their revenue.
Our
CAT platform can be accessed from a variety of devices, including networked display terminals, desktop computers, and mobile devices.
It can operate in all operating systems, including Windows, Android and iOS. It unifies all access points into one unique user account,
through which a user can log onto our cloud system and enjoy all available software features and functions.
Our
Resource Exchange and Sharing
Building
on top of our CAT platform is our industry-specific resource sharing functionality. For the out-of-home new media industry, in the fourth
quarter of 2015, we released a resource exchange called "Taoping" as a module of our proprietary cloud-based information
distribution and ad delivery platform - Yunfa Net (www.pubds.com). Taoping in Chinese means "search and select display terminals."
Taoping pairs those who seek, with those who own out-of-home advertisement resources of interactive display terminals, and facilitates
their transactions online.
For
example, a local advertising agency based in Shenzhen City may need to place advertisement in Guangzhou City, but does not own any display
terminals in Guangzhou. Through Taoping, the advertising agency can search available display terminals by location, venue, and time slots,
find suitable resources, negotiate rental prices with terminal owners, and process payments online. Then through Taoping, the advertising
agency can upload advertisement content onto remote terminals, monitor advertisement performances, make necessary editing to the advertisement,
and update advertisement content.
Taoping
enables advertising terminal resource owners to improve their asset utilization rates and returns on investments. At the same time, Taoping
allows advertisement promoters to leverage available advertising resources in other geographic regions, and cost effectively expand into
new business territories.
Our
Big Data Services
Building
on top of our resource sharing capability is our big data analysis service. After releasing our resource sharing feature, we have been
compiling and analyzing data related to buyer/seller behavioral preferences, so that we can provide value-added services to our customers.
For
example, through big data analyses, we are able to make insightful suggestions to advertising resource owners on which specific types
of venues being displayed at specific time slots likely garner high rental fees as well as the optimal range of rental fees they could
charge for each type of resources they own. For advertising promoters, we are able to provide advice such as the optimal combinations
of terminals to rent in order to reach the biggest possible audience they desire, and attain the greatest impact while staying within
their advertising budget.
47
Our
Industry-Specific Ecosystems
In
combining our proprietary CAT technology platform, resource sharing functionality, and big data services with our industry expertise,
we provide integrated ecosystem solutions to the industries of out-of-home digital advertising new media, healthcare, education, and
residential community management. As described above, starting from the out-of-home digital advertising new media industry, we have been
in the process of rolling out product offerings to all of those four industries.
●
New
    Media Elevator Management - Our New Media Elevator Management solution integrates advertisement placement with safety supervision
    into one single technology unit. The built-in LED screen of the unit delivers high-definition digital advertisement, while its safety
    sensors and data collectors transmit operational and technical data of the elevator to the appropriate property managers, safety
    supervisors, and maintenance crew, so that such staff can efficiently maintain operational safety of the elevator, and instantaneously
    respond to emergencies. Since our New Media Elevator Management solution combines public safety with media display, property managers
    view our products as of strategic importance to their daily operations, and they welcome our products better than the ones that are
    pure advertisement display terminals without safety devices. As a result, we are able to help advertising agencies that purchase
    our products to attain customers more easily and enter into new markets more cost effectively. In addition, the Elevator Management
    platform could be sold as a separate product depending on customer needs to facilitate digital elevator maintenance, big data solution
    for elevator maintenance company, residential management, and government authorities.
●
New
    Media Transportation Management - Our New Media Transportation Management solution remotely uploads advertisement content together
    with critical transportation information - such as arrival and departure schedules, delay or cancellation notifications, gate assignments,
    and station announcements - into our cloud infrastructure and displays the content on our large-screen terminals strategically placed
    at high-traffic transportation hubs, including high-speed railway stations, subway stations, airports, and onboard public buses.
    Because our Transportation New Media Application combines advertisement display with transportation information crucial to commuters,
    we enable advertising agencies that purchase our products to attain large and attentive audiences at prime locations, which in turn
    help them achieve good advertisement placement rates and generate high revenue amounts.
●
New
    Media Community Management - Our New Media Community Management solution combines advertisement display with dissemination of community
    information. Placed within various high-rise residential communities, our large screen display terminals serve as a window of information
    into various resources available to community residents, including community maps, news updates, emergency announcements, safety
    precautions, health tips, recreational activities, and local commercial promotions.
Product
Warranty
For
our TIT segment, we usually offer a one-year or three-year warranty for our system integration services depending on the project. Our
warranty includes support services, minimal updates and system maintenance. No rights of return are allowed except for non-conforming
products, which have been insignificant based on historical experiences. If nonconforming products are returned due to software issues,
we will provide upgrades or additional customization to suit the customers' needs, which is infrequent with immaterial costs. The
original vendors of hardware are ultimately liable for replacement of defective or non-conforming hardware products. In cases where non-conformity
is due to the integrated hardware, we return the hardware to the original vendor for replacement. Based on our past experience, the cost
of our warranty provision has been immaterial.
For
our CBT segment, we provide a one-year warranty for our digital displays and high-end data servers. The actual warranty service is carried
out by our OEM partners, with whom we have obtained a contractual guarantee that they will repair or replace any defective hardware products
that we have purchased on behalf of our customers. Our OEM partners ultimately bear and are liable for the costs of product warranty.
Consequently, our own cost of warranty for this segment has been minimal.
Sales
and Marketing
We
develop new businesses by identifying and contacting potential new customers and through referrals, or by direct contacts from new customers
as a result of our strong brand recognition and reputation in the industry. We solidify our market presence through various types of
marketing campaigns, such as participating in exhibitions, trade shows, and seminars, developing distributors and dealers, and presenting
solutions to prospective customers. We founded and played a key role in the Taoping Alliance, a new media operating organization that
includes numerous advertising agencies throughout China, which greatly improved our market expansion capability and industry reputation.
48
Customers
and Related Parties
In
fiscal year 2023, one customer accounted for greater than 10% of total revenues in 2023. In fiscal year 2022 and 2021, no single customer
represented 10% or more of our total revenue of continuing operations. The following tables provide revenue by our major customers of
continuing operations for the years ended December 31, 2023, 2022 and 2021.
Year
2023
Revenues
% of
(Thousands)
Revenues
Fujian Haixia Xingyun Information Technology Co., Ltd
$
6,020
16
%
Shenzhen Chuangzhi Tiancheng Technology Co., Ltd
1,714
4
%
Fuzhou Shenpeng Technology Co., Ltd
1,487
4
%
Guangzhou Shengzhuo Intelligent Technology Co., Ltd
1,234
3
%
Shenzhen Dashan Intelligent Technology Co., Ltd
1,113
3
%
TOTAL
$
11,568
30
%
Year
2022
Revenues
% of
(Thousands)
Revenues
Guangzhou Shengzhuo Intelligent Technology Co., Ltd
$
1,831
8
%
Shenzhen Chuangzhi Tiancheng Technology Co., Ltd
1,464
6
%
Shenzhen Nortel Positive Light Technology Co., Ltd
949
4
%
Shenzhen Dingsheng Huaxun Technology Co., Ltd
840
3
%
Shanghai Easy Net E-commerce Co., Ltd
835
3
%
TOTAL
$
5,919
24
%
Year
2021
Revenues
% of
(Thousands)
Revenues
Shenzhen Yixing Information Technology Co. Ltd
$
1,654
9
%
Guangxi Wancang Technology Group Co., Ltd
1,092
6
%
Guangzhou Shengzhuo Intelligent Technology Co., Ltd
990
5
%
Shenzhen Taitao Electronic Technology Co., Ltd
967
5
%
Shenzhen Chuangzhi Tiancheng Technology Co. Ltd
750
4
%
TOTAL
$
5,453
29
%
Competition
In
the CBT segment, there are many small IT service companies in China providing one-off software packages to solve one aspect of the problems,
but not integrated solutions combining technology platform, resource exchange and sharing, and big data services like ours. For example,
in the new media industry, we encounter competition from 56iq.com, Fujian Star-net Communication Co., Ltd, Shanghai View Show Technology
Co., Ltd., and Maipu Communications Technology Co., Ltd. After completion of acquisition of Taoping New Media Co., Ltd, we compete with
advertising agencies, such as Focus Media, Air Media, and Vision China in some geographic regions in China.
49
Compared
with our competitors, we believe we have the following advantages:
●
We
    provide integrated ecosystem solutions that combine technology platform, resource exchange and sharing, and big data services. Our
    solution not only helps our customers improve their operational efficiency and reduce their labor cost, more importantly, help them
    maximize their asset utilization rate and increase their revenue. For example, by utilizing our solution, an advertising agency can
    upload its advertisement content from a centralized location to geographically dispersed display terminals, saving its maintenance
    staff from traveling to each terminal and updating media content manually. In addition, the advertising agency can list its idle
    terminal assets on Taoping, our resource exchange platform, and lease display terminals to other agencies by location and time slot,
    generating additional revenue from their existing assets.
●
Our
    solution has high scalability, availability, and flexibility. Because our technology solution is architected from ground up using
    the latest cloud-computing technology, our system can easily scale up to handle a rapidly increasing amount of data. In addition,
    as the number of display terminals connected to our network continues to grow, our system is able to handle additional workload and
    workflows to ensure high availability of each terminal. More importantly, because we own our cloud infrastructure and platform, we
    have the flexibility of changing or upgrading our software anytime without any constraints.
●
Our
    solution has a high level of security guarantee. Because we own the entire stack of technology infrastructure and terminals, we have
    a solid security fortress to prevent hackers from breaking into our system. In addition, because we have over 10 years of experience
    providing large-scale information systems to the public entities, such as police stations and public security bureaus, we have a
    track record of protecting our network from security intrusions or breaches. Lastly, to protect ourselves from national security
    concerns, we have an operational agreement with China's Internet Oversight Board to inspect and filter all of our advertisement
    contents before uploading them onto our display network.
●
Our
    solution combines digital network with physical assets, establishing a high barrier to entry than other internet related companies.
    Our proprietary Cloud-Application-Terminal platform has integrated three layers of technology: cloud storage, application software,
    and display terminals. Although it is relatively easy for potential competitors to develop software application with technology advancement
    nowadays, it will take them a considerable amount of time and capital to replicate our nationwide physical network of cloud-based
    display terminals.
Business
Transformation Efforts
Prior
to 2014, we predominately sold large-scale customized IT solutions to the Chinese public service sector through various build-and-transfer
projects. Due to changes in policies and regulations in China in 2012, various local governments started postponing IT projects they
had previously contracted with us indefinitely. As a result, many of our existing receivables became uncollectable.
In
early 2013, our management team made a strategic decision to transition our business from servicing the public sector to focusing on
the private sector. We started completing our in-process IT projects and ceased taking on new customers in the public sector. In addition,
we wrote off accounts receivable that we deemed no longer collectable. At the same time, we decided to transform our business from a
build-and-transfer IT service company into a standardized IT product company. Leveraging our experience and expertise in handling large-scale
IT projects for the public sector, we started investing in research and development of our own software products suitable for the private
sector.
In
2014, continuing our transition from the public sector to the private sector, we identified new media, healthcare, education, and residential
community management as the four core end markets on which we would focus. After fortifying our own software R&D efforts through
our acquisition of Biznest in September 2014, we decided to exit the hardware manufacturing business and complete our transformation
into a software company. In November 2014, we initiated the process of closing our own manufacturing facilities and transferring hardware
production to our OEM partners. Transferring hardware production to our OEM partners was completed during 2015. As a result, we wrote
off a large amount of accounts receivable and took substantial goodwill and identifiable intangible asset impairment charges in 2015
and 2016.
50
As
part of transition from the traditional IT business to the cloud-based business, we sold iASPEC's 100% equity holding in Zhongtian
and 54.89% equity holding in Geo in 2015. Proceeds from these sales totaling $19.5 million have been invested in the development and
market expansion of our new cloud-based business, as well as repayment of a portion of our short-term debts.
In
2017, we completed our business transformation to a leading products and services provider of CAT and IoT technology based digital advertising
distribution network and new media resource sharing platform in the out-of-home Advertising Market in China. In 2017, we gained profitability
as a result of the successful transition of our business model. In 2018, we continued to prove the sustainability of the new business
model and increased the net income to be approximately $1.7 million. In 2021, 2020 and 2019, due to the unfavorable macro-economic environment
and the slowdown of the out-of-home advertising market in China, we had net loss of approximately $9.9 million, $18.3 million and $3.6
million respectively. For years going forward, we will continue to execute our business plan and build a nationwide cloud-based ad terminal
network by penetrating into more cities throughout China, which is expected to generate recurring service revenue for the Company, in
addition to equipment sales. In addition, we have been actively exploring other cloud-based solutions including the smart charging pile
business throughout China, by leveraging our TAOP smart cloud and the Taoping Alliance national distribution network.
In
2021, we expanded our CAT based new media sharing platform into digital advertising and smart community sectors by acquiring Taoping
New Media Co., Ltd. to provide out-of-home digital advertising. Also, we explored business opportunities in blockchain, digital assets,
and cryptocurrency mining operations by recruiting seasoned executives, contracting various well-known consulting firms, suppliers, and
operators in these areas. In addition, we formed a Blockchain Business Division to manage blockchain development, digital assets NFT
(None Fungible Token) and cryptocurrency mining operations, and a Digital Culture Business Division to cover on-line education and digital
advertising operations. We generated revenues of $5.5 million from the blockchain business during the year ended December 31, 2021.
However,
due to a decrease in output and the highly volatile nature of the cryptocurrency market, in December 2022, the Company entered into a
series of contracts with certain third parties to sell its cryptocurrency mining and related equipment for a total sale price of approximately
$1.08 million. The Company also terminated the leases for both the office facility and the storage rooms, which were previously used
to house most of its mining machines for its cryptocurrency mining operations, and laid off relevant employees. As a result, the Company
had ceased its cryptocurrency mining business by December 31, 2022.
In
2023, as an application expansion of its cloud-based platform, the Company started to explore new business opportunities in off-grid
wastewater treatment and other AI-related product and solutions.
Intellectual
Property
Our
success depends, in part, on our ability to maintain and protect our proprietary technology and to conduct our business without infringing
on the proprietary rights of others. We rely primarily on a combination of copyrights, patents, trademarks, and trade secrets, as well
as executions of employee and third-party confidentiality agreements, to safeguard our intellectual property.
As
of December 31, 2023, through our wholly-owned subsidiaries IST, TopCloud, Biznest, Bocom, and ISIOT, we had 187 registered and copyrighted
software products, 528 registered trademarks and held 30 patents. We also own three domain names
(http://www.taop.com; http://www.taoping.cn;
and http://www.pubds.com
).
We
protect our know-how and technologies through confidentiality provisions in the employment contracts we enter into with our employees.
In addition, our engineers are generally divided into different project groups, each of which generally handles only a portion of the
project. As a result, no one engineer generally has access to the entire design process and documentation for a particular product.
We
have funded a vendor to develop vehicular display terminal using our digital new media sharing platform to deliver advertisements. The
development of vehicular display terminal was completed in September 2020 and started earning advertising revenue. According to modified
contract, we have capitalized the funding as purchased software enjoying the intellectual property of the vehicular display terminal
and shared advertising revenue generated from the vehicular display terminal within the four-year modified contract term.
51
Regulation
Because
all of our operating entities are located in the PRC, we are regulated by the national and local laws of the PRC. This section summarizes
the major PRC regulations relating to our business.
Permits
and Certificates
Through
our subsidiaries, we hold the following permits and certificates:
Name
Expiration
    Date
Company
National
    High-tech Enterprise
Valid
    till December 22, 2024, subject to renewal every three years.
IST
National
    High-tech Enterprise
Valid
    till December 22, 2024, subject to renewal every three years.
Biznest
The
establishment, operation and management of corporate entities in mainland China are governed by the Company Law of the People's
Republic of China, or the China Company Law, which was adopted by the SCNPC in December 1993, implemented in July 1994, and subsequently
amended in December 1999, August 2004, October 2005, December 2013 and October 2018. Under the China Company Law, companies are generally
classified into two categories: limited liability companies and companies limited by shares. The China Company Law applies to both domestic
and foreign-invested companies.
Investment
activities in mainland China by foreign investors are governed by the Guiding Foreign Investment Direction, which was promulgated by
the State Council on February 11, 2002, and came into effect on April 1, 2002, and the latest Special Administrative Measures (Negative
List) for Foreign Investment Access (2022), or the Negative List, which was promulgated by the MOFCOM and the NDRC on March 12, 2022,
and took effect on the same date. The Negative List sets out in a unified manner the restrictive measures, such as the requirements on
shareholding percentages and management, for the access of foreign investments, and the industries that are prohibited for foreign investment.
Any field not falling in the Negative List shall be administered under the principle of equal treatment to domestic and foreign investment.
The
Foreign Investment Law of the People's Republic of China, or the Foreign Investment Law was promulgated by the NPC in March 2019
and become effective in January 2020. The investment activities of foreign natural persons, enterprises or other organizations (hereinafter
referred to as foreign investors) directly or indirectly within the territory of mainland China are governed by the Foreign Investment
Law, including: 1) establishing by foreign investors of foreign-invested enterprises in mainland China alone or jointly with other investors;
2) acquiring by foreign investors of shares, equity, property shares, or other similar interests of Chinese domestic enterprises; 3)
investing by foreign investors in new projects in mainland China alone or jointly with other investors; and 4) other forms of investment
prescribed by laws, administrative regulations or the State Council.
In
December 2019, the State Council issued the Regulations on Implementing the Foreign Investment Law, which came into effect in January
2020. After the Regulations on Implementing the Foreign Investment Law came into effect, the Regulation on Implementing the Law on Sino-foreign
Equity Joint Ventures, Provisional Regulations on the Duration of Sino-Foreign Equity Joint Ventures, the Regulations on Implementing
the Law on Wholly Foreign-Owned Enterprises and the Regulations on Implementing the Law on Sino-Foreign Cooperative Joint Ventures have
been repealed simultaneously.
In
December 2019, the MOFCOM and the SAMR issued the Measures for the Reporting of Foreign Investment Information, which came into effect
in January 2020. After the Measures for the Reporting of Foreign Investment Information came into effect, the Interim Measures on the
Administration of Filing for Establishment and Change of Foreign Invested Enterprises has been repealed simultaneously. Since January
1, 2020, for foreign investors carrying out investment activities directly or indirectly in mainland China, the foreign investors or
foreign-invested enterprises shall submit investment information to the relevant commerce administrative authorities pursuant to these
measures.
In
light of the above restrictions and requirements, prior to the dissolution of our VIE structure in September 2021, we had conducted our
value-added telecommunications businesses through our then consolidated VIEs. As a result of the dissolution of our VIE structure, we
ceased the e-commerce and related businesses which had constituted a minor portion of our consolidated revenue. Based on the legal analysis
of the Company's in-house legal counsel, who is a licensed attorney in the PRC, we believe that none of our PRC subsidiaries'
current business is stipulated on the Negative List.
52
As
a result, according to the laws and regulations currently in effect, our PRC subsidiaries are able to conduct their business without
being subject to restrictions imposed by the foreign investment laws and regulations of the PRC and none of Taoping or our subsidiaries
is required to obtain additional licenses or permits beyond a regular business license for each PRC subsidiary's operations. Each
of our PRC subsidiaries is required to obtain and has obtained such regular business license from the local branch of the SAMR. No application
for any such license has been denied.
Amended
Company Law
The
establishment, operation and management of corporate entities in the PRC are governed by the Company Law of the PRC. On December 29,
2023, the SCNPC promulgated the amended Company Law of the PRC, which will come into effect on July 1, 2024, to supersede the existing
PRC Company Law which was amended in October 2018. The major revisions made by the amended PRC Company Law included improving the system
for the establishment and liquidation of companies, optimizing organizational structures of companies, improving the capital system of
companies, strengthening the responsibilities of the controlling shareholder and management staff, and enhancing the social responsibilities
of companies, etc. With respect to the period for payment of the registered capital, pursuant to the amended PRC Company Law, all shareholders
of a PRC limited liability company shall fully pay up the registered capital subscribed for by such shareholders within five years since
the date of establishment of the PRC limited liability company, unless otherwise provided by laws and regulations. On February 6, 2024,
the SAMR issued a draft of the Provisions of the State Council on Implementing the Registered Capital Registration and Management System
under the PRC Company Law for public comments, which further specified the detailed requirements and measures of the registration and
management of registered capital under the amended PRC Company Law. Pursuant to such draft provisions, there shall be a three-year interim
period from July 1, 2024 to June 30, 2027 for the existing companies to adjust their periods of capital contribution.
Regulations
on Mobile Internet Applications Information Services
Mobile
Internet applications and the Internet application store are especially regulated by the Administrative Provisions on Mobile Internet
Applications Information Services, or the APP Provisions, which was promulgated by the CAC, on June 28, 2016 and entered into force on
August 1, 2016. The APP Provisions regulate the APP information and the APP store service providers, and the CAC and local offices of
cyberspace administration are responsible for the supervision and administration of nationwide or local APP information respectively.
The
APP information service providers shall acquire relevant qualifications in accordance with laws and regulations and fulfil the information
security management obligations as follows: (1) shall authenticate the identity information of the registered users including their mobile
telephone number and other identity information under the principle of mandatory real name registration at the back-office end, and voluntary
real name display at the front-office end; (2) shall establish and perfect the mechanism for the protection of users' information,
and follow the principle of legality, rightfulness and necessity, indicate expressly the purpose, method and scope of collection and
use and obtain the consent of users while collecting and using users' personal information; (3) shall establish and perfect the
mechanism for the examination and management of information content, and in terms of any information content released that violates laws
or regulations, take such measures as warning, restricting the functions, suspending the update and closing the accounts as the case
may be, keep relevant records and report the same to relevant competent authorities; (4) shall safeguard users' right to know and
to make choices when users are installing or using such applications, and shall neither start such functions as collecting the information
of users' positions, accessing users' contacts, turning on the camera and recording the sound, or any other function irrelevant
to the services, nor forcefully install any other irrelevant applications without prior consent of users when noticed expressly; (5)
shall respect and protect the intellectual properties and shall neither produce nor release any application that infringes others'
intellectual properties; and (6) shall record the users' log information and keep the same for 60 days.
We
have established necessary mechanisms and adopted data encryption and protection technology in our mobile application to ensure the collection,
protection and storage of user information are in compliance with the requirements of the APP Provisions in all material aspects.
53
Regulations
on Internet Information Security
In
1997, the Ministry of Public Security promulgated measures that prohibit use of the internet in ways which, among other things, result
in a leakage of state secrets or a spread of socially destabilizing content. If an internet information service provider violates these
measures, the Ministry of Public Security and the local security bureaus may revoke its operating license and shut down its websites.
Internet
information in China is regulated and restricted from a national security standpoint. The Standing Committee of the National People's
Congress, or the SCNPC, has enacted the Decisions on Maintaining Internet Security on December 28, 2000 and further amended on August
27, 2009, which may subject violators to criminal punishment in China for any effort to: (i) gain improper entry into a computer or system
of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial
information; or (v) infringe intellectual property rights.
The
PRC Cybersecurity Law was promulgated by the SCNPC on November 7, 2016 and became effective on June 1, 2017. Under this regulation, network
operators, including online information service providers, shall comply with laws and regulations and fulfill their obligations to safeguard
security of the network when conducting business and providing services, and take all necessary measures pursuant to laws, regulations
and compulsory national requirements to safeguard the safe and stable operation of the networks, respond to network security incidents
effectively, prevent illegal and criminal activities, and maintain the integrity, confidentiality and usability of network data.
On
July 6, 2021, certain PRC regulatory authorities issued Opinions on Strictly Cracking Down on Illegal Securities Activities, which, among
others, provides for improving the laws and regulations on data security, cross-border data transmission, and confidential information
management. It provided that efforts will be made to revise the regulations on strengthening the confidentiality and file management
relating to the offering and listing of securities overseas, to implement the responsibility on information security of overseas listed
companies, and to strengthen the standardized management of cross-border information provision mechanisms and procedures.
On
July 12, 2021, the Ministry of Industry and Information Technology (the "MIIT") and two other authorities jointly issued
the Provisions on the Administration of Security Vulnerabilities of Network Products. The Provisions state that, no organization or individual
may abuse the security vulnerabilities of network products to engage in activities that endanger network security, or to illegally collect,
sell, or publish the information on such security vulnerabilities. Anyone who is aware of the aforesaid offences shall not provide technical
support, advertising, payment settlement and other assistance to the offenders. According to the Provisions, network product providers,
network operators, and platforms collecting network product security vulnerabilities shall establish and improve channels for receiving
network product security vulnerability information and keep such channels available, and retain network product security vulnerability
information reception logs for at least six months. The Provisions also bans provision of undisclosed vulnerabilities to overseas organizations
or individuals other than to the product providers.
On
July 30, 2021, the State Council issued the Regulations on Protection of Critical Information Infrastructure. Pursuant to these regulations,
critical information infrastructure shall mean the important network facilities or information systems of key industries or fields such
as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs
and national defense science, and important network facilities or information systems which may endanger national security, people's
livelihood and public interest once there occur damage, malfunctioning or data leakage to them. The Regulations provide that no individual
or organization may carry out any illegal activity of intruding into, interfering with, or sabotaging any critical information infrastructures,
or endanger the security of any critical information infrastructures. The Regulations also require that critical information infrastructure
operators shall establish a cybersecurity protection system and accountability system, and that the main responsible person of a critical
information infrastructure operator shall take full responsibility for the security protection of the critical information infrastructures
operated by it. In addition, the administration departments for each important industry and sector shall be responsible for formulating
the rule of critical information infrastructure determination applicable to their respective industry or sector, and determine the critical
information infrastructure operators in their industry or sector.
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On
November 14, 2021, the CAC released the discussion draft of the Administrative Measures for Internet Data Security, which provides that
data processors refer to individuals or organizations that autonomously determine the purpose and the manner of processing data. In accordance
with the draft measures, data processors shall apply for a cybersecurity review for the following activities: (i) merger, reorganization
or division of internet platform operators that have acquired a large number of data resources related to national security, economic
development or public interests to the extent that affects or may affect national security; (ii) listing abroad of data processors which
process over one million users' personal information; (iii) listing in Hong Kong which affects or may affect national security;
or (iv) other data processing activities that affect or may affect national security. Besides, data processors that are listed overseas
shall carry out an annual data security assessment. The draft measures remains unclear on whether the requirements will be applicable
to companies that have been listed in the United States and Hong Kong, such as us. There is no timetable as to when the draft measures
will be enacted.
On
July 7, 2022, the CAC promulgated the Security Assessment Measures for Outbound Data Transfer, which became effective on September 1,
2022. These measures provide for the circumstances under which a data processor shall be subject to security assessment, including (i)
where a data processor provides important data abroad; (ii) where a critical information infrastructure operator or a data processor
that processes personal information of more than one million individuals provides personal information abroad; (iii) where a data processor
that has exported personal information of over 100,000 individuals or sensitive personal information of over 10,000 individuals in total
since January 1 of the previous year provides personal information abroad; and (iv) other circumstances prescribed by the CAC.
We
have, in accordance with relevant provisions on network security of the PRC, established necessary mechanisms to protect information
security, including, among others, adopting necessary network security protection technologies such as anti-virus firewalls, intrusion
detection and data encryption, keeping record of network logs, and implementing information classification framework.
Regulations
Relating to Advertising Business
The
SAMR is the government agency responsible for regulating advertising activities in the PRC. According to PRC laws and regulations, companies
that engage in advertising activities must obtain a business license from the SAMR or its local branches which specifically includes
operating an advertising business within its business scope. The business license of an advertising company is valid for the duration
of its existence, unless the license is suspended or revoked due to a violation of any law or regulation. PRC advertising laws and regulations
set forth certain content requirements for advertisements in the PRC including, among other things, prohibitions on false or misleading
content, superlative wording, socially destabilizing content or content involving obscenities, superstition, violence, discrimination
or infringement of the public interest. Advertisers, advertising agencies, and advertising distributors are required to ensure that the
content of the advertisements they prepare or distribute is true and in full compliance with applicable law. In providing advertising
services, advertising operators and advertising distributors must review the supporting documents provided by advertisers for advertisements
and verify that the content of the advertisements complies with applicable PRC laws and regulations. Prior to distributing advertisements
that are subject to government censorship and approval, advertising distributors are obligated to verify that such censorship has been
performed and approval has been obtained. The release or delivery of advertisements through the internet must not impair the normal use
of the network by users. The advertisements released in pop-up form on a webpage and other forms must show the close flag prominently
and ensure one-click close. Violation of these regulations may result in penalties, including fines, confiscation of advertising
income, orders to cease dissemination of the advertisements and orders to eliminate the effect of illegal advertisement. In circumstances
involving serious violations, the SAMR or its local branches may revoke the violators' licenses or permits for their advertising
business operations.
In
July 2016, the State Administration of Industry and Commerce issued the Interim Measures for the Administration of Internet Advertising
to regulate internet advertising activities. On February 25, 2023, the SAMR released the Administrative Measures for Internet Advertising,
which came into effect from May 1, 2023 and replaced Interim Measures for the Administration of Internet Advertising. The Administrative
Measures for Internet Advertising set out, among other things, the following requirements for Internet advertising activities:
●
online
    advertisements for tobacco (including e-cigarettes) are not allowed, and online advertisements for prescription medicine
    are not allowed unless otherwise permitted by laws and regulations;
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●
online
    advertisements for special commodities and services such as medical treatments, pharmaceuticals, medical devices, agrochemicals,
    veterinary medicine, health foods and food for special medical purposes must be reviewed by competent authorities before online publication,
    and the advertisements for such commodities and services are not allowed to be published in the form of introducing health and wellness
    knowledge;
●
advertisements
    for medical treatments, pharmaceuticals, health foods, special medical purpose formula foods, medical devices, cosmetics, alcohol,
    beauty advertisements, and online game advertisements that are detrimental to the physical and mental health of minors shall not
    be published on Internet media targeted to minors;
●
Internet
    advertisements must be visibly marked as "advertisement" while paid-search results must be obviously distinguished from
    natural search results; and
●
if
    the Internet advertisements are published by means of algorithmic recommendation or other technologies, the rules related to algorithm
    recommendation services and advertising records shall be included in the advertising archives
According
to the Administrative Measures for Internet Advertising, the advertisers are responsible for the authenticity of the content of internet
advertisements, while the internet advertisement publishers and advertisement agencies are required to establish, improve, and implement
registration, review, and archive management systems for internet advertising businesses, which include verifying and registering advertiser
information, verifying supporting documents and advertisements content, and allocating advertising review personnel familiar with advertising
laws and regulations or establish advertising review bodies.
In
addition, the Administrative Measures for Internet Advertising require internet platform operators providing internet information services
to take measures to prevent and stop illegal advertisements, which include recording and storing the real identity information of users
who publish advertisements for at least three years, monitoring and investigating the content of advertisements, and employing measures
to stop illegal advertisements. Internet platform operators are also required to establish effective complaint and reporting mechanisms,
cooperate with market regulatory departments in investigating illegal conduct, and use measures such as warnings, suspending or terminating
services for users who publish illegal advertisements.
Regulations
on Privacy Protection
The
Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT in December 2011, provide that,
an internet information service provider may not collect any user personal information or provide any such information to third parties
without the consent of a user. An internet information service provider must expressly inform the users of the method, content and purpose
of the collection and processing of such user personal information and may only collect such information necessary for the provision
of its services. An internet information service provider is also required to properly maintain the user personal information, and in
case of any leak or likely leak of the user personal information, online lending service providers must take immediate remedial measures
and, in severe circumstances, make an immediate report to the telecommunications regulatory authority.
In
addition, pursuant to the Decision on Strengthening the Protection of Online Information issued by the SCNPC in December 2012 and the
Order for the Protection of Telecommunication and Internet User Personal Information issued by the MIIT in July 2013, any collection
and use of user personal information must be subject to the consent of the user, abide by the principles of legality, rationality and
necessity and be within the specified purposes, methods and scopes.
The
Guidelines jointly released by ten PRC regulatory agencies in July 2015 aim, among other things, to require service providers to improve
technology security standards, and safeguard user and transaction information. The Guidelines also prohibit service providers from illegally
selling or disclosing users' personal information. Pursuant to the Ninth Amendment to the Criminal Law issued by the SCNPC in August
2015, which became effective in November 2015, any Internet service provider that fails to fulfill the obligations related to Internet
information security administration as required by applicable laws and refuses to rectify upon orders is subject to criminal penalty
for the result of (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client's
information; (iii) any serious loss of criminal evidence; or (iv) other severe situation, and any individual or entity that (i) sells
or provides personal information to others in a way violating the applicable law, or (ii) steals or illegally obtain any personal information
is subject to criminal penalty in severe situation. In addition, the Interpretations of the Supreme People's Court and the Supreme
People's Procuratorate of the PRC on Several Issues Concerning the Application of Law in Handling Criminal Cases of Infringing
Personal Information, effective in June 2017, have clarified certain standards for the conviction and sentencing in relation to personal
information infringement. The PRC government has the power and authority to order internet content provider operators to turn over personal
information if an internet user posts any prohibited content or engages in illegal activities on the internet. The Civil Code further
provides in a stand-alone chapter of right of personality and reiterate that the personal information of a natural person shall be protected
by the law. Any organization or individual shall legitimately obtain such personal information of others in due course on a need-to-know
basis and ensure the safety and privacy of such information, and refrain from excessively handling or using such information.
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With
respect to the security of information collected and used by mobile apps, pursuant to the Announcement of Conducting Special Supervision
against the Illegal Collection and Use of Personal Information by Apps, which was issued on January 23, 2019, app operators should collect
and use personal information in compliance with the Cyber Security Law and should be responsible for the security of personal information
obtained from users and take effective measures to strengthen the personal information protection. Furthermore, app operators should
not force their users to make authorization by means of bundling, suspending installation or in other default forms and should not collect
personal information in violation of laws, regulations or breach of user agreements. Such regulatory requirements were emphasized by
the Notice on the Special Rectification of Apps Infringing upon User's Personal Rights and Interests, which was issued by MIIT
on October 31, 2019. On November 28, 2019, the CAC, the MIIT, the Ministry of Public Security and the SAMR jointly issued the Methods
of Identifying Illegal Acts of Apps to Collect and Use Personal Information. This regulation further illustrates certain commonly-seen
illegal practices of apps operators in terms of personal information protection, including "failure to publicize rules for collection
and use," "failure to expressly state the purpose, manner and scope of collecting and using personal information,"
"collection and use of personal information without consent of users," "collecting personal information irrelevant
to the services provided by such app in violation of the principle of necessity," "provision of personal information to others
without consent," "failure to provide the function of deleting or correcting personal information as required by laws"
and "failure to publish information such as methods for complaints and reporting." Among others, any of the following acts
of an app operator will constitute "collection and use of personal information without consent of users": (i) collecting
an user's personal information or activating the permission for collecting any user's personal information without obtaining
such user's consent; (ii) collecting personal information or activating the permission for collecting the personal information
of any user who explicitly refuses such collection, or repeatedly seeking for user's consent such that the user's normal
use of such app is disturbed; (iii) any user's personal information which has been actually collected by the app operator or the
permission for collecting any user's personal information activated by the app operator is beyond the scope of personal information
which such user authorizes such app operator to collect; (iv) seeking for any user's consent in a non-explicit manner; (v) modifying
any user's settings for activating the permission for collecting any personal information without such user's consent; (vi)
using users' personal information and any algorithms to directionally push any information, without providing the option of non-directed
pushing such information; (vii) misleading users to permit collecting their personal information or activating the permission for collecting
such users' personal information by improper methods such as fraud and deception; (viii) failing to provide users with the means
and methods to withdraw their permission of collecting personal information; and (ix) collecting and using personal information in violation
of the rules for collecting and using personal information promulgated by such app operator.
On
August 22, 2019, the CAC promulgated the Provisions on the Internet Protection of Children's Personal Information, which took effect
on October 1, 2019, requiring that before collecting, using, transferring or disclosing the personal information of a child, the Internet
service operator should inform the child's guardians in a noticeable and clear manner and obtain their consents. Meanwhile, internet
service operators should take measures like encryption when storing children's personal information. On March 12, 2021, the CAC
and three other authorities jointly issued the Rules on the Scope of Necessary Personal Information for Common Types of Mobile Internet
Applications. The Rules specifies the scope of necessary personal information to be collected each for a variety of common mobile internet
applications, such as maps and navigation apps, online ride-hailing apps, instant messaging apps, online community apps. Operators of
such apps shall not refuse to provide basic services to users on the ground of users' refusal to provide their personal non-essential
information.
In
addition, on August 20, 2021, the SCNPC adopted the Personal Information Protection Law which took effect on November 1, 2021. The Personal
Information Protection Law requires, among others, that (i) the processing of personal information should have a clear and reasonable
purpose which should be directly related to the processing purpose, in a method that has the least impact on personal rights and interests,
and (ii) the collection of personal information should be limited to the minimum scope necessary to achieve the processing purpose to
avoid the excessive collection of personal information. Different types of personal information and personal information processing will
be subject to various rules on consent, transfer, and security. Entities handling personal information shall bear responsibilities for
their personal information handling activities, and adopt necessary measures to safeguard the security of the personal information they
handle. The entities failing to comply could be ordered to correct, or suspend or terminate the provision of services, and face confiscation
of illegal income, fines or other penalties.
Our
Taoping APP is used to facilitate cloud ads and content distribution to the designated terminal in our network, which does not invoice
the collection and storage of any personal information.
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Regulations
Relating to Artificial Intelligence
Pursuant
to the Internet Information Service Algorithmic Recommendation Management Provisions, which came into effect on March 1, 2022, algorithm
recommendation service providers shall clearly inform users of their provision of algorithm recommendation services, and make public
the basic principles, intentions and main operating mechanisms of the algorithm recommendation services. The algorithmic recommendation
service providers shall not (i) carry out any illegal activity which may endanger national security and social public interest,
disturb economic order and social order, or infringe third parties' legal interest, or (ii) spread any information prohibited
by laws or regulations. Algorithm recommendation service providers selling goods or providing services to consumers shall also protect
consumers' rights of fair trade, and are prohibited from carrying out illegal conduct such as unreasonable, differentiated treatment
based on consumers' preferences, purchase behavior or such other characteristics.
On
July 10, 2023, the CAC and six other regulatory authorities in China promulgated the Interim Measures for Generative
Artificial Intelligence Services, which took effect on August 15, 2023. The measures impose compliance requirements for providers
of generative artificial intelligence services to the general public within the Chinese mainland. The measures stipulate that providers
of generative artificial intelligence services related to text, image, audio, video and other content to the general public within the
Chinese mainland will be responsible as "producers of Internet information content" and "personal information processors,"
with the responsibilities specified in the Personal Information Protection Law, the Data Security Law, the Internet Security Law, and
other Chinese mainland laws and regulations related to cybersecurity and personal information protection. Providers of generative artificial
intelligence services are required to enter into service agreements with their users and adopt effective measures to prevent minor users
from over-relying upon or becoming addicted to generative artificial intelligence services. In addition, providers of generative artificial
intelligence services that have the potential to influence public opinion or provoke social agitation are required to conduct security
assessments and complete filings in accordance with the Internet Information Service Algorithmic Recommendation Management Provisions.
Regulations
Related to Intellectual Property
The
SCNPC and the State Council have promulgated comprehensive laws and regulations to protect trademarks. The Trademark Law of the PRC (2019
revision, effective November 1, 2019) promulgated on August 23, 1982 and subsequently amended on February 22, 1993, October 27, 2001,
August 30, 2013 and April 23, 2019 respectively, and the Implementation Regulation of the PRC Trademark Law (2014 revision) issued by
the State Council on August 3, 2002 and amended on April 29, 2014, are the main regulations protecting registered trademarks. The Trademark
Office under the SAIC administrates the registration of trademarks on a "first-to-file" basis, and grants a term of ten years
to registered trademarks.
The
PRC Copyright Law, adopted in 1990 and revised in 2001 and 2010 respectively, with its implementation rules adopted on August 8, 2002
and revised in 2011 and 2013 respectively, and the Regulations for the Protection of Computer Software as promulgated on December 20,
2001 and amended in 2011 and 2013 provide protection for copyright of computer software in the PRC. Under these rules and regulations,
software owners, licensees and transferees may register their rights in software with the National Copyright Administration Center or
its local branches to obtain software copyright registration certificates.
The
Patent Law of the PRC was adopted by NPCSC in 1984 and amended in 1992, 2000 and 2008, respectively. A patentable invention, utility
model or design must meet three conditions: novelty, inventiveness and practical applicability. Patents cannot be granted for scientific
discoveries, rules and methods for intellectual activities, methods used to diagnose or treat diseases, animal and plant breeds or substances
obtained by means of nuclear transformation. The Patent Office under the State Intellectual Property Office is responsible for receiving,
examining and approving patent applications. A patent is valid for a term of twenty years for an invention and a term of ten years for
a utility model or design, commencing on the application date. Subject to limited exceptions provided by law, any third-party user must
obtain consent or a proper license from the patent owner to use the patent, or otherwise the use will constitute an infringement of the
rights of the patent holder.
58
The
MIIT, promulgated the Administrative Measures on Internet Domain Name, or the Domain Name Measures, on August 24, 2017 to protect domain
names. According to the Domain Name Measures, domain name applicants are required to duly register their domain names with domain name
registration service institutions. The applicants will become the holder of such domain names upon the completion of the registration
procedure.
We
have adopted necessary mechanisms to register, maintain and enforce intellectual property rights in China. However, we cannot assure
you that we can prevent our intellectual property from all the unauthorized use by any third party, neither can we promise that none
of our intellectual property rights would be challenged any third party.
Regulations
Related to Employment
The
PRC Labor Law and the Labor Contract Law require that employers execute written employment contracts with full-time employees. All employers
must compensate their employees with wages equal to at least the local minimum wage standards. Violations of the PRC Labor Law and the
Labor Contract Law may result in the imposition of fines and other administrative sanctions, and serious violations may constitute criminal
offences.
On
December 28, 2012, the PRC Labor Contract Law was amended, effective since July 1, 2013 to impose more stringent requirements on labor
dispatch. Under such law, dispatched workers are entitled to pay equal to that of full-time employees for equal work, but the number
of dispatched workers that an employer hires may not exceed a certain percentage of its total number of employees as determined by the
Ministry of Human Resources and Social Security. Additionally, dispatched workers are only permitted to engage in temporary, auxiliary
or substitute work. According to the Interim Provisions on Labor Dispatch promulgated by the Ministry of Human Resources and Social Security
on January 24, 2014, which became effective on March 1, 2014, the number of dispatched workers hired by an employer shall not exceed
10% of the total number of its employees (including both directly hired employees and dispatched workers). The Interim Provisions on
Labor Dispatch require employers not in compliance with the PRC Labor Contract Law in this regard to reduce the number of its dispatched
workers to below 10% of the total number of its employees prior to March 1, 2016.
Enterprises
in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds,
namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity
insurance plan, and a housing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries,
including bonuses and allowances, of the employees as specified by the local government from time to time at locations where they operate
their businesses or where they are located.
According
to the Interim Regulations on the Collection and Payment of Social Insurance Premiums, the Regulations on Work Injury Insurance, the
Regulations on Unemployment Insurance and the Trial Measures on Employee Maternity Insurance of Enterprises, enterprises in the PRC shall
provide benefit plans for their employees, which include basic pension insurance, unemployment insurance, maternity insurance, work injury
insurance and basic medical insurance. An enterprise must provide social insurance by making social insurance registration with local
social insurance agencies, and shall pay or withhold relevant social insurance premiums for and on behalf of employees. The Law on Social
Insurance of the PRC, which was promulgated by the SCNPC on October 28, 2010, became effective on July 1, 2011, and was most recently
updated on December 29, 2018, has consolidated pertinent provisions for basic pension insurance, unemployment insurance, maternity insurance,
work injury insurance and basic medical insurance, and has elaborated in detail the legal obligations and liabilities of employers who
do not comply with laws and regulations on social insurance.
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According
to the Regulations on the Administration of Housing Provident Fund, which was promulgated by the State Counsel and became effective on
April 3, 1999, and was amended on March 24, 2002 and was partially revised on March 24, 2019 by the Decision of the State Council on
Revising Some Administrative Regulations (Decree No. 710 of the State Council), housing provident fund contributions by an individual
employee and housing provident fund contributions by his or her employer shall belong to the individual employee. Registration by PRC
companies with the applicable housing provident fund management center is compulsory, and a special housing provident fund account for
each of the employees shall be opened at an entrusted bank.
The
employer shall timely pay up and deposit housing provident fund contributions in full amount and late or insufficient payments of such
contributions are unlawful. The employer shall make the housing provident fund payment and deposit registrations with the housing provident
fund administration center. With respect to companies which violate the above regulations and fail to complete housing provident fund
payment and deposit registrations or open housing provident fund accounts for their employees, such companies shall be ordered by the
housing provident fund administration center to complete such procedures within a designated time limit. Those who fail to complete their
registrations within the designated period shall be levied a fine ranging from RMB 10,000 to RMB 50,000. When companies breach these
regulations and fail to pay housing provident fund contributions in full amount that are due, the housing provident fund administration
center shall order such companies to pay up within a designated period, and may further petition a People's Court for mandatory
enforcement against those who still fail to comply after the expiry of such period.
Regulations
on Foreign Currency Exchange
Under
the PRC Foreign Currency Administration Rules promulgated on January 29, 1996 and last amended on August 5, 2008 and various regulations
issued by SAFE and other relevant PRC government authorities, payment of current account items in foreign currencies, such as trade and
service payments, payment of interest and dividends can be made without prior approval from SAFE by following the appropriate procedural
requirements. By contrast, the conversion of RMB into foreign currencies and remittance of the converted foreign currency outside the
PRC for the purpose of capital account items, such as direct equity investments, loans and repatriation of investment, requires prior
approval from SAFE or its local office.
On
February 13, 2015, SAFE promulgated the Circular on Simplifying and Improving the Foreign Currency Management Policy on Direct Investment,
effective from June 1, 2015, which cancels the requirement for obtaining approvals of foreign exchange registration of inbound foreign
direct investment and outbound overseas direct investment from SAFE. The application for the registration of foreign exchange for the
purpose of inbound foreign direct investment and outbound overseas direct investment may be filed with qualified banks, which, under
the supervision of SAFE, may review the application and process the registration.
The
Circular of the SAFE on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise,
or SAFE Circular 19, was promulgated on March 30, 2015 and became effective on June 1, 2015. According to SAFE Circular 19, a foreign-invested
enterprise may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital
account for which the relevant foreign exchange bureau has confirmed monetary contribution rights and interests (or for which the bank
has registered the account-crediting of monetary contribution). For the time being, foreign-invested enterprises are allowed to settle
100% of their foreign exchange capitals on a discretionary basis; a foreign-invested enterprise shall truthfully use its capital for
its own operational purposes within the scope of business; where an ordinary foreign-invested enterprise makes domestic equity investment
with the amount of foreign exchanges settled, the invested enterprise shall first go through domestic re-investment registration and
open a corresponding Account for Foreign Exchange Settlement Pending Payment with the foreign exchange bureau (bank) at the place of
registration. The Circular of the SAFE on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital
Accounts, or SAFE Circular 16, was promulgated and became effective on June 9, 2016. According to SAFE Circular 16, enterprises registered
in PRC may also convert their foreign debts from foreign currency into Renminbi at the enterprise's discretion. SAFE Circular 16
provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign
currency capital and foreign debts) at the enterprise's discretion, which applies to all enterprises registered in the PRC. SAFE
Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly
or indirectly used for purposes beyond its business scope and may not be used for investments in securities or other investment with
the exception of bank financial products that can guarantee the principal within the PRC unless otherwise specifically provided. Besides,
the converted Renminbi shall not be used to make loans for related enterprises unless it is within the business scope or to build or
to purchase any real estate that is not for the enterprise own use with the exception for the real estate enterprise.
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On
January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness
and Compliance Verification, or SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance
of profits from domestic entities to offshore entities, including (i) banks must check whether the transaction is genuine by reviewing
board resolutions regarding profit distribution, original copies of tax filing records and audited financial statements, and (ii) domestic
entities must retain income to account for previous years' losses before remitting any profits. Moreover, pursuant to SAFE Circular
3, domestic entities must explain in detail the sources of capital and how the capital will be used, and provide board resolutions, contracts
and other proof as a part of the registration procedure for outbound investment.
On
October 25, 2019, SAFE promulgated the Notice on Further Facilitating Cross-Board Trade and Investment, which became effective on the
same date (except for Article 8.2 thereof). The notice removed restrictions on the capital equity investment in China by non-investment
foreign-invested enterprises. In addition, restrictions on the use of funds for foreign exchange settlement of domestic accounts for
the realization of assets have been removed and restrictions on the use and foreign exchange settlement of foreign investors' security
deposits have been relaxed. Eligible enterprises in the pilot areas are also allowed to use revenues under capital accounts, such as
capital funds, foreign debts and overseas listing revenues for domestic payments without providing materials to the bank in advance for
authenticity verification on an item by item basis, while the use of funds should be true, in compliance with applicable rules and conforming
to the current capital revenue management regulations.
Regulations
on Foreign Exchange Registration of Overseas Investment by PRC Residents
SAFE
issued the Circular on Relevant Issues Relating to Domestic Resident's Investment and Financing and Roundtrip Investment through
Special Purpose Vehicles, or SAFE Circular 37, which became effective in July 2014, to replace the Circular of the State Administration
of Foreign Exchange on Issues Concerning the Regulation of Foreign Exchange in Equity Finance and Roundtrip Investments by Domestic Residents
through Offshore Special Purpose Vehicles, to regulate foreign exchange matters in relation to the use of special purpose vehicles, or
SPVs, by PRC residents or entities to seek offshore investment and financing or conduct round trip investment in China. SAFE Circular
37 defines a SPV as an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose
of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests, while "round
trip investment" is defined as direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested
enterprises to obtain the ownership, control rights and management rights. SAFE Circular 37 stipulates that, prior to making contributions
into an SPV, PRC residents or entities be required to complete foreign exchange registration with SAFE or its local branch. In addition,
SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment
in February 2015, which amended SAFE Circular 37 and became effective on June 1, 2015, requiring PRC residents or entities to register
with qualified banks rather than SAFE in connection with their establishment or control of an offshore entity established for the purpose
of overseas investment or financing.
PRC
residents or entities who had contributed legitimate onshore or offshore interests or assets to SPVs but had not obtained registration
as required before the implementation of the SAFE Circular 37 must register their ownership interests or control in the SPVs with qualified
banks. An amendment to the registration is required if there is a material change with respect to the SPV registered, such as any change
of basic information (including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers
or exchanges of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and
the subsequent notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established
through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested
enterprise, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or
liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC
residents or entities to penalties under PRC foreign exchange administration regulations. See "Risk Factors-Risks Related to Doing
Business in China-PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial
owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary or limit our PRC
subsidiary's ability to increase their registered capital or distribute profits."
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Regulations
on Stock Incentive Plans
SAFE
promulgated the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive
Plan of Overseas Publicly Listed Company, or the Stock Incentive Plan Notice, in February 2012, replacing the previous rules issued by
SAFE in March 2007. Pursuant to the Stock Incentive Plan Notice and other relevant rules and regulations, PRC residents participating
in stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and follow certain
other procedures. Participants of a stock incentive plan who are PRC residents must conduct the SAFE registration and other procedures
with respect to the stock incentive plan through a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed
company or another qualified institution appointed by the PRC subsidiary. In addition, the PRC agent is required to update the relevant
SAFE registration should there be any material change to the stock incentive plan, the PRC agent or other material changes. The PRC agent
must, on behalf of the PRC residents who have the right to exercise the employee stock options, apply to SAFE or its local branches for
an annual quota for the payment of foreign currencies in connection with the PRC residents' exercise of the employee stock options.
The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends
distributed by the overseas listed companies must be remitted into the bank accounts in the PRC opened by the PRC agents prior to distribution
to such PRC residents.
We
have adopted an equity incentive plan, under which we will have the discretion to award incentives and rewards to eligible participants.
We have advised the recipients of awards under our equity incentive plan to handle relevant foreign exchange matters in accordance with
the Stock Incentive Plan Notice. However, we cannot guarantee that all employees awarded equity-based incentives can successfully register
with SAFE in full compliance with the Stock Incentive Plan Notice. See "Risk Factors-Risks Relating to Doing Business in China-Any
failure to comply with PRC regulations regarding employee share incentive plans may subject the PRC plan participants or us to fines
and other legal or administrative sanctions."
Regulations
on Dividend Distribution
Distribution
of dividends of foreign investment enterprises are mainly governed by the Foreign Investment Enterprise Law, issued in 1986 and amended
in 2000 and 2016 respectively, and the Implementation Rules under the Foreign Investment Enterprise Law, issued in 1990 and amended in
2001 and 2014 respectively. Under these regulations, foreign investment enterprises in the PRC may distribute dividends only out of their
accumulative profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, no less than 10% of
the accumulated profits of the foreign investment enterprises in the PRC are required to be allocated to fund certain reserve funds each
year unless these reserves have reached 50% of the registered capital of the enterprises. A PRC company is not permitted to distribute
any profits until any losses from previous fiscal years have been offset. Profits retained from prior fiscal years may be distributed
together with distributable profits from the current fiscal year. Under our current corporate structure, our BVI holding company may
rely on dividend payments from IST, which is a wholly foreign-owned enterprise incorporated in China, to fund any cash and financing
requirements we may have. Limitation on the ability of our consolidated VIEs to make remittance to IST and on the ability of IST to pay
dividends to us could limit our ability to access cash generated by the operations of those entities. See "Risk Factors-Risks Relating
to Doing Business in China-- Restrictions under PRC law on our PRC subsidiaries' ability to make dividends and other distributions
could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends
to you, and otherwise fund and conduct our business."
62
Dividend
Withholding Tax
In
March 2007, the SCNPC enacted the Enterprise Income Tax Law which became effective on January 1, 2008 and last amended on December 29,
2018. The PRC State Council promulgated the Implementation Rules of the Enterprise Income Tax Law on December 6, 2007, which became effective
on January 1, 2008 and was partially amended on April 23, 2019. According to Enterprise Income Tax Law and its Implementation Rules,
dividends payable by a foreign-invested enterprise in China to its foreign enterprise investors are subject to a 10% withholding tax,
unless any such foreign investor's jurisdiction of incorporation has a tax treaty with China that provides for a preferential withholding
arrangement. Pursuant to the Notice of the State Administration of Taxation on Negotiated Reduction of Dividends and Interest Rates,
issued on January 29, 2008 and supplemented and revised on February 29, 2008, and the Arrangement between Mainland China and the Hong
Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income,
which became effective on December 8, 2006 and applicable to income derived in any year of assessment commencing on or after April 1,
2007 in Hong Kong and in any year commencing on or after January 1, 2007 in the PRC, such withholding tax rate may be lowered to 5% if
a Hong Kong enterprise is deemed the beneficial owner of any dividend paid by a PRC subsidiary by PRC tax authorities and holds at least
25% of the equity interest in that particular PRC subsidiary at all times within the 12-month period immediately prior to the distribution
of the dividends. Furthermore, pursuant to the Announcement on Issues concerning "Beneficial Owners" in Tax Treaties issued
on February 3, 2018 by the State Administration of Taxation, when determining the status of "beneficial owners," a comprehensive
analysis may be conducted through materials such as articles of association, financial statements, records of capital flows, minutes
of board of directors, resolutions of board of directors, allocation of manpower and material resources, the relevant expenses, functions
and risk assumption, loan contracts, royalty contracts or transfer contracts, patent registration certificates and copyright certificates,
etc. However, even if an applicant has the status as a "beneficiary owner," if the competent tax authority finds necessity
to apply the principal purpose test clause in the tax treaties or the general anti-tax avoidance rules stipulated in domestic tax laws,
the general anti-tax avoidance provisions shall apply.
Enterprise
Income Tax
In
December 2007, the State Council promulgated the Implementing Rules of the Enterprise Income Tax Law, or the Implementing Rules, which
became effective on January 1, 2008. The Enterprise Income Tax Law and its relevant Implementing Rules (i) impose a uniform 25% enterprise
income tax rate, which is applicable to both foreign invested enterprises and domestic enterprises (ii) permits companies to continue
to enjoy their existing tax incentives, subject to certain transitional phase-out rules and (iii) introduces new tax incentives, subject
to various qualification criteria.
The
Enterprise Income Tax Law also provides that enterprises organized under the laws of jurisdictions outside China with their "de
facto management bodies" located within China may be considered PRC resident enterprises and therefore be subject to PRC enterprise
income tax at the rate of 25% on their worldwide income. The Implementing Rules further define the term "de facto management body"
as the management body that exercises substantial and overall management and control over the production and operations, personnel, accounts
and properties of an enterprise. If an enterprise organized under the laws of jurisdiction outside China is considered a PRC resident
enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, it would be subject
to the PRC enterprise income tax at the rate of 25% on its worldwide income. Second, a 10% withholding tax would be imposed on dividends
it pays to its non-PRC enterprise shareholders and with respect to gains derived by its non-PRC enterprise shareholders from transfer
of its shares. Dividends paid to non-PRC individual shareholders and any gain realized on the transfer of equity by such shareholders
may be subject to PRC tax at a rate of 20%, if such income is deemed to be from PRC sources. See "Risk Factors-Risks Relating to
Doing Business in China-Under the Enterprise Income Tax Law, we may be classified as a "resident enterprise" of China. Such
classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders."
On
October 17, 2017, the State Administration of Taxation issued the Bulletin on Issues Concerning the Withholding of Non-PRC Resident Enterprise
Income Tax at Source, or Bulletin 37, which replaced the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers
by Non-PRC Resident Enterprises issued by the State Administration of Taxation on December 10, 2009, and partially replaced and supplemented
rules under the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or Bulletin
7, issued by the State Administration of Taxation on February 3, 2015. Under Bulletin 7, an "indirect transfer" of assets,
including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct
transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose
of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise
income tax. In respect of an indirect offshore transfer of assets of a PRC establishment, the relevant gain is to be regarded as effectively
connected with the PRC establishment and therefore included in its enterprise income tax filing, and would consequently be subject to
PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immoveable properties in China or to equity
investments in a PRC resident enterprise, which is not effectively connected to a PRC establishment of a non-resident enterprise, a PRC
enterprise income tax at 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements,
and the party who is obligated to make the transfer payments has the withholding obligation. Pursuant to Bulletin 37, the withholding
party shall declare and pay the withheld tax to the competent tax authority in the place where such withholding party is located within
7 days from the date of occurrence of the withholding obligation. Both Bulletin 37 and Bulletin 7 do not apply to transactions of sale
of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange.
See "Risk Factors-Risks Relating to Doing Business in China-We and our shareholders face uncertainties with respect to indirect
transfers of equity interests in PRC resident enterprises or other assets attributed to a Chinese establishment of a non-Chinese company,
or immovable properties located in China owned by non-Chinese companies."
63
Value-Added
Tax
Pursuant
to the Provisional Regulations on Value-Added Tax of the PRC, or the VAT Regulations, which were promulgated by the State Council on
December 13, 1993, and took effect on January 1, 1994, and were amended on November 10, 2008, February 6, 2016, and November 19, 2017,
respectively, and the Rules for the Implementation of the Provisional Regulations on Value Added Tax of the PRC, which were promulgated
by the Ministry of Finance, on December 25, 1993, and were amended on December 15, 2008, and October 28, 2011, respectively, entities
and individuals that sell goods or labor services of processing, repair or replacement, sell services, intangible assets, or immovables,
or import goods within the territory of the People's Republic of China are taxpayers of value-added tax. The VAT rate is 17% for
taxpayers selling goods, labor services, or tangible movable property leasing services or importing goods, except otherwise specified;
11% for taxpayers selling goods, labor services, or tangible movable property leasing services or importing goods, except otherwise specified;
6% for taxpayers selling services or intangible assets.
According
to Provisions in the Notice on Adjusting the Value added Tax Rates, or the Notice, issued by the State Administration of Taxation and
the Ministry of Finance, where taxpayers make VAT taxable sales or import goods, the applicable tax rates shall be adjusted from 17%
to 16% and from 11% to 10%, respectively. The Notice took effect on May 1, 2018, and the adjusted VAT rates took effect at the same time.
Pursuant to the Notice of the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs of
the PRC on Relevant Policies for Deepening the Value-Added Tax Reform, which was promulgated on March 20, 2019 and became effective on
April 1, 2019, the tax rate of 16% applicable to the VAT taxable sale or import of goods by a general VAT taxpayer shall be adjusted
to 13%, and the tax rate of 10% applicable thereto shall be adjusted to 9. On September 30, 2019, the Ministry of Finance and the State
Taxation Administration jointly issued the Announcement on Clarifying the VAT Additional Deduction Policy for the Living Services, pursuant
to which, from October 1, 2019 to December 31, 2021, the taxpayers engaging in providing living services are allowed to deduct additional
15% of the deductible input VAT amount for the current period from the payable tax. For aforementioned taxpayers providing production
and living services relating to Announcement on Policies for Deepening the VAT Reform and Announcement on Clarifying the VAT Additional
Deduction Policy for the Living Services, the input VAT additional deduction policies is further extended to December 31, 2022 according
to the regulations. From January 1, 2023 to December 31, 2023, the VAT Additional Deduction policy is implemented in accordance with
the following provisions: (i). Taxpayers in the productive service industry are allowed to add 5% of the current deductible input tax
to offset the taxable amount; (ii). Taxpayers in the lifestyle service industry are allowed to deduct 10% of the current deductible input
tax to offset the taxable amount.
In
November 2011, the Ministry of Finance and the State Administration of Taxation promulgated the Pilot Plan for Imposition of Value-Added
Tax to Replace Business Tax, or the Pilot Plan. The Notice of the Ministry of Finance and the State Administration of Taxation on Implementing
the Pilot Plan of Replacing Business Tax with Value-Added Tax in an All-round Manner, issued on March 23, 2016, took effect on May 1,
2016. Pursuant to the Pilot Plan and the subsequent Notice, VAT at a rate of 6% is applied nationwide to revenue generated from the provision
of certain modern services in lieu of the prior Business Tax.
New
Overseas Listing Rules issued by the Chinese Government
The
PRC government has recently indicated an intent to take actions to exert more oversight and control over offerings that are conducted
overseas and/or foreign investment in China-based issuers. For example, on July 6, 2021, the relevant PRC government authorities made
public the Opinions on Strictly Scrutinizing Illegal Securities Activities in Accordance with the Law, or the Opinions. These Opinions
emphasized the need to strengthen the administration over illegal securities activities and the supervision of overseas listings by China-based
companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the
risks and incidents faced by China-based overseas-listed companies.
64
On
December 24, 2021, the CSRC issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing
by Domestic Companies (Draft for Comments) and the Administrative Measures for the Filing of Overseas Securities Offering and Listing
by Domestic Companies (Draft for Comments), collectively the Draft Overseas Listing Regulations, for public comment until January 23,
2022.
Following
issuance of the Draft Overseas Listing Regulations, on February 17, 2023, the CSRC issued the CSRC Filing Notice, stating that the CSRC
has published the Trial Measures and Listing Guidelines, collectively the Trial Measures and Listing Guidelines or the Oversea Listing
Rules. Among others, the Oversea Listing Rules provide that overseas offerings and listings by PRC domestic companies shall:
(i)
require submission of relevant materials that contain a filing report and a legal opinion, providing truthful, accurate and complete
information on matters including but not limited to the shareholders of the issuer. Where the filing documents are complete and in compliance
with stipulated requirements, the CSRC shall, within 20 working days after receipt of filing documents, conclude the filing procedure
and publish filing results on the CSRC website. Where filing documents are incomplete or do not conform to stipulated requirements, the
CSRC shall request supplementation and amendment thereto within five working days after receipt of the filing documents. The issuer should
then complete supplementation and amendment within 30 working days;
(ii)
abide by laws, administrative regulations and relevant state rules concerning foreign investment in China, state-owned asset administration,
industry regulation and outbound investment, and shall not disrupt the PRC domestic market order, harm state or public interests or undermine
the lawful rights and interests of PRC domestic investors;
(iii)
abide by national secrecy laws and relevant provisions. Necessary measures shall be taken to fulfill confidentiality obligations. Divulgence
of state secrets or working secrets of government agencies is strictly prohibited. Provision of personal information and important data,
etc., to overseas parties in relation to overseas offering and listing of PRC domestic companies shall be in compliance with applicable
laws, administrative regulations and relevant state rules; and
(iv)
be made in strict compliance with relevant laws, administrative regulations and rules concerning national security in the spheres of
foreign investment, cybersecurity, data security, etc., and issuers shall duly fulfill their obligations to protect national security.
If the intended overseas offering and listing necessitates a national security review, relevant security review procedures shall be completed
according to the law before the application for such offering and listing is submitted to any overseas parties such as securities regulatory
agencies and trading venues.
The
Trial Measures came into effect on March 31, 2023. PRC domestic companies seeking to offer and list securities (which, for the purposes
of the Trial Measures, are defined thereunder as equity shares, depository receipts, corporate bonds convertible to equity shares, and
other equity securities that are offered and listed overseas, either directly or indirectly, by PRC domestic companies) in overseas markets,
either via direct or indirect means, must file with the CSRC within three working days after their application for an overseas listing
is submitted.
The
Trial Measures provide that where a PRC domestic company seeks to indirectly offer and list securities in overseas markets, the issuer
shall designate a major domestic operating entity, which shall, as the domestic entity responsible, file with the CSRC. The Trial Measures
stipulate that an overseas listing will be determined as "indirect" if the issuer meets both of the following conditions:
(1) 50% or more of any of the issuer's operating revenue, total profit, total assets or net assets as documented in its audited
consolidated financial statements for the most recent accounting year are accounted for by PRC domestic companies (Condition I), and
(2) the main parts of the issuer's business activities are conducted in the PRC, or its main places of business are located in
the PRC, or the senior managers in charge of its business operations and management are mostly Chinese citizens or domiciled in the PRC
(Condition II); whether Chinese citizens from Taiwan, Hong Kong, and Macau are included in the foregoing specification is not specified.
The determination as to whether or not an overseas offering and listing by PRC domestic companies is indirect shall be made on a 'substance
over form' basis; the Listing Guidelines further stipulate that if an issuer not satisfying Condition I submits an application
for issuance and listing in overseas markets in accordance with relevant non-PRC issuance regulations requiring such issuer to disclose
risk factors mainly related to the PRC, the securities firm(s) and the issuer's PRC counsel should follow the principle of "substance
over form" in order to identify and argue whether the issuer should complete a filing under the Trial Measures. Subsequent securities
offerings of an issuer in (i) the same overseas market where it has previously offered and listed securities, and (ii) an overseas market
other than one where the issuer has previously offered and listed securities shall be filed with the CSRC within three working days after
offerings are completed. Additionally, the Trial Measures stipulate that after an issuer has offered and listed securities in an overseas
market, the issuer shall submit a report to the CSRC within three working days after the occurrence and public disclosure of (i) a change
of control thereof, (ii) investigations of or sanctions imposed on the issuer by overseas securities regulators or relevant competent
authorities, (iii) changes of listing status or transfers of listing segment, and (iv) a voluntary or mandatory delisting.
65
The
CSRC Filing Notice states that, beginning from March 31, 2023, PRC domestic enterprises which have already issued and listed securities
overseas and fall within the scope of filing under the Trial Measures shall be considered Existing Listed Enterprises. Existing Listed
Enterprises are not required to complete filings immediately; rather, Existing Listed Enterprises should complete filings if they are
subsequently involved in matters require filings, such as follow-on financing activities, in accordance with the Trial Measures.
There
is a possibility that we may be deemed as an Existing Listed Enterprise as defined under the CSRC Filing Notice, and that future offerings
of listed securities or listings outside China by us may be subject to CSRC filing requirements in accordance with the Trial Measures.
Regulations
Relating to Anti-Monopoly
The
currently effective Anti-Monopoly Law was promulgated by SCNPC in 2007 and most recently amended on June 24, 2022. Pursuant to the Anti-Monopoly
Law, the operators of a concentration of undertakings which reaches the standard for declaration shall make an advance declaration to
the Anti-Monopoly Law enforcement authority under the State Council. The fines for illegal concentration of business operators shall
be "no more than ten percent of its preceding year's sales revenue if the concentration of business operator has or may have
an effect of excluding or limiting competition; or a fine of up to RMB5 million if the concentration of business operator does not have
an effect of excluding or limiting competition." Pursuant to the Anti-Monopoly Law, the authority may require the operators to
make a declaration where there is evidence that the concentration has or may have the effect of eliminating or restricting competition,
even if such concentration does not reach the filing threshold.
On
February 7, 2021, the Anti-Monopoly Committee of the State Council promulgated the Anti-Monopoly Guidelines for the Internet Platform
Economy Sector which stipulates that any concentration of undertakings involving variable interest entities shall fall within the scope
of antimonopoly review. Furthermore, the Guidelines to Anti-Monopoly in the Field of Internet Platforms prohibit certain monopolistic
acts of internet platforms so as to protect market competition and safeguard interests of users and undertakings participating in internet
platform economy, including without limitation, prohibiting platforms with dominant position from abusing their market dominance (such
as discriminating customers in terms of pricing and other transactional conditions using big data and analytics, coercing counterparties
into exclusivity arrangements, using technology means to block competitors' interface, favorable positioning in search results
of goods displays, using bundle services to sell services or products, compulsory collection of unnecessary user data). On August 17,
2021, the SAMR issued the Provisions on Prohibition of Unfair Competition on the Internet (Draft for Comments), which prohibits business
operators from using data, algorithms and other technical means to commit traffic hijacking, interference, malicious incompatibility
and other improprieties to influence user choices or hinder or damage the normal operation of network products or services offered by
other business operators.
Seasonality
The
first quarter of the calendar year is typically the slowest season of the year due to the Chinese New Year holiday. During this period,
accounts receivable collection is very slow and we also need to prepare for upcoming busier seasons by making payments for inventory.
66
C.
Organizational Structure
See
"A. History and Development of the Company-Corporate Structure" above for details of our current organizational structure.
D.
Property, Plant and Equipment
All
land in China is owned by the state or local governments. Individuals and companies are permitted to acquire rights to use land or land
use rights for specific purposes. In the case of land used for industrial purposes, the land use rights are granted for a period of 50
years. This period may be renewed at the expiration of the initial and any subsequent terms according to the relevant Chinese laws. Granted
land use rights are transferable and may be used as collateral for borrowings and other obligations.
Our
current executive offices are located at 21
st
Floor, Everbright Bank Building, Zhuzilin, Futian District, Shenzhen, Guangdong,
518040, China, of which IST currently has property use rights. This office facility property consists of approximately 1,200 square meters
and is currently being used as collateral for certain of our short-term bank loans. Our other properties primarily consist of media display
equipment, computer equipment, servers, licensed software, furniture and fixtures. We currently do not have any intention to make large
scale improvements or developments with respect to these properties.
We
believe that all our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our
business.
ITEM
4A. UNRESOLVED STAFF COMMENTS
Not
Applicable.
ITEM
5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You
should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated
financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking
statements. Our actual results may differ materially from those anticipated in these forward-looking statements because of various factors,
including those set forth under Item 3 "Key Information-D. Risk Factors" or in other parts of this annual report on Form
20-F. See also "Introductory Notes-Forward-looking Information."
A.
Operating Results
Overview
We
are a provider of cloud-app technologies for Smart City IoT platforms, digital advertising delivery, and other internet-based information
distribution systems in China. Our Internet ecosystem enables all participants of the new media community to efficiently promote branding,
disseminate information, and exchange resources. In addition, we provide a broad portfolio of software and hardware with fully integrated
solutions, including Information Technology infrastructure, Internet-enabled display technologies, and IoT platforms to customers in
government, education, residential community management, media, transportation, and other private sectors.
We
were founded in 1993. As of December 31, 2023, we had approximately 56 full-time employees.
Prior
to 2014, we generated majority of our revenues through selling our products to public service entities to help improve their operational
efficiency and service quality. Our representative customers included China Ministry of Public Security, provincial bureaus of public
security, fire departments, traffic bureaus, police stations, human resource departments, urban planning boards, civic administrations,
land resource administrations, mapping and surveying bureaus, and the Shenzhen General Station of Exit and Entry Frontier Inspection.
In
2014, we generated revenues from sales of hardware products, software products, system integration services, and related maintenance
and supporting services. Starting in 2015, with the introduction of our cloud-based software as a service (SaaS) offering, we generated
additional recurring monthly revenues from SaaS fees. The revenue from SaaS was still small in 2018 and 2019, which is expected to pick
up in future years along with the large-scale roll-out of our cloud-based new media terminals.
67
In
May 2017, we completed the business transformation and rolled out CAT and IoT technology based digital ads distribution network and new
media resource sharing platform in the out-of-home advertising market. In 2017, 2018 and 2019, we generated most revenue from selling
fully integrated ads display terminals. In 2020, we have a portion of revenue generated from the sale of cloud severs as part of our
CBT business. The revenue generated from SaaS and other software products and services remained small.
In
2021, we ventured into the blockchain related business through the launch of cryptocurrency mining operations. However, in December 2022,
the Company entered into a series of contracts with certain third parties to sell its cryptocurrency mining and related equipment for
a total sale price of approximately $1.08 million. The Company also terminated the leases for both the office facility and storage rooms,
which were previously used to house most of its mining machines for its cryptocurrency mining operations, and laid off relevant employees.
As a result, the Company had ceased its cryptocurrency mining business by December 31, 2022.
Recent
Developments
In
March and April 2023, the Company entered into two long-term strategic cooperation agreements (the "Agreements") with Zhaoyuan
City, Shandong Province and Wuxuan County, Guangxi Province, respectively. Under the Agreements, the Company will provide Taoping's
cloud-based intelligent product solutions, including its IoT Smart Rest Station, fully autonomous street sweeper, smart large screen
displays, and Blue Box off-grid wastewater treatment solution. Zhaoyuan City and Wuxuan County will provide the Company with multiple
channels of support and preferential policies. As part of the Agreements, both parties will also work together on low-carbon environmental
protection, urban renewal, rural ecological revitalization, and other related projects.
Leveraging
its strong technological reserves and advanced supporting technologies such as AI and IoT, the Company will provide Zhaoyuan City and
Wuxuan County with smart city renewal solutions and technical support, and implement environmental governance projects such as wastewater,
waste gas, and garbage treatment. Based on the concept of efficient and low-carbon environmental governance, the Company has combined
its digital and intelligent innovative technology products, including its IoT Smart Rest Station with fully autonomous street sweeper
and its new off-grid wastewater treatment solution, which will effectively improve the overall public service and environmental protection
level for both urban and rural areas.
The
above collaborations are expected to continue to bring revenue streams for the Company in the future.
Principal
Factors Affecting Our Financial Performance
Demand
for Software Products and Services, Advertising, and High-End Server
The
revenue growth and profitability of our business depend on the overall market demand for software products and related services, high-end
data servers, and out-of-home advertising. The demand for our CBT products is attributable to rapid urbanization and rising living standards
in China. As a result of migration to the cities, individuals' disposable income and consumptions of information to assist their
purchases of goods and services increase as well. Consequently, our CBT products become increasingly receptive to advertisements displayed
at public locations. Meanwhile, rising competition has driven merchants and service providers to seek advertisements as a way to make
their brands visible and memorable that drives up the demand for innovative advertising technology like our cloud-based software and
services. COVID-19 pandemic has changed landscape of business operations and resulted in significant increase in working from remote
locations, on-line shopping, on-line education, on-line entertainment, and other on-line business transactions creating high demand for
high-end data storage servers to accommodate the surging internet information transmission.
The
demand for our TIT products is attributable to digitization of public services in China. Due to changes in policies and regulations in
China in 2012, various local governments started postponing IT projects they had previously contracted with us indefinitely. As a result,
many of our existing receivables became uncollectable. Starting 2013, we made a strategic decision to transition our business from servicing
the public sector to focusing on the private sector. We started completing our in-process IT projects and ceased taking on new customers
in the public sector. As a result, the TIT business has diminished throughout the years and gradually being phased out.
68
Taxation
Taoping
and Taoping Holdings were incorporated in the BVI, and not subject to taxation in that jurisdiction. Under the "anti-inversion"
rules of Section 7874 of the U.S. Internal Revenue Code, Taoping is treated for U.S. federal taxation purpose as a U.S. corporation and,
accordingly, is subject to U.S. federal income tax on its worldwide income with a maximum income tax rate of 21%.
No
provision for income tax in the United States has been made as Taoping has no taxable income in the United States.
IST
HK, and our former subsidiary, HPC Electronics (China) Co., Limited ("HPC") were incorporated in Hong Kong and subject to
a Hong Kong Profits Tax of 16.5% according to the current Hong Kong tax laws.
Under
the Chinese EIT Law, IST is approved as High Technology Enterprises and respective income tax rates were reduced to 15%. Biznest is approved
as software enterprises and enjoys EIT at the tax rate of 12.5%. TopCloud, ISIOT, iASPEC and Bocom are subject to regular EIT at 25%.
Business
Segment Information
Segment
information is consistent with how the Chief Operating Decision Maker, i.e., the Directors of the Company, review business health, make
investment, allocates resources and assess operating performances. Transfers and sales between reportable segments, if any, are recorded
at cost.
We
report financial and operational information in the following three segments:
(1)
Cloud-based
    Technology (CBT) segment - It includes the Company's cloud-based products, high-end data storage servers and related services
    sold to private sectors including new media, healthcare, education and residential community management, and among other industries
    and applications. In this segment, the Company generates revenues from the sales of hardware and software total solutions with proprietary
    software and content as well as from designing and developing software products specifically customized for private sector customers'
    needs for a fixed price. The Company includes the revenue and cost of revenue of high-end data storage servers in the CBT segment.
    Advertising services is included in the CBT segment, after the Company consummated the acquisition of TNM. Advertisements are delivered
    to the ads display terminals and vehicular ads display terminals through the Company's cloud-based new media sharing platform.
    Incorporation of advertising services complements the Company's out-of-home advertising business strategy.
(2)
Blockchain
    Technology (BT) segment - The BT segment is the Company's newly formed business sector in 2021. Cryptocurrency mining is the
    first initiative implemented in the BT segment. However, due to the decreased output and the highly volatile cryptocurrency market,
    the Company had ceased the operation of the BT segment by December 2022.
(3)
Traditional
    Information Technology (TIT) segment - The TIT segment includes the Company's project-based technology products and services
    sold to the public sector. The solutions the Company has sold primarily include Geographic Information Systems (GIS), Digital Public
    Security Technology (DPST), and Digital Hospital Information Systems (DHIS). In this segment, the Company generates revenues from
    sales of hardware and system integration services. As a result of the business transformation, the TIT segment is gradually being
    phased out in 2021.
For
more information regarding our operating segments, see Note 20 (Consolidated Segment Data) to our audited consolidated financial statements
included elsewhere in this report.
69
Results
of Operations
Comparison
of Years Ended December 31, 2023 and 2022
The
following table sets forth key components of our results of operations for fiscal years ended December 31, 2023 and 2022, both in dollars
and as a percentage of our revenue.
December 31, 2023
December 31, 2022
Amount
% of Revenue
Amount
% of Revenue
Revenue
$
38,635,635
100.00
%
$
24,233,463
100.00
%
Costs of revenue
29,783,354
77.09
%
17,003,414
70.17
%
Gross profit
8,852,281
22.91
%
7,230,049
29.83
%
Administrative expenses
(5,600,578
)
(14.50
)%
(6,149,981
)
(25.38
)%
Research and development expenses
(2,967,043
)
(7.68
)%
(3,606,653
)
(14.88
)%
Selling expenses
(482,358
)
(1.25
)%
(639,052
)
(2.64
)%
(Loss) from operations
(197,698
)
(0.51
)%
(3,165,637
)
(13.06
)%
Subsidy income
292,797
0.76
%
148,577
0.61
%
(Loss) from equity method investment
(8,031
)
(0.02
)%
(261,397
)
(1.08
)%
Other income (loss), net
267,292
0.69
%
3,314,433
13.68
%
Interest income
2,100
0.01
%
7,956
0.03
%
Interest expense
(580,630
)
(1.50
)%
(556,434
)
(2.30
)%
(Loss) before income taxes
(224,170
)
(0.58
)%
(512,502
)
(2.11
)%
Income tax (expense) benefit
(7,980
)
(0.02
)%
(69,869
)
(0.29
)%
Net loss from continuing operations
(232,150
)
(0.60
)%
(582,371
)
(2.40
)%
Net loss from discontinued operations
(465,791
)
(1.21
)%
(6,499,276
)
(26.82
)%
Net (loss)
(697,941
)
(1.81
)%
(7,081,647
)
(29.22
)%
Less: Net loss attributable to non- controlling interest
-
-
-
-
Net (loss) attributable to Company
$
(697,941
)
(1.81
)%
$
(7,081,647
)
(29.22
)%
Revenue.
We generate revenues from advertising, selling hardware, software, and other technology-related services to customers. For the year
ended December 31, 2023, our total revenue of continuing operations was $38.6 million, of which approximately $0.2 million was from related
parties, compared to total revenue of $24.2 million for the year ended December 31, 2022, an increase of $14.4 million, or 59.4%. The
increase was primarily due to an increase of $12.0 million revenue from products, and an increase of $4.0 million of software revenue,
offset by a decrease of $1.2 million of other revenue, and a decrease of $0.4 million of advertising revenue. The Company expects that
revenue for the year of 2024 would increase moderately as a result of the steady growth of its product sales and digital advertising,
as well as the additions of its new cloud-based intelligent products and solutions.
The
following table shows our revenue, percentage of revenue, cost of revenue and gross margin, by revenue categories:
Year Ended December 31, 2023
Year Ended December 31, 2022
% of
Cost of
Gross
% of
Cost of
Gross
Revenue
Revenue
Revenue
Margin
Revenue
Revenue
Revenue
Margin
Products
$
24,239,113
62.74
%
21,389,832
11.75
%
$
12,253,565
50.56
%
11,125,855
9.20
%
Software
8,798,802
22.77
%
4,145,233
52.89
%
4,820,454
19.89
%
665,846
86.19
%
Advertising
5,001,695
12.95
%
3,945,211
21.12
%
5,409,511
22.32
%
3,746,585
30.74
%
Others
596,025
1.54
%
303,078
49.15
%
1,749,933
7.23
%
1,465,128
16.28
%
Total
$
38,635,635
100.00
%
29,783,354
22.91
%
$
24,233,463
100.00
%
17,003,414
29.83
%
70
A
breakdown of revenue, percentage of revenue, cost of revenue and gross margin by segments is as follows:
Year Ended December 31, 2023
Year Ended December 31, 2022
% of
Cost of
Gross
% of
Cost of
Gross
Revenue
Revenue
Revenue
Margin
Revenue
Revenue
Revenue
Margin
TIT Segment
$
214,980
0.56
%
183,381
14.70
%
$
235,128
0.97
%
715,907
(204.48
)%
CBT Segment
38,420,655
99.44
%
29,599,973
22.96
%
23,998,335
99.03
%
16,287,508
32.13
%
Total
$
38,635,635
100.00
%
29,783,354
22.91
%
$
24,233,463
100.00
%
17,003,415
29.83
%
Cost
of revenue and gross profit
. As indicated in the tables above, our cost of revenue increased by $12.8 million, which were mainly
attributed to increases in cost of products of $10.3 million and cost of software of $3.5 million, or 75.2%, to $29.8 million, for the
year ended December 31, 2023, from $17.0 million for the year ended December 31, 2022. As a percentage of revenue, our cost of revenue
increased to 77.1% during the year ended December 31, 2023, from 70.2% during the year ended December 31, 2022. As a result, gross profit
as a percentage of revenue decreased to 22.9% for the year ended December 31, 2023 from 29.8% for the year ended December 31, 2022. The
decrease in the overall gross margin primarily resulted from lower margin of software and advertising.
Administrative
expenses
. Our administrative expenses consist primarily of compensation and benefits for our general management, finance and administrative
staff, professional advisor consulting fees, audit fees, and other expenses incurred in connection with general operations. Our administrative
expenses decreased by $0.5 million, or 8.9%, to $5.6 million for the year ended December 31, 2023, from $6.1 million for the year ended
December 31, 2022. As a percentage of revenue, administrative expenses decreased to 14.5% for 2023, from 25.4% for 2022. Such decrease
was primarily due to a decrease of $0.4 million of professional service fee, a decrease of $0.3 million in depreciation expenses, a decrease
of foreign currency exchange loss of $0.4 million, and a decrease of $0.2 million in office expenses, offset by increase of $1.0 million
in share-based compensation to certain directors, executive officers, employees and consultants. We expect that the administrative expenses
in 2024 will decrease as a result of the decrease of share-based compensation. As a percentage of revenue, administrative expenses will
decrease as result of the expected additions of new revenue streams.
Research
and development expenses
. Our research and development expenses consist primarily of personnel related expenses, as well as costs
associated with new software and hardware development and enhancement. Our research and development expenses decreased by $0.6 million,
or 17.7%, to $3.0 million for the year ended December 31, 2023, from $3.6 million for the year ended December 31, 2022. Such decrease
was primarily due to the decrease in depreciation of R&D related hardware equipment and software, and the decrease in payroll and
benefits to R&D staff. As a percentage of revenue, research and development expenses decreased to 7.7% for 2023, from 14.9% for 2022.
We expect that the R&D expenses in 2024 will be consistent with that of fiscal 2023, while as a percentage of revenue, R&D expenses
will slightly decrease.
Selling
expenses
. Our selling expenses consist primarily of the compensation and benefits to our sales and marketing staff, business entertainment
expenses, and marketing expenses. Our selling expenses decreased by $0.16 million, or 24.5%, to $0.48 million for the year ended December
31, 2023, from $0.64 million for the year ended December 31, 2022. This decrease was due to the decrease of the selling activities related
costs. We expect that the selling expenses in 2024 will increase in line with revenue increase, while as a percentage of revenue, selling
expenses will slightly decrease.
Subsidy
income
. Our subsidy income consists primarily of the compensation and benefits to governmental subsidies. Our subsidy income increased
by $0.14 million, or 97.1%, to $0.29 million for the year ended December 31, 2023, from $0.15 million for the year ended December 31,
2022.
Other
income (loss)
. Our other income decreased by $3.0 million, or 91.9%, to $0.3 million for the year ended December 31, 2023, from $3.3
million for the year ended December 31, 2022. Other income in 2022 was mainly generated from an income of approximately $3.0 million
for disposition of a subsidiary.
Interest
expense
. Interest expense for the year ended December 31, 2023 was approximately $0.6 million, compared to interest expense of approximately
$0.6 million in 2022.
71
Income
tax expense
. We recorded income tax expense of $7,980 for the year ended December 31, 2023, as compared to $69,869 of income tax
expense in 2022.
Net
loss (income) from discontinued operations.
Net loss from discontinued operations for the year ended December 31, 2023 was approximately
$0.5 million, compared to a net loss of approximately $6.5 million in 2022.
Net
loss attributable to Company
. As a result of the cumulative effect of the foregoing factors, we had a net loss attributable to the
Company of $0.7 million for the year ended December 31, 2023, as compared to net loss of $7.1 million for the year ended December 31,
2022.
Comparison
of Years Ended December 31, 2022 and 2021
The
following table sets forth key components of our results of operations for fiscal years ended December 31, 2022 and 2021, both in dollars
and as a percentage of our revenue.
December 31, 2022
December 31, 2021
Amount
% of Revenue
Amount
% of Revenue
Revenue
$
24,233,463
100.00
%
$
19,390,579
100.00
%
Costs of revenue
17,003,414
70.17
%
12,719,125
65.59
%
Gross profit
7,230,049
29.83
%
6,671,454
34.41
%
Administrative expenses
(6,149,981
)
(25.38
)%
(11,638,691
)
(60.02
)%
Research and development expenses
(3,606,653
)
(14.88
)%
(4,479,045
)
(23.10
)%
Selling expenses
(639,052
)
(2.64
)%
(694,474
)
(3.58
)%
(Loss) from operations
(3,165,637
)
(13.06
)%
(10,140,756
)
(52.30
)%
Subsidy income
148,577
0.61
%
181,620
0.94
%
(Loss) from equity method investment
(261,397
)
(1.08
)%
(814,440
)
(4.20
)%
Other income (loss), net
3,314,433
13.68
%
(59,867
)
(0.31
)%
Interest income
7,956
0.03
%
4,631
0.02
%
Interest expense
(556,434
)
(2.30
)%
(928,352
)
(4.79
)%
(Loss) before income taxes
(512,502
)
(2.11
)%
(11,757,164
)
(60.63
)%
Income tax (expense) benefit
(69,869
)
(0.29
)%
(5,321
)
(0.03
)%
Net loss from continuing operations
(582,371
)
(2.40
)%
(11,762,485
)
(60.66
)%
Net loss (income) from discontinued operations
(6,499,276
)
(26.82
)%
1,837,626
9.48
%
Net (loss)
(7,081,647
)
(29.22
)%
(9,924,859
)
(51.18
)%
Less: Net loss attributable to non- controlling interest
-
-
-
-
Net (loss) attributable to Company
$
(7,081,647
)
(29.22
)%
$
(9,924,859
)
(51.18
)%
Revenue.
We generate revenues from advertising, selling hardware, software, and other technology-related services to customers. For the year
ended December 31, 2022, our total revenue of continuing operations was $24.2 million, of which approximately $0.2 million was from related
parties, compared to total revenue of $19.4 million for the year ended December 31, 2021, an increase of $4.8 million, or 25.0%. The
increase was primarily due to an increase of $1.5 million revenue from products, an increase of $2.8 million of advertising revenue,
an increase of $0.8 million of other revenue, offset by a decrease of $0.3 million of software revenue. The Company expects that revenue
for the year of 2023 would increase moderately as a result of the growth of advertising businesses, as well as the sales of its new cloud-based
intelligent products and solutions.
72
The
following table shows our revenue, percentage of revenue, cost of revenue and gross margin, by revenue categories:
Year Ended December 31, 2022
Year Ended December 31, 2021
% of
Cost of
Gross
% of
Cost of
Gross
Revenue
Revenue
Revenue
Margin
Revenue
Revenue
Revenue
Margin
Products
$
12,253,565
50.56
%
11,125,855
9.20
%
$
10,724,707
55.31
%
9,890,346
7.78
%
Software
4,820,454
19.89
%
665,846
86.19
%
5,174,422
26.69
%
582,490
88.74
%
Advertising
5,409,511
22.32
%
3,746,585
30.74
%
2,577,712
13.29
%
2,193,945
14.89
%
Others
1,749,933
7.23
%
1,465,128
16.28
%
913,738
4.71
%
52,344
94.27
%
Total
$
24,233,463
100.00
%
17,003,414
29.83
%
$
19,390,579
100.00
%
12,719,125
34.41
%
A
breakdown of revenue, percentage of revenue, cost of revenue and gross margin by segments is as follows:
Year Ended December 31, 2022
Year Ended December 31, 2021
% of
Cost of
Gross
% of
Cost of
Gross
Revenue
Revenue
Revenue
Margin
Revenue
Revenue
Revenue
Margin
TIT Segment
$
235,128
0.97
%
715,907
(204.48
)%
$
636,743
3.28
%
633,713
0.48
%
CBT Segment
23,998,335
99.03
%
16,287,508
32.13
%
18,753,836
96.72
%
12,085,412
35.56
%
BT Segment
-
-
-
-
-
-
-
-
Total
$
24,233,463
100.00
%
17,003,415
29.83
%
$
19,390,579
100.00
%
12,719,125
34.41
%
Cost
of revenue and gross profit
. As indicated in the tables above, our cost of revenue increased by $4.3 million, which were mainly attributed
to increases in cost of products of $1.2 million, cost of advertising of $1.6 million, cost of software of $0.1 million, and cost of
others of $1.4 million, or 33.7%, to $17.0 million, for the year ended December 31, 2022, from $12.7 million for the year ended December
31, 2021. As a percentage of revenue, our cost of revenue increased to 70.2% during the year ended December 31, 2022, from 65.6% during
the year ended December 31, 2021. As a result, gross profit as a percentage of revenue decreased to 29.8% for the year ended December
31, 2022 from 34.4% for the year ended December 31, 2021. The decrease in the overall gross margin primarily resulted from lower margin
of software and other revenue.
Administrative
expenses
. Our administrative expenses consist primarily of compensation and benefits for our general management, finance and administrative
staff, professional advisor consulting fees, audit fees, and other expenses incurred in connection with general operations. Our administrative
expenses decreased by $5.5 million, or 47.2%, to $6.1 million for the year ended December 31, 2022, from $11.6 million for the year ended
December 31, 2021. As a percentage of revenue, administrative expenses decreased to 25.4% for 2022, from 60.0% for 2021. Such decrease
was primarily due to a decrease of $4.5 million in allowance for credit losses, and decrease in share-based compensation of $2.6 million
to certain employees and consultants, offset by an increase of consulting fees of $0.6 million and an increase of foreign currency exchange
loss of $0.7 million. We expect that the administrative expenses in 2023 will be consistent with that of fiscal year 2022. As a percentage
of revenue, administrative expenses will decrease as result of the expected additions of new revenue streams.
Research
and development expenses
. Our research and development expenses consist primarily of personnel related expenses, as well as costs
associated with new software and hardware development and enhancement. Our research and development expenses decreased by $0.9 million,
or 19.5%, to $3.6 million for the year ended December 31, 2022, from $4.5 million for the year ended December 31, 2021. Such decrease
was primarily due to the decrease of amortization of intangible assets, decrease of depreciation of R&D related hardware equipment
and software, and the decrease in payroll and benefits to R&D staff. As a percentage of revenue, research and development expenses
decreased to 14.9% for 2022, from 23.1% for 2021. We expect that the R&D expenses in 2023 will be consistent with that of fiscal
2022, while as a percentage of revenue, R&D expenses will slightly decrease.
Selling
expenses
. Our selling expenses consist primarily of the compensation and benefits to our sales and marketing staff, business entertainment
expenses, and marketing expenses. Our selling expenses decreased by $0.06 million, or 8.0%, to $0.64 million for the year ended December
31, 2022, from $0.70 million for the year ended December 31, 2021. This decrease was due to the decrease of the other selling activities
related costs. We expect that the selling expenses in 2023 will increase in line with revenue increase, while as a percentage of revenue,
selling expenses will slightly decrease.
73
Subsidy
income
. Our subsidy income consists primarily of the compensation and benefits to governmental subsidies. Our subsidy income decreased
by $0.03 million, or 18.2%, to $0.15 million for the year ended December 31, 2022, from $0.18 million for the year ended December 31,
2021.
Other
income (loss)
. Other income for the year ended December 31, 2022 was approximately $3.3 million, compared to other loss of approximately
$0.1 million in 2021. Other income in 2022 was mainly the income generated from the write-off of approximately $0.3 million of accounts
payable and other payables, and an income of approximately $3.0 million for disposition of a subsidiary.
Interest
expense
. Interest expense for the year ended December 31, 2022 was approximately $0.6 million, compared to interest expense of approximately
$0.9 million in 2021. The decrease of interest expense in 2022 was mainly due to the decrease of interest accrual and the amortization
of debt discount from issuance of convertible notes in 2021.
Income
tax expense
. We recorded income tax expense of $69,869 for the year ended December 31, 2022, as compared to $5,321 of income tax
expense in 2021.
Net
loss (income) from discontinued operations.
Net loss from discontinued operations for the year ended December 31, 2022 was approximately
$6.5 million, compared to net income of approximately $1.8 million in 2021.
Net
loss attributable to Company
. As a result of the cumulative effect of the foregoing factors, we had a net loss attributable to the
Company of $7.1 million for the year ended December 31, 2022, as compared to net loss of $9.9 million for the year ended December 31,
2021.
Inflation
Inflation
does not materially affect our business or the results of our operations.
Foreign
Currency Fluctuations
See
Item 11 "Quantitative and Qualitative Disclosures about Market Risk-Foreign Exchange Risk."
B.
Liquidity and Capital Resources
As
of December 31, 2023, we had cash and cash equivalents of $1.3 million.
In
January 2020, the Company adopted ASU 2016-13, Topics 326-Credit Losses, Measurement of Credit Losses on Financial Instruments, which
replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL)
methodology, as its accounting standard for its trade accounts receivable.
The
Company considers the following factors when determining whether to permit a longer payment period or provide other concessions to customers:
●
the
    customer's past payment history;
●
the
    customer's general risk profile, including factors such as the customer's size, age, and public or private status;
●
macroeconomic
    conditions that may affect a customer's ability to pay; and
●
the
    relative importance of the customer relationship to the Company's business.
The
normal credit term is ranging from 1 month to 3 months after the customers' acceptance of high-end data storage servers or software,
and completion of advertising and other services, and ranging from 1 month to 6 months after the customers' acceptance of ads display
terminals. However, because of various factors of business cycle, the actual collection of outstanding accounts receivable may be beyond
the normal credit terms.
The
allowance for credit losses at December 31, 2023 and 2022, totaled approximately $25.6 million and $25.5 million, respectively, representing
management's best estimate. The following table describes the movement for allowance for credit losses during the year ended December
31, 2023.
Balance at December 31, 2022
$
25,484,295
Increase in allowance for credit losses
794,087
Foreign exchange difference
(686,436
)
Balance at December 31, 2023
$
25,591,946
74
The
following table summarizes the key cash flow components from our consolidated statements of cash flows for the periods indicated.
Cash
Flows
Years Ended December 31,
2023
2022
2021
Net cash (used in) operating activities
(2,326,017
)
(7,511,698
)
(16,149,498
)
Net cash (used in) provided by investing activities
(1,209,024
)
4,310,557
(14,000,268
)
Net cash provided by financing activities
3,839,344
22,716
33,028,157
Effects of exchange rate changes on cash and cash equivalents
(26,688
)
(329,601
)
555,961
Net increase (decrease) in cash and cash equivalents
277,615
(3,508,026
)
3,434,352
)
Cash, cash equivalents, and restricted cash at beginning of the year
1,023,240
4,531,266
1,096,914
Cash, cash equivalents, and restricted cash at end of the year
1,300,855
1,023,240
4,531,266
Operating
Activities
Net
cash used in operating activities was $2.3 million for the year ended December 31, 2023, $7.5 million for the year ended December 31,
2022 and $16.1 million for the year ended December 31, 2021. For the fiscal year 2023, net cash used in operating activities were primarily
attributed to increase in advances to suppliers, increase in inventories and the decrease in accounts payable. For the fiscal year 2022,
net cash used in operating activities were primarily attributed to the increase in accounts receivable for approximately $4.0 million
and approximately $6.0 million for decrease in accounts payable. Net cash used in operating activities in the fiscal year 2021 were primarily
attributed to increase in advance to suppliers for approximately $4.3 million and approximately $9.8 million for reduction of our payable
liabilities.
Investing
Activities
Net
cash used in investing activities was $1.2 million for the year ended December 31, 2023 and net cash provided by investing activities
was $4.3 million for the year ended December 31, 2022. Net cash used in investing activities was $14.0 million for the year ended December
31, 2021. Net cash used in investing activities in 2023 was mainly due to purchase of property and equipment of approximately $1.2 million.
Net cash provided by investing activities in 2022 was mainly due to purchase of property and equipment of approximately $1.8 million,
offset by the proceeds from sales of property and equipment of $1.1 million, and proceeds from sales of cryptocurrencies of $5.0 million.
Net cash used in investing activities in 2021 was mainly due to the purchase of property and equipment of approximately $11.3 million,
and the consideration paid for acquisition of $7.3 million, offset by the proceeds from sales of cryptocurrencies of $4.5 million.
Financing
Activities
Net
cash provided by financing activities was $3.8 million for the year ended December 31, 2023, mainly attributable to proceeds from borrowings
under short-term loans of $8.8 million, repayment of short-term loan of $7.2 million, proceeds from issuance of ordinary shares
of $1.7 million, and proceeds from issuance of convertible note of $0.6 million. Net cash provided by financing activities
was $22,700 for the year ended December 31, 2022, mainly attributable to proceeds from borrowings under short-term loans of $7.4 million,
and repayment of short-term loan of $7.4 million. Net cash provided by financing activities was $33.0 million for the year ended December
31, 2021, mainly attributable to receipts of the borrowings from related party of $3.1 million, and net proceeds of $28.3 million from
issuance of ordinary shares through private placement offerings.
75
Loan
Facilities
As
of December 31, 2023 and 2022, our loan facilities were as follows:
Short-term
bank loans
December 31,
2023
2022
Secured short-term loans
$
8,547,509
$
7,203,762
Total short-term bank loans
$
8,547,509
$
7,203,762
Management's
Plans
As
a result of the recovery of market conditions and customer demands, as well as the Company's continued efforts in diversifying
applications of its innovative Taoping smart cloud, the Company achieved a 59.4% year-over-year revenue growth and significantly reduced
net loss by $6.4 million in 2023. Cash and cash equivalents at December 31, 2023 was $1.3 million, compared to cash and cash equivalents
of $1.0 million a year ago.
The
Company incurred a net loss of $0.7 million for year ended December 31, 2023, compared to a net loss of $7.1 million for 2022. The improved
profitability was mainly due to the increase of gross profit, and the Company's cessation of cryptocurrency mining business in
2023. As of December 31, 2023, the Company had a working capital surplus of approximately $5.2 million, significantly improved from a
working capital deficit of $0.2 million as of December 31, 2022.
The
Company will continue to focus the efforts on the digital advertising and other cloud-based and AI-related products and applications.
Furthermore, its two core competencies, the Taoping national sales network and the highly scalable and compatible cloud platform, and
its strong software development capability, make it a valued partner by many other smart-community customers and solution providers.
In addition to seeking strategic acquisition to expand its digital advertising business, the Company continues to explore business opportunity
in the smart community and new energy sectors. Starting from April 2023, the Company has entered into a series of long-term strategic
cooperation agreements with various customers to provide Taoping's cloud-based intelligent product solutions, including smart large
screen, IoT smart rest station and off-grid wastewater treatment solution, which are expected to generate revenue and operating cashflow
for the Company for year 2023 and beyond.
If
the Company's execution of business strategies is not successful in addressing its current financial concerns, additional capital
raise from issuing equity security or debt instrument or additional loan facility may occur to support required cash flows. The Company's
existing $8.5 million revolving bank loan, which was collateralized with the Company's office property, provides important capital
support for its operation. In addition, the Company has renewed the bank facility line with a value of approximately $2.6 million in
July 2023 and a value of approximately $4.9 million in September 2023, and both are valid for 12 months.
76
July
2023 Standby Equity Purchase Agreements
On
July 17, 2023, the Company entered into a public standby equity purchase agreement and a private standby equity purchase agreement with
an investor. Pursuant to the agreements, the Company has the right, but not the obligation, to sell to the investor up to $1,000,000
and $10,000,000, respectively, of its ordinary shares, within 24 months and 36 months, respectively, from the date of the agreements.
As of April 2024, the Company has raised a total of $3.3 million through this equity line offering. In conclusion, the Company believes
that it has the ability to raise needed capital to fund its operations and business growth, and is able to operate as a going concern.
However,
the Company can make no assurances that financing will be available for the amounts we need, or on terms commercially acceptable to us,
if at all. If one or all of these events do not occur or subsequent capital raise was insufficient to bridge financial and liquidity
shortfall, substantial doubt exists about the Company's ability to continue as a going concern. The consolidated financial statements
have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might
result from the outcome of this uncertainty.
September
2023 Securities Purchase Agreement and Convertible Promissory Note
On
September 27, 2023, the Company entered into a securities purchase agreement, pursuant to which the Company sold to the investor an
unsecured convertible promissory note (the "Note") with a 12-month maturity. The Note has the original principal amount
of $609,000.00 including the original issue discount of $44,000 and the investor's legal and other transaction costs of
$15,000. The Company anticipates using the proceeds for general working capital purposes. The investor may, at any time after six
months from the issue date, convert all or any part of the outstanding balance of the note, at a conversion price of $8.00 per
share. In addition, at any time after six months from the issue date, the investor may redeem all or any portion of the note,
subject to a maximum amount of $150,000 per month, into ordinary shares of the Company at a price equal to 80% multiplied by the
lowest daily volume-weighted average price during the 10 trading days immediately preceding the applicable redemption, subject to
certain adjustments and limitations. The investor also has the right, on any trading day and the following trading day, that any
intraday trade price of the ordinary shares is 10% greater than the previous measurement period's closing trade price (as
defined in the Note), to redeem all or any portion of the outstanding balance of the note into ordinary shares.
The
Note is recognized initially at fair value, net of debt discounts including original issue discount, transaction Expense Amount, and
allocation of proceeds to beneficial conversion feature, in the amount of $215,440. As of December 31, 2023, the remaining unamortized
debt discount was $159,785, and will be amortized through September 27, 2024. See "Notes to Consolidated Financial Statements-
16. Convertible Note Payable" on page F-37 for additional information.
Intercompany
Transfers
Our
subsidiaries organized in the PRC may pay dividends only out of their accumulated profits. Our PRC subsidiaries are required to set aside
at least 10% of their after-tax profit to their general reserves until such reserves cumulatively reach 50% of their respective registered
capital. General reserves of our PRC subsidiaries are not distributable as cash dividends. Restrictions on our net assets also include
the conversion of local currency into foreign currencies, tax withholding obligations on dividend distributions, the need to obtain approval
from SAFE for loans to a non-PRC consolidated entity, and the covenants or financial restrictions related to outstanding debt obligations.
We are not aware of other restrictions on our net assets or the transferability of assets via loans or advances to our non-PRC consolidated
entities. As our operations are principally based in China, our non-PRC consolidated entities do not have material cash obligations.
77
The
following table provides the amount of our statutory general reserve, the amount of restricted net assets, consolidated net assets, and
the amount of restricted net assets as a percentage of consolidated net assets, as of December 31, 2023 and 2022:
December 31,
2023
2022
PRC general reserve - restricted net assets
$
10,209,086
$
10,209,086
Consolidated net assets
$
12,763,297
$
9,616,692
Restricted net assets as percentage of consolidated net assets
79.99
%
106.16
%
An
offshore holding company, as a shareholder of a Foreign Investment Entity (FIE), can make loans to the FIE, provided the parties being
in compliance with the PRC regulations governing such loans. Our parent company can make a shareholder loan to a PRC subsidiary provided
that (i) the amount of the loan does not exceed the difference between the total investment and registered capital as approved by the
local Administration for Industry and Commerce that issued the business license of the subsidiary; and (ii) before the loan can be converted
into RMB, the subsidiary reports to SAFE the intended use of proceeds (which cannot be to purchase domestic assets). The subsidiary can
finance the operations of iASPEC in accordance with the terms of the MSA with iASPEC.
As
of December 31, 2023 and 2022, the breakdown of our cash and cash equivalents (including restricted cash) was as follows:
December 31,
2023
2022
Cash located outside of the PRC
$
653,638
$
17,348
Cash held by other entities located in the PRC (except VIEs noted above)
647,217
997,243
Cash and cash equivalents from continuing operations
1,300,855
1,014,591
Cash and cash equivalents from discontinued operations
-
8,649
$
1,300,855
$
1,023,240
We
do not believe that there would be any material costs to transfer cash outside the PRC. In addition, as our operations are principally
based in China, our non-PRC consolidated entities do not incur material cash obligations. If nature of the businesses for our non-PRC
consolidated entities have changed in the future and require material amounts of cash being transferred to them, we will assess the feasibility
and plan cash transfers in accordance with foreign exchange regulations, taking into account of tax consequences. A company registered
in mainland China must apply for and receive an approval from the SAFE to remit foreign currency to any foreign country, and must comply
with PRC statutory reserve requirement as disclosed in Item 3 Key Information - D. Risk Factor of this annual report. As we conduct all
of our operations in China, our inability to convert cash and short-term investments held in RMB to other currencies will materially
affect our liquidity.
C.
Research and Development, Patents and Licenses, Etc.
Our
industry is characterized by extremely rapid technological change, evolving industry standards, and changing customer demands. These
conditions require continuous expenditures on product research and development to enhance existing products, create new products, and
avoid product obsolescence. See Item 3 "Key Information-D. Risk Factors-If we are unable to develop and offer competitive new products
and services, our future operations could be adversely affected," -"If we are unable to keep abreast with the rapid technological
changes in our industry, demand for our products and services could decline and adversely affect our revenue and growth," and -"Our
technology may become obsolete, which could materially adversely affect our ability to sell our products and services." For a detailed
analysis of research and development costs, see Item 5.A. "Operating Results-Results of Operations-Research and development expenses".
D.
Trend Information
Other
than as disclosed elsewhere in this annual report, we are not aware of any trend, uncertainty, demand, commitment or event that is reasonably
likely to have a material effect on our net revenues and income from continuing operations, profitability, liquidity, capital resources,
or would cause reported financial information not necessarily to be indicative of future operation results or financial condition.
78
E.
Accounting policies adopted on the preparation of financial statements
The
preparation of financial statements in conformity with U.S. GAAP requires our management to make assumptions, estimates and judgments
that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and
contingencies, if any. We consider our accounting policies to be those that require the more significant judgments and estimates in the
preparation of financial statements, including the following:
Revenue
Recognition
In
accordance with the ASC 606, the Company recognizes revenues net of applicable taxes, when goods or services are transferred to customers
in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services.
The
Company generates its revenues primarily from four sources: (1) product sales, (2) software sales, (3) advertising and (4) other sales.
Revenue is recognized when obligations under the terms of a contract with our customers are satisfied, generally, upon delivery of the
goods and services.
Revenue
- Products
Product
revenues are generated primarily from the sale of Cloud-Application-Terminal based digital ads display terminals with integrated software
essential to the functionality of the hardware to our customers (inclusive of related parties) and high-end data storage servers. Although
manufacturing of the products has been outsourced to the Company's Original Equipment Manufacturer (OEM) suppliers, the Company
has acted as the principal of the contract. The Company recognized the product sales at the point of delivery. The Company may from time
to time provide future unspecified software upgrades to the hardware products' essential software, which is expected to be infrequent
and, free of charge. Non-software service is mainly the one-time training session provided to the customer to familiarize them with the
software operation upon the customer's initial introduction to the software platform. The costs of providing infrequent software
upgrade and training are de minimis. As a result, the Company does not allocate transaction price to software upgrade and customer training.
Product sales are classified as "Revenue-Products" on the Company's consolidated statements of operations.
Revenue
- Software
The
Company designs and develops software products. Software development usually includes developing software, integrating various isolated
software systems into one, and testing the software. The design and build process, together with the integration of the various elements,
are generally determined to be essential to the functionality of the delivered software. The contracted price is usually paid at the
delivery of the software. The Company usually provides non-software services including after-sale support and training. The training
only occurs at the introduction of the software. The software is high ended and stable, after-sale support and subsequent upgrade or
enhancement are infrequent. The Company has estimated the costs associated with the non-software performance obligations and concludes
that these obligations are de minimis to the overall contract. Therefore, the Company does not further allocate transaction price.
The
Company usually completes the software support service in one-off and recognizes the revenue at the point of delivery of service because
the Company does not have an enforceable right to payment for performance completed to date. Revenues from software development contracts
are classified as "Revenue-Software" on the Company's consolidated statements of operations.
Revenue
- Advertising
The
Company generates revenues primarily from providing advertising slots to customers to promote their businesses by broadcasting advertisements
on identifiable digital ads display terminals and vehicular ads display terminals in different geographic regions and locations through
a cloud-based new media sharing platform. The Company also contracts individuals to promote special events or for various occasions.
The Company is only obligated to broadcast the advertisements to the contracted digital ads display terminals, and therefore allocates
100% of the transaction price to advertisement broadcasting. The transaction price for advertisement broadcasting is fixed based on the
numbers of advertisement delivery and duration of the contract, and has no variable consideration, or significant financing component,
or subsequent price change, and is not refundable.
79
The
Company recognizes the revenues, net of applicable taxes, from advertisement broadcasting contracts with customers over the contracted
advertising duration.
Revenue
- Cryptocurrency mining
The
Company has entered into digital asset mining pools by executing contracts with the mining pool operators to provide computing power
to the mining pool. The contracts are terminable under certain circumstances. Both the Company and the mining pool operator have the
right to terminate the contract at any time, with or without cause, and without compensation. In exchange for providing computing power,
the Company is entitled to a fractional share of the fixed cryptocurrency awards the mining pool operator receives (less digital asset
transaction fees to the mining pool operator, if any.) for successfully adding a block to the blockchain. The Company's fractional
share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power
contributed by all mining pool participants in solving the current algorithm. The contract first exists upon the successful placement
of a block on the blockchain by the pool operator because that is the point when the parties have performed their contract obligation
and neither party can unilaterally terminate the contract without compensating the other party.
Providing
computing power in digital asset transaction verification services is an output of the Company's ordinary activities. The provision
of providing such computing power is the only performance obligation in the Company's contract with mining pool operator.
The
transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value using the
quoted price from principal market of the related cryptocurrency on the date received, which is not materially different than the fair
value at the contract inception or at the time the Company has earned the award from the pools. The consideration is all variable. Because
it is not probable that a significant reversal of cumulative revenue will not occur (ASC 606-10-32-11), the consideration is constrained
until the mining pool operator successfully places a block (by being the first to solve an algorithm), and the Company receives confirmation
of the consideration it will receive, at which time revenue is recognized. There is no financing component, nor allocation of transaction
price in these transactions.
Revenue
- Other
The
Company also reports other revenue which comprises revenue generates from System upgrade and technical support services, platform service
fee, and rental income.
System
upgrade and technical support revenue is recognized when performance obligations are satisfied upon completion of the services. Platform
service fee is charged based on number of the display terminals used by the customers or a percentage of advertising revenue generated
by the display terminals. Platform service revenue is recognized on a monthly basis over the contract period.
The
Company follows ASC 842 – Leases that requires lessor to identify the underlying assets and allocate rental income among considerations
in lease and non-lease components. The Company owns two units of office space renting out to a third party and TNM under non-cancelable
operating lease agreements with lease terms of two years starting from May 1, 2022 and four years starting from July 1, 2022, respectively.
The lease agreements have fixed monthly rental payments, and no non-lease component or option for lessees to purchase the underlying
assets. The Company collects monthly rental payments from the lessees and recognizes rental income.
After
completion of the business acquisition on June 9, 2021, TNM became a subsidiary of the Company. The rental income from TNM has become
an intercompany revenue and been eliminated since June 9, 2021.
Contract
balances
The
Company records advances from customers when cash payments are received or due in advance of our performance.
80
Practical
expedients and exemptions
The
Company generally expenses sales commissions if any incurred because the amortization period would have been one year or less. In many
cases, the Company is approached by customers for customizing software products for their specific needs without incurring significant
selling expenses.
The
Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year
or less.
Accounts
Receivable, Accounts Receivable -related parties
Accounts
receivable are recognized and carried at carrying amount less an allowance for credit loss, if any. The Company maintains an allowance
for credit losses resulting from the inability of its customers to make required payments based on contractual terms. The Company reviews
the collectability of its receivables on a regular and ongoing basis according to historical trend, and estimates its provision for expected
credit losses on receivables aging analysis.
The
Company estimates allowance for credit losses for the anticipation of future economic condition and credit risk indicators of customers.
After all attempts to collect a receivable have failed, the receivable is written off against the allowance. In the event the Company
recovers amounts previously reserved for, the Company will reduce the specific allowance for credit losses.
Inventories
Inventories
are valued at the lower of cost (weighted average basis) and net realizable value. Net realizable value is the expected selling price
in the ordinary course of business minus any costs of completion, disposal, and transportation to make the sale.
The
Company performs an analysis of slow-moving or obsolete inventory periodically and any necessary valuation reserves, which could potentially
be significant, are included in the period in which the evaluations are completed. Any inventory impairment results in a new cost basis
for accounting purposes.
Cryptocurrencies
Cryptocurrencies
held, including Bitcoin and Ethereum, are accounted for as intangible assets with indefinite useful lives. An intangible asset with an
indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances
occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount
exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured.
If the carrying amount of the cryptocurrency exceeds its fair value, the Company recognizes an impairment loss in an amount equal to
that excess. Subsequent reversal of impairment losses is not permitted.
There
are no cash flows from cryptocurrencies included in net cash used in operating activities since the revenue recognized from mining is
a noncash activity. The sales of cryptocurrencies are included within investing activities in the consolidated statements of cash flows
and any realized gains or losses from such sales are included in other income (expense) in the consolidated statements of operations.
The Company accounts for its gains or losses in accordance with the first in first out (FIFO) method of accounting.
Long-term
investment
The
Company's long-term investment consists of investments accounted for under the equity method and equity investments without readily
determinable fair value. Pursuant to ASC 321, equity investments, except for those accounted for under the equity method, those that
result in consolidation of the investee and certain other investments, are measured at fair value, and any changes in fair value are
recognized in earnings. For equity securities without readily determinable fair value and do not qualify for the existing practical expedient
in ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820") to estimate fair value using the net asset value per
share (or its equivalent) of the investment, the Company elected to measure those investments at cost, less any impairment, plus or minus
changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any.
81
For
equity investments that the Company elects to measure at cost, less any impairment, plus or minus changes resulting from observable price
changes, the Company makes a qualitative assessment considering impairment indicators to evaluate whether investments are impaired at
each reporting date. Impairment indicators considered include, but are not limited to, a significant deterioration in the earnings performance
or business prospects of the investee, including factors that raise significant concerns about the investee's ability to continue
as a going concern, a significant adverse change in the regulatory, economic, or technologic environment of the investee and a significant
adverse change in the general market condition of either the geographical area or the industry in which the investee operates. If a qualitative
assessment indicates that the investment is impaired, the entity has to estimate the investment's fair value in accordance with
the principles of ASC 820. For equity investments without readily determinable fair value, the Company uses Level 3 inputs of fair value
accounting in accordance with ASC 820-10 and recognizes impairment loss other than temporary in the statement of operations equal to
the difference between its initial investment and its proportional share of the net book value of the investee's net assets which
approximates its fair value.
For
impairment on equity investments without readily determinable fair value, the Company uses Level 3 inputs of fair value accounting in
accordance with ASC 820-10 and recognizes impairment loss in the statement of operations equal to the difference between its initial
investment and its proportional share of the net book value of investee's net assets which approximates its fair value if those
are determined to be other than temporary.
Operating
leases - Right-of-use assets and lease liabilities
The
Company accounts for lease under ASC 842 "Leases", and also elects practical expedient not to separate non-lease component
from lease components in accordance with ASC 842-10-15-37 and instead to account for each separate lease component and the non-lease
components associated with that lease component as a single lease component. The Company also elects the practical expedient not to recognize
lease assets and lease liabilities for leases with a term of 12 months or less.
The
Company recognized a lease liability and corresponding right-to-use asset based on the present value of minimum lease payments discounted
at the Company's incremental borrowing rate. The Company records amortization and interest expense on a straight-line basis based
on lease terms and reduces lease liabilities upon making lease payments.
Income
Taxes
Income
taxes are provided on an asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes are
recognized for all significant temporary differences at enacted rates and classified as non-current in the financial statements. A valuation
allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion, or all
of, the deferred tax assets will not be realized. The Company classifies interest and/or penalties related to unrecognized tax benefits,
if any, as a component of income tax expense.
Discontinued
Operations
The
Company follows "ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting
Discontinued Operations and Disclosures of Disposals of Components of an Entity" for reporting discontinued operations. Under the
revised standard, a discontinued operation must represent a strategic shift that has or will have a major effect on an entity's
operations and financial results. Examples could include a disposal of a major line of business, a major geographical area, a major equity
method investment, or other major parts of an entity. The revised standard also allows an entity to have certain continuing cash flows
or involvement with the component after the disposal. Additionally, the standard requires expanded disclosures about discontinued operations
that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued
operations.
82
Recent
Accounting Pronouncements
Please
refer to Note 2 to our audited consolidated financial statements for a discussion of relevant pronouncements.
ITEM
6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.
Directors and Senior Management
The
following table sets forth certain information regarding our directors and senior management, as well as employees upon whose work we
are dependent, as of the date of this annual report.
NAME
AGE
POSITION
Jianghuai
    Lin
55
Chairman
    of the Board, Chief Executive Officer
Zhiqiang
    Zhao
53
President
    and Director
Liqiong
    (Iris) Yan
47
Chief
    Financial Officer
Zhixiong
    Huang
55
Chief
    Operating Officer
Guangzeng
    Chen
45
Chief
    Technology Officer
Huan
    Li
39
Chief
    Marketing Officer
Ping
    Cai
64
Director
Yong
    Jiang
50
Director
Remington
    C.H. Hu
58
Director
Mr.
Jianghuai Lin.
Mr. Lin has been the Chairman of Board of Directors and the Chief Executive Officer of the Company since 2006. Mr.
Lin has also served as the Chairman and Chief Executive Officer of our subsidiary, IST, since its incorporation in January 2006. During
the period from September 2000 to June 2004, Mr. Lin served as the President and Chief Executive Officer of Hong Kong United Development
Group, a consolidated enterprise engaging in investment, high technology, and education. Before that, during the period from February
1995 through August 2000, Mr. Lin was a Director and the General Manager of Fujian Wild Wolf Electronics Limited, a company engaged in
the business of manufacturing electrical consumer products. Mr. Lin holds a Master's Degree in Software Engineering from Wuhan
University and a Bachelor's Degree in Industrial Accounting from Xiamen University.
Mr.
Zhiqiang Zhao.
Mr. Zhao has been the President of the Company since August 2015 and a member of Board of Directors since June 19,
2012. Mr. Zhao has extensive experience in corporate operations and integrations, strategic planning, and human resource management.
From March 2003 to March 2005, Mr. Zhao served as Supervisor of Human Resources for the Foxconn Technology Group. From April 2005 to
July 2006, Mr. Zhao served as Administrative and Human Resource Director of iASPEC; and as Deputy General Manager of iASPEC from July
2006 to August 2010. From November 2010, Mr. Zhao began serving as the Chief Operating Officer and Vice President of the Company. From
August 2010, he was vice chairman of iASPEC. From July 2011, Mr. Zhao served as General Manager of ISIOT (former HPC Electronics (Shenzhen)
Ltd.). Mr. Zhao holds a Bachelor's Degree in Mechanical & Electrical Engineering from Inner Mongolia University.
Ms.
Liqiong (Iris) Yan.
Ms. Yan has been the Chief Financial Officer of the Company since May 2021. Ms. Yan has over ten years'
experience in finance, investor relations and corporate governance. She served as the Company's Assistant CFO between 2018 and
2021 and prior to that she was the Director of Investor Relations and Secretary of the Board of the Company since 2007. During her tenure,
Ms. Yan assisted in Company's NASDAQ listing, Company's strategic acquisitions and overseas equity/debt financings, and was
instrumental in strategy planning, financial management and capital strategy management. Ms. Yan is a Certified Management Accountant
(CMA) licensed by the Institute of Management Accountants. Ms. Yan received a postgraduate diploma in Investment from Fudan University
and a bachelor's degree in International Economics from Beijing Normal University.
Mr.
Zhixiong Huang.
Mr. Huang has been Chief Operating Officer of the Company since August 2015. Between July 2001 and March 2002, Mr.
Huang served as the General Manager of product development of Shenzhen Runsheng Information Systems Company Ltd., and was responsible
for overseeing general operations. From September 2002 and October 2006, Mr. Huang served as the deputy general manager of iASPEC, where
he supervised iASPEC's research and development activities and consulted on various sophisticated technical issues. From January
2006 to September 2013, he served as the Company's Vice President, and was Chief Technology Officer from December 2008 and September
2013. Mr. Huang holds a Bachelor's Degree in computer science from Hehai University in China, and has over twenty years of'
experience in information systems. Mr. Huang is currently a Director of the Shenzhen Computer Association, and an expert with the Shenzhen
Expert Association and the Shenzhen Science and Technology Innovation Association.
83
Mr.
Guangzeng Chen.
Mr. Chen has served as Chief Technology Officer of the Company since December 1, 2015. Mr. Chen joined the Company
as Vice President of the Research & Development Division in March 2014. Prior to joining the Company, Mr. Chen was a project manager
at CoolPad Group Limited, a Shenzhen-based telecommunications equipment company that was one of the top ten smartphone manufacturing
companies in China, from May 2011 to February 2014. Previously, Mr. Chen was the head of research and development at VideoHome, a Taiwanese
multimedia appliance manufacturer and exporter, from June 2004 to May 2011. Mr. Chen graduated from Zhengzhou University with a Bachelor's
Degree in Computer Science.
Mr.
Huan Li.
Mr. Li has served as Chief Marketing Officer of the Company since July 2021. He has over 15 years' experience in the
culture and media field. He has worked as a reporter for several media outlets including Asia Pacific Media Group. Mr. Li has been directly
responsible for the planning and operation management of a number of large-scale commercial and cultural projects. Mr. Li holds a Bachelor's
Degree in Journalism from Jiangsu Ocean University in China.
Ms.
Ping Cai.
Ms. Cai has been serving as an Associate Professor of Engineering at Shenzhen MSU-BIT University since August 2022. Prior
to her current role, she held the position of Associate Professor at the College of Big Data and Internet at Shenzhen Technology University
from August 2020 to July 2022. Before that, she made significant contributions to the academic community as an Associate Professor at
the College of Computer Science and Software Engineering in Shenzhen University from August 1988 to July 2020. Ms. Cai is an accomplished
academician, having edited a major textbook titled "Introduction to Computer" and co-edited four textbooks in collaboration
with others. She has demonstrated her commitment to research by presiding over two projects above the provincial level and publishing
more than ten research papers.
Her
outstanding contributions to education have been recognized through various honors, including winning one first prize and one second
prize for higher education teaching achievement in Guangdong Province. Additionally, she received one first prize for Excellent Teaching
Achievement at Shenzhen University and the prestigious award for Excellent Undergraduate Teacher of Shenzhen University. Ms. Cai earned
her Bachelor's degree in Computer Software from Nanjing University in 1982 and went on to achieve a Master's degree in Software
Engineering from Wuhan University in 2004. Her educational background, coupled with her extensive experience in academia, underscores
her dedication and expertise in the field of engineering and software development.
Dr.
Yong Jiang.
Dr. Jiang has been a member of Board of Directors of the Company since August 13, 2013. As a professor and supervisor
for Ph. D candidates, Dr. Jiang has been the Vice Director of Division of Information Science & Technology and the Director of Network
Center in the Graduate School at Shenzhen, Tsinghua University (GSST) since 2002. Dr. Jiang is a member of Association of Computing Machinery
(ACM), the world's largest educational and scientific computing society, and a member of China Computer Federation (CCF). He also
serves as the Vice Chairman of Shenzhen Association of Chief Information Officer, and a committee member of Shenzhen Association of Experts.
Dr. Jiang was majored in the research of next generation internet and computer network architecture, and has led more than 10 national-level
scientific research programs, including programs from National Natural Science Foundation of China (NSFC), the National 863 Program,
the pilot program from China Next Generation Internet (CNGI), and National Major Projects. Dr. Jiang graduated from the Department of
Computer Science and Technology of Tsinghua University.
Mr.
Remington C.H. Hu.
Mr. Hu has been a member of Board of Directors of the Company since June 19, 2012 and was a member of the Board
of CITN from October 30, 2009 until completion of the corporate reorganization on October 31, 2012. He is a seasoned executive with more
than 16 years of experience in corporate finance and investment management, and is the founder and CEO of Tomorrow Capital Limited, a
financial advisory firm. Prior to founding Tomorrow Capital Limited, Mr. Hu served, from February 2008 to July 2009, as Chief Financial
Officer of Yucheng Technologies Limited, a Nasdaq listed top IT solutions and BPO company servicing Chinese banking industry. From August
2004 to August 2007, Mr. Hu served as China Representative for CVM Capital Partners, LLC, the largest Taiwanese Venture Capital affiliated
with the largest Taiwanese private equity investment group. Earlier in his career, Mr. Hu founded and served, from June 1999 to June
2002, as Chief Financial Officer of eSoon Communications International Corp., a software start-up focusing on the then fast-growing CRM/CTI
market. He also served, from August 1996 to May 1999, as Vice President of Crimson Asia Capital Holdings, Ltd., former Asia's largest
venture capital firm backed by Taiwanese China Trust Financial Group. He began his career at Citibank, NA, as an Assistant Vice President
in the Taipei and Hong Kong. Mr. Hu holds a Master's Degree in Business Administration from the Wharton Business School and a Bachelor's
Degree in Computer Science and Information Engineering from the National Chiao Tung University.
84
There
is no arrangement or understanding with any major shareholders, customers, suppliers or others, pursuant to which any person named above
was selected as a director or member of senior management.
No
family relationship exists between any of the persons named above.
B.
Compensation
In
2023, we paid an aggregate of approximately $626,000 in cash compensation to our directors and senior management as a group. We do not
set aside or accrue any amounts for pension, retirement or other benefits for our directors and senior management. However, we reimburse
our directors for out-of-pocket expenses incurred in connection with their services in such capacity.
2016
Equity Incentive Plan, as amended
On
May 9, 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan, or the 2016 Plan, pursuant to which the Company
may offer up to five million ordinary shares as equity incentives to its directors, employees and consultants. Such number of shares
is subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends,
or other change in the corporate structure of the Company affecting the shares issuable under the 2016 Plan. On July 30, 2020, the Company
effectuated a 6-to-1 share combination, which effectively reduced the ordinary shares authorized to be issued under the 2016 Plan from
5,000,000 to 833,334. On May 9, 2021, the Board of Directors of the Company amended the 2016 Plan to, among other things, (1) increase
the number of ordinary shares authorized to be issued pursuant to the 2016 Plan by 4,166,666 to 5,000,000, and (2) extend the term of
the 2016 Plan to May 9, 2026. On August 1, 2023, the Company effectuated a 10-to-1 share combination, which effectively reduced the ordinary
shares authorized to be issued under the 2016 Plan from 5,000,000 to 500,000.
The
following paragraphs summarize the terms of our 2016 Plan:
Purpose
.
The purposes of the 2016 Plan are to promote the long-term growth and profitability of the Company and its Affiliates by stimulating
the efforts of Employees, Directors and Consultants of the Company and its Affiliates who are selected to be participants, aligning the
long-term interests of participants with those of shareholders, heightening the desire of participants to continue working toward and
contributing to our success, attracting and retaining the best available personnel for positions of substantial responsibility, and generally
providing additional incentive for them to promote the success of our business through the grant of Awards of or pertaining to the Company's
ordinary shares. The 2016 Plan permits the grant of ISOs, NSOs, Restricted Shares, Restricted Share Units, Share Appreciation Rights,
Performance Units and Performance Shares as the Administrator may determine.
Administration
.
The 2016 Plan may be administered by our Board or a committee. The 2016 Plan is currently being administered by our Compensation Committee.
The Administrator has the authority to determine the specific terms and conditions of all Awards granted under the 2016 Plan, including,
without limitation, the number of ordinary shares subject to each Award, the price to be paid for the ordinary shares and the applicable
vesting criteria. The Administrator has discretion to make all other determinations necessary or advisable for the administration of
the 2016 Plan.
85
Eligibility
.
NSOs, Restricted Shares, Restricted Share Units, Share Appreciation Rights, Performance Units and Performance Shares may be granted to
Employees, Directors or Consultants either alone or in combination with any other Awards. ISOs may be granted only to employees of the
Company, and of any Parent or Subsidiary.
Shares
Available for Issuance Under the 2016 Plan
. Subject to adjustment as described below, (a) the maximum aggregate number of Shares
that may be issued under the 2016 Plan is 500,000 ordinary shares, (b) to the extent consistent with Section 422 of the Code, not more
than an aggregate of 500,000 Ordinary Shares may be issued under ISOs, and (c) not more than 50,000 ordinary shares (or for Awards denominated
in cash, the Fair Market Value of 50,000 ordinary shares on the Grant Date), may be awarded to any individual Participant in the aggregate
in any one fiscal year of the Company, such limitation to be applied in a manner consistent with the requirements of, and only to the
extent required for compliance with, the exclusion from the limitation on deductibility of compensation under Code Section 162(m). The
number and class of shares available under the 2016 Plan are subject to adjustment in the event of certain reorganizations, mergers,
combinations, recapitalizations, share splits, share dividends, or other similar events which change the number or kind of shares outstanding.
Transferability
.
Unless otherwise provided in the 2016 Plan or otherwise determined by the Administrator, an Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Participant, only by the Participant. However, the Administrator may, at or after the grant of an Award other
than an ISO, provide that such Award may be transferred by the recipient to a "family member" (as defined in the 2016 Plan);
provided, however, that any such transfer is without payment of any consideration whatsoever and that no transfer shall be valid unless
first approved by the Administrator, acting in its sole discretion, and as required by the Company's memorandum and articles of
association. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator
deems appropriate.
Termination
of, or Amendments to, the 2016 Plan
. The Board may at any time amend, alter, suspend or terminate the 2016 Plan, provided that the
Company will obtain shareholder approval of any 2016 Plan amendment to the extent necessary and desirable to comply with Applicable Laws.
No amendment, alteration, suspension or termination of the 2016 Plan will impair the rights of any Participant, unless mutually agreed
otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company.
Termination of the 2016 Plan will not affect the Administrator's ability to exercise the powers granted to it hereunder with respect
to Awards granted prior to the date of such termination.
The
2016 Plan will expire on May 9, 2026, unless sooner terminated by the Board.
On
May 27, 2016, the following directors and officers were granted options to purchase ordinary shares of the Company under the 2016 Plan:
●
Jianghuai
    Lin, options to purchase 5,000 ordinary shares
●
Zhiqiang
    Zhao, options to purchase 3,334 ordinary shares
●
Zhixiong
    Huang, options to purchase 3,334 ordinary shares
●
Guangzeng
    Chen, options to purchase 2,500 ordinary shares
The
options are exercisable at the fair market value of the Company's ordinary shares on the grant date ($72.6 per share) with 40%
of the options vesting 18 months after the date of grant, 30% vesting 30 months after the date of grant and the remaining 30% vesting
42 months after the date of grant. On January 22, 2018, Messrs. Lin, Zhao, Huang and Chen partially exercised their options granted on
May 27, 2016 on a cashless basis, and received 1,194, 796, 796 and 597 ordinary shares of the Company, respectively. On July 31, 2020,
Messrs. Lin, Zhao, Huang and Chen partially exercised their options on a cashless basis, and received 525, 350, 350, 263 ordinary shares
of the Company, respectively.
On
May 17, 2017, Mr. Chen was granted options to purchase additional 4,000 ordinary shares of the Company under the 2016 Plan. The options
are exercisable at the fair market value of the Company's ordinary shares on the date of the grant ($59.4 per share) with 40% of
the options vesting 12 months after the date of grant, 30% vesting 24 months after the date of grant and the remaining 30% vesting 36
months after the date of grant. On July 31, 2020, Mr. Chen exercised his options on a cashless basis, and received 1,300 ordinary shares
of the Company.
86
On
July 10, 2020, a total of 5,737 share options were granted to certain consultants of the Company.
On
July 24, 2020, the following directors and officers were granted options to purchase ordinary shares of the Company under the 2016 Plan:
●
Jianghuai
    Lin, options to purchase 4,250 ordinary shares
●
Zhiqiang
    Zhao, options to purchase 3,334 ordinary shares
●
Zhixiong
    Huang, options to purchase 3,334 ordinary shares
●
Guangzeng
    Chen, options to purchase 3,084 ordinary shares
From
December 2021 to July 2022, a total of 3,000 restricted shares were granted to certain consultant of the Company.
On
May 26, 2023, the board of directors granted restricted shares in an aggregate amount of 200,000 ordinary shares, no par value under
the 2016 Plan to certain of its directors, executive officers and employees as compensations for their services. The following shares
were granted to the executive officers and directors of the Company:
●
Jianghuai
                                            Lin, 100,000 shares;
●
Zhiqiang
                                            Zhao, 27,000 shares;
●
Zhixiong
                                            Huang, 27,000 shares;
●
Iris
                                            Yan, 27,000 shares;
●
Huan
                                            Li, 8,000 shares;
●
Guangzeng
                                            Chen, 2,000 shares;
●
Yong
                                            Jiang, 1,500 shares;
●
Remington
                                            C.H. Hu, 1,500 shares.
All
of the restricted shares vested immediately upon the grant date.
As
of the date of this report, we have issued 238,453 restricted shares under the 2016 Plan and no options to purchase ordinary shares are
outstanding.
C.
Board Practices
Terms
of Directors and Executive Officers
Our
Board of Directors currently consists of five directors, who were elected to serve until they resign, are removed or otherwise leave
offices. Eligible directors may be elected by shareholders at any general meeting by a majority of votes cast assuming properly proposed
or nominated in accordance with our memorandum and articles of association.
Any
member or the Board may propose any person for election as a director. Where any person, other than a director retiring at the meeting
or a person proposed for re-election or election as a director by the Board, is to be proposed for election as a director, notice must
be given to the Company of the intention to propose him and of his willingness to serve as a director. Such notice must be given not
later than 10 days following the earlier of the date on which notice of the general meeting was posted to the shareholders or the date
on which public disclosure of the date of the next general meeting was made. Where the number of persons validly proposed for re-election
or election as a director is greater than the number of directors to be elected, the persons receiving the most votes (up to the number
of directors to be elected) shall be elected as directors, and an absolute majority of the votes cast shall not be a prerequisite to
the election of such directors.
87
Each
director so elected holds office for the term, if any, as may be specified in the resolution appointing him or until his earlier death,
disqualification, resignation or removal. The directors may appoint one or more directors to fill a vacancy on the Board of Directors.
We do not have any contracts with our directors providing for benefits upon termination of employment.
Our
executive officers are appointed by our Board of Directors. The executive officers shall hold office until their successors are duly
elected and qualified, but any officer elected or appointed by the directors may be removed at any time, with or without cause, by a
majority vote of the directors.
The
chairman of the board of directors shall have a second or casting vote in the case of an equality of votes at any meeting of the board
of directors.
Board
Composition and Committees
The
Board has established three standing committees: Audit Committee, Compensation Committee and Governance and Nominating Committee. Each
of the Audit Committee, Compensation Committee and Governance and Nominating Committee is comprised entirely of independent directors.
From time to time, the Board may establish other committees. The Board has adopted a written charter for each of the Committees which
are available on the corporate governance page of our website at
www.taop.com
. Printed copies of these charters may be obtained,
without charge, by contacting the Corporate Secretary, Taoping Inc., 21
st
Floor, Everbright Bank Building, Zhuzilin, Futian
District, Shenzhen, Guangdong 518040, China.
Audit
Committee and Audit Committee Financial Expert
Our
Audit Committee is currently composed of three members: Messrs. Ping Cai, Yong Jiang, and Remington C.H. Hu. Our Board of Directors determined
that each member of the Audit Committee meets the independence criteria prescribed by applicable regulation and the rules of the SEC
for audit committee membership and is an "independent" director within the meaning of the NASDAQ Marketplace Rules. Each
Audit Committee member also meets NASDAQ's financial literacy requirements. Mr. Hu serves as Chair of the Audit Committee.
Our
Audit Committee oversees our accounting and financial reporting processes and the audits of our financial statements. Our Audit Committee
is responsible for, among other things:
●
selecting
    our independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors;
●
reviewing
    with our independent auditors any audit problems or difficulties and management's response;
●
reviewing
    and approving all proposed related-party transactions;
●
discussing
    the annual audited financial statements with management and our independent auditors;
●
reviewing
    major issues as to the adequacy of our internal controls and any special audit steps adopted in light of significant internal control
    deficiencies;
●
annually
    reviewing and reassessing the adequacy of our Audit Committee charter;
●
meeting
    separately and periodically with management and our internal and independent auditors;
●
reporting
    regularly to the full Board of Directors; and
●
such
    other matters that are specifically delegated to our Audit Committee by our Board of Directors from time to time.
88
Our
Board of Directors has determined that Mr. Hu is the "audit committee financial expert" as such term is defined in Item 407(d)
of Regulation S-K promulgated by the SEC and also meets NASDAQ's financial sophistication requirements.
Compensation
Committee
Our
Compensation Committee is currently composed of three members: Messrs. Ping Cai, Yong Jiang, and Remington C.H. Hu, each of whom is "independent"
within the meaning of the NASDAQ Marketplace Rules. Ms. Cai serves as Chair of the Compensation Committee.
The
purpose of our Compensation Committee discharges the responsibilities of the Company's Board of Directors relating to compensation
of the Company's executives, to produce an annual report on executive compensation for inclusion in the Company's proxy statement,
if required, and to oversee and advise the Board on the adoption of policies that govern the Company's compensation programs, including
stock and benefit plans. Our chief executive officer may not be present at any Compensation Committee meeting during which his compensation
is deliberated. The Compensation Committee is responsible for, among other things:
●
Reviewing
    and approving the compensation structure for corporate officers at the level of corporate vice president and above;
●
Overseeing
    an evaluation of the performance of the Company's executive officers and approving the annual compensation, including salary,
    bonus, incentive and equity compensation, for the executive officers;
●
Reviewing
    and approving chief executive officer goals and objectives, evaluating chief executive officer performance in light of these corporate
    objectives, and setting chief executive officer compensation consistent with Company philosophy;
●
Making
    recommendations to the Board regarding the compensation of board members;
●
Reviewing
    and making recommendations concerning long-term incentive compensation plans, including the use of equity-based plans. Except as
    otherwise delegated by the Board of Directors, the Compensation Committee will act on behalf of the Board of Directors as the "Committee"
    established to administer equity-based and employee benefit plans, and as such will discharge any responsibilities imposed on the
    Compensation Committee under those plans, including making and authorizing grants, in accordance with the terms of those plans.
Governance
and Nominating Committee
Our
Governance and Nominating Committee is currently composed of three members: Messrs. Ping Cai, Yong Jiang, and Remington C.H. Hu, each
of whom is "independent" within the meaning of the NASDAQ Marketplace Rules. Mr. Jiang serves as Chair of the Governance
and Nominating Committee.
The
Governance and Nominating Committee assists the Board in identifying individuals qualified to become our directors and in determining
the composition of the Board and its committees.
The
Governance and Nominating Committee is responsible for, among other things:
●
identifying
    and recommending to the Board nominees for election or re-election of the Board, or for appointment to fill any vacancy;
●
reviewing
    annually with the Board the current composition of the Board in light of the characteristics of independence, age, skills, experience
    and availability of service to us;
●
identifying
    and recommending to the Board the directors to serve as members of the Board's committees; and
●
monitoring
    compliance with our code of ethics.
89
The
procedures by which stockholders may recommend nominees have not changed materially since last year's proxy statement.
Board
    Diversity Matrix (As of April 24, 2024)
Country
    of Principal Executive Offices:
China
Foreign
    Private Issuer
Yes
Disclosure
    Prohibited under Home Country Law
No
Total
    Number of Directors
5
Female
Male
Non-
    Binary
Did
    Not Disclose
Gender
Part
    I: Gender Identity
Directors
1
4
0
0
Part
    II: Demographic Background
Underrepresented
    Individual in Home Country Jurisdiction
0
LGBTQ+
0
Did
    Not Disclose Demographic Background
0
D.
Employees
As
of December 31, 2021, 2022 and 2023, we had a total of 76, 63 and 56 full-time employees, respectively. The following table illustrates
the allocation of these employees among the various job functions conducted at our company as of December 31, 2023.
Department
Number of Employees
Software Development
16
Sales & Marketing
12
Administration & Human Resources
4
Operation
9
Finance and Accounting
9
Management
6
TOTAL
56
We
believe that our relationship with our employees is good. Our Chinese subsidiaries have trade unions which protect employees' rights,
aim to assist in the fulfillment of our economic objectives, encourage employee participation in management decisions and assist in mediating
disputes between us and union members. We have not experienced any significant problems or disruption to our operations due to labor
disputes, nor have we experienced any difficulties in recruitment and retention of experienced staff. The remuneration payable to employees
includes basic salaries and allowances. We also provide training for our staff from time to time to enhance their technical knowledge.
As
required by applicable Chinese law, we have entered into employment contracts with all of our officers, managers and employees.
Our
employees in China participate in a state pension scheme organized by Chinese municipal and provincial governments. We are required to
contribute to the scheme at rates ranging from 13% to 18% of the average monthly salary. As of the date of this report, we have complied
with the regulation and have paid the state pension plan as required by law. In addition, we are required by Chinese law to cover employees
in China with various types of social insurance. We have purchased social insurance for all of our full-time employees.
E.
Share Ownership
The
following table sets forth information regarding beneficial ownership of each class of our voting securities as of April 24, 2024
(i) by each person who is known by us to beneficially own 5% or more of each class of our voting securities; (ii) by each of our officers
and directors; and (iii) by all of our officers and directors as a group. Unless otherwise specified, the address of each of the persons
set forth below is in care of the Company, 21
st
Floor, Everbright Bank Building, Zhuzilin, Shenzhen 518040, China.
90
Name and Address of Beneficial Owner
Office, If Any
Title of Class
Amount and Nature of Beneficial Ownership
(1)
Percent of Class
(2)
Officers and Directors
Jianghuai Lin
Chairman and CEO
Ordinary Shares
518,956
11.5
%
Zhiqiang Zhao
President and Director
Ordinary Shares
33,658
*
Liqiong (Iris) Yan
Chief Financial Officer
Ordinary Shares
27,762
*
Zhixiong Huang
Chief Operating Officer
Ordinary Shares
31,946
*
Guangzeng Chen
Chief Technology Officer
Ordinary Shares
3,000
*
Huan Li
Chief Marketing Officer
Ordinary Shares
8,000
*
Ping Cai
Director
Ordinary Shares
-
*
Yong Jiang
Director
Ordinary Shares
1,500
*
Remington C.H. Hu
Director
Ordinary Shares
1,500
*
All officers and directors as a group
(10 persons named above)
Ordinary Shares
626,320
13.9
%
5% Security Holders
Jianghuai Lin
Ordinary Shares
518,956
11.5
%
*
Less than 1%
(1)
Beneficial
    Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to
    securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect
    to our ordinary shares.
(2)
As
    of April 24, 2024, a total of 4,516,126 ordinary shares are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1).
    For each Beneficial Owner above, any securities that are exercisable or convertible within 60 days have been included in the denominator.
None
of our major shareholders have different voting rights from other shareholders. We are not aware of any arrangement that may, at a subsequent
date, result in a change of control of our Company.
ITEM
7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
Major Shareholders
Please
refer to Item 6 "Directors, Senior Management and Employees-E. Share Ownership."
91
B.
Related Party Transactions
The
following includes a summary of transactions since January 1, 2021 between us and certain related persons. We believe the terms obtained
or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms
available or the amounts that would be paid or received, as applicable, in arm's-length transactions.
●
Since
    May 2017, the Company has entered into a series of contracts with Taoping New Media Co., Ltd. (TNM) and its affiliates for the sale
    of the Company's Cloud-Application-Terminal based digital ads display terminals, software and technical services. TNM was a
    related party company controlled by Mr. Lin, the Company's Chairman and Chief Executive Officer, until the Company's
    completion of the acquisition on June 9, 2021, after which date the related party transactions were eliminated in the Company's
    consolidated financial statements. For the years ended December 31, 2023, 2022 and 2021, revenues from related parties for sales
    of products, software, and advertising were approximately $0.2 million, $0.1 million and $0.1 million, respectively. Accounts receivable
    from related parties, net of allowance for credit losses, as of December 31, 2023, 2022 and 2021 were approximately $0.6 million,
    $0.1 million and $0.4 million, respectively. Advances received from related parties were approximately $0.1 million, $0.1 million
    and $0.1 million as of December 31, 2023, 2022 and 2021, respectively.
●
For
    the year ended December 31, 2021, the Company had a rental income of approximately $27,000, from TNM which was for the office lease
    between TNM and the Company. Upon completion of the Company's acquisition of TNM on June 9, 2021, the related party rental
    income was eliminated in the Company's consolidated financial statements thereafter. Other revenue generated from related parties
    also includes system maintenance service provided to Taoping affiliate customers, which was approximately $nil, $20,000 and $49,000,
    for the years ended December 31, 2023, 2022 and 2021, respectively.
●
As
    of December 31, 2023 and 2022, the amounts due to related parties was $3.0 million and $3.3 million, respectively, which included
    the borrowing from the major shareholder, Mr. Jianghuai Lin ("Mr. Lin"), of approximately $0.9 million and $0.4 million,
    respectively, for 2 years without interest and matures on September 4, 2024, and a loan balance of approximately $2.1 million (RMB15
    million) and approximately $2.9 million (RMB20 million), respectively, from a related company 100% owned by Mr. Lin for 12-month
    at the interest of 5.85% per annum, which matures on May 17, 2024.
●
On
    June 9, 2021, the Company and Biznest, a subsidiary of the Company, consummated an acquisition of 100% of the equity interests of
    TNM. Mr. Lin, the Chairman and CEO of the Company, who then owned approximately 24.6% of total shares outstanding of the
    Company, owned approximately 51% of TNM. TNM is a new media operator focusing on digital life scenes and mainly engaged in selling
    out-of-home advertising time slots on its networked smart digital advertising display terminals with artificial intelligence and
    big data technologies. Acquiring TNM and synergizing its new media network will enhance the Company's presence in the new media
    and advertising sectors. After completion of the acquisition, TNM becomes a wholly owned subsidiary of Biznest.
●
On
    September 18, 2021, the Company and the Company's wholly owned subsidiary, Information Security Technology (China) Co., Ltd.
    entered into an equity transfer agreement with Mr. Lin, the sole shareholder of iASPEC. Upon closing of the equity transfer,
    the Company's existing VIE structure was dissolved and iASPEC became a wholly owned subsidiary of the Company.
See
also Item 6 "Directors, Senior Management and Employees-B. Compensation."
C.
Interests of Experts and Counsel
Not
applicable.
92
ITEM
8. FINANCIAL INFORMATION
A.
Consolidated Statements and Other Financial Information
Financial
Statements
We
have appended consolidated financial statements filed as part of this annual report. See Item 18 "Financial Statements."
Legal
Proceedings
We
may be subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time.
In
September 2023, Guangdong Zexun Advertising Co., Ltd. filed a lawsuit against the Company which claimed a payment of RMB 231,866 (approximately
$32,200) from the Company resulted from its alleged failure of performance for a business subcontract agreement signed by both parties
in 2017. The Company anticipated an unfavorable outcome from the lawsuit and accrued a contingent liability of $32,200 for probable loss
in 2023. The lawsuit was settled in a court mediation on January 30, 2024, and the Company agreed to pay the above claimed amount in
three installments in 2024.
Dividend
Policy
To
date, we have not paid any cash dividends on the Company ordinary shares. As a BVI company, we may only declare and pay dividends if
our directors are satisfied, on reasonable grounds, that immediately after the distribution (i) the value of our assets will exceed our
liabilities and (ii) we will be able to pay our debts as they fall due. We currently anticipate that we will retain any available funds
to finance the growth and operation of our business and we do not anticipate paying any cash dividends in the foreseeable future. Additionally,
our cash held in foreign countries may be subject to certain control limitations or repatriation requirements, limiting our ability to
use this cash to pay dividends.
B.
Significant Changes
No
significant change has occurred since the date of our consolidated financial statements filed as part of this annual report.
ITEM
9. THE OFFER AND LISTING
A.
Offer and Listing Details
Taoping's
ordinary shares have been listed on the NASDAQ Capital Market under the trading symbol "TAOP" since June 1, 2018. Prior to
that, the ordinary shares were listed on the NASDAQ Capital Market under the symbol "CNIT."
B.
Plan of Distribution
Not
applicable.
C.
Markets
See
our disclosures above under "A. Offer and Listing Details."
D.
Selling Shareholders
Not
applicable.
E.
Dilution
Not
applicable.
F.
Expenses of the Issue
Not
applicable.
93
ITEM
10. ADDITIONAL INFORMATION
A.
Share Capital
Not
applicable.
B.
Memorandum and Articles of Association
The
following represents a summary of certain key provisions of the Company's memorandum and articles of association. The summary does
not purport to be a summary of all of the provisions of the Company's memorandum and articles of association and of all relevant
provisions of BVI law governing the management and regulation of BVI companies.
Register
Taoping
was incorporated in the BVI on June 18, 2012 under the BVI Act. Its memorandum of association authorizes the issuance of up to 100,000,000
ordinary shares without par value, which may be issued from time to time at the discretion of the Board of Directors without shareholder
approval. Subject to the memorandum of association being amended by resolution of shareholders, the Board of Directors is authorized
to issue shares in different classes and series and, with respect to each class or series, to determine the designations, powers, preferences,
privileges and other rights, including dividend rights, conversion rights, terms of redemption and liquidation preferences, any or all
of which may be greater than the powers and rights associated with the ordinary shares, at such times and on such other terms as they
think proper.
On
July 30, 2020, we completed a share combination of Taoping's ordinary shares at a ratio of one-for-six, which decreased the Company's
outstanding ordinary shares to approximately 7,332,434 shares. This share combination did not change the maximum number of shares Taoping
is authorised to issue or the par value of Taoping ordinary shares.
On
August 1, 2023, we completed a share combination of Taoping's ordinary shares at a ratio of one-for-ten, which decreased the Company's
outstanding ordinary shares to approximately 1,864,554 shares. This share combination did not change the maximum number of shares Taoping
is authorised to issue or the par value of its ordinary shares. Accordingly, except as otherwise indicated, all share and per share information
contained in this annual report has been restated to retroactively show the effect of the share combination.
Objects
and Purposes
Taoping's
memorandum of association grants the Company full power and authority to carry out any object not prohibited by the BVI Act or any other
BVI legislation.
Directors
Directors
may exercise all such powers necessary for managing, and for directing and supervising the business and affairs of the Company as are
not by the BVI Act or by the memorandum and articles of association of the Company required to be exercised by the shareholders, including
general powers to borrow on behalf of the Company.
Taoping's
memorandum and articles of association provide that a director who is interested in a transaction entered into or to be entered into
by the Company may: (i) vote on a matter relating to the transaction; (ii) attend a meeting of directors at which a matter relating to
the transaction arises and be included among the directors present at the meeting for the purposes of a quorum; and (iii) sign a document
on our behalf, or do any other thing in his capacity as a director, that relates to the transaction. Additionally, Taoping's articles
of association provide that no director shall be disqualified by his office from contracting with the Company either as a buyer, seller
or otherwise, nor shall any such contract or arrangement entered into by or on the Company's behalf in which any director shall
be in any way interested be voided, nor shall any director so contracting or being so interested be liable to account to us for any profit
realized by any such contract or arrangement, by reason of such director holding that office or by reason of the fiduciary relationship
thereby established, provided such director shall, immediately after becoming aware of the fact that he is interested in a transaction
entered into or to be entered into by us, disclose such interest to the Company's Board of Directors. A director is not required
to make such a disclosure if: (i) the transaction or proposed transaction is between us and the director, and (ii) the transaction or
proposed transaction is or is to be entered into in the ordinary course of the Company's business and on usual terms and conditions.
A disclosure to the Company's Board to the effect that a director is a member, director, officer or trustee of another named company
or other person and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered
into with that company or person, is a sufficient disclosure of interest in relation to that transaction. Such a disclosure is not made
to our Board of directors unless it is made or brought to the attention of every director on the Board. Subject to Section 125(1) of
the BVI Act, the failure by a director to comply with this provision does not affect the validity of a transaction entered into by the
director or the Company.
94
Pursuant
to the Company's articles of association, a director shall not require a share qualification, but nevertheless shall be entitled
to attend and speak at any meeting of the directors and meeting of the shareholders and (if applicable) at any separate meeting of the
holders of any class of the Company's shares. In addition, the remuneration of directors (whether by way of salary, commission,
participation in profits or otherwise) in respect of services rendered or to be rendered in any capacity to us (including to any company
in which we may be interested) shall be fixed by resolution of directors or shareholders. The directors may also be paid such travelling,
hotel and other expenses properly incurred by them in attending and returning from meetings of the directors, or any committee of the
directors or meetings of the shareholders, or in connection with our business as shall be approved by resolution of directors or of shareholders.
Notwithstanding
any other requirement of the memorandum of association or articles of association, immediately following each annual meeting of the shareholders,
there shall be held at the same place as the annual meeting of the shareholders as aforesaid, a meeting of the directors (and there shall
be no requirement for any further notice of that meeting of the directors to be provided to the directors). This requirement may only
be disapplied where the directors (being the directors in office immediately after the annual meeting of the shareholders as aforesaid)
unanimously resolve to change such time or place of such meeting of the directors.
Rights
and Obligations of Shareholders
Dividends
.
Subject to the BVI Act, the directors may, by resolution of directors, authorize a distribution (including a dividend) by us to shareholders
at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately after the distribution,
the value of our assets exceeds our liabilities and we are able to pay our debts as they fall due. Any distribution payable in respect
of a share which has remained unclaimed for three years from the date when it became due for payment shall, if the board of the directors
so resolves, be forfeited for the benefit of the Company. The directors may, before recommending any distribution, set aside out of the
profits of the Company such sums as they think proper as a reserve or reserves which shall, at their discretion, either be employed in
the business of the Company or be invested in such investments as the directors may from time to time think fit. The holder of each ordinary
share has the right to an equal share in any distribution paid by us.
Voting
Rights
. Each ordinary share confers on the shareholder the right to one vote at a meeting of the shareholders or on any resolution
of shareholders on all matters before the Company's shareholders.
Winding
Up
. The holder of each ordinary share is entitled to an equal share in the distribution of the surplus assets of us on a winding
up.
Redemption
.
The directors may, on behalf of the Company, purchase, redeem or otherwise acquire any of the Company's own shares for such consideration
as the directors consider fit, and either cancel or hold such shares as treasury shares. Shares may be purchased or otherwise acquired
in exchange for newly issued shares. The directors shall not, unless permitted pursuant to the BVI Act, purchase, redeem or otherwise
acquire any of the Company's own shares unless immediately after such purchase, redemption or other acquisition, the value of the
Company's assets exceeds the Company's liabilities and we are able to pay the Company's debts as they fall due.
Changes
in Rights of Shareholders
Under
the Company's memorandum and articles of association, if at any time the shares which we are authorized to issue are divided into
more than one class or series of shares, the rights attaching to any class may only be changed by a consent in writing of the holders
of a majority of the issued shares of that class or with the sanction of a resolution passed by the holders of at least a majority of
the shares of the class present in person or by proxy at a separate general meeting of the holders of the shares of the class. At such
a separate general meeting, the quorum shall be at least one person holding or representing by proxy a majority of the issued shares
of the class.
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Meetings
Under
the BVI Act, there is no requirement for an annual meeting of shareholders. Under the Company's memorandum and articles of association,
we are not required to hold an annual meeting of shareholders. The Company's shareholders' meetings may be held at such times
and in such place within or outside the BVI as our Board of Directors considers appropriate.
Our
Board of Directors shall call a shareholders' meeting if requested in writing to do so by shareholders entitled to exercise at
least 10% of the voting rights in respect of the matter for which the meeting is being requested. Our Board of Directors shall give not
less than 10 days and not more than 60 days prior written notice of a shareholders' meeting to those persons whose names on, either
(a) the date the notice is given or (b) on a date fixed by the directors as the record date (which must be a date that is not less than
10 days nor more than 60 days prior to the meeting), appear as shareholders in our register and are entitled to vote at the meeting.
The inadvertent failure of the directors to give notice of a meeting to a shareholder, or the fact that a shareholder has not received
notice, does not invalidate the meeting.
The
Company's memorandum and articles of association provide that a meeting of shareholders is duly constituted if, at the commencement
of the meeting, there are shareholders present in person or by proxy representing not less than a majority of the votes of the shares
or class or series of shares entitled to vote on resolutions of shareholders to be considered at the meeting. A shareholder may be represented
at a meeting of shareholders by a proxy (who need not be a shareholder) who may speak and vote on behalf of the shareholder. A written
instrument giving the proxy such authority must be produced at the place appointed for the meeting before the time for holding the meeting
at which the person named in such instrument proposes to vote. A shareholder or his proxy shall be deemed to be present at the meeting
if he participates by telephone or other electronic means and all shareholders and proxies participating in the meeting are able to hear
each other.
Holders
of the Company's ordinary shares are entitled to one vote for each share held of record on all matters at all meetings of shareholders.
The Company's shareholders have no cumulative voting rights. The Company's shareholders take action by a majority of votes
cast by shareholders entitled to vote and voting, unless otherwise provided by the BVI Act or the Company's memorandum and articles
of association. A resolution of shareholders may be also be passed in writing by the holders of a majority of in excess of fifty (50)
percent of the votes of those shareholders entitled to vote on the resolution.
Notices
Any
notice, information or written statement required to be given to shareholders shall be served by mail (air-mail service if available)
addressed to each shareholder at the address shown in the Company's register of members.
All
notices directed to be given to the shareholders shall, with respect to any registered shares to which persons are jointly entitled,
be given to whichever of such persons is named first in the Company's register of members, and notice so given shall be sufficient
notice to all the holders of such shares.
Any
notice, if served by post, shall be deemed to have been served within ten days of posting, and in proving such service it shall be sufficient
to prove that the letter containing the notice was properly addressed and mailed with the postage prepaid.
Limitations
on Ownership of Securities
There
are no limitations on the right of non-residents or foreign persons to own the Company's securities imposed by BVI law or by the
Company's memorandum and articles of association.
Change
in Control of Company
Our
Board of Directors is authorized to issue the Company's ordinary shares at such times and on such other terms as they think proper.
Subject to the memorandum of association being amended by resolution of shareholders, the Board of Directors is authorized to issue these
shares in different classes and series and, with respect to each class or series, to determine the designations, powers, preferences,
privileges and other rights, including dividend rights, conversion rights, terms of redemption and liquidation preferences, any or all
of which may be greater than the powers and rights associated with the ordinary shares, at such times and on such other terms as they
think proper. Such power could be used in a manner that would delay, defer or prevent a change of control of the Company.
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Ownership
Threshold
There
are no provisions governing the ownership threshold above which shareholder ownership must be disclosed imposed by BVI law or by the
Company's memorandum and articles of association.
Changes
in Capital
Subject
to the provisions of the Company's memorandum and articles of association, the BVI Act and the rules of NASDAQ, the Company's
unissued shares shall be at the disposal of the directors who may, without prejudice to any rights previously conferred on the holders
of any existing shares, offer, allot, grant options over or otherwise dispose of the shares to such persons, at such times and upon such
terms and conditions as we may by resolution of directors determine.
We
may, by a resolution of shareholders, amend the Company's memorandum of association to increase or decrease the maximum number
of ordinary shares authorized to be issued.
Amendments
to Memorandum and Articles of Association
The
Company's memorandum of association may be amended by resolution of shareholders and the Company's articles of association
may be amended by resolution of shareholders or resolution of directors. For the avoidance of doubt, the memorandum of association cannot
be amended the directors.
Further,
the directors shall not have the power to amend the articles of association of the Company (a) to restrict the rights or powers of shareholders
to amend the memorandum of association or articles of association, (b) to change the percentage of shareholders required to pass a resolution
to amend the memorandum of association or articles of association, (c) to change the manner prescribed in the articles of association
for the election of directors to hold office, (d) where to do so would involve amending the provisions of Regulations 17.3 or 23.9 of
the articles of association, and (e) in circumstances where the memorandum of association or articles of association may only be amended
by the shareholders.
The
rights conferred upon the holders of the shares of any class issued with preferred or other rights (for the purpose of this paragraph,
any such shares of any class being referred to herein as "Preferred Shares") shall not, unless otherwise expressly provided
by the terms of issue of the Preferred Shares, be deemed to be varied by the creation or issue of further shares (a) ranking pari passu
with the Preferred Shares, or (b) which in all respects do not rank ahead of the Preferred Shares and which would not confer on the holders
of such further shares any rights which are superior to the rights conferred upon the holders of the Preferred Shares.
The
directors shall give notice of such resolutions passed to amend the memorandum and / or articles of association to the registered agent
of the Company, for the registered agent to file with the Registrar of Corporate Affairs of the BVI a notice of the amendment to the
memorandum of association or articles of association, or a restated memorandum and articles of association incorporating the amendment(s)
made, and any such amendment(s) to the memorandum of association or articles of association will take effect from the date of the registration
by the Registrar of Corporate Affairs of the notice of amendment or restated memorandum and articles of association incorporating the
amendment(s) made.
Differences
in Corporate Law
BVI
law differs from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of the significant differences
between the provisions of BVI law applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.
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Protection
for Minority Shareholders
Under
the laws of most U.S. jurisdictions, majority and controlling shareholders of a company generally have certain "fiduciary"
responsibilities to the minority shareholders. Corporate actions taken by majority and controlling shareholders which are unreasonable
and materially detrimental to the interests of minority shareholders may be declared null and void. Minority shareholders may have less
protection for their rights under BVI law than they would have under U.S. law.
Powers
of Directors
Unlike
most U.S. jurisdictions, the directors of a BVI company, subject in certain cases to court approval but without shareholders' approval,
may implement the sale, transfer, exchange or disposition of any Company asset, property, part of the business, or securities, with the
exception that shareholder approval is required for the disposition of over 50% in the value of the Company's total assets.
Conflict
of Interests
Similar
to the laws of most U.S. jurisdictions, when a director becomes aware of the fact that he has an interest in a transaction which we are
to enter into, he must disclose it to our Board. However, with sufficient disclosure of interest in relation to that transaction, the
director who is interested in a transaction entered into or to be entered into by us may (i) vote on a matter relating to the transaction;
(ii) attend a meeting of directors at which a matter relating to the transaction arises and be included in the quorum; and (iii) sign
a document on behalf of us, or do any other thing in his capacity as a director, that relates to the transaction.
Written
Consent and Cumulative Voting
Similar
to the laws of most U.S. jurisdictions, under BVI law, shareholders are permitted to approve matters by way of written resolution in
place of a formal meeting. There are no prohibitions in relation to cumulative voting under the laws of the BVI but the Company's
memorandum and articles of association do not provide for cumulative voting. As a result, our shareholders are not afforded any less
protections or rights on this issue than shareholders of a Delaware corporation.
Takeover
Provisions
Some
provisions of the Company's memorandum and articles of association may discourage, delay or prevent a change in control of the
Company or management that shareholders may consider favorable. For instance, subject to the memorandum of association being amended
by resolution of shareholders, the Board of Directors is authorized to issue shares in different classes and series and, with respect
to each class or series, to determine the designations, powers, preferences, privileges and other rights, including dividend rights,
conversion rights, terms of redemption and liquidation preferences, any or all of which may be greater than the powers and rights associated
with the ordinary shares, at such times and on such other terms as they think proper.
However,
under BVI law, our directors may only exercise the rights and powers granted to them under the Company's memorandum and articles
of association for a proper purpose and for what they believe in good faith to be in the best interests of the Company.
Shareholder's
Access to Corporate Records
A
shareholder of the Company is entitled, on giving written notice to the Company, to inspect (a) the memorandum and articles of association
of the Company; (b) the register of members; (c) the register of directors; and (d) the minutes of meetings and resolutions of shareholders
and of those classes of shares of which he is a shareholder; and to make copies of or take extracts from the documents and records. Subject
to the Company's memorandum and articles of association, the directors may, if they are satisfied that it would be contrary to
the Company's interests to allow a shareholder to inspect any document, or part of a document, specified in (b), (c) and (d) above,
refuse to permit the shareholder to inspect the document or limit the inspection of the document, including limiting the making of copies
or the taking of extracts from the records.
98
Where
a company fails or refuses to permit a shareholder to inspect a document or permits a shareholder to inspect a document subject to limitations,
that shareholder may apply to the BVI High Court for an order that he should be permitted to inspect the document or to inspect the document
without limitation.
A
company is required to keep at the office of its registered agent: its memorandum and articles of association of the company; the register
of members or a copy of the register of members; the register of directors or a copy of the register of directors; and copies of all
notices and other documents filed by the company in the previous ten years.
In
addition, the Company's memorandum and articles of association allow any shareholder of record who owns at least 15% of the Company's
outstanding shares, upon at least five days' written demand, to inspect, during usual business hours, the books of account and
all financial records, to make copies of records, and to conduct an audit of such records at their own cost.
Indemnification
BVI
law does not limit the extent to which a company's memorandum and articles of association may provide for indemnification of officers
and directors, except to the extent any such provision may be held by the BVI High Court to be contrary to public policy (e.g. for purporting
to provide indemnification against the consequences of committing a crime). An indemnity will be void and of no effect and will not apply
to a person unless the person acted honestly and in good faith and in what he believed to be in the best interests of the company and,
in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful. The Company's
memorandum and articles of association permit indemnification of officers and directors for losses, damages, costs and expenses incurred
in their capacities as such unless such losses or damages arise from dishonesty or fraud of such directors or officers.
Under
the Company's memorandum and articles of association, subject to the BVI Act, we shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is or was a director or officer (excluding the auditors), or who is or was serving
at our request as a director or officer of another company, partnership, joint venture, trust or other enterprise. Each such indemnified
person shall be indemnified out of our assets against any liability, action, proceeding, claim, demand, judgments, fines, costs, damages
or expenses, including legal expenses, whatsoever which they or any of them may reasonably incur as a result of any act or failure to
act in carrying out their functions other than such liability that they may incur by reason of their own actual fraud or willful default.
In addition, to be entitled to indemnification, an indemnified person must not have acted in such a manner as to have incurred the liability
by virtue of having committed actual fraud or willful default but no person shall be found to have committed actual fraud or willful
default unless or until a court of competent jurisdiction shall have made a finding to that effect.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us
under the foregoing provisions, we have been advised that in the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Mergers
and Similar Arrangements
Under
the BVI Act two or more BVI companies or a BVI company and non-BVI company, each a "constituent company", may merge or consolidate.
The BVI Act provides for slightly different procedures depending on the nature of the parties to the merger.
A
merger involves the merging of two or more companies into one of the constituent companies (to the merger) with one constituent company
continuing in existence to become the surviving company post-merger. A consolidation involves two or more companies consolidating into
a new company.
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A
merger is effective on the date that the articles of merger (as described below) are registered by the Registrar of Corporate Affairs
in the BVI, or on such later date, not exceeding 30 days from the date of registration as is stated in the articles of merger.
As
soon as a merger becomes effective:
a)
the surviving company (so far as is consistent with its memorandum and articles, as amended by the articles of merger) has all rights, privileges, immunities, powers, objects and purposes of each of the constituent companies;
b)
the memorandum and articles of the surviving company are automatically amended to the extent, if any, that changes to its memorandum and articles are contained in the articles of merger;
c)
assets of every description, including choses in action and the business of each of the constituent companies, immediately vest in the surviving company;
d)
the surviving company is liable for all claims, debts, liabilities and obligations of each of the constituent companies;
e)
no conviction, judgment, ruling, order, claim, debt, liability or obligation due or to become due, and no cause existing, against a constituent company or against any shareholder, director, officer or agent thereof, is released or impaired by the merger; and
f)
no proceedings, whether civil or criminal, pending at the time of a merger by or against a constituent company, or against any shareholder, director or officer, or agent thereof, are abated or discontinued by the merger; but
i.
the proceedings may be enforced, prosecuted, settled or compromised by or against the surviving company or against the shareholder, director, officer or agent thereof, as the case may be; or
ii.
the surviving company may be substituted in the proceedings for a constituent company.
iii.
The
registrar shall strike off the Register of Companies a constituent company that is not the surviving company in the merger.
Dissenter
Rights
The
BVI Act provides that any shareholder of the Company is entitled to payment of the fair value of his shares upon dissenting from a merger,
unless the Company is the surviving company of the merger and the shareholder continues to hold the same or similar shares. The following
is a summary of the position in respect of dissenters rights in the event of a merger under the BVI Act.
A
dissenter is in most circumstances required to give to the Company written objection to the merger, which must include a statement that
the dissenter proposes to demand payment for his shares if the merger takes place. This written objection must be given before the meeting
of shareholders at which the merger is submitted to a vote, or at the meeting but before the vote. However, no objection is required
from a shareholder to whom the Company did not give notice of the meeting of shareholders or where the proposed merger is authorized
by written consent of the shareholders without a meeting.
Within
20 days immediately following the written consent, or the meeting at which the merger was approved, the Company shall give written notice
of the consent or resolution to each shareholder who gave written objection or from whom written objection was not required, except those
shareholders who voted for, or consented in writing to, the proposed merger.
100
A
shareholder to whom the Company was required to give notice who elects to dissent shall, within 20 days immediately following the date
on which the copy of the plan of merger or an outline of the merger is given to him, give to the Company a written notice of his decision
to elect to dissent, stating:
a)
his
    name and address;
b)
the
    number and classes of shares in respect of which he dissents (which must be all shares that he holds in the Company); and
c)
a
    demand for payment of the fair value of his shares.
Upon
the giving of a notice of election to dissent, the dissenter ceases to have any of the rights of a shareholder except the right to be
paid the fair value of his shares, and the right to institute proceedings to obtain relief on the ground that the action is illegal.
The
Company shall make a written offer to each dissenter to purchase his shares at a specified price that the Company determines to be their
fair value. Such offer must be given within 7 days immediately following the date of the expiration of the period within which shareholders
may give their notices of election to dissent, or within 7 days immediately following the date on which the merger is put into effect,
whichever is later.
If
the Company and the dissenter fail, within 30 days immediately following the date on which the offer is made, to agree on the price to
be paid for the shares owned by the dissenter, then within 20 days:
a)
the
    Company and the dissenter shall each designate an appraiser;
b)
the
    two designated appraisers together shall designate an appraiser;
c)
the
    three appraisers shall fix the fair value of the shares owned by the dissenter as of the close of business on the day prior to the
    date of the meeting or the date on which the resolution was passed, excluding any appreciation or depreciation directly or indirectly
    induced by the action or its proposal, and that value is binding on the Company and the dissenter for all purposes; and
d)
the
    Company shall pay to the dissenter the amount in money upon the surrender by him of the certificates representing his shares, and
    such shares shall be cancelled.
Shareholders'
Suits
Under
the provisions of the BVI Act, the memorandum and articles of association of a company are binding as between the company and its shareholders
and between the shareholders.
If
the majority shareholders have infringed a minority shareholder's rights, the minority may seek to enforce its rights either by
derivative action or by personal action. A derivative action concerns the infringement of the company's rights where the wrongdoers
are in control of the company and are preventing it from taking action, whereas a personal action concerns the infringement of a right
that is personal to the particular shareholder concerned.
The
BVI Act provides for a series of remedies available to shareholders. Where a company incorporated under the BVI Act conducts some activity
which breaches the BVI Act or the company's memorandum and articles of association, the BVI High Court can issue a restraining
or compliance order. Shareholders can now also bring derivative, personal and Representative Actions under certain circumstances.
Generally
any other claims against a company by its shareholders must be based on the general laws of contract or tort applicable in the BVI or
their individual rights as shareholders as established by the company's memorandum and articles of association.
In
certain circumstances, a shareholder has the right to seek various remedies against the company in the event the directors are in breach
of their duties under the BVI Act. Pursuant to Section 184B of the BVI Act, if a company or director of a company engages in, proposes
to engage in or has engaged in, conduct that contravenes the provisions of the BVI Act or the memorandum or articles of association of
the company, the courts of the BVI may, on application of a shareholder or director of the company, make an order directing the company
or director to comply with, or restraining the company or director from engaging in conduct that contravenes the BVI Act or the memorandum
or articles. Furthermore, pursuant to Section 184I(1) of the BVI Act, a shareholder of a company who considers that the affairs of the
company have been, are being or likely to be, conducted in a manner that is, or any acts of the company have been, or are likely to be
oppressive, unfairly discriminatory, or unfairly prejudicial to him in that capacity, may apply to the courts of the BVI for an order
which, inter alia, can require the company or any other person to pay compensation to the shareholders.
101
C.
Material Contracts
We
have not entered into any material contracts other than in the ordinary course of business and other than those described in Item 4 "Information
on the Company," Item 5 "Operating and Financial Review and Prospects-F. Tabular Disclosure of Contractual Obligations,"
Item 7 "Major Shareholders and Related Party Transactions," or filed (or incorporated by reference) as exhibits to this annual
report or otherwise described or referenced in this annual report.
D.
Exchange Controls
BVI
Exchange Controls
There
are no material exchange controls restrictions on payment of dividends, interest or other payments to the holders of Taoping's
ordinary shares or on the conduct of our operations in the BVI, where Taoping was incorporated. There are no material BVI laws that impose
any material exchange controls on us or that affect the payment of dividends, interest or other payments to nonresident holders of Taoping's
ordinary shares. BVI law and the Company's memorandum and articles of association do not impose any material limitations on the
right of non-residents or foreign owners to hold or vote the Company's ordinary shares.
PRC
Exchange Controls
Regulations
on Foreign Currency Exchange
Under
the
PRC Foreign Currency Administration Rules
promulgated on January 29, 1996 and last amended on August 5, 2008 and various regulations
issued by SAFE and other relevant PRC government authorities, payment of current account items in foreign currencies, such as trade and
service payments, payment of interest and dividends can be made without prior approval from SAFE by following the appropriate procedural
requirements. By contrast, the conversion of RMB into foreign currencies and remittance of the converted foreign currency outside the
PRC for the purpose of capital account items, such as direct equity investments, loans and repatriation of investment, requires prior
approval from SAFE or its local office.
On
February 13, 2015, SAFE promulgated the
Circular on Simplifying and Improving the Foreign Currency Management Policy on Direct Investment
,
effective from June 1, 2015, which cancels the requirement for obtaining approvals of foreign exchange registration of foreign direct
investment and overseas direct investment from SAFE. The application for the registration of foreign exchange for the purpose of foreign
direct investment and overseas direct investment may be filed with qualified banks, which, under the supervision of SAFE, may review
the application and process the registration.
The
Circular of the SAFE on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise,
or SAFE Circular 19, was promulgated on March 30, 2015 and became effective on June 1, 2015. According to SAFE Circular 19, a foreign-invested
enterprise may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital
account for which the relevant foreign exchange bureau has confirmed monetary contribution rights and interests (or for which the bank
has registered the account-crediting of monetary contribution). For the time being, foreign-invested enterprises are allowed to settle
100% of their foreign exchange capitals on a discretionary basis; a foreign-invested enterprise shall truthfully use its capital for
its own operational purposes within the scope of business; where an ordinary foreign-invested enterprise makes domestic equity investment
with the amount of foreign exchanges settled, the invested enterprise shall first go through domestic re-investment registration and
open a corresponding Account for Foreign Exchange Settlement Pending Payment with the foreign exchange bureau (bank) at the place of
registration.
The Circular of the SAFE on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital
Accounts,
or SAFE Circular 16, was promulgated and became effective on June 9, 2016. According to SAFE Circular 16, enterprises registered
in PRC may also convert their foreign debts from foreign currency into Renminbi at the enterprise's discretion. SAFE Circular 16
provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign
currency capital and foreign debts) on self-discretionary basis, which applies to all enterprises registered in the PRC. SAFE Circular
16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly
used for purposes beyond its business scope and may not be used for investments in securities or other investment with the exception
of bank financial products that can guarantee the principal in the PRC unless otherwise specifically provided. Besides, the converted
Renminbi shall not be used to make loans for related enterprises unless it is within the business scope or to build or to purchase any
real estate that is not for the enterprise own use with the exception for the real estate enterprise.
102
On
January 26, 2017, SAFE promulgated the
Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness
and Compliance Verification,
or SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance
of profits from domestic entities to offshore entities, including (i) banks must check whether the transaction is genuine by reviewing
board resolutions regarding profit distribution, original copies of tax filing records and audited financial statements, and (ii) domestic
entities must retain income to account for previous years' losses before remitting any profits. Moreover, pursuant to SAFE Circular
3, domestic entities must explain in detail the sources of capital and how the capital will be used, and provide board resolutions, contracts
and other proof as a part of the registration procedure for outbound investment.
On
October 25, 2019, SAFE promulgated the
Notice on Further Facilitating Cross-Board Trade and Investment
, which became effective
on the same date (except for Article 8.2 thereof). The notice removed restrictions on the capital equity investment in China by non-investment
foreign-invested enterprises. In addition, restrictions on the use of funds for foreign exchange settlement of domestic accounts for
the realization of assets have been removed and restrictions on the use and foreign exchange settlement of foreign investors' security
deposits have been relaxed. Eligible enterprises in the pilot areas are also allowed to use revenues under capital accounts, such as
capital funds, foreign debts and overseas listing revenues for domestic payments without providing materials to the bank in advance for
authenticity verification on an item by item basis, while the use of funds should be true, in compliance with applicable rules and conforming
to the current capital revenue management regulations.
Regulations
on Foreign Exchange Registration of Overseas Investment by PRC Residents
The
SAFE issued
the Circular on Relevant Issues Relating to Domestic Resident's Investment and Financing and Roundtrip Investment
through Special Purpose Vehicles
, or SAFE Circular 37, which became effective in July 2014, to replace the
Circular of the State
Administration of Foreign Exchange on Issues Concerning the Regulation of Foreign Exchange in Equity Finance and Roundtrip Investments
by Domestic Residents through Offshore Special Purpose Vehicles
, to regulate foreign exchange matters in relation to the use of special
purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing or conduct round trip investment in
China. SAFE Circular 37 defines a SPV as an offshore entity established or controlled, directly or indirectly, by PRC residents or entities
for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests,
while "round trip investment" is defined as direct investment in China by PRC residents or entities through SPVs, namely,
establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. SAFE Circular 37 stipulates
that, prior to making contributions into an SPV, PRC residents or entities be required to complete foreign exchange registration with
SAFE or its local branch. In addition, SAFE promulgated the
Notice on Further Simplifying and Improving the Administration of the
Foreign Exchange Concerning Direct Investment in February 2015
, which amended SAFE Circular 37 and became effective on June 1, 2015,
requiring PRC residents or entities to register with qualified banks rather than SAFE in connection with their establishment or control
of an offshore entity established for the purpose of overseas investment or financing.
PRC
residents or entities who had contributed legitimate onshore or offshore interests or assets to SPVs but had not obtained registration
as required before the implementation of the SAFE Circular 37 must register their ownership interests or control in the SPVs with qualified
banks. An amendment to the registration is required if there is a material change with respect to the SPV registered, such as any change
of basic information (including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers
or exchanges of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and
the subsequent notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established
through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested
enterprise, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or
liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC
residents or entities to penalties under PRC foreign exchange administration regulations. See "Risk Factors-Risks Relating to Doing
Business in China-PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial
owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary or limit our PRC
subsidiary's ability to increase their registered capital or distribute profits."
103
Regulations
on Stock Incentive Plans
SAFE
promulgated the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive
Plan of Overseas Publicly Listed Company, or the Stock Incentive Plan Notice, in February 2012, replacing the previous rules issued by
SAFE in March 2007. Pursuant to the Stock Incentive Plan Notice and other relevant rules and regulations, PRC residents participating
in stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and follow certain
other procedures. Participants of a stock incentive plan who are PRC residents must conduct the SAFE registration and other procedures
with respect to the stock incentive plan through a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed
company or another qualified institution appointed by the PRC subsidiary. In addition, the PRC agent is required to update the relevant
SAFE registration should there be any material change to the stock incentive plan, the PRC agent or other material changes. The PRC agent
must, on behalf of the PRC residents who have the right to exercise the employee stock options, apply to SAFE or its local branches for
an annual quota for the payment of foreign currencies in connection with the PRC residents' exercise of the employee stock options.
The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends
distributed by the overseas listed companies must be remitted into the bank accounts in the PRC opened by the PRC agents prior to distribution
to such PRC residents.
We
adopted an equity incentive plan, under which we have the discretion to award incentives and rewards to eligible participants. We have
advised the recipients of awards under our equity incentive plan to handle relevant foreign exchange matters in accordance with the Stock
Incentive Plan Notice. However, we cannot guarantee that all employee awarded equity-based incentives can successfully register with
SAFE in full compliance with the Stock Incentive Plan Notice. See "Risk Factors-Risks Relating to Doing Business in China-Any failure
to comply with PRC regulations regarding employee share incentive plans may subject the PRC plan participants or us to fines and other
legal or administrative sanctions."
E.
Taxation
The
following is a general summary of certain material BVI, PRC and U.S. federal income tax considerations. The discussion is not intended
to be, nor should it be construed as, legal or tax advice to any particular shareholder or prospective shareholder. The discussion is
based on laws and relevant interpretations thereof in effect as of the date hereof, all of which are subject to change or different interpretations,
possibly with retroactive effect.
BVI
Taxation
The
Company and all dividends, interest, rents, royalties, compensation and other amounts paid by the Company to persons who are not resident
in the BVI and any capital gains realized with respect to any shares, debt obligations, or other securities of the Company by persons
who are not resident in the BVI are exempt from all provisions of the Income Tax Ordinance in the BVI.
No
estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are not resident in the BVI with
respect to any shares, debt obligation or other securities of the Company.
All
instruments relating to transfers of property to or by the Company and all instruments relating to transactions in respect of the shares,
debt obligations or other securities of the Company and all instruments relating to other transactions relating to the business of the
Company are exempt from payment of stamp duty in the BVI. This assumes that the Company does not hold an interest in real estate in the
BVI.
There
are currently no withholding taxes or exchange control regulations in the BVI applicable to the Company or its shareholders.
104
PRC
Taxation
Taoping
is a holding company incorporated in the BVI, which indirectly holds equity interests in its PRC operating subsidiaries. The EIT Law
and its implementation rules, both of which became effective as of January 1, 2008, as amended on February 24, 2017, provide that a PRC
enterprise is subject to a standard income tax rate of 25% and China-sourced income of foreign enterprises, such as dividends paid by
a PRC subsidiary to its overseas parent, will normally be subject to PRC withholding tax at a rate of 10%, unless there are applicable
treaties between the overseas parent's jurisdiction of incorporation and China to reduce such rate.
The
EIT Law also provides that enterprises organized under the laws of jurisdictions outside China with their "de facto management
bodies" located within China may be considered PRC resident enterprises and therefore subject to PRC enterprise income tax at the
rate of 25% on their worldwide income. Its implementation rules further define the term "de facto management body" as the
management body that exercises substantial and overall management and control over the business, personnel, accounts, and properties
of an enterprise. While we do not currently consider Taoping or any of Taoping's overseas subsidiaries to be a PRC resident enterprise,
there is a risk that the PRC tax authorities may deem Taoping or any of its overseas subsidiaries as a PRC resident enterprise since
a substantial majority of the members of Taoping's management team as well as the management team of our overseas subsidiaries
are located in China, in which case Taoping or the overseas subsidiaries, as the case may be, would be subject to the PRC enterprise
income tax at the rate of 25% on worldwide income. If the PRC tax authorities determine that Taoping is a "resident enterprise"
for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. Under the EIT Law and its implementation
regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends paid to investors that are non-resident
enterprises, which do not have an establishment or place of business in the PRC or which have such establishment or place of business
but the dividends are not effectively connected with such establishment or place of business, to the extent such dividends are derived
from sources within the PRC. In addition, any gain realized on the transfer of shares by such investors is also subject to PRC tax at
a rate of 10%, if such gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident enterprise, dividends
paid on the Company's ordinary shares, and any gain realized from the transfer of the Company's ordinary shares, may be treated
as income derived from sources within the PRC and may as a result be subject to PRC taxation. Furthermore, if we are deemed a PRC resident
enterprise, dividends paid to individual investors who are non-PRC residents and any gain realized on the transfer of ordinary shares
by such investors may be subject to PRC tax at a current rate of 20% (which in the case of dividends may be withheld at source). Any
PRC tax liability may be reduced under applicable tax treaties or tax arrangements between China and other jurisdictions. If Taoping
or any of its subsidiaries established outside of China are considered a PRC resident enterprise, it is unclear whether holders of Taoping
ordinary shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries
or areas.
U.S.
Federal Income Taxation
The
following is a discussion of certain material U.S. federal income tax consequences of the acquisition, ownership and disposition of the
Company's ordinary shares. It does not purport to be a comprehensive description of all of the tax considerations that may be relevant
to a particular person's situation. The discussion applies only to holders that hold their ordinary shares as capital assets (generally
property held for investment) within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, or the Code. This
discussion is based on the Code, income tax regulations promulgated thereunder, judicial positions, published positions of the Internal
Revenue Service, or the IRS, and other applicable authorities, all as in effect as of the date hereof and all of which are subject to
change, possibly with retroactive effect. This discussion is general in nature and is not exhaustive of all possible tax considerations,
nor does the discussion address any state, local or foreign tax considerations or any U.S. tax considerations (e.g., estate or gift tax)
other than U.S. federal income tax considerations, that may be applicable to particular holders.
105
This
discussion does not address all aspects of U.S. federal income taxation that may be relevant in light of particular circumstances, nor
does it address the U.S. federal income tax consequences to persons who are subject to special rules under U.S. federal income tax law,
including:
(a)
banks,
    insurance companies or other financial institutions;
(b)
persons
    subject to the alternative minimum tax;
(c)
tax-exempt
    organizations;
(d)
controlled
    foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid United States federal
    income tax;
(e)
certain
    former citizens or long-term residents of the United States;
(f)
dealers
    in securities or currencies;
(g)
traders
    in securities that elect to use a mark-to-market method of accounting for their securities holdings;
(h)
persons
    that own, or are deemed to own, more than five percent of the Company shares;
(i)
holders
    who acquired the Company shares as compensation or pursuant to the exercise of a share option; or
(j)
persons
    who hold the Company shares as a position in a hedging transaction, "straddle," or other risk reduction transaction.
For
purposes of this discussion, a U.S. holder is (i) an individual who is a citizen or resident of the United States for U.S. federal income
tax purposes; (ii) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized
in or under the laws of the United States (or treated as such under applicable U.S. tax laws), any state thereof, or the District of
Columbia; (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source; or (iv) a trust if (a)
a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority
to control all substantial decisions of the trust, or (b) it has a valid election in effect under applicable law and regulations to be
treated as a U.S. person for U.S. federal income tax purposes. A non-U.S. holder is a holder that is neither a U.S. holder nor a partnership
or other entity classified as a partnership for U.S. federal income tax purposes.
In
the case of a partnership or entity classified as a partnership for U.S. federal income tax purposes, the U.S. federal income tax treatment
of a partner generally will depend on the status of the partner and the activities of the partnership. Partners of partnerships should
consult their tax advisors regarding the U.S. federal income tax consequences to them of the merger or of the ownership and disposition
of the Company's ordinary shares.
Because
of the redomestication transaction in 2012 by which the Company, which is a BVI company, became the parent of the U.S. domestic company
of which it was formerly a subsidiary, the Company is treated, under Section 7874 of the Code, as a U.S. domestic corporation for U.S.
federal tax purposes and, among other consequences, is subject to U.S. federal income tax on its worldwide income. This discussion assumes
that Section 7874 of the Code continues to apply to treat the Company as a U.S. corporation for all purposes under the Code. If, for
some reason (e.g., future repeal of Section 7874 of the Code), the Company were no longer treated as a U.S. corporation under the Code,
the U.S. federal income tax consequences described herein could be materially and adversely affected.
U.S.
Federal Income Tax Consequences for U.S. Holders
Distributions
We
do not currently anticipate paying distributions on the Company's ordinary shares. In the event that distributions are paid, however,
the gross amount of such distributions will be included in the gross income of the U.S. holder as dividend income on the date of receipt
to the extent that the distribution is paid out of current or accumulated earnings and profits, as determined under U.S. federal income
tax principles. Such dividends will be eligible for the dividends-received deduction allowed to corporations in respect of dividends
received from other U.S. corporations. Dividends received by non-corporate U.S. holders, including individuals, may be subject to reduced
rates of taxation under current law. A U.S. holder may be eligible to claim a foreign tax credit with respect to any PRC withholding
tax imposed on dividends paid by us. However, the foreign tax credit rules are complex, and their application in connection with Section
7874 of the Code and the Agreement Between the Government of the United States of America and the Government of the People's Republic
of China for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income, or the U.S.-PRC Tax
Treaty, is not entirely clear at this time. U.S. holders should consult their own tax advisors with respect to any benefits they may
be entitled to under the foreign tax credit rules and the U.S.-PRC Tax Treaty.
106
To
the extent that dividends paid on the Company's ordinary shares exceed current and accumulated earnings and profits, the distributions
will be treated first as a tax-free return of tax basis on the Company's ordinary shares, and to the extent that the amount of
the distribution exceeds tax basis, the excess will be treated as gain from the disposition of those ordinary shares. Because Section
7874 of the Code has applied to treat the Company as a U.S. corporation only since our redomestication in 2012, we may not be able to
demonstrate to the IRS the extent to which a distribution on the Company's ordinary shares exceeds our current and accumulated
earnings and profits (as determined under U.S. federal income tax principles), in which case all of such distribution will be treated
as a dividend for U.S. federal income tax purposes.
Sale
or Other Disposition
U.S.
holders of the Company's ordinary shares will recognize taxable gain or loss on any sale, exchange, or other taxable disposition
of ordinary shares equal to the difference between the amounts realized for the ordinary shares and the U.S. holder's tax basis
in the ordinary shares. This gain or loss generally will be capital gain or loss. Under current law, non-corporate U.S. holders, including
individuals, are eligible for reduced tax rates if the ordinary shares have been held for more than one year. The deductibility of capital
losses is subject to limitations. A U.S. holder may be eligible to claim a foreign tax credit with respect to any PRC withholding tax
imposed on gain from the sale or other disposition of ordinary shares. However, the foreign tax credit rules are complex, and their application
in connection with Section 7874 of the Code and the U.S.-PRC Tax Treaty is not entirely clear at this time. U.S. holders should consult
their own tax advisors with respect to any benefits they may be entitled to under the foreign tax credit rules and the U.S.-PRC Tax Treaty.
Net
Investment Income Tax
Certain
U.S. holders who are individuals, trusts or estates are required to pay an additional 3.8% net investment income tax on, among other
things, dividends on and capital gains from the sale or other disposition of shares of stock. U.S. holders should consult their own advisors
regarding the effect, if any, of this rule on their ownership and disposition of the Company's ordinary shares.
U.S.
Federal Income Tax Consequences for Non-U.S. Holders
Distributions
The
rules applicable to non-U.S. holders for determining the extent to which distributions on the Company's ordinary shares, if any,
constitute dividends for U.S. federal income tax purposes are the same as for U.S. holders. See "-U.S. Federal Income Tax Consequences
for U.S. Holders- Distributions."
Any
dividends paid to a non-U.S. holder by us are treated as income derived from sources within the United States and generally will be subject
to U.S. federal income tax withholding at a rate of 30% of the gross amount of the dividends, or at a lower rate provided by an applicable
income tax treaty if non-U.S. holders provide proper certification of eligibility for the lower rate (usually on IRS Form W-8BEN or Form
W-8BEN-E). Dividends received by a non-U.S. holder that are effectively connected with such holder's conduct of a U.S. trade or
business (and, if an income tax treaty applies, are attributable to a permanent establishment maintained by the non-U.S. holder in the
U.S.) are exempt from such withholding tax, provided that applicable certification requirements are satisfied. In such case, however,
non-U.S. holders will be subject to U.S. federal income tax on such dividends, net of certain deductions, at the rates applicable to
U.S. persons. In addition, corporate non-U.S. holders may be subject to an additional branch profits tax equal to 30% or such lower rate
as may be specified by an applicable tax treaty on dividends received that are effectively connected with the conduct of a trade or business
in the United States.
If
non-U.S. holders are eligible for a reduced rate of U.S. withholding tax pursuant to an applicable income tax treaty, such non-U.S. holders
may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS.
107
Sale
or Other Disposition
Except
as described below for a reduced rate of U.S. withholding tax pursuant to an applicable income tax treaty, any gain realized by a non-U.S.
holder upon the sale or other disposition of the Company's ordinary shares generally will not be subject to U.S. federal income
tax unless:
●
the
    gain is effectively connected with the conduct of a trade or business in the United States by such non- U.S. holder, and, if an income
    tax treaty applies, is attributable to a permanent establishment maintained by such non- U.S. holder in the United States;
●
the
    non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition,
    and certain other conditions are met; or
●
the
    Company is or has been a "U.S. real property holding corporation," or USRPHC, for U.S. federal income tax purposes at
    any time during the shorter of the five-year period ending on the date of disposition or the period during which the holder has held
    the Company's ordinary shares.
Non-U.S.
holders whose gain is described in the first bullet point above will be subject to U.S. federal income tax on the gain derived from the
sale, net of certain deductions, at the rates applicable to U.S. persons. Corporate non-U.S. holders whose gain is described in the first
bullet point above may also be subject to the branch profits tax described above at a 30% rate or lower rate provided by an applicable
income tax treaty. Individual non-U.S. holders described in the second bullet point above will be subject to a flat 30% U.S. federal
income tax rate on the gain derived from the sale, which may be offset by U.S.-source capital losses, even though such non-U.S. holders
are not considered to be residents of the United States.
A
corporation will be a United States real property holding company, or USRPHC, if the fair market value of its U.S. real property interests
equals or exceeds 50 percent of the aggregate of its real property interests (U.S. and non-U.S.) and its assets used or held for use
in a trade or business. Because we do not currently own significant U.S. real property, we believe that we are not currently and will
not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real
property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in
the future. Even if we become a USRPHC, however, so long as the Company's ordinary shares are regularly traded on an established
securities market, such ordinary shares will be treated as U.S. real property interests only if a non-U.S. holder actually or constructively
holds more than 5% of such regularly traded ordinary shares at any time during the applicable period that is specified in the Code.
Foreign
Account Tax Compliance
The
Foreign Account Tax Compliance provisions of the Hiring Incentives to Restore Employment Act (generally referred to as "FATCA"),
when applicable, impose a U.S. federal withholding tax of 30% on payments of dividends on, and gross proceeds from dispositions of, the
Company's ordinary shares that are held through "foreign financial institutions" (which is broadly defined for this
purpose and in general includes investment vehicles) and certain other non-U.S. entities unless various U.S. information reporting and
due diligence requirements (generally relating to ownership by U.S. persons of certain interests in or accounts with those entities)
have been satisfied or an exemption applies. An intergovernmental agreement between the United States and an applicable foreign country
may modify these requirements. U.S. Holders should consult their tax advisers regarding the effect, if any, of the FATCA provisions on
their particular circumstances.
Information
Reporting and Backup Withholding
Payments
of dividends or of proceeds on the disposition of stock made to a holder of the Company's ordinary shares may be subject to information
reporting and backup withholding at a current rate of 24% unless such holder provides a correct taxpayer identification number on IRS
Form W-9 (or other appropriate withholding form) or establishes an exemption from backup withholding, for example by properly certifying
the holder's non-U.S. status on a Form W-8BEN, Form W-8BEN-E or another appropriate version of IRS Form W-8. Payments of dividends
to holders must generally be reported annually to the IRS, along with the name and address of the holder and the amount of tax withheld,
if any. A similar report is sent to the holder. Pursuant to applicable income tax treaties or other agreements, the IRS may make these
reports available to tax authorities in the holder's country of residence.
108
Backup
withholding is not an additional tax; rather, the U.S. income tax liability of persons subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the
IRS, provided that the required information is furnished to the IRS in a timely manner.
F.
Dividends and Paying Agents
Not
applicable.
G.
Statement by Experts
Not
applicable.
H.
Documents on Display
We
have filed this annual report on Form 20-F with the SEC under the Exchange Act. Statements made in this report as to the contents of
any document referred to are not necessarily complete. With respect to each such document filed as an exhibit to this report, reference
is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
We
are subject to the informational requirements of the Exchange Act as a foreign private issuer and file reports and other information
with the SEC. Reports and other information filed by us with the SEC, including this report, may be inspected and copied at the public
reference room of the SEC at 100 F Street, N.E., Washington D.C. 20549. You can also obtain copies of this report by mail from the Public
Reference Section of the SEC, 100 F. Street, N.E., Washington D.C. 20549, at prescribed rates. Additionally, copies of this material
may be obtained from the SEC's Internet site at
http://www.sec.gov.
The SEC's telephone number is 1-800-SEC-0330.
In accordance with NASDAQ Stock Market Rule 5250(d), we will also post this annual report on Form 20-F on our website at
www.taop.com
.
In addition, we will provide hardcopies of our annual report free of charge to shareholders upon request.
As
a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports
and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery
provisions contained in Section 16 of the Exchange Act.
I.
Subsidiary Information
Not
applicable.
ITEM
11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest
Rate Risk
We
deposit surplus funds with Chinese banks earning daily interest. We do not invest in any instruments for trading purposes. Most of our
outstanding debt instruments carry fixed rates of interest. Our operations generally are not directly sensitive to fluctuations in interest
rates. There was no long-term debt outstanding as of December 31, 2023 and 2022. A hypothetical 1.0% increase in the annual interest
rates for all of our credit facilities under which we had outstanding borrowings at December 31, 2023 would increase net loss before
income taxes by approximately $85,000 or less than 1% for the year ended December 31, 2023. Management monitors the banks' prime
rates in conjunction with our cash requirements to determine the appropriate level of debt balances relative to other sources of funds.
We have not entered into any hedging transactions in an effort to reduce our exposure to interest rate risk.
109
Foreign
Exchange Risk
While
our reporting currency is the U.S. dollar, substantially all of our consolidated revenues and consolidated costs and expenses are denominated
in RMB. Substantially all of our assets are denominated in RMB except for cash. As a result, we are exposed to foreign exchange risk
as our revenues and results of operations may be affected by fluctuations in the exchange rate between the U.S. dollar and the RMB. If
the RMB depreciates against the U.S. dollar, the value of our RMB revenues, earnings and assets as expressed in our U.S. dollar financial
statements will decline. Assets and liabilities are translated at exchange rates at the balance sheet dates and revenue and expenses
are translated at the average exchange rates and equity is translated at historical exchange rates. Any resulting translation adjustments
are not included in determining net income but are included in determining other comprehensive income, a component of equity. An average
appreciation (depreciation) of the RMB against the U.S. dollar of 5% would increase (decrease) our comprehensive income by $1.2 million
based on our outstanding revenues, costs and expenses, assets and liabilities denominated in RMB as of December 31, 2023. As of December
31, 2023, our accumulated other comprehensive income was approximately $23.6 million. We have not entered into any hedging transactions
in an effort to reduce our exposure to foreign exchange risk.
The
value of RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China's political and
economic conditions. Since July 2005, RMB has not been pegged to the U.S. dollar. Although the People's Bank of China regularly
intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, RMB may appreciate or
depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future, PRC
authorities may lift restrictions on fluctuations in RMB exchange rate and lessen intervention in the foreign exchange market.
Inflation
Inflationary
factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not
believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation
in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative
expenses as a percentage of net revenues if the selling prices of our products do not increase with these increased costs.
ITEM
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A.
Debt Securities
Not
applicable.
B.
Warrants and Rights
Not
applicable.
C.
Other Securities
Not
applicable.
D.
American Depositary Shares
We
do not have any American Depositary Shares.
110
PART
II
ITEM
13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF PROCEEDS
None.
ITEM
15. CONTROLS AND PROCEDURES
Disclosure
Controls and Procedures
We
maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures
refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the
SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure.
As
required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief
Executive Officer, Mr. Jianghuai Lin and our Chief Financial Officer, Ms. Liqiong (Iris) Yan, of the effectiveness of the design and
operation of our disclosure controls and procedures, as of December 31, 2023. Based upon, and as of the date of this evaluation, Mr.
Lin and Ms. Yan, determined that, as of December 31, 2023, our disclosure controls and procedures were not effective due to the material
weaknesses in our internal control over financial reporting, which are described below.
Management's
Annual Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal
control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief
Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S.
GAAP, and includes those policies and procedures that:
(1)
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our
assets;
(2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and
directors; and
(3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
All
internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Management
assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, management
used the framework set forth in the report entitled Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company's internal
control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication,
and (v) monitoring. Based on our assessment, as a result of the material weaknesses described below, we determined that, as of December
31, 2023, our internal control over financial reporting was not effective based on those criteria.
As
a result of our assessment, management identified the following control deficiencies that represent material weaknesses as of December
31, 2023: (1) We lack of formal process in respect of management going concern assessment and (2) We do not have sufficient formal procedures
to be applied for the impairment assessment of the property, plant and equipment and long-lived assets and to consider appropriately
all the internal and external impairment indicators as well.
111
We
have taken steps to remediate these deficiencies as soon as practicable by implementing a plan to improve our internal control over financial
reporting including, but not limited to, hiring additional internal staff and/or outside consultants experienced in US GAAP financial
reporting as well as in SEC reporting requirements. In 2021 we promoted Ms. Liqiong (Iris) Yan to be our Chief Financial Officer to oversee
our internal control over financial reporting, and recruited seasoned accounting staff to improve our technical capability for financial
reporting process. Our management team will continue to monitor and evaluate the effectiveness of our internal controls and procedures
and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional
enhancements or improvements.
Our
management does not believe that these deficiencies had a material effect on our financial condition or results of operations or caused
our financial statements as of and for the year ended December 31, 2023 to contain a material misstatement.
Attestation
Report of the Registered Public Accounting Firm
Because
the Company is a non-accelerated filer, this annual report does not include an attestation report of our registered public accounting
firm regarding internal control over financial reporting.
Changes
in Internal Control Over Financial Reporting
Except
as described above, there have been no changes in our internal control over financial reporting during the fiscal year ended December
31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM
16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our
board of directors has determined that Mr. Remington C.H. Hu is an "audit committee financial expert" and that he is an "independent
director" as defined by the rules and regulations of NASDAQ.
ITEM
16B. CODE OF ETHICS
Our
code of conduct and business ethics conforms to the rules and regulations of NASDAQ. The code of conduct and business ethics applies
to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal
accounting officer, and addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations
and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and
reporting of violations of the code. A copy of conduct and business ethics has been filed as Exhibit 11.1 to the annual report on Form
20-F dated March 30, 2018. Our code of ethics is also posted on the corporate governance page of our website at www.taop.com. During
the fiscal year ended December 31, 2023, there were no waivers of our code of ethics.
ITEM
16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The
following table sets forth the aggregate fees by categories specified below in connection with services rendered by our principal external
auditors for the periods indicated.
Fiscal Year Ended December 31,
2023
2022
Audit Fees
$
203,711
$
212,353
Tax Fees
40,000
40,000
TOTAL
$
243,711
$
252,353
112
"Audit
Fees" consisted of the aggregate fees billed for professional services rendered for the audit of our annual financial statements
or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.
"Tax
Fees" consisted of the aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning.
Included in such Tax Fees were fees for preparation of our tax returns and consultancy and advice on other tax planning matters.
Our
Audit Committee pre-approves all auditing services and permitted non-audit services to be performed for us by our independent auditor,
including the fees and terms thereof (subject to the de minimums exceptions for non-audit services described in Section 10A(i)(l)(B)
of the Exchange Act that are approved by our Audit Committee prior to the completion of the audit). The percentage of services provided
for which we paid audit-related fees, tax fees, or other fees that were approved by our Audit Committee pursuant to paragraph (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X promulgated by the SEC was 100%.
ITEM
16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
We
have not asked for, nor have we been granted, an exemption from the applicable listing standards for our Audit Committee.
ITEM
16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
There
were no purchases of equity securities made by or on behalf of us or any "affiliated purchaser" as defined in Rule 10b-18
of the Exchange Act during the period covered by this Annual Report.
ITEM
16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
None.
ITEM
16G. CORPORATE GOVERNANCE
We
are incorporated in the BVI and our corporate governance practices are governed by applicable BVI law, our memorandum and articles of
association. In addition, because our ordinary shares are listed on NASDAQ, we are subject to NASDAQ's corporate governance requirements.
NASDAQ
Listing Rule 5615(a)(3) permits a foreign private issuer like us to follow home country practices in lieu of certain requirements of
Listing Rule 5600, provided that such foreign private issuer discloses in its annual report filed with the SEC each requirement of Rule
5600 that it does not follow and describes the home country practice followed in lieu of such requirement.
We
currently follow our home country practice that (i) does not require us to seek shareholders' approval of any issuance of securities
in connection with a transaction other than a public offering where such transaction involves the issuance of securities representing
more than 20% of or more of the voting power outstanding before the issuance at a price lower than the "Minimum Price", in
lieu of the corporate governance requirements of Nasdaq Listing Rule 5635(d) with respect to shareholder approval; (ii) does not require
us to seek shareholders' approval for the establishment of or any material amendments to our equity compensation plans in lieu
of the corporate governance requirements of Nasdaq Listing Rule 5635(c) with respect to shareholder approval; and (iii) does not require
us to seek shareholders' approval for the issuance of securities to external consultants, in lieu of the corporate governance requirements
of Nasdaq Listing Rule 5635(c) with respect to shareholder approval. Our BVI counsel, Maples and Calder, has provided relevant letters
to NASDAQ certifying that under BVI law, we are not required to seek shareholders' approval in the above circumstances.
In
addition, Maples and Calder has provided a letter to NASDAQ certifying that under BVI law, we are not required to hold annual shareholders'
meetings. In the fiscal year 2023, we followed the home country practice and did not hold an annual meeting of shareholders.
113
ITEM
16H. MINE SAFETY DISCLOSURE
Not
applicable.
ITEM
16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not
Applicable.
ITEM
16J. INSIDER TRADING POLICIES
Not
Applicable.
ITEM
16K. CYBERSECURITY
Risk
Management and Strategy
We
maintain a technology and cybersecurity program, which includes information security, as part of our overall risk management process
with the aim that our information systems, including those of our suppliers and other third-parties, will be resilient, effective and
capable of safeguarding against emerging risks and cybersecurity threats. We endeavor to assure our program is appropriately resourced
and to attract and retain expert talent to execute it.
The
program is based on the PRC Cybersecurity Law, aiming to comply with applicable laws and regulations. We use the PRC Cybersecurity Law
as a guideline to help us identify, assess, and manage cybersecurity risks related to our business operations.
Under
the PRC Cybersecurity Law, we have established preventive measures that are consistent with the national cybersecurity level. We fulfill
our security obligations to protect our networks from interference, damage, or unauthorized access, and to prevent the leakage, theft,
or alteration of network data. As part of our supplier risk management program, we conduct security assessments prior to engagement of
high-risk suppliers and other third-party providers and have a monitoring program to evaluate ongoing compliance with our cybersecurity
standards.
A
key element of our technology and cybersecurity program strategy is fostering training and awareness. Our training and awareness program
includes annual cybersecurity awareness training and role-based phishing tests for our employees and for third parties with access to
our systems.
Our
technology and cybersecurity program focuses on the defense, rapid detection and rapid remediation of cybersecurity threats and incidents.
Our approach aims to deliver the control capabilities specified in the PRC Cybersecurity Law. Additionally, our program incorporates
comprehensive cybersecurity policies and crisis response and management procedures, aimed at rapidly addressing, responding to, and effectively
communicating about cybersecurity threats and incident.
Our
cybersecurity crisis management program sets forth the items, procedures and actions we expect to address and follow in the event of
a cybersecurity incident, including detection, response, mitigation and remediation. When a potential threat or incident is identified,
our cyber security incident response team will assign a risk level classification and initiate the escalation and other steps called
for by our plan. All incidents that are initially assessed by the cybersecurity incident response team as potentially high-risk are escalated
promptly to our Chief Financial Officer, who will determine whether and what elements of our cybersecurity crisis response and management
plan should be activated, including escalation to other senior management. Our Chief Financial Officer will inform our board of directors
of cybersecurity incidents, as appropriate, considering a variety of factors, including financial, operational, legal or reputational
impact.
Our
program's maturity and operational readiness are regularly evaluated by independent experts using the PRC Cybersecurity Law's
cybersecurity framework and penetration tests that are consistent with the national cybersecurity level. Our program, and the results
of these independent evaluations and testing, are regularly reviewed by our senior management and members of our board of directors.
114
We
have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially
affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial
condition.
Risk
Governance
We
are committed to appropriate cybersecurity governance and oversight.
Our
board of directors has oversight of our strategic and business risk management, including cybersecurity risk management. Our board of directors is responsible for ensuring that management has processes in
place designed to identify and evaluate cybersecurity risks to which we are exposed and to implement processes and programs to manage
cybersecurity risks and mitigate cybersecurity incidents. Management is responsible for identifying, assessing, and managing material
cybersecurity risks on an ongoing basis, establishing processes to ensure that such potential cybersecurity risk exposures are monitored,
putting in place appropriate mitigation measures, maintaining cybersecurity policies and procedures, and providing regular reports to
our board of directors.
For
additional information on our cybersecurity risks, please see Item 1A "
Risk Factors
."
115
PART
III
ITEM
17. FINANCIAL STATEMENTS
We
have elected to provide our financial statements pursuant to Item 18.
ITEM
18. FINANCIAL STATEMENTS
The
full text of our audited consolidated financial statements begins on page F-1 of this annual report.
ITEM
19. EXHIBITS
Exhibit
    No.
Description
1.1
Amended and Restated Memorandum and Articles of Association of the registrant (incorporated by reference to Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on December 30, 2020)
2.1
Description of Rights of Ordinary Shares Registered Pursuant to Section 12 of the Exchange Act as of December 31, 2023
2.2
Form of Warrant (incorporated by reference to Exhibit 4.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on July 14, 2021)
4.1
Form of Independent Director Agreement (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form F-4 filed by the registrant on June 21, 2012)
4.2
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form F-4 filed by the registrant on June 21, 2012)
4.3
Form of Stock Option Agreement (incorporated by reference to Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on June 1, 2016)
4.4
English translation of Share Acquisition Agreement, dated March 17, 2021, by and among the Company, Biznest Internet Technology Co., Ltd., Taoping New Media Co., Ltd. and shareholders of Taoping New Media Co., Ltd. (incorporated by reference to Exhibit 99.1 to the Report on Form 6-K furnished by the registrant on March 19, 2021)
4.5
Taoping Inc. 2016 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 4.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on May 10, 2021)
4.6
Form of Securities Purchase Agreement, dated July 12, 2021 (incorporated by reference to Exhibit 10.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on July 14, 2021)
4.7
English Translation of Equity Transfer Agreement, dated September 18, 2021 (incorporated by reference to Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on September 20, 2021)
4.8
Form of Idle mining Machines and Accessories Sales Contract (English Translation) (incorporated by reference to Exhibit 4.9 to the Annual Report on Form 20-F filed on April 25, 2023)
4.9
Form of Standby Equity Purchase Agreement (Public), dated July 17, 2023 (incorporated by reference to Exhibit 4.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on July 19, 2023)
4.10
Form of Standby Equity Purchase Agreement (Public), dated July 17, 2023 (incorporated by reference to Exhibit 4.2 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on July 19, 2023)
4.11
Form of Securities Purchase Agreement, dated September 27, 2023 (incorporated by reference to Exhibit 4.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on September 29, 2023)
4.12
Form of Convertible Promissory Note, dated September 27, 2023 (incorporated by reference to Exhibit 4.2 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on September 29, 2023)
8.1
List of the registrant's subsidiaries
11.1
Code of Conduct and Business Ethics, adopted on June 20, 2012 (incorporated by reference to Exhibit 11.1 to the Annual Report on Form 20-F filed on March 30, 2018)
12.1
Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)
12.2
Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)
13.1
Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2
Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1
Consent from PKF Littlejohn LLP, Independent Registered Public Accounting Firm
97.1
Clawback Policy of the Registrant
101.INS
XBRL
    Instance Document
101.SCH
XBRL
    Taxonomy Extension Schema Document
101.CAL
XBRL
    Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL
    Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL
    Taxonomy Extension Label Linkbase Document
101.PRE
XBRL
    Taxonomy Extension Presentation Linkbase Document
116
SIGNATURE
The
registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.
Date:
    April 25, 2024
TAOPING INC.
/s/
    Jianghuai Lin
Jianghuai Lin
Chief Executive Officer
117
TAOPING
INC.
CONSOLIDATED
FINANCIAL STATEMENTS
Contents
Page(s)
Report of Independent Registered Public Accounting Firm
(PCAOB ID No.
2814
)
F-2
Consolidated Balance Sheets as of December 31, 2023 and 2022
F-4
Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021
F-5
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 and 2021
F-6
Consolidated Statements of Changes in Stockholders' (Deficits) Equity for the years ended December 31, 2023, 2022 and 2021
F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021
F-8
Notes to Consolidated Financial Statements
F-10
F-
1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Stockholders and the Board of Directors of Taoping Inc.
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of Taoping Inc. (the "Company") as of December 31, 2023 and 2022,
the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three
years period ended December 31, 2023, and the related notes (collectively referred to as the "consolidated financial statements").
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years period ended December
31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Substantial
Doubt about the Company's Ability to Continue as Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated financial statements, the Company's short-term bank loans of $8.5 million which are repayable within one
year and the uncertainty about the availability of future financing raise substantial doubt about the Company's ability to continue
as a going concern. Management's evaluation of the events and conditions and management's plans regarding these matters are
also described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments
that might result from the outcome of the uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing
an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical
Audit Matters
The
critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements
that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the
accounts or disclosures to which they relate.
F-
2
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in the "Substantial Doubt about the Company's Ability to Continue as a Going Concern" and Note 1 to the consolidated
financial statements, the Company's short-term bank loans of $8.5 million which are repayable within one year and the uncertainty
about the future financing raise substantial doubt about the Company's ability to continue as a going concern. Management's
evaluation of the events and conditions and management's plans regarding these matters are also described in Note 1 to the consolidated
financial statements.
The
principal considerations for our determination that the evaluation of management's going concern assessment is a critical audit
matter are the significant judgment and subjectivity inherent risk in the Company's assumptions made in the going concern assessment
and the uncertainty of the Company's ability to secure funding subsequent to December 31, 2023.
Our
audit procedures related to the evaluation of management's going concern assessment included the following, among others:
a.
assessing
    the overall reasonableness of the Company's going concern assessment, including significant assumptions utilized by the Company.
b.
assessing
    the projected revenue and operating costs, liquidity of existing assets, the terms of bank loans and related party loans and finance
    facilities available.
c.
considering
    the adequacy of the Company's financial statements disclosures.
Revenue
recognition
The
Company has the following revenue streams:
a.
revenue
    from sale of products.
b.
revenue
    from software.
c.
revenue
    from advertising service.
As
disclosed in Note 2 to the consolidated financial statements, the Company recognizes revenue from product, software and advertising service
upon transfer of control of promised products or completion of service. Significant judgment is exercised by the management of the Company
in determining existence criteria through evaluation on the terms and conditions in the contracts with customers and the identification
of performance obligations in the recognition of revenue. The principal considerations for our determination that revenue recognition
is a critical audit matter are:
a.
revenue
    is material to the consolidated financial statements; and
b.
significant
    judgement by management of the Company in determining the existence criteria to recognize revenue and the identification of performance
    obligations was extensive and it required a high degree of auditor judgement.
Our
audit procedures in respect of the revenue recognition included:
a.
updating
    understanding of the system and reviewing related internal controls relevant to the revenue.
b.
examining
    sales contracts with major customers and evaluating the existence criteria determined and the performance obligations identified
    by the management of the Company.
c.
conducting
    substantive transaction and cut-off test.
d.
conducting
    analytical review on revenue.
/s/
PKF Littlejohn LLP
PKF
    Littlejohn LLP
We have served as the Company's auditor since 2021.
London,
    United Kingdom
April
    25, 2024
PCAOB
    ID No.: 2814
F-
3
TAOPING
INC.
CONSOLIDATED
BALANCE SHEETS
DECEMBER
31, 2023 AND 2022
NOTES
December 31,
2023
December 31,
2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
1,300,855
$
1,014,591
Accounts receivable, net
2(e)
8,063,280
9,201,245
Accounts receivable-related parties, net
2(e)
630,775
91,371
Advances to suppliers
2(f)
12,015,810
5,851,381
Prepaid expenses
349,558
-
Inventories, net
8
1,250,567
356,358
Other current assets
13(a)
1,640,070
1,554,488
Current assets from discontinued operations
10
-
1,326,265
TOTAL CURRENT ASSETS
25,250,915
19,395,699
Property, equipment and software, net
9
6,677,484
7,833,902
Right-of-use assets
2(r)
-
48,786
Long-term investments
15
86,889
95,966
Goodwill
-
58,922
Other assets, non-current, net
13(b)
811,026
1,775,540
TOTAL ASSETS
$
32,826,314
$
29,208,815
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term bank loans
11
$
8,547,509
$
7,203,762
Accounts payable
832,436
2,287,244
Advances from customers
1,199,732
622,581
Advances from customers-related parties
7(a)
90,880
94,832
Amounts due to related parties
7(c)
3,037,607
3,338,882
Accrued payroll and benefits
626,151
411,995
Other payables and accrued expenses
17
5,224,225
4,996,344
Income tax payable
55,262
60,054
Lease liability-current
14
-
29,373
Other current liability
-
149,148
Convertible note payable
16
449,215
-
Current liabilities from discontinued operations
10
-
377,539
TOTAL CURRENT LIABILITIES
20,063,017
19,571,754
Lease liability
14
-
20,369
TOTAL LIABILITIES
20,063,017
19,592,123
EQUITY
Ordinary shares, 2023 and
    2022: par $
0
;
    authorized capital
100,000,000
shares;
    shares issued and outstanding, 2023:
2,891,822
shares; 2022:
1,587,371
shares
*
;
19
165,115,938
161,404,797
Additional paid-in capital
19
22,603,523
22,447,083
Reserve
18
10,209,086
10,209,086
Accumulated deficit
(
208,752,548
)
(
208,054,607
)
Accumulated other comprehensive income
23,587,298
23,610,333
Total equity of the Company
12,763,297
9,616,692
Non-controlling interest
-
-
TOTAL EQUITY
12,763,297
9,616,692
TOTAL LIABILITIES AND EQUITY
$
32,826,314
$
29,208,815
*
On
    August 1, 2023, the Company implemented a
one-for-ten
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.
The
accompanying notes are an integral part of these consolidated financial statements
F-
4
TAOPING
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
YEARS
ENDED DECEMBER 31, 2023, 2022 AND 2021
NOTES
2023
2022
2021
Revenue – Products
$
24,073,593
$
12,135,570
$
10,651,928
Revenue – Products-related parties
7(a)
165,520
117,995
72,779
Revenue – Advertising
5,001,695
5,397,610
2,577,712
Revenue - Advertising-related parties
-
11,901
-
Revenue – Software
8,792,781
4,820,454
5,174,422
Revenue – Software-related parties
7(a)
6,021
-
-
Revenue – Others
596,025
1,729,847
837,660
Revenue – Others-related parties
7(b)
-
20,086
76,078
TOTAL REVENUE
38,635,635
24,233,463
19,390,579
Cost – Products
21,389,832
11,125,855
9,890,346
Cost – Advertising
2(t)
3,945,211
3,746,585
2,193,945
Cost – Software
4,145,233
665,846
582,490
Cost – System integration
-
-
40,875
Cost – Others
303,078
1,465,128
11,469
TOTAL COST
29,783,354
17,003,414
12,719,125
GROSS PROFIT
8,852,281
7,230,049
6,671,454
Administrative expenses
5,600,578
6,149,981
11,638,691
Research and development expenses
2,967,043
3,606,653
4,479,045
Selling expenses
482,358
639,052
694,474
LOSS FROM OPERATIONS
(
197,698
)
(
3,165,637
)
(
10,140,756
)
Subsidy income
292,797
148,577
181,620
Loss from equity method investment
(
8,031
)
(
261,397
)
(
814,440
)
Other income (loss), net
267,292
3,314,433
(
59,867
)
Interest income
2,100
7,956
4,631
Interest expense and debt discounts expense
(
580,630
)
(
556,434
)
(
928,352
)
Loss before income taxes
(
224,170
)
(
512,502
)
(
11,757,164
)
Income tax (expense) benefit
12
(
7,980
)
(
69,869
)
(
5,321
)
Net (loss) from continuing operations
(
232,150
)
(
582,371
)
(
11,762,485
)
Net (loss) income from discontinued operations
10
(
465,791
)
(
6,499,276
)
1,837,626
NET LOSS
(
697,941
)
(
7,081,647
)
(
9,924,859
)
Less: net loss attributable to the non-controlling interest
4
-
-
-
NET LOSS ATTRIBUTABLE TO THE COMPANY
$
(
697,941
)
$
(
7,081,647
)
$
(
9,924,859
)
(Loss) income per share - Basic and Diluted
*
CONTINUING OPERATIONS
Basic
6
$
(
0.12
)
$
(
0.37
)
$
(
8.89
)
Diluted
6
$
(
0.12
)
$
(
0.37
)
$
(
8.89
)
DISCONTINUED OPERATIONS
Basic
6
$
(
0.24
)
$
(
4.10
)
$
1.39
Diluted
6
$
(
0.24
)
$
(
4.10
)
$
1.39
LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY
*
Basic
6
$
(
0.36
)
$
(
4.47
)
$
(
7.50
)
Diluted
6
$
(
0.36
)
$
(
4.47
)
$
(
7.50
)
*
On
    August 1, 2023, the Company implemented a
one-for-ten
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.
The
accompanying notes are an integral part of these consolidated financial statements
F-
5
TAOPING
INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS
ENDED DECEMBER 31, 2023, 2022 AND 2021
2023
2022
2021
Net loss
$
(
697,941
)
$
(
7,081,647
)
$
(
9,924,859
)
Other comprehensive (loss) income:
-
-
-
Foreign currency translation (loss) gain
(
23,035
)
(
881,398
)
150,109
Comprehensive loss
(
720,976
)
(
7,963,045
)
(
9,774,750
)
Comprehensive loss attributable to the non- controlling interest
-
-
37,776
Comprehensive loss attributable to the Company
$
(
720,976
)
$
(
7,963,045
)
$
(
9,736,974
)
The
accompanying notes are an integral part of these consolidated financial statements
F-
6
TAOPING
INC.
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY
YEARS
ENDED DECEMBER 31, 2023, 2022 AND 2021
Ordinary shares*
Additional
Paid-in
Accumulated
Accumulated
other
comprehensive
Non
controlling
Shares
Amount
Capital
Reserve
deficit
income
interest
Total
BALANCE AS AT JANUARY 1, 2021
875,988
$
131,247,787
$
15,643,404
$
14,044,269
$
(
192,212,544
)
$
23,612,413
$
8,640,871
$
976,200
Stock-based payment for consulting fee (Note 19)
6,200
187,390
72,706
-
-
-
-
260,096
Stock-based Compensation (Note 19)
-
-
158,070
-
-
-
-
158,070
Conversion of convertible notes (Note 19)
59,803
1,739,768
(
205,810
)
-
-
-
-
1,533,958
Issuance of ordinary shares for financing (Note 19)
434,074
17,894,609
-
-
-
-
-
17,894,609
Employee stock incentive (Note 19)
20,000
2,792,000
-
-
-
-
-
2,792,000
Net loss for the year
-
-
-
-
(
9,924,859
)
-
(
9,924,859
)
Foreign currency translation gain
-
-
-
-
-
187,886
(
37,777
)
150,109
Dissolve of variable interest entity and ordinary shares issued for acquisition of a wholly owned subsidiary
61,225
1,800,000
6,778,713
-
-
-
(
8,603,094
)
(
24,381
)
Ordinary shares issued for business acquisition
121,363
5,436,456
-
-
-
-
-
5,436,456
Minority shareholders' contribution
-
-
-
-
-
-
(
1,759
)
(
1,759
)
BALANCE AS AT DECEMBER 31, 2021
1,578,653
161,098,010
22,447,083
14,044,269
(
202,137,403
)
23,800,299
(
1,759
)
19,250,499
Stock-based payment for consulting fee (Note 19)
2,000
188,650
-
-
-
-
-
188,650
Net loss for the year
-
-
-
-
(
7,081,647
)
-
(
7,081,647
)
Foreign currency translation (loss)
-
-
-
-
-
(
881,398
)
-
(
881,398
)
Disposal of a wholly owned subsidiary
-
-
-
(
3,835,183
)
1,164,443
691,432
-
(
1,979,308
)
Ordinary shares issued for business acquisition
6,718
118,137
-
-
-
-
-
118,137
Reversal of minority shareholders' interest upon disposal of a subsidiary
-
-
-
-
-
-
1,759
1,759
BALANCE AS AT DECEMBER 31, 2022
1,587,371
161,404,797
22,447,083
10,209,086
(
208,054,607
)
23,610,333
-
9,616,692
Stock-based payment for consulting fee (Note 19)
50,000
340,000
-
-
-
-
-
340,000
Beneficial conversion feature on convertible note (Note 16)
156,440
156,440
Issuance of ordinary shares for Equity Incentive Plan (Note 19)
200,000
1,360,000
-
-
-
-
1,360,000
Issuance of ordinary shares for financing (Note 19)
1,047,733
1,961,923
-
-
-
-
-
1,961,923
Net loss for the year
-
-
-
-
(
697,941
)
-
(
697,941
)
Foreign currency translation (loss)
-
-
-
-
-
(
23,035
)
-
(
23,035
)
Ordinary shares issued for business acquisition
6,718
49,218
-
-
-
-
-
49,218
BALANCE AS AT DECEMBER 31, 2023
2,891,822
165,115,938
22,603,523
10,209,086
(
208,752,548
)
23,587,298
-
12,763,297
*
On
    August 1, 2023, the Company implemented a
one-for-ten
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.
The
accompanying notes are an integral part of these consolidated financial statements
F-
7
TAOPING
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
YEARS
ENDED DECEMBER 31, 2023, 2022 AND 2021
2023
2022
2021
OPERATING ACTIVITIES
Net loss
$
(
697,941
)
$
(
7,081,647
)
$
(
9,924,859
)
Adjustments to reconcile net (loss) to net cash (used in) provided by operating activities:
Provision for allowance for credit losses on accounts receivable, other current assets, and advances to suppliers
1,413,216
645,493
5,541,717
Provision for obsolete inventories
(
53,314
)
63,716
(
82,255
)
Depreciation
2,993,285
7,235,797
3,704,818
Amortization of convertible note discount
68,241
-
-
Loss (gain) on sale of property and equipment
96,131
3,001,559
(
655,907
)
Impairment of property and equipment
-
1,468,014
-
Loss from disposal of inventories
-
-
-
Stock-based payments for consulting services
204,000
23,100
187,390
Stock-based compensation to employees
1,360,000
-
2,950,070
Impairment on cryptocurrencies
-
1,517,172
493,617
(Gain) on sales of cryptocurrencies
-
(
679,111
)
(
410,979
)
Loss (gain) on disposal of subsidiaries
16,184
(
3,106,798
)
-
Loss on long-term investment
8,031
261,397
814,440
Exchange difference
594,137
1,524,177
-
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable
(
393,934
)
(
3,964,973
)
(
907,826
)
(Increase) decrease in accounts receivable from related parties
(
197,096
)
238,806
515,334
Decrease in accounts payable from related party
-
-
(
70,525
)
(Increase) decrease in inventories
(
1,786,825
)
101,792
165,566
Cryptocurrencies - mining and purchases
-
(
5,026,628
)
(
5,455,345
)
Decrease in other non-current assets
919,081
967,407
1,885,104
(Increase) in other receivables and prepaid expenses
(
53,329
)
(
183,808
)
-
(Increase) decrease in advances to suppliers
(
6,266,842
)
656,158
(
6,719,399
)
(Decrease) Increase in amounts due to/from related parties
494,889
-
(
827,901
)
Increase (decrease) in other payables and accrued expenses
(
465,678
)
798,636
(
2,263,237
)
Increase in advances from customers
593,429
235,823
48,301
Increase (decrease) in advances from related parties
509
(
17,192
)
(
22,705
)
Increase in payroll payable and benefits
199,360
177,953
231,673
(Decrease) increase in lease liability
(
4,082
)
(
84,161
)
91,586
(Decrease) in accounts payable
(
1,364,282
)
(
5,986,490
)
(
5,812,529
)
(Decrease) increase in income tax payable
(
3,187
)
(
297,890
)
374,353
Net cash (used in) operating activities
(
2,326,017
)
(
7,511,698
)
(
16,149,498
)
INVESTING ACTIVITIES
Proceeds from sales of cryptocurrencies
-
5,017,732
4,543,543
Proceeds from sales of property and equipment
-
1,082,272
-
Purchases of property, equipment and software
(
1,209,613
)
(
1,793,342
)
(
11,293,962
)
Acquisition of cash in connection with a business acquisition
589
3,895
7,545
Consideration paid for acquisition
-
-
(
7,257,394
)
Net cash (used in) provided by investing activities
(
1,209,024
)
4,310,557
(
14,000,268
)
FINANCING ACTIVITIES
Proceeds from borrowings under short-term loans
8,766,614
7,441,600
11,937,002
Borrowings from related parties
-
-
3,100,520
Repayment of short-term loans
(
7,225,528
)
(
7,418,884
)
(
10,332,736
)
Proceeds from issuance of convertible note
550,000
-
-
Proceeds from issuance of ordinary shares
1,748,258
-
28,323,371
Net cash provided by financing activities
3,839,344
22,716
33,028,157
Effect of exchange rate changes on cash and cash equivalents
(
26,688
)
(
329,601
)
555,961
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
277,615
(
3,508,026
)
3,434,352
CASH AND CASH EQUIVALENTS, BEGINNING
1,023,240
4,531,266
1,096,914
CASH AND CASH EQUIVALENTS, ENDING
$
1,300,855
$
1,023,240
$
4,531,266
Supplemental disclosure of cash flow information:
Cash paid during the year
Income taxes
$
8,180
$
69,869
$
-
Interest
$
512,389
$
553,885
$
454,261
F-
8
December 31, 2023
December 31, 2022
Reconciliation to amounts on consolidated balance sheets
Cash and cash equivalents from continuing operations
$
1,300,855
$
1,014,591
Cash and cash equivalents from discontinued operations
-
8,649
Total cash, cash equivalents, and restricted cash
$
1,300,855
$
1,023,240
Supplemental
disclosure of significant non-cash transactions*:
*
On
    August 1, 2023, the Company implemented a
one-for-ten
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.
In
January 2021, the Company issued
700
non-restricted shares with a fair value of $
21,840
to a consultant as a compensation for his service.
In
March 2021, the Company issued
20,000
restricted ordinary shares under its 2016 Equity Incentive Plan to certain employees with the fair
value of approximately $
2,792,000
as rewards for their past services.
In
April 2021, the Company issued warrants to an investor relationship consultant to purchase
1,500
ordinary shares of the Company as a
compensation for its service. The fair value of the warrants was approximately $
73,000
.
In
April 2021, the Company obtained right-of-use assets of approximately $
1
million in exchange for lease liabilities.
In
June 2021, the Company issued
121,363
restricted ordinary shares for the acquisition of Taoping New Media Co., Ltd. The fair value of
the restricted ordinary shares was approximately $
5,436,000
.
In
September 2021, the Company issued
61,225
ordinary shares for the acquisition of iASPEC Technology Group Co., Ltd. The fair value of
the ordinary shares was approximately $
1.8
million.
In
November 2021, the Company issued
4,500
restricted ordinary shares with a fair value of $
136,350
to a financial intermediary service
organization as a compensation for the intermediary service.
In
December 2021, the Company issued
1,000
ordinary shares with a fair value of $
29,200
to a consultant as a compensation for his service.
In
2021, purchase of software and equipment in an amount of approximately $
6.3
million was made by an increase in accounts payable, respectively,
and $
1.4
million was made by a decrease of advances to suppliers.
In
2021, the Company held cryptocurrencies in an amount of approximately of $
830,000
which were noncash transactions received from cryptocurrency
mining operations.
In
February 2022, the Company issued the first phase of approximately
6,718
restricted ordinary shares with a fair value of approximately
$
118,000
, for the acquisition of Zhenjiang Taoping IoT Tech. Co., Ltd ("ZJIOT"). The Company agreed to issue to the shareholders
of ZJIOT a total of approximately
20,154
restricted ordinary shares in three phases, conditioned upon the satisfaction of certain performance
targets.
In
March 2022 and July 2022, the Company issued
2,000
ordinary shares with a fair value of $
23,100
to a consultant as a compensation for
his service.
In
April 2023, the Company issued the second phase of approximately
6,718
restricted ordinary shares with a fair value of approximately
$
49,000
, for the acquisition of ZJIOT, upon the satisfaction of certain performance targets.
In
May 2023, the Company issued
50,000
restricted shares to a consultant as its service compensation for the service period from May 26,
2023 to May 25, 2024. The fair value of the
50,000
ordinary shares was $
340,000
, which was amortized over the service period.
In
May 2023, the Company issued
200,000
ordinary shares with fair value of approximately $
1,360,000
to certain directors, executive officers,
and employees as compensations for their services.
The
accompanying notes are an integral part of these consolidated financial statements
F-
9
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION, PRINCIPAL ACTIVITIES AND MANAGEMENT'S PLANS
Taoping
Inc. (f/k/a China Information Technology, Inc.), together with its subsidiaries (the "Company"), is a provider of
cloud-app technologies for Smart City IoT platforms, digital advertising delivery, and other internet-based information distribution
systems in China. Its Internet ecosystem enables all participants of the new media community to efficiently promote branding, disseminate
information, and exchange resources. In addition, the Company provides a broad portfolio of software and hardware with fully integrated
solutions, including Information Technology infrastructure, Internet-enabled display technologies, and IoT platforms to customers in
government, education, residential community management, media, transportation, and other private sectors.
In
May 2018, we changed our corporate name from "China Information Technology Inc." to "Taoping Inc.", to reflect
our current business operations in the new media and IoT industries. In 2021, Information Security Tech International Co. Ltd. ("IST
HK"), one of the Company's Hong Kong subsidiaries then, changed its corporate name to Taoping Group (China) Ltd. to reflect
the Company's current corporate structure to be in line with the new business strategies. As listed in the table below, these services
are provided through the Company's operating subsidiaries, primarily in Hong Kong and mainland China.
In
June 2021, the Company consummated an acquisition of
100
% of the equity interest of Taoping New Media Co., Ltd ("TNM"), a
leading media operator in China's out-of-home digital advertising industry. Mr. Jianghuai Lin, the Chairman and CEO of the Company,
who then owned approximately
24.6
% of total shares outstanding of the Company, owned approximately
51
% of TNM. TNM focuses on digital
life scenes and mainly engaged in selling out-of-home advertising time slots on its networked smart digital advertising display terminals
with artificial intelligence and big data technologies. The acquisition of TNM is expected to enhance the Company's presence in
the new media and advertising sectors.
In
2021, the Company launched blockchain related new business in cryptocurrency mining operations and newly established subsidiaries in
Hong Kong to supplement its diminished Traditional Information Technology (TIT) business segment as a part of new business transformation.
However, due to the decreased output and the highly volatile cryptocurrency market, the Company had ceased the operation of cryptocurrency
mining business by December 2022, and continues to focus the efforts on its digital adverting, smart display and the newly added smart
community and related businesses.
As
the cessation of the operation of cryptocurrency mining business represent a strategic shift in the Company's strategy that will
have a major effect on the Company's operations and financial results, the operations of cryptocurrency mining business have been
presented as "discontinued operations" in the Company's consolidated financial statements. See Note 10.
In
September 2021, the Company and the Company's wholly owned subsidiary, Information Security Technology (China) Co., Ltd. ("IST")
entered into an equity transfer agreement with Mr. Jianghuai Lin, the sole shareholder of iASPEC Technology Group Co., Ltd. ("iASPEC").
Upon closing of the equity transfer, the Company's variable interest entity structure was dissolved and iASPEC became a wholly
owned indirect subsidiary of the Company.
F-
10
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
In
January 2022, the Company completed the acquisition of
100
% equity interest of ZJIOT, aiming to accelerate the Company's smart
charging pile and digital new media businesses in East China.
As
a result of the Company's business transformation and its exit from the TIT business, the Company disposed of
100
% equity interests
of iASPEC (excluding iASPEC's subsidiaries) which mainly conducted the Company's TIT business to an unrelated third party
for
nil
consideration on June 7, 2022. The disposition resulted in a total recorded income of approximately $
3.0
million for the Company
for the year ended December 31, 2022.
The
Company disposed of
100
%
equity interests of TDL to an unrelated third party for
nil
consideration on September 6, 2023, and disposed of
100
%
equity interests of TDAL and TCL (including their respective subsidiary) to an unrelated third party for
nil
consideration on October 27, 2023. The disposition resulted in a total recorded loss of $
16,184
for the Company for the year ended December 31, 2023.
In
May 2023, the Company established a subsidiary Taoping EP Holdings (Shenzhen) Co., Ltd. with a majority stake of
51
%, to explore the new off-grid wastewater treatment business line.
In
September 2023, the Company acquired
80
% equity from other shareholders of Fujian Taoping Investment Co., Ltd. with
nil
consideration,
to expand its digital advertising and other businesses in Fujian Province. As a result of the acquisition, the Company currently owns
100
% of Fujian Taoping Investment Co, Ltd.
In
November 2023, the Company established a subsidiary Taoping (Guangxi) EP Tech Co., Ltd. to expand its wastewater treatment business in
Guangxi Province.
December 31, 2023
December 31, 2022
December 31, 2021
Entities
Subsidiaries
% owned
% owned
% owned
Location
Taoping Inc.
British Virgin Islands
Taoping Holdings Limited (THL)
Subsidiary
100
%
100
%
100
%
British Virgin Islands
Taoping Group (China) Ltd. (IST HK)
Subsidiary
100
%
100
%
100
%
Hong Kong, China
Taoping Digital Assets (Asia) Limited (TDAL)
Subsidiary
-
100
%
100
%
Hong Kong, China
Taoping Digital Assets (Hong Kong) Limited (TDL)
Subsidiary
-
100
%
100
%
Hong Kong, China
Taoping Capital Limited (TCL)
Subsidiary
-
100
%
100
%
Hong Kong, China
Alpha Digital Group Ltd. (ADG)
Subsidiary
-
-
100
%
Cayman, Island
Kazakh Taoping Operation Management Co. Ltd. (KTO)
Subsidiary
-
100
%
100
%
Kazakhstan
Kazakh Taoping Data Center Co. Ltd. (KTD)
Subsidiary
-
100
%
100
%
Kazakhstan
Information Security Tech. (China) Co., Ltd. (IST)
Subsidiary
100
%
100
%
100
%
Shenzhen, China
TopCloud Software (China) Co., Ltd. (TopCloud)
Subsidiary
100
%
100
%
100
%
Shenzhen, China
Information Security IoT Tech. Co., Ltd. (ISIOT)
Subsidiary
100
%
100
%
100
%
Shenzhen, China
iASPEC Technology Group Co., Ltd. (iASPEC)
Subsidiary
-
-
100
%
Shenzhen, China
Biznest Internet Tech. Co., Ltd. (Biznest)
Subsidiary
100
%
100
%
100
%
Shenzhen, China
iASPEC Bocom IoT Tech. Co., Ltd. (Bocom)
Subsidiary
100
%
100
%
100
%
Shenzhen, China
Taoping New Media Co., Ltd. (TNM)
Subsidiary
100
%
100
%
100
%
Shenzhen, China
Shenzhen Taoping Education Technology Co., Ltd. (SZTET)
Subsidiary
-
-
51
%
Shenzhen, China
Wuhu Taoping Education Technology Co., Ltd. (WHTET)
Subsidiary
-
-
51
%
Wuhu, China
Taoping Digital Tech. (Dongguan) Co., Ltd. (TDTDG)
Subsidiary
-
-
100
%
Dongguan, China
TopCloud Tech. (Chenzhou) Co., Ltd. (TCTCZ)
Subsidiary
-
100
%
100
%
Chenzhou, China
Taoping Digital Tech. (Jiangsu) Co., Ltd. (TDTJS)
Subsidiary
100
%
100
%
100
%
Jiangsu, China
Zhenjiang Taoping IoT Tech. Co., Ltd (ZJIOT)
Subsidiary
100
%
100
%
-
Zhenjiang, China
Taoping EP Holdings (Shenzhen) Co., Ltd. (TEPH)
Subsidiary
51
%
-
-
Shenzhen, China
Fujian Taoping Investment Co., Ltd. (FJTI)
Subsidiary
100
%
-
-
Fujian, China
Taoping (Guangxi) EP Tech. Co., Ltd. (TPGXT)
Subsidiary
100
%
-
-
Guangxi, China
F-
11
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Dissolution
of the Variable Interest Entity Structure
iASPEC
was a VIE of the Company. To comply with PRC laws and regulations that restrict foreign ownership of companies that provide public security
information technology and Geographic Information Systems software operating services to certain government and other customers, the
Company used to operate the restricted aspect of its business through iASPEC.
In
September 2021, we dissolved the variable interest entity structure by exercising the purchase option under certain Option Agreement
among IST, iASPEC and its shareholders, to purchase all of the equity interests in iASPEC at an aggregate exercise price of
$
1,800,000
.
On September 18, 2021, Taoping Inc. and IST entered into an equity transfer agreement with iASPEC and iASPEC's then sole shareholder,
Mr. Lin, under which Mr. Lin sold and transferred to IST all of the equity interests in and any and all rights and benefits relating
thereto of iASPEC in exchange for
61,225
unregistered ordinary shares of Taoping Inc., as determined by dividing
$
1,800,000
by the volume-weighted
average closing price of ordinary shares for the consecutive five (5) trading days immediately prior to September 18, 2021. The parties
thereafter completed the equity transfer through applicable PRC governmental registration(s).
Upon
the closing of the equity transfer, the Company's variable interest entity structure was dissolved and iASPEC became a wholly owned
indirect subsidiary of the Company. The amended and restated MSA was automatically terminated.
Going
Concern and Management's Plans
As
a result of the recovery of market conditions and customer demands, as well as the Company's continued efforts in diversifying
applications of its innovative Taoping smart cloud, the Company achieved a
59.4
% year-over-year revenue growth and significantly reduced
net loss by $
6.4
million in 2023. Cash and cash equivalents at December 31, 2023 was $
1.3
million, compared to cash and cash equivalents
of
$
1.0
million a year ago.
The
Company incurred a net loss of $
0.7
million for year ended December 31, 2023, compared to a net loss of $
7.1
million for 2022. The improved
profitability was mainly due to the increase of gross profit, and the Company's cessation of cryptocurrency mining business in
2023. As of December 31, 2023, the Company had a working capital surplus of approximately $
5.2
million, significantly improved from a
working capital deficit of $
0.2
million as of December 31, 2022.
F-
12
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
Company will continue to focus its efforts on the digital advertising and other cloud-based and AI-related products and applications.
Furthermore, its two core competencies, the Taoping national sales network and the highly scalable and compatible cloud platform, and
its strong software development capability, make it a valued partner by many other smart-community customers and solution providers.
In addition to seeking strategic acquisition to expand its digital advertising business, the Company continues to explore business opportunities
in the smart community and new energy sectors. Starting from April 2023, the Company has entered into a series of long-term strategic
cooperation agreements with various customers to provide Taoping's cloud-based intelligent product solutions, including smart large
screen, IoT smart rest station and off-grid wastewater treatment solution, which are expected to generate revenue and operating cashflow
for the Company for year 2023 and beyond.
If
the Company's execution of business strategies is not successful in addressing its current financial concerns, additional capital
raise from issuing equity security or debt instrument or additional loan facility may occur to support required cash flows. The Company's
existing $
8.5
million revolving bank loan, which was collateralized with the Company's office property, provides important capital
support for its operation. In addition, the Company has renewed the bank facility line with a value of approximately $
2.6
million in
July 2023 and a value of approximately $
4.9
million in September 2023, and both are valid for 12 months. In addition, on July 17, 2023,
the Company entered into a public standby equity purchase agreement and a private standby equity purchase agreement with an investor.
Pursuant to the agreements, the Company has the right, but not the obligation, to sell to the investor up to $
1,000,000
and $
10,000,000
,
respectively, of its ordinary shares, within 24 months and 36 months, respectively, from the date of the agreements. As of April, 2024,
the Company has raised a total of $
3.3
million through this equity line offering. In conclusion, the Company believes that it has the
ability to raise needed capital to fund its operations and business growth, and is able to operate as a going concern.
However,
the Company can make no assurances that financing will be available for the amounts we need, or on terms commercially acceptable to us,
if at all. If one or all of these events do not occur or subsequent capital raise was insufficient to bridge financial and liquidity
shortfall, substantial doubt exists about the Company's ability to continue as a going concern. The consolidated financial statements
have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might
result from the outcome of this uncertainty.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of Presentation and Principles of Consolidation
The
consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP"). In the opinion of management, all adjustments (consisting of normal recurring adjustments)
have been made that are necessary to present fairly the financial position, the results of its operations and cash flows. The consolidated
financial statements include the accounts of the Company, and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Reverse
Stock Split: A one-for-ten reverse stock split of the Company's issued and outstanding ordinary shares was effective on August
1, 2023 (the "Reverse Stock Split"). Except shares authorized, all share and per share information has been retroactively
adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated.
(b)
Use of Estimates
The
preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company's significant
estimates include assessment of credit losses and useful lives of property and equipment. Management makes these estimates using the
best information available at the time the estimates are made; however actual results could differ from those estimates.
F-
13
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(c)
Economic, Pandemic, Political, and Currency Exchange Risks
All
the Company's revenue-generating operations are conducted in Hong Kong and mainland China. Accordingly, the Company's business,
financial condition and results of operations may be influenced by the political, economic, public health, and legal environments in
the PRC, and by the general state of the PRC economy. The Company's operations in the PRC are subject to special considerations
and significant risks that are not typically pertaining to the companies in North America and Western Europe. These include risks associated
with, among others, the political, economic, public health concerns with persistent outbreaks of COVID-19 infections in various regional
localities, and legal environments, geopolitical influences, and foreign currency exchange, notably in recent events, where the government's
sudden interventions or modifications of the laws and regulations currently in effective could negatively impact the Company's
operations and financial results.
The
functional currency of the Company is primarily Chinese Renminbi Yuan ("RMB"), which is not freely convertible into foreign
currencies. The Company cannot guarantee that the current exchange rate will remain steady. Therefore, there is a possibility that the
Company could post the same amount of profit for two comparable periods and yet, because of fluctuating exchange rates, record higher
or lower profit depending on exchange rate of RMB. RMB converted to U.S. dollars on the relevant dates. The exchange rate could fluctuate
depending on changes in the political and economic environment without notice.
(d)
Cash and Cash Equivalents
The
Company considers all highly liquid investments purchased and cash deposits with financial institutions with original maturities of three
months or less to be cash equivalents. The Company had
no
cash equivalents other than bank and cash as of December 31, 2023 or 2022.
The
Company maintains its bank accounts at credit worthy financial institutions and closely monitors the movements of its cash positions.
As of December 31, 2023 and 2022, approximately $
1.3
million and $
1.0
million of cash, respectively, was held in bank accounts in Hong
Kong and mainland China.
(e)
Accounts Receivable, Accounts Receivable–related parties, and Concentration of Risk
Accounts
receivable are recognized and carried at carrying amount less an allowance for credit loss, if any. The Company maintains an allowance
for credit losses resulting from the inability of its customers to make required payments based on contractual terms. The Company reviews
the collectability of its receivables on a regular and ongoing basis according to historical trend, and estimates its provision for expected
credit losses on receivables aging analysis.
The
Company estimates allowance for credit losses for the anticipation of future economic condition and credit risk indicators of customers.
After all attempts to collect a receivable have failed, the receivable is written off against the allowance. In the event the Company
recovers amounts previously reserved for, the Company will reduce the specific allowance for credit losses. The balance of allowance
for credit losses for the year ended December 31, 2023 has increased approximately $
0.03
million from the year ended December 31, 2022.
F-
14
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accounts
receivable as at December 31, 2023 and 2022 are as follows:
December 31, 2023
December 31, 2022
Accounts Receivable
$
19,471,159
$
20,159,165
Allowance for credit losses
(
11,407,879
)
(
10,957,920
)
Accounts Receivable, net
$
8,063,280
$
9,201,245
Accounts Receivable - related parties
$
14,814,842
$
14,617,746
Allowance for credit losses
(
14,184,067
)
(
14,526,375
)
Accounts Receivable - related parties, net
$
630,775
$
91,371
The
normal credit term is ranging from 1 month to 3 months after the customers' acceptance of high-end data storage servers or software,
and completion of advertising and other services, and ranging from 1 month to 6 months after the customers' acceptance of ads display
terminals. However, because of various factors of business cycle, the actual collection of outstanding accounts receivable may be beyond
the normal credit terms.
The
allowance for credit losses at December 31, 2023 and 2022, totaled approximately $
25.6
million and $
25.5
million, respectively, representing
management's best estimate. The following table describes the movements for allowance for credit losses during the years ended
December 31, 2023 and 2022:
Balance at January 1, 2022
$
27,262,848
Decrease for balance due to transfer of a company
(
771,189
)
Increase in allowance for credit losses
674,664
Foreign exchange difference
(
1,682,028
)
Balance at December 31, 2022
$
25,484,295
Increase in allowance for credit losses
794,087
Foreign exchange difference
(
686,436
)
Balance at December 31, 2023
$
25,591,946
(f)
Advances to Suppliers
Advances
to suppliers include but are not limited to cash deposits for the purchase of inventory items and super-computing server machines from
suppliers.
(g)
Advances from Customers and Related Parties
Advances
from customers and related parties represent cash received from customers and related parties as advance payments for the purchases of
the Company's products and services.
F-
15
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(h)
Fair Value and Fair Value Measurement of Financial Instruments
Management
has estimated that carrying amounts reported in the consolidated balance sheets for cash, accounts receivable, accounts receivable –
related parties, advances to suppliers, other current assets, other non-current assets, short-term bank loans, accounts payable, advances
from customers, advances from customers - related parties, other payables and accrued expenses, income taxes payable, and due to related
parties approximate their fair market value
based
on the short-term maturity of these instruments.
(i)
Fair Value Accounting
Financial
Accounting Standards Board (FASB) Accounting Standards Codifications (ASC) 820-10 "Fair Value Measurements and Disclosures",
establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). As required by FASB ASC 820-10, assets are classified in their entirety
based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy under
FASB ASC 820-10 are described below:
Level
    1
Unadjusted
    quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level
    2
Quoted
    prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term
    of the asset or liability; and
Level
    3
Prices
    or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by
    little or no market activity).
F-
16
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(j)
Inventories, net
Inventories
are valued at the lower of cost (weighted average basis) and net realizable value. Net realizable value is the expected selling price
in the ordinary course of business minus any costs of completion, disposal, and transportation to make the sale.
The
Company performs an analysis of slow-moving or obsolete inventory periodically and any necessary valuation reserves, which could potentially
be significant, are included in the period in which the evaluations are completed. Any inventory impairment results in a new cost basis
for accounting purposes.
(k)
Property, equipment and software
Property,
equipment and software are stated at cost less accumulated amortization and depreciation. Amortization and depreciation are provided
over the assets' estimated useful lives, using the straight-line method. Estimated useful lives of property, equipment and software
are as follows:
Office
    buildings
20
-
50
years
Lease
    improvement
Shorter
    of lease term or assets lives
Electronics
    equipment, furniture and fixtures
3
-
5
years
Motor
    vehicles
5
years
Purchased
    software
5
years
Media
    display equipment
5
years
Cryptocurrency
    mining machine
3
years
Expenditures
for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures
for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated
depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss are included in the Company's
results of operations.
(l)
Cryptocurrencies
Cryptocurrencies
held, including Bitcoin and Ethereum, are accounted for as intangible assets with indefinite useful lives. An intangible asset with an
indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances
occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount
exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured.
If the carrying amount of the cryptocurrency exceeds its fair value, the Company recognizes an impairment loss in an amount equal to
that excess. Subsequent reversal of impairment losses is not permitted.
There
are no cash flows from cryptocurrencies included in net cash used in operating activities since the revenue recognized from mining is
a noncash activity. The sales of cryptocurrencies are included within investing activities in the consolidated statements of cash flows
and any realized gains or losses from such sales are included in other income (expense) in the consolidated statements of operations.
The Company accounts for its gains or losses in accordance with the first in first out (FIFO) method of accounting.
Upon
disposal of cryptocurrencies, the Company will evaluate whether the control of the cryptocurrencies is transferred in accordance with
ASC 610-20. The control over the cryptocurrencies disposed will transfer at the same time of the disposal, hence the cryptocurrencies
transferred will be derecognized at the same time of the disposal. The gain or loss on disposal is calculated as the difference between
the consideration allocated to each distinct cryptocurrency and its carrying amount.
The Company had ceased the operation of cryptocurrency mining business
by December 2022.
(m)
Business combination
In
accordance with ASC 805, the Company applies acquisition method to account for business combination. The acquisition method requires
that the fair value of the underlying exchange transaction is used to establish a new accounting basis of the acquired entity upon the
acquirer taking control over the acquiree. Furthermore, because of obtaining control the acquirer is responsible and accountable for
all of the acquiree's assets, liabilities and operations, the acquirer recognizes and measures the assets acquired and liabilities
assumed at their full fair values as of the date control is obtained, which may result in goodwill, when purchase consideration exceeds
the net of fair value of the assets acquired and liabilities assumed, or a bargain purchase gain, when the net of fair value of the assets
acquired and liabilities assumed exceeds the purchase consideration, regardless of the percentage ownership in the acquiree or how the
acquisition was achieved.
F-
17
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(n)
Disposal of subsidiary
The
Company deconsolidates a subsidiary upon the loss of control, the related subsidiary's assets (including goodwill), liabilities,
non-controlling interest and other components of equity are de-recognized. This may mean that amounts previously recognized in other
comprehensive income are reclassified to profit or loss.
Any
consideration received is recognized at fair value. Any resultant gain or loss is recognized in the Statement of Operations.
(o)
Long-term investment
The
Company's long-term investment consists of investments accounted for under the equity method and equity investments without readily
determinable fair value. Pursuant to ASC 321, equity investments, except for those accounted for under the equity method, those that
result in consolidation of the investee and certain other investments, are measured at fair value, and any changes in fair value are
recognized in earnings. For equity securities without readily determinable fair value and do not qualify for the existing practical expedient
in ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820") to estimate fair value using the net asset value per
share (or its equivalent) of the investment, the Company elected to measure those investments at cost, less any impairment, plus or minus
changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any.
For
equity investments that the Company elects to measure at cost, less any impairment, plus or minus changes resulting from observable price
changes, the Company makes a qualitative assessment considering impairment indicators to evaluate whether investments are impaired at
each reporting date. Impairment indicators considered include, but are not limited to, a significant deterioration in the earnings performance
or business prospects of the investee, including factors that raise significant concerns about the investee's ability to continue
as a going concern, a significant adverse change in the regulatory, economic, or technologic environment of the investee and a significant
adverse change in the general market condition of either the geographical area or the industry in which the investee operates. If a qualitative
assessment indicates that the investment is impaired, the entity has to estimate the investment's fair value in accordance with
the principles of ASC 820. For equity investments without readily determinable fair value, the Company uses Level 3 inputs of fair value
accounting in accordance with ASC 820-10 and recognizes impairment loss other than temporary in the statement of operations equal to
the difference between its initial investment and its proportional share of the net book value of the investee's net assets which
approximates its fair value.
For
impairment on equity investments without readily determinable fair value, the Company uses Level 3 inputs of fair value accounting in
accordance with ASC 820-10 and recognizes impairment loss in the statement of operations equal to the difference between its initial
investment and its proportional share of the net book value of investee's net assets which approximates its fair value if those
are determined to be other than temporary.
(p)
Convertible promissory note
The
Company determines the appropriate accounting treatment of its convertible debts in accordance with the terms in relation to conversion
features. After considering the impact of such features, the Company may account for such instrument as a liability in its entirety,
or separate the instrument into debt and equity components following the guidance described under ASC 815 Derivatives and Hedging and
ASC 470 Debt. The debt discount, if any, together with related issuance cost are subsequently amortized as interest expense over the
period from the issuance date to the earliest conversion date or stated redemption date. The Company presented the issuance cost of debt
in the balance sheet as a direct deduction from the related debt.
F-
18
TAOPING INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(q)
Impairment of Long-Lived Assets
Long-lived
assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology
or other industry changes. Recoverability of assets to be held and used is determined by comparing their carrying amount with their expected
future net undiscounted future cash flows from the assets. If such assets are considered to be impaired, the impairment to be recognized
is measured by how much the carrying amount exceeds the fair value of the assets. There were impairment charges of approximately
$
1,468,000
for the year ended December 31, 2022, and
no
impairment charges for the year ended December 31, 2023 and 2021. Assets held for disposal,
if any, are reported at the lower of the carrying amount or fair value less costs to sell.
(r)
Operating leases - Right-of-use assets and lease liabilities
The
Company accounts for lease under ASC 842 "Leases", and also elects practical expedient not to separate non-lease component
from lease components in accordance with ASC 842-10-15-37 and instead to account for each separate lease component and the non-lease
components associated with that lease component as a single lease component. The Company also elects the practical expedient not to recognize
lease assets and lease liabilities for leases with a term of 12 months or less.
The
Company recognized a lease liability and corresponding right-of-use asset based on the present value of minimum lease payments discounted
at the Company's incremental borrowing rate. The Company records amortization and interest expense on a straight-line basis based
on lease terms and reduces lease liabilities upon making lease payments.
(s)
Revenue Recognition
In
accordance with the ASC 606, the Company recognizes revenues net of applicable taxes, when goods or services are transferred to customers
in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services.
The
Company generates its revenues primarily from four sources: (1) product sales, (2) software sales, (3) advertising and (4) other sales.
Revenue is recognized when obligations under the terms of a contract with our customers are satisfied, generally, upon delivery of the
goods and services.
F-
19
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Revenue
- Products
Product
revenues are generated primarily from the sale of Cloud-Application-Terminal based digital ads display terminals with integrated software
essential to the functionality of the hardware to our customers (inclusive of related parties) and high-end data storage servers. Although
manufacturing of the products has been outsourced to the Company's Original Equipment Manufacturer (OEM) suppliers, the Company
has acted as the principal of the contract. The Company recognized the product sales at the point of delivery.
Product sales are classified as "Revenue-Products" on the Company's consolidated statements of operations.
Revenue
- Software
The
Company designs and develops software products. Software development usually includes developing software, integrating various isolated
software systems into one, and testing the software. The design and build process, together with the integration of the various elements,
are generally determined to be essential to the functionality of the delivered software. The Company recognized the software sales at the point of delivery.
The
Company usually completes the software support service in one-off and recognizes the revenue at the point of delivery of service because
the Company does not have an enforceable right to payment for performance completed to date. Revenues from software development contracts
are classified as "Revenue-Software" on the Company's consolidated statements of operations.
Revenue
- Advertising
The
Company generates revenues primarily from providing advertising slots to customers to promote their businesses by broadcasting advertisements
on identifiable digital ads display terminals and vehicular ads display terminals in different geographic regions and locations through
a cloud-based new media sharing platform. The Company also contracts individuals to promote special events or for various occasions.
The Company is only obligated to broadcast the advertisements to the contracted digital ads display terminals, and therefore allocates
100
% of the transaction price to advertisement broadcasting. The transaction price for advertisement broadcasting is fixed based on the
numbers of advertisement delivery and duration of the contract, and has no variable consideration, or significant financing component,
or subsequent price change, and is not refundable.
The
Company recognizes the revenues, net of applicable taxes, from advertisement broadcasting contracts with customers over the contracted
advertising duration.
F-
20
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Revenue
- Cryptocurrency mining
The
Company has entered into digital asset mining pools by executing contracts with the mining pool operators to provide computing power
to the mining pool. The contracts are terminable under certain circumstances. Both the Company and the mining pool operator have the
right to terminate the contract at any time, with or without clause, and without compensation. In exchange for providing computing power,
the Company is entitled to a fractional share of the fixed cryptocurrency awards the mining pool operator receives (less digital asset
transaction fees to the mining pool operator, if any.) for successfully adding a block to the blockchain. The Company's fractional
share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power
contributed by all mining pool participants in solving the current algorithm. The contract first exists upon the successful placement
of a block on the blockchain by the pool operator because that is the point when the parties have performed their contract obligation
and neither party can unilaterally terminate the contract without compensating the other party.
Providing
computing power in digital asset transaction verification services is an output of the Company's ordinary activities. The provision
of providing such computing power is the only performance obligation in the Company's contract with mining pool operator.
The
transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value using the
quoted price from principal market of the related cryptocurrency on the date received, which is not materially different than the fair
value at the contract inception or at the time the Company has earned the award from the pools. The consideration is variable. Because
it is not probable that a significant reversal of cumulative revenue will not occur (ASC 606-10-32-11), the consideration is constrained
until the mining pool operator successfully places a block (by being the first to solve an algorithm), and the Company receives confirmation
of the consideration it will receive, at which time revenue is recognized. There is no financing component, nor allocation of transaction
price in these transactions.
The
Company had ceased the operation of cryptocurrency mining business by December 2022, and there is no Revenue - Cryptocurrency mining
for the year ended December 31, 2023.
Revenue
- Other
The
Company also reports other revenue which comprises revenue generated from System upgrade and technical support services, platform service
fee, and rental income.
System
upgrade and technical support revenue is recognized when performance obligations are satisfied upon completion of the services. Platform
service fee is charged based on number of the display terminals used by the customers or a percentage of advertising revenue generated
by the display terminals. Platform service revenue is recognized on a monthly basis over the contract period.
The
Company follows ASC 842 – Leases that requires lessor to identify the underlying assets and allocate rental income among considerations
in lease and non-lease components. The Company owns two units of office space renting out to a third party and TNM under non-cancelable
operating lease agreements with lease terms of two years starting from May 1, 2022 and four years starting from July 1, 2022, respectively.
The lease agreements have fixed monthly rental payments, and no non-lease component or option for lessees to purchase the underlying
assets. The Company collects monthly rental payments from the lessees, and has generated approximately
$
251,000
and
$
276,000
rental income
for the year ended December 31, 2023, and 2022, respectively.
F-
21
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
After
completion of the business acquisition on June 9, 2021, TNM became a subsidiary of the Company. The rental income from TNM has become
an intercompany revenue and been eliminated since June 9, 2021.
Annual minimum rental income to be received in the next 5 years:
2024
83,799
Total
83,799
Contract
balances
The
Company records advances from customers when cash payments are received or due in advance of our performance. For the year ended December
31, 2023, 2022 and 2021, the Company recognized revenue of
$
290,000
,
$
232,000
and $
141,000
, respectively, that was included in the advances
from customers balance at the beginning of each reporting period.
Practical
expedients and exemptions
The
Company generally expenses sales commissions if any incurred because the amortization period would have been one year or less. In many
cases, the Company is approached by customers for customizing software products for their specific needs without incurring significant
selling expenses.
The
Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year
or less.
(t)
Cost of Sales - advertising and cost of cryptocurrencies
The
cost of sales for advertising revenue mainly comprises of direct costs of generating advertising revenue including lease expense for
the wall space, to where the ads display terminal to be installed, installation costs of ads display terminals, depreciation of display
termination, labor, and other related expenses.
The
cost of sales for cryptocurrencies revenue consists primarily of direct costs of earning Bitcoin and Ethereum related to mining operations,
including mining platform fees, mining pool fees, mining facility rental fees, electric power costs, other utilities, depreciation of
mining machines, labor, insurance, and among other ancillary costs.
The
Company had ceased the operation of cryptocurrency mining business by December 2022.
(u)
Stock-based compensation
The
Company applies ASC No. 718, "Compensation-Stock Compensation", which requires that share-based payment transactions with
employees, such as share options, be measured based on the grant date fair value of the equity instrument and recognized as compensation
expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation cost related to employee
share options or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over
the period during which an employee is required to provide service in exchange for the award, which generally is the vesting period.
The
Company adopted ASU 2018-07, Compensation-Stock Compensation (Topic: 718): Improvements to Nonemployee Share-Based Payment Accounting
on January 1, 2019, to account for stock-based compensation to goods and services provided by the third parties. The fair value of the
equity awards to nonemployee are measured on the grant day. Under this guidance, compensation cost related to nonemployee share options
or similar equity instruments is recognized in the same period and in the same manner (i.e. capitalize or expense) the entity would if
it paid cash for the goods or services. The Company's adoption of ASU 2018-07 has no material impact to the Company's consolidated
financial statements, nor requirement for cumulative adjustment in retained earnings or other components of equity or net assets.
During
the year ended December 31, 2023, 2022, and 2021, the Company recognized approximately $
1,564,000
, $
23,100
, and $
3,137,000
, respectively,
of stock-based compensation expense.
F-
22
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(v)
Foreign Currency Translation
The
functional currency of the US and BVI companies is the United States dollar. The functional currency of the Company's Hong Kong
subsidiaries is the Hong Kong dollar.
The
functional currency of the Company's PRC subsidiaries is the Chinese Renminbi Yuan, ("RMB"). RMB is not freely convertible
into foreign currencies. The Company's PRC subsidiaries' financial statements are maintained in the functional currency.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency
at rates of exchange prevailing at the balance sheet date. Transactions denominated in currencies other than the functional currency
are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Exchange gains or losses
arising from foreign currency transactions are included in the determination of net loss for the respective periods.
For
financial reporting purposes, the financial statements of the Company have been translated into United States dollars. Assets and liabilities
are translated at exchange rates at the balance sheet dates, revenue and expenses are translated at average exchange rates, and equity
is translated at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are
included in other comprehensive loss, a component of equity.
The
exchange rates adopted are as follows:
December 31, 2023
December 31, 2022
Year-end RMB to US$ exchange rate
7.0898
6.8993
Average yearly RMB to US$ exchange rate
7.0723
6.7190
Year-end HKD to US$ exchange rate
7.8081
7.8077
Average yearly HKD to US$ exchange rate
7.8284
7.8302
The
average yearly RMB to US$ exchange rate adopted for the year ended December 31, 2021 was
6.4505
.
No
representation is made that the RMB amounts and HKD amounts could have been, or could be, converted into United States dollars at the
rates used in translation.
(w)
Research & Development Expenses
The
Company follows the guidance in FASB ASC 985-20, Cost of Software to Be Sold, Leased or Marketed, regarding software development costs
to be sold, leased, or otherwise marketed.
FASB
ASC 985-20-25 requires research and development costs for software development to be expensed as incurred until the software model is
technologically feasible. Technological feasibility is established when the enterprise has completed all planning, designing, coding,
testing, and identification of risks activities necessary to establish that the product can be produced to meet its design specifications,
features, functions, technical performance requirements. A certain amount of judgment and estimation is required to assess when technological
feasibility is established, as well as the ongoing assessment of the recoverability of capitalized costs. The Company's products
reach technological feasibility shortly before the products are released and sold to the public. Therefore, research and development
costs are generally expensed as incurred.
(x)
Subsidy Income
Subsidy
income mainly represents income received from various local governmental agencies in China for developing high technology products in
the fields designated by the government as new and highly innovative. The Company has no continuing obligation under the subsidy provision.
The Company recognizes subsidy income upon receipt of official grant notice from local government authorities.
(y)
Sales, use, other value-added taxes, and income taxes
Revenue
is recorded net of applicable sales, use, and value-added taxes.
Income
taxes are provided on an asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes are
recognized for all significant temporary differences at enacted rates and classified as non-current in the financial statements. A valuation
allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion, or all
of, the deferred tax assets will not be realized. The Company classifies interest and/or penalties related to unrecognized tax benefits,
if any, as a component of income tax expense.
F-
23
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
Company applies the provisions of ASC No. 740 "Income Taxes" ("ASC 740"), which clarifies the accounting for
uncertainty in income taxes recognized by prescribing a recognition threshold and measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides accounting guidance on de-recognition,
classification, interest and penalties, and disclosure.
(z)
Discontinued Operations
The
Company follows "ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting
Discontinued Operations and Disclosures of Disposals of Components of an Entity" for reporting discontinued operations. Under the
revised standard, a discontinued operation must represent a strategic shift that has or will have a major effect on an entity's
operations and financial results. Examples could include a disposal of a major line of business, a major geographical area, a major equity
method investment, or other major parts of an entity. The revised standard also allows an entity to have certain continuing cash flows
or involvement with the component after the disposal. Additionally, the standard requires expanded disclosures about discontinued operations
that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued
operations.
(aa)
Segment reporting
Segment
information is consistent with how the Chief Operating Decision Maker, i.e., the Directors of the Company, review the businesses, make
investing and resource allocation decisions and assess operating performance. Transfers and sales between reportable segments, if any,
are recorded at cost.
The
Company reports financial and operating information in the following three segments:
(1)
Cloud-based
    Technology (CBT) segment — It includes the Company's cloud-based products, high-end data storage servers and related
    services sold to private sectors including new media, healthcare, education and residential community management, and among other
    industries and applications. In this segment, the Company generates revenues from the sales of hardware and software total solutions
    with proprietary software and content as well as from designing and developing software products specifically customized for private
    sector customers' needs for a fixed price. The Company includes the revenue and cost of revenue of high-end data storage servers
    in the CBT segment. Advertising services is included in the CBT segment, after the Company consummated the acquisition of TNM. Advertisements
    are delivered to the ads display terminals and vehicular ads display terminals through the Company's cloud-based new media
    sharing platform. Incorporation of advertising services complements the Company's out-of-home advertising business strategy.
(2)
Blockchain
    Technology (BT) segment — The BT segment is the Company's newly formed business sector in 2021. Cryptocurrency mining
    is the first initiative implemented in the BT segment. However, due to the decreased output and the highly volatile cryptocurrency
    market, the Company had ceased the operation of the BT segment by December 2022.
(3)
Traditional
    Information Technology (TIT) segment — The TIT segment includes the Company's project-based technology products and services
    sold to the public sector. The solutions the Company has sold primarily include Geographic Information Systems (GIS), Digital Public
    Security Technology (DPST), and Digital Hospital Information Systems (DHIS). In this segment, the Company generates revenues from
    sales of hardware and system integration services. As a result of the business transformation, the TIT segment is gradually being
    phased out in 2021.
For
more information regarding our operating segments, see Note 20 (Consolidated Segment Data).
F-
24
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ab)
Recent Accounting Pronouncements
In
October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers". Under ASU 2021-08, an acquirer must recognize and measure contract assets and contract liabilities
acquired in a business combination in accordance with Topic 606, as if it had originated the contracts. Prior to this ASU, an acquirer
generally recognized contract assets acquired and contract liabilities assumed that arose from contracts with customers at fair value
on the acquisition date. The Company adopted the ASU on January 1, 2023 and the adoption did not have a material impact on the Company's
consolidated financial statements.
In
November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,"
which requires public entities to disclose expanded information about their reportable segment(s)' significant expenses and other
segment items on an interim and annual basis. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods
within fiscal years beginning after December 15, 2024, with early adoption permitted. The ASU is required to be applied retrospectively
to all prior periods presented in the financial statements once adopted. The Company is evaluating the disclosure requirements related
to the new standard.
In
December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which requires
public entities to disclose specific tax rate reconciliation categories, as well as income taxes paid disaggregated by jurisdiction,
amongst other disclosure enhancements. The ASU is effective for financial statements issued for annual periods beginning after December
15, 2024, with early adoption permitted. The ASU can be adopted on a prospective or retrospective basis. The Company is evaluating the
disclosure requirements related to the new standard.
The
Company has considered all other recently issued accounting pronouncements and does not believe that the adoption of such pronouncements
will have a material impact on the consolidated financial statements.
F-
25
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
BUSINESS ACQUISITION
On
June 9, 2021, the Company and Biznest, a subsidiary of the Company, consummated an acquisition of
100
% of the equity interests of TNM
and its subsidiary. Mr. Jianghuai Lin, the Chairman and CEO of the Company, who then owned approximately
24.6
% of total shares outstanding
of the Company, owned approximately
51
% of TNM. TNM is a new media operator focusing on digital life scenes and mainly engages in selling
out-of-home advertising time slots on its networked smart digital advertising display terminals with artificial intelligence and big
data technologies. Acquiring TNM and synergizing its new media network will enhance the Company's presence in the new media and
advertising sectors. After completion of the acquisition, TNM becomes a wholly owned subsidiary of Biznest.
Pursuant
to the share purchase agreement, as a consideration of the purchase, the Company issued to the shareholders of TNM a total of
121,363
ordinary shares equivalent to the value of approximately $
5.4
million.
The
Company uses Level 3 inputs of fair value accounting for the identifiable assets and liabilities of TNM. The allocation of the purchase
consideration is final, which was determined after the completion of a detailed analysis of the fair value for all assets acquired.
The
following table summarizes the purchase price allocation for TNM, and the amounts of the assets acquired, and liabilities assumed which
were based on their estimated fair values at the acquisition date:
Cash
$
7,644
Accounts receivable, net
1,252,601
Advances to suppliers
75,971
Other receivables and other current assets, net
2,345,332
Long-term investments
1,386,191
Property and equipment
1,550,113
Right of use assets
74,812
Accounts payable
(
339,198
)
Advances from customers
(
10,943
)
Accrued payroll and benefits
(
32,840
)
Amount due to related parties
(
619,571
)
Other payables and accrued expenses
(
87,373
)
Lease liabilities
(
153,938
)
Total net assets acquired
5,448,801
Bargain purchase gain
(
12,345
)
Total purchase price
$
5,436,456
Due
to the negative impact from COVID-19 pandemic and slowdown of the out-of-home advertising industry in China, the total consideration
paid by the Company was less than the net amount of identifiable assets acquired and liabilities assumed of TNM, which resulted in a
bargain purchase gain of approximately $
12,000
on the acquisition date.
The
Company's consolidated statement of operations for the year ended December 31, 2021 included revenue of $
1.78
million and net loss
of $
0.55
million attributable to TNM since June 9, 2021, the acquisition date.
The
Company's consolidated statement of operations for the year ended December 31, 2022 included revenue of $
3.3
million and net loss
of $
0.37
million attributable to TNM.
The
Company's consolidated statement of operations for the year ended December 31, 2023 included revenue of $
3.0
million and net profit
of $
1.0
million attributable to TNM.
F-
26
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
On
January 13, 2022, the Company entered into a share purchase agreement to acquire
95.56
% equity interest in ZJIOT, aiming to accelerate
the Company's smart charging pile and digital new media businesses in East China. Pursuant to the share purchase agreement, as
consideration the Company agreed to issue to the shareholders of ZJIOT a total of approximately
20,154
restricted ordinary shares of
the Company. The shares are expected to be issued in three phases. The first phase will issue approximately
6,718
shares within 20 days
after closing of the transaction; the second phase will issue approximately
6,718
shares before May 31, 2023; the third phase will issue
approximately
6,718
shares before May 31, 2024. Issuance of shares during the second and third phases will be conditioned upon the satisfaction
of certain performance targets of ZJIOT as set forth in the share purchase agreement. Specifically, the second phase issuance requires
from the closing date to December 31, 2022, ZJIOT have at least
2.5
million RMB of audited revenue and
0.5
million RMB of audited net
income; and to be eligible for the third phase issuance, ZJIOT shall have at least
2.6
million RMB of revenue and
0.55
million RMB of
net income during the fiscal year 2023. Upon the completion of the acquisition, the Company currently owns
100
% equity interest in ZJIOT.
The
total fair value of the contingent consideration presented as other current liability is in accordance with ASC 820-10 "Fair Value
Measurements and Disclosures". The approximately
20,154
ordinary shares issued under the share purchase agreement were deemed as
the consideration transferred for the acquisition. The fair value of the shares issued was measured based on the average share price
of the Company during year 2022, which therefore is categorized as Level 3 measurement of fair value.
The
following table summarizes the purchase price allocation for ZJIOT, and the amounts of the assets acquired, and liabilities assumed which
were based on their estimated fair values at the acquisition date:
Cash
$
4,116
Accounts receivable, net
260,189
Advances to suppliers
4,252
Other receivables, net
2,532
Property, plant and equipment, net
215,689
Accounts payable
(
250,706
)
Advances from customers
(
8,046
)
Accrued payroll and benefits
(
10,633
)
Other payables and accrued expenses
(
8,923
)
Total net assets acquired
208,470
Goodwill
58,922
Total purchase price
$
267,392
The
Company's consolidated statement of operations for the year ended December 31, 2022 included revenue of $
0.6
million and net profit
of $
0.13
million under PRC GAAP attributable to ZJIOT since January 13, 2022, the acquisition date, to the end of December 31, 2022.
The
Company's consolidated statement of operations for the year ended December 31, 2023 included revenue of $
0.07
million and net loss
of $
0.18
million attributable to ZJIOT.
The
Company will not issue the third phase of restricted ordinary shares before May 31, 2024, due to unsatisfaction of certain performance
targets of ZJIOT as set forth in the share purchase agreement.
F-
27
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.
VARIABLE INTEREST ENTITY
Prior
to the dissolution of the Company's VIE structure in September 2021, iASPEC was a variable interest entity of the Company and the
Company was the primary beneficiary of iASPEC. iASPEC's assets, liabilities and financial results were consolidated into the Company's
financial statements. From September 2021 to June 7, 2022, iASPEC was a wholly-owned subsidiary of the Company. Accordingly, the assets
and liabilities and revenues and expenses of iASPEC have been included in the accompanying consolidated financial statements up to June
7, 2022.
In
June 2021, iASPEC, through its subsidiary Biznest, acquired TNM. In addition, Biznest formed Shenzhen Taoping Education Technology Co.,
Ltd. and Wuhu Taoping Education Technology Co., Ltd. in 2021 where iASPEC indirectly owned
51
% equity interests of each entity. As indirect
wholly owned or majority owned subsidiaries of iASPEC, the financial results of TNM, Shenzhen Taoping Education Technology Co., Ltd.
and Wuhu Taoping Education Technology Co., Ltd. have been consolidated into the Company's financial statements.
Prior
to the dissolution of the VIE structure, government licenses, permits and certificates represented substantially all of the unrecognized
revenue-producing assets held by iASPEC, the VIE, and its subsidiaries; recognized revenue-producing assets held by iASPEC and its subsidiaries
consisted of property, equipment and software.
On
September 18, 2021, the Company and the Company's wholly owned subsidiary, IST entered into an equity transfer agreement with Mr.
Jianghuai Lin, the sole shareholder of iASPEC. Upon closing of the equity transfer, the Company's then existing variable interest
entity structure was dissolved and iASPEC became a wholly owned indirect subsidiary of the Company. As a result, all assets and liabilities
of iASPEC were incorporated into the Company's balance sheet since December 31, 2021.
On
June 7, 2022, the Company transferred
100
% equity interests of iASPEC, excluding its subsidiaries, to an unrelated third party for
nil
consideration. The disposition resulted in a total recorded income of approximately $
3.0
million for the Company for the year ended December
31, 2022. Upon the disposition, iASPEC, excluding its subsidiaries, was no longer part of the Company. As such, the Company's consolidated
financial statements for the year ended December 31, 2022 only included the financial results of iASPEC for the period from January 1
through June 7, 2022.
F-
28
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.
DISPOSALS OF CONSOLIDATED ENTITIES
ADG,
SZTET, WHTET, and TDTDG were dissolved on January 28, June 14, May 31, and May 17, 2022, respectively. The dissolution of these companies
results in minimal gain or loss for the year ended December 31, 2022.
TCTCZ
was dissolved on September 20, 2023. The dissolution did not result in any gain or loss for the year ended December 31, 2023.
The
Company disposed of
100
% equity interests of TDL to an unrelated third party for
nil
consideration on September 6, 2023, and disposed
of
100
% equity interests of TDAL and TCL (including their subsidiaries) to an unrelated third party for
nil
consideration on October
27, 2023. The disposition resulted in a total recorded loss of $
16,184
for the Company for the year ended December 31, 2023.
None
of the above-referenced dispositions in 2022 qualified as discontinued operations as they do not individually or in the aggregate represent
a strategic shift that has had a major impact on the Company's operations or financial results.
6.
LOSS PER SHARE
Basic
loss per share is computed by dividing loss available to common shareholders by the weighted-average number of ordinary shares outstanding
during the period. Diluted loss per share reflects the potential dilution that could occur, if securities or other contracts to issue
ordinary shares were exercised or converted into ordinary shares, or resulted in the issuance of ordinary shares that shared in the earnings
of the entity.
Components
of basic and diluted loss per share were as follows for the year ended December 31, 2023, 2022, and 2021:
2023
2022
*
2021
*
Net loss attributable to the Company
$
(
697,941
)
$
(
7,081,647
)
$
(
9,924,859
)
Weighted average outstanding ordinary shares-Basic
1,910,783
1,585,542
1,323,537
-dilutive effect of stock options- employees
-
-
-
-dilutive effect of stock options- nonemployees
-
-
-
Weighted average outstanding ordinary shares- Diluted
1,910,783
1,585,542
1,323,537
Loss per share:
Basic
$
(
0.36
)
$
(
4.47
)
$
(
7.50
)
Diluted
$
(
0.36
)
$
(
4.47
)
$
(
7.50
)
CONTINUING OPERATIONS
Net loss attributable to the Company
$
(
232,150
)
$
(
582,371
)
$
(
11,762,485
)
Weighted average outstanding
    ordinary shares-Basic
*
1,910,783
1,585,542
1,323,537
-dilutive effect of stock options- employees
-
-
-
-dilutive effect of stock options- nonemployees
-
-
-
Weighted
    average outstanding ordinary shares- Diluted
*
1,910,783
1,585,542
1,323,537
Loss per share
*
:
Basic
$
(
0.12
)
$
(
0.37
)
$
(
8.89
)
Diluted
$
(
0.12
)
$
(
0.37
)
$
(
8.89
)
DISCONTINUED OPERATIONS
Net (loss) income attributable to the Company
$
(
465,791
)
$
(
6,499,276
)
$
1,837,626
Weighted average outstanding
    ordinary shares-Basic
*
1,910,783
1,585,542
1,323,537
-dilutive effect of stock options- employees
-
-
-
-dilutive effect of stock options- nonemployees
-
-
-
Weighted
    average outstanding ordinary shares-Diluted
*
1,910,783
1,585,542
1,323,537
(Loss) income per share
*
:
Basic
$
(
0.24
)
$
(
4.10
)
$
1.39
Diluted
$
(
0.24
)
$
(
4.10
)
$
1.39
For
the years ended December 31, 2023, 2022, and 2021, there was
no
incremental shares included in the diluted earnings per share calculation, these incremental shares were not added to denominator
for the period that stock options and warrants were outstanding due to the fact that the average market price of the Company's
ordinary shares in the period was lower than the exercise prices of the outstanding stock options and warrants. The incremental shares were computed under the treasury stock method.  Because the
effect would be anti-dilutive, there were -
0
-
stock options for employees, -
0
-
stock options and
36,000
warrants for nonemployees outstanding that were not included in the computation of dilutive weighted average shares outstanding for
the year ended December 31, 2023. There were
28,250
stock options for employees,
5,737
stock options and
46,667
warrants for nonemployees outstanding that were not included in the computation of dilutive weighted average shares outstanding for
the year ended December 31, 2022. There were
29,768
stock options for employees,
5,737
stock options and
50,834
warrants for nonemployees outstanding that were not included in the computation of dilutive weighted average shares outstanding for
the year ended December 31, 2021.
On
September 27, 2023, the Company issued a Convertible Promissory Note ("Note") in a private placement in aggregate
principal amount of $
609,000
.
The Note matures in 12 months from the issuance date of the Note (the "Maturity Dates"), with an annual interest rate of
8
%
.
The Note is convertible into the Company's ordinary shares at $
8.0
per share or at a price equal to 80% multiplied by the lowest daily volume-weighted average price during the 10 trading days
immediately preceding the applicable redemption, subject to certain adjustments and limitations, at the holder's option at any
time after six months from the issuance date.
On
the Maturity Date, the holder of the Note has the right to convert all of the outstanding balance of the Note at a price of no less
than $2.0 per share ("Floor Price"), which is subject to adjustment by consents of both parties.
The computation
of diluted loss per share for year ended December 31, 2023 did not assume the conversion of the Note since the assumed conversion
would result in decrease in loss per share.
*
On
    August 1, 2023, the Company implemented a
one-for-ten
reverse stock split of the Company's issued and outstanding ordinary
    shares. Except shares authorized, all share and per share information has been retroactively adjusted to give effect to the reverse
    stock split for all periods presented, unless otherwise indicated.
F-
29
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
7.
RELATED PARTY TRANSACTIONS
(a)
Revenue – related parties
Since
May 2017, the Company has entered into a series of contracts with Taoping New Media Co., Ltd. (TNM) and its affiliates for the sale of
the Company's Cloud-Application-Terminal based digital ads display terminals, software and technical services. TNM was a related
party company controlled by Mr. Lin, the Company's Chairman and Chief Executive Officer, until the Company's completion of
the acquisition on June 9, 2021, after which date the related party transactions were eliminated in the Company's consolidated
financial statements. For the years ended December 31, 2023, 2022 and 2021, revenues from related parties for sales of products, software,
and advertising were approximately $
0.2
million, $
0.1
million and $
0.1
million, respectively. Accounts receivable from related parties,
net of allowance for credit losses, as of December 31, 2023, 2022 and 2021 were approximately $
0.6
million, $
0.1
million and $
0.4
million,
respectively. Advances received from related parties were approximately $
0.1
million, $
0.1
million and $
0.1
million as of December 31,
2023, 2022 and 2021, respectively.
(b)
Other revenue – related parties
For
the year ended December 31, 2021, the Company had a rental income of approximately $
27,000
, from TNM which was for the office lease between
TNM and the Company. Upon completion of the Company's acquisition of TNM on June 9, 2021, the related party rental income was eliminated
in the Company's consolidated financial statements thereafter. Other revenue generated from related parties also includes system
maintenance service provided to Taoping affiliate customers, which was approximately $
nil
, $
20,000
and $
49,000
, for the years ended December
31, 2023, 2022 and 2021, respectively.
(c)
Amounts due to related parties
As
of December 31, 2023 and 2022, the amounts due to related parties was $
3.0
million and $
3.3
million, respectively, which included the
borrowing from the major shareholder, Mr. Jianghuai Lin ("Mr. Lin"), of approximately $
0.9
million and $
0.4
million, respectively,
for
2
years without interest and matures on September 4, 2024, and a loan balance of approximately $
2.1
million (RMB
15
million) and approximately
$
2.9
million (RMB
20
million), respectively, from a related company
100
% owned by Mr. Lin for
12
-month at the interest of
5.85
% per annum,
which matures on
May 17, 2024
.
8.
INVENTORIES
As
of December 31, 2023 and 2022, inventories consist of:
December 31, 2023
December 31, 2022
Raw materials
$
3,379
$
3,472
Finished goods
1,336,771
510,733
Inventories, gross
$
1,340,150
$
514,205
Allowance for slow-moving or obsolete inventories
(
89,583
)
(
157,847
)
Inventories, net
$
1,250,567
$
356,358
For
the year ended December 31, 2023, there was a reversal of impairments for obsolete inventories in the amount of approximately $
53,000
.
For the year ended December 31, 2022, impairments expense for obsolete inventories were approximately $
64,000
. For the year ended December
31, 2021, there was a reversal of impairments for obsolete inventories in the amount of approximately $
214,000
. Impairment charges on
inventories are included with administrative expenses.
F-
30
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
9.
PROPERTY, EQUIPMENT AND SOFTWARE
As
of December 31, 2023 and 2022, property, equipment and software consist of:
December 31,
2023
2022
Office buildings
$
4,300,780
$
4,053,815
Electronic equipment, furniture and fixtures
3,281,359
2,222,712
Media display equipment
1,081,589
1,111,450
Leasehold improvement
-
39,738
Purchased software
5,815,297
5,935,931
14,479,025
13,363,646
Less: accumulated depreciation
(
7,801,541
)
(
5,529,744
)
Property, equipment and software, net
$
6,677,484
$
7,833,902
Depreciation
expense for the year ended December 31, 2023, 2022, and 2021 were approximately $
2.5
million, $
3.5
million and $
2.2
million for continuing
operations, and $
0.5
million, $
3.7
million and $
1.5
million for discontinued operations respectively.
Management
regularly evaluates property, equipment and software for impairment, if an event occurs or circumstances change that would potentially
indicate that the carrying amount of the property, equipment and software exceeded its fair value. Management utilizes the discounted
cash flow method to estimate the fair value of the property, equipment and software.
Company's
office buildings, with net carry value of approximately $
2.5
million, are used as collateral for its short-term bank loan.
10.
DISCONTINUED OPERATIONS
In
December 2022, the Company ceased its cryptocurrency mining business and entering into a series of contracts with certain third parties
to sell its cryptocurrency mining and related equipment, terminating the leases for both the office facility and the storage rooms for
most mining machines, and laying off relevant employees. As a result, the operations of Cryptocurrency mining business are reflected
within "discontinued operations" periods presented.
The
significant items included within discontinued operations are as follows:
Year Ended December 31
2023
2022
Revenue - Cryptocurrency mining
$
-
$
4,108,372
Cost - Cryptocurrency mining
488,104
3,898,171
Administrative expenses
(
94,284
)
1,445,272
Impairment losses on cryptocurrencies
-
1,517,172
(Gain) on sales of cryptocurrencies
-
(
679,111
)
Impairment on property, equipment and software
-
1,468,014
Operating (loss) from discontinued operations
(
393,820
)
(
3,541,146
)
Subsidy income
-
9,195
Other (loss)
(
71,984
)
(
2,936,541
)
Interest income
13
111
Interest expense
-
(
30,895
)
(Loss) from discontinued operations before income taxes
(
465,791
)
(
6,499,276
)
Income tax expense
-
-
Net (loss) from discontinued operations
$
(
465,791
)
$
(
6,499,276
)
F-
31
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Assets
and liabilities of discontinued operations included within the Consolidated Balance Sheets are comprised of the following:
December 31, 2023
December 31, 2022
Cash and cash equivalents
$
-
$
8,649
Other current assets
-
37,015
Property, equipment and software, net
-
1,155,063
Right-of-use assets
-
125,538
Current assets from discontinued operations
$
-
$
1,326,265
Accounts payable
-
187,206
Accrued payroll and benefits
-
3,065
Other payables and accrued expenses
-
58,572
Lease liability
-
128,696
Current liabilities from discontinued operations
$
-
$
377,539
Years Ended December 31,
2023
2022
2021
Net cash provided by (used in) operating activities
106,207
(
1,835,015
)
4,334,828
Net cash (used in) provided by investing activities
-
2,746,758
(
8,455,550
)
CRYPTOCURRENCIES
As
of December 31, 2023 and 2022, no cryptocurrencies held by the Company.
11.
BANK LOANS
December 31, 2023
December 31, 2022
Secured short-term loans
$
8,547,509
$
7,203,762
Total short-term bank loans
$
8,547,509
$
7,203,762
F-
32
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Detailed
information of secured short-term loan balances as of December 31, 2023 and 2022 were as follows:
December 31, 2023
December 31, 2022
Guaranteed by IST and Mr. Lin and Collateralized by the real property of ISIOT and equity investment of ISTIL
$
8,547,509
$
7,203,762
Total
$
8,547,509
$
7,203,762
As
of December 31, 2023, the Company had short-term bank loans of approximately $
8.6
million, which
mature on various dates from July 6,
2024 to October 23, 2024
. The short-term bank loans may be extended upon maturity for another year by the banks without additional charges
to the Company. The bank borrowings are in the form of credit facilities. Amounts available to the Company from the banks are based on
the amount of collateral pledged or the amount guaranteed by the Company's subsidiaries. These borrowings bear fixed interest rates
ranging from
3.45
% to
4.80
% per annum. The weighted average interest rates on short term debts were approximately
4.15
%,
4.76
% and
5.38
%
for the year ended December 31, 2023, 2022, and 2021, respectively. The interest expenses were approximately $
0.4
million, $
0.4
million,
and $
0.4
million, respectively, for the same periods, respectively.
12.
INCOME TAXES
Pre-tax
(loss) income from continuing operations and discontinued operations for the year ended December 31, 2023, 2022, and 2021 in the following
jurisdictions:
2023
2022
2021
PRC
$
2,769,080
$
(
4,284,019
)
$
(
8,287,495
)
Hong Kong
(
123,008
)
(
1,384,286
)
(
876,289
)
BVI
(
3,336,033
)
(
1,343,473
)
(
755,754
)
Total (loss) before income taxes
$
(
689,961
)
$
(
7,011,778
)
$
(
9,919,538
)
United
States
Because
of the domestication transaction in 2012 by which CNIT BVI became the parent of our group, under Section 7874 of the Internal Revenue
Code of 1986, as amended, the Company is treated for U.S. federal tax purposes as a U.S. corporation and, among other consequences, is
subject to U.S. federal income tax on its worldwide income. It is management's intention to reinvest all the income attributable
to the Company earned by its operations outside the United States.
On
December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Act").
The Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate
tax rate from
35
percent to
21
percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of
foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a tax
on Global Intangible Low-Taxed Income ("GILTI") which is a current inclusion in U.S. federal taxable income of certain earnings
of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax ("AMT") and changing how existing
AMT credits can be realized; (6) creating the base erosion anti-abuse tax ("BEAT"), a new minimum tax; (7) creating a new
limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards
created in tax years beginning after December 31, 2017.
The
SEC staff issued Staff Accounting Bulletin 118, which provides guidance on accounting for the tax effects of the Act for which the accounting
under ASC 740, Income Taxes ("ASC 740") is incomplete. To the extent that a company's accounting for certain income
tax effects of the Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the
financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue
to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before enactment of the Act.
F-
33
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
Company from time to time evaluates the tax effect of GILTI, and determined that there was no impact of GILTI tax to the Company's
consolidated financial statements as of December 31, 2023.
BVI
Under
the current laws of the BVI, dividends and capital gains arising from the Company's investments in the BVI and ordinary income,
if any, are not subject to income taxes.
Hong
Kong
Under
the current laws of Hong Kong, IST HK, TDAL, TDL and TCL are subject to a profit tax rate of
16.5
%.
PRC
Income
tax expense (benefit) from continuing operations consists of the following:
2023
2022
2021
Current taxes
$
7,980
$
69,869
$
5,321
Income tax expense
$
7,980
$
69,869
$
5,321
Current
income tax expense (benefit) was recorded in 2023, 2022 and 2021 and was related to differences between the book and corporate income
tax returns.
2023
2022
2021
PRC statutory tax rate
25
%
25
%
25
%
Expected income tax (benefit)
$
(
172,490
)
$
(
1,752,944
)
$
(
2,479,885
)
Tax rate difference
(
187,321
)
227,985
950,843
Permanent differences
(
265,279
)
(
1,011,482
)
(
589,598
)
Tax effect of temporary differences not recognized
-
170,383
837,438
Tax effect of tax losses unrecognized
633,070
2,435,927
1,286,523
Income tax expense
$
7,980
$
69,869
$
5,321
F-
34
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
Company's tax loss carry forwards totaling RMB
160.8
million ($
22.7
million) as of December 31, 2023, substantially all of which
were from PRC subsidiaries and will expire on various dates through December 31, 2033. Deferred tax asset was not provided for respective
tax losses.
IST
is approved as being high-technology enterprises and subject to PRC enterprise income tax rate ("EIT") at
15
%. For Biznest,
the income tax starts from the earning year, is tax exempt for the first two years and is subject to
12.5
% income tax rate for year 3-5.
The
Company recognizes that virtually all tax positions in the PRC are not free of some degree of uncertainty due to tax law and policy changes
by the State. However, the Company cannot reasonably quantify political risk factors and thus must depend on guidance issued by current
State officials.
Based
on all known facts, circumstances, and current tax law, the Company has not recorded tax benefits from year 2021 to 2023. The Company
believes that there are no tax positions for which it is reasonably possible, based on current Chinese tax laws and policies, that the
unrecognized tax benefits will significantly increase or decrease over the next 12 months, individually or in the aggregate, and have
a material effect on the Company's results of operations, financial condition or cash flows.
The
Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
Any accrued interest or penalties associated with any unrecognized tax benefits were not significant for the year ended December 31,
2023, 2022, and 2021.
Since
the Company intends to reinvest its earnings to further expand its businesses in the PRC, the PRC subsidiaries do not intend to declare
dividends to their parent companies in the foreseeable future. The Company's foreign subsidiaries are in a cumulative deficit position.
Accordingly, the Company has not recorded any deferred taxes on the cumulative amount of any undistributed deficit. It is impractical
to calculate the tax effect of the deficit at this time.
13.
OTHER CURRENT AND NON-CURRENT ASSETS
(a)
As of December 31, 2023 and 2022, other current assets consist of:
December 31, 2023
December 31, 2022
Advances to unrelated-parties
(i)
$
1,209,202
$
837,041
Advances to a related party
239,469
246,080
Advances to employees
78,566
309,911
Other current assets
112,833
161,456
$
1,640,070
$
1,554,488
(i)
The
    advances to unrelated parties for business development are non-interest bearing and are due on demand.
As
                                            of December 31, 2023, the balance included the amount due from a third-party vendor of approximately
                                            $
383,000
.
According to the contract and its subsequent amendment,
                                            the vendor is contracted to perform consulting service of market research as subcontractor
                                            and to facilitate the development of the new media advertising market.
Based
    on the amendment of the contract, the Company agrees to make advances to the vendor specifically for its market development purposes,
    and the total commitment of funding was RMB
6
million (approximately USD $
846,000
). Meanwhile, the Company agrees to pay the vendor
    a
12
% commission fee based on the advertising revenue it has facilitated, and a
50
% subcontractor fee based on the consulting services
    revenue, tax inclusive.
If
    the Company's revenue facilitated by the vendor does not reach certain threshold during specified periods, the contract could
    be terminated by the Company, and all funding with applicable interest, less any commissions and subcontractor fees payable to the
    vendor, shall be repaid to the Company within one month after the termination of the contract. If the two parties terminate the cooperation
    on the condition that the vendor meet the target, all funding without interest, shall be repaid.
The
    first period as specified is from January 1, 2021 to December 31, 2021 with a threshold revenue of RMB
15
million (approximately
    USD $
2,294,400
). The threshold revenue is to increase by 30% in the year 2022. As of December 31, 2021, revenue facilitated by the
    vendor has reached RMB
15.2
million (approximately USD $
2,386,360
). In December 2022, both parties agreed a one-year extension to
    fulfill the revenue threshold for year 2022. For the year ended December 31, 2022, revenue facilitated by the vendor has reached
    RMB
7.5
million (approximately USD $
1,111,000
). For the year ended December 31, 2023, revenue facilitated by the vendor has reached
    RMB
20.8
million (approximately USD $
2,947,000
). The revenue facilitated by the vendor has fulfilled the revenue threshold and no
    event occurs or circumstance changes that would potentially indicate that the carrying amount of the receivable was impaired.
F-
35
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b)
As of December 31, 2023 and 2022, Other assets, non-current consist of:
December 31, 2023
December 31, 2022
Other assets, non-current, net
$
811,026
$
1,775,540
$
811,026
$
1,775,540
During
2019 and 2020, the Company advanced RMB
30
million (USD $
4.2
million) to a vendor, whom the Company has contracted to develop a vehicular
IOT smart advertising software ("Internet of Vehicle" or "IOV" software) to interconnect to the Company's
new media advertising sharing platform expanding its advertising capability to people riding in motor vehicles. According to the contract
and its subsequent amendment, total commitment of the funding was RMB
30
million (USD $
4.2
million). The vendor is solely responsible
for hardware and software development and marketing the vehicular terminal. The Company financially supports development cost of IOV
software in exchange for advertising revenue generated from the software for four years of the contract term.
Based
on the amendment of the contract, if the Company's new media advertising revenue generated from IOV software does not reach certain
threshold during specified period, the contract could be terminated by the Company, and all funding with applicable interest, and less
the revenue generated from the IOV software shall be repaid to the Company within one half year after the termination of the contract.
Before the full repayment of the funding, the Company owns
100
% of the title of the IOV software and related equipment, which will be
transferred to the vendor upon its repayment of the total funding plus applicable interest.
Starting
in October 2020, IOV software revenue will be divided into eight periods. The first period as specified was from October 1, 2020 to April
30, 2021 with a threshold advertising revenue from IOV software of RMB
3
million (approximately USD $
462,000
).
The revenue is to increase
incrementally by 15% in every six months going forward until the contract expires four years after the commencing date of the operation.
The first period as specified was from October 1, 2020 to April 30, 2021 with advertising revenue from IOV software of RMB
3
million
(approximately USD $
462,000
). The second period as specified was from May 1, 2021 to November 30, 2021 with advertising revenue from
IOV software of RMB
3.3
million (approximately USD $
510,000
). The third period as specified was from December 1, 2021 to May 30, 2022
with advertising revenue from IOV software of RMB
3.4
million (approximately USD $
531,000
). The fourth period as specified was from June
1, 2022 to November 30, 2022 with advertising revenue from IOV software of RMB
14.1
million (approximately USD $
2,285,000
). The fifth
period as specified was from December 1, 2022 to May 30, 2023 with advertising revenue from IOV software of RMB
3.9
million (approximately
USD $
562,000
). The sixth period as specified was from June 1, 2023 to November 30, 2023 with advertising revenue from IOV software of
RMB
18.3
million (approximately USD $
2,581,000
). In 2024, The Company will continue to monitor advertising revenue generation from the
IOV software and evaluate for impairment, if an event occurs or circumstance changes that would potentially indicate that the carrying
amount of the asset exceeded its fair value. The vendor will own the title of the IOV software upon its fulfillment of the contract obligations
after three years.
The
development of IOV software was completed by September 30, 2020. Since the Company has the right to use the IOV software under the contract
term, software was capitalized as "other assets, non-current, net" and started to amortize from October 1, 2020 over the
four
-year contract term. As of December 31, 2023 and December 31, 2022, the balance of "other assets, non-current, net" was
$
811,026
and $
1,775,540
, respectively. The reduction of the amount receivable was approximately $
0.9
million and $
1.2
million for the
years ended December 31, 2023 and 2022, respectively.
If
full repayment is achieved within the contract term, the Company might be charged to continue using the software and related equipment,
depending on both parties' future agreement.
F-
36
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
14.
OPERATING LEASES
In
addition to the lease with a related party for computing server room in Dongguan City, commenced in April 2021, and terminated in March
2022, the Company leased an office space, three server rooms, and a dormitory in Hong Kong for executing the Blockchain business strategy,
and the Company also leased an office space in Zhenjiang commenced in October 2021. The office space and two of the server rooms in Hong
Kong were terminated in September 2022, and November 2022, respectively. The remaining server room and dormitory in Hong Kong were terminated
in April 2023. The fixed monthly lease payment for the Zhenjiang office space is $
2,528
(RMB
17,882
) with a lease term of
three years
ending September 30, 2024, with a rental free period from October 1, 2021 to March 31, 2022. The Zhenjiang office was terminated in September
2023. The fixed monthly lease payment for the remaining server room is $
5,656
(HKD
40,000
) with a lease term of
three years
ending January
15, 2025, which terminated in April 2023. The fixed monthly lease payment for the dormitory is $
4,807
(HKD
34,000
) including rental and
management fee with a lease term of
two years
ending April 19, 2023. All lease agreements have no variable lease payment nor option to
purchase the underlying assets. There was no initial direct cost associated with the office space lease agreement. The initial direct
costs associated with the lease for the remaining server room and dormitory is $
5,656
(HKD
40,000
), and $
2,404
(HKD
17,000
), respectively.
The
Company has also leased specific and identifiable wall spaces with a certain dimension in commercial and residential building lobbies,
inside elevators, elevator waiting areas, and various places to install the new media advertising display terminals without substitution
for purpose of broadcasting advertisements paid by the customers to promote their businesses or special events. The lease terms with
negotiated payment terms range from
one
year to
three
years, and the rental costs vary depending on the number of spots where the display
terminals are installed and the duration of the leases.
The
Company incurred rent expenses of approximately $
13,000
for continuing operations and $
25,000
for discontinued operations for the year
ended December 31, 2023.
There
was no remaining lease term as of December 31, 2023.
15.
LONG-TERM INVESTMENTS
As
of December 31, 2023, the carrying value of the Company's equity investments were $
86,889
, which consisted of the followings:
(1)
Equity method investments:
As
of December 31, 2023, the Company's equity method investments had a carrying value of $
nil
which were as follows:
Investees
Abbreviation
% of Ownership
Carrying value
Qingdao Taoping IoT Co., Ltd.
QD Taoping, or QD
47
%
$
-
Yunnan Taoping IoT Co., Ltd.
YN Taoping, or YN
40
%
-
Jiangsu Taoping IoT Technology Co., Ltd.
JS Taoping, or JS
25
%
-
Jiangsu Taoping New Media Co., Ltd
JS New Media, or JN
21
%
-
$
-
The
Company's initial investments in the above equity method investments were approximately $
1.9
million. The Company recognized losses
from equity method investments of approximately $
0.01
million and
no
impairment on equity method investments for the year ended December
31, 2023. The Company recognized losses from equity method investments of approximately $
0.3
million and
no
impairment on equity method
investments for the year ended December 31, 2022.
(2)
Equity investments without readily determinable fair value that is not accounted for under equity method accounting:
In
accordance with ASC 321, the Company elected to use the measurement alternative to measure such investments at cost, less any impairment,
plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same
issuer, if any.
As
of December 31, 2023, the carrying value for the equity investments without readily determinable fair value was $
86,889
. The total initial
investments to the equity investments without readily determinable fair value were approximately $
711,000
. Impairment of approximately
$
nil
for continuing operations was recognized for year ended December 31, 2023. Impairment of approximately $
0.1
million for continuing
operations and $
0.2
million for discontinued operations were recognized for year ended December 31, 2022.
F-
37
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
16.
CONVERTIBLE NOTE PAYABLE
In
October 2019, March 2020, and September 2020, the Company issued Convertible Promissory Notes with principal amount of $
1.04
million,
$
1.48
million and $
1.48
million, respectively (Note-1, Note-2, and Note-3, collectively "Notes").
All three Notes mature
in 12 months from the issue dates of the Notes
(the "Maturity Dates"), carrying an interest rate of
5
% per annum and an original
issue discount (OID) to cover investors' transaction costs of the Notes. As of December 31, 2021, there was
no
outstanding balance
and unamortized debt issuance cost of Note-1, Note-2 and Note-3.
In
conjunction with issuance of the Notes, the Company also issued the holders of the Notes warrants to purchase
2,667
,
5,334
, and
5,334
ordinary shares of the Company, at an exercise price of $
90.0
with a cashless-exercise option. The warrants will expire in three years
from the dates of issuance, respectively.
In
June 2021, the investor of Note-3 converted $
740,000
of principal amount of the convertible note along with accrued interest of $
26,208
into
29,871
ordinary shares of the Company with no par value at a conversion price of $
25.65
. In October 2021, a total of $
777,000
including
outstanding principal amount of $
740,000
and accrued interest of $
37,000
of Note-3 was repaid to the investor. As a result, the outstanding
balance of Note-3 was $
nil
as of December 31, 2021.
The
Company recognized interest expense of approximately $
354,000
for Note-3 including interest relating to contractual interest obligation
of $
55,000
and amortization of debt discount of $
299,000
for the year ended December 31, 2021.
On
September 27, 2023, the Company issued a Convertible Promissory Note ("Note") in a private placement in aggregate
principal amount of $
609,000
.
The
Note matures in 12 months from the issue date of the Note
(the "Maturity Date"), with an annual interest rate of
8
%.
The Note carries an original issue discount of $
44,000
.
In addition, the Company agrees to pay $
15,000
to cover the transaction costs incurred in connection with the purchase and sale of this Note ("Transaction Expense
Amount"). Thus, the net proceeds of the Note were $
550,000
.
The Note is convertible into the Company's ordinary shares at $
8.0
per share or at a price equal to 80% multiplied by the lowest daily volume-weighted average price during the 10 trading days
immediately preceding the applicable redemption, subject to certain adjustments and limitations, at the holder's option at any
time after six months from the issue date. On the Maturity Date, the holder of the Note has the right to convert all of the
outstanding balance of the Note at a price of no less than $
2.0
per share ("Floor Price"), which is subject to adjustment by consents of both parties.
For
the holder of the Note, conversion price results in beneficial conversion feature (BCF) that is separated as an equity component and
assigned a value of $
156,440
, which is the intrinsic value of the BCF that is measured by difference between the effective conversion
price based on the proceeds allocated to the convertible instrument and the conversion prices that are most beneficial to the Note holder
and assigned to the equity component and recorded as a debt discount. Debt discount is amortized using the effective interest rate method
over the period from the issuance date through the stated maturity date.
The
Note is recognized initially at fair value, net of debt discounts including original issue discount, Transaction Expense Amount, and
allocation of proceeds to beneficial conversion feature, in the amount of $
215,440
. As of December 31, 2023, the remaining unamortized
debt discount was $
159,785
, and will be amortized through September 27, 2024. Issuance costs and other Discounts accretion are recorded
as interest expense in the consolidated statement of operations.
The
Company recognized interest expense of approximately $
68,000
for the year ended December 31, 2023 including interest relating to contractual
interest obligation approximately of $
13,000
and amortization of the discounts and debt issuance cost approximately of $
55,000
. As a
result of discounts accretion and amortization, the Note was in the carrying value of $
449,215
as of December 31, 2023.
17.
OTHER PAYABLES AND ACCRUED EXPENSES
As
of December 31, 2023 and 2022, other payables and accrued expenses consist of:
December 31, 2023
December 31, 2022
Advances from unrelated third-parties
(i)
$
621,146
$
395,359
Other taxes payable
(ii)
4,133,972
4,216,786
Accrued professional fees
230,000
215,889
Amount due to employees
(iii)
158,396
41,782
Others
80,711
126,528
$
5,224,225
$
4,996,344
(i)
The
    advances from unrelated parties are non-interest bearing and due on demand.
(ii)
The
    other taxes payable were the amounts due to the value added tax, business tax, city maintenance and construction tax, and individual
    income tax.
(iii)
The
    amounts due to employees were pertaining to employees' out-of-pocket expenses for travel and meal allowance, etc.
F-
38
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
18.
RESERVE AND DISTRIBUTION OF PROFIT
In
accordance with relevant PRC regulations and the Articles of Association of our PRC subsidiaries, our PRC subsidiaries are required to
allocate at least
10
% of their annual after-tax profits determined in accordance with PRC statutory financial statements to a statutory
general reserve fund until the amounts in said fund reaches
50
% of their registered capital. As of December 31, 2023 and 2022, the balance
of general reserve was $
10.2
million and $
10.2
million, respectively.
Under
the applicable PRC regulations, the Company may pay dividends only out of the accumulated profits, if any, determined in accordance with
the PRC accounting standards and regulations. The statutory reserve funds can only be used for specific purposes under the PRC laws and
regulations. The general reserves are not distributable as cash dividends.
Our
after-tax profits or losses with respect to the payment of dividends out of accumulated profits and the annual appropriation of after-tax
profits as calculated pursuant to the PRC accounting standards and regulations do not result in significant differences as compared to
after-tax earnings as presented in our consolidated financial statements. However, there are certain differences between the PRC accounting
standards and regulations and the U.S. generally accepted accounting principles, arising from different treatment of items such as amortization
of intangible assets and change in fair value of contingent consideration arising from business combinations.
19.
EQUITY
(a)
Ordinary shares
The
Company is authorized to issue
100,000,000
ordinary shares at no par value.
In
December 2020, the holders of the convertible notes issued in March 2020 converted all principal balance of the notes and accrued interests
to the Company's ordinary shares in an aggregate of
29,932
ordinary shares, which were not issued until February 2021. The total
amount of principal and accrued interest was approximately $
0.8
million, which was converted into the ordinary shares in February 2021.
In
January 2021, the Company issued a total of
74,074
ordinary shares to certain individual investors at $
27.0
per share, which generated
approximately $
1.99
million net proceeds for the Company.
In
January 2021, the Company issued
700
ordinary shares with fair value of approximately $
21,840
to a consultant as compensation for the
consulting service.
In
February 2021, the Company issued a total of
190,000
ordinary shares to certain institutional and individual investors at $
40.8
per share,
resulting in approximately $
7.74
million net proceeds for the Company.
In
March 2021, the Company issued
20,000
ordinary shares with fair value of approximately $
2,792,000
to certain employees for their job
performance.
In
March 2021, the Company issued
50,000
ordinary shares in the registered direct offering at the offering price of $
67.0
per share resulting
in approximately $
3.34
million net proceeds for the Company.
In
June 2021, the Company issued
121,363
ordinary shares with 6 months restricted period upon the closing of acquisition of Taoping New
Media Co., Ltd ("TNM"), at unit price of $
52.7
per share with discounts for lack of marketability as the consideration equivalent
to approximately $
5.4
million for acquiring
100
% equity interest of TNM.
F-
39
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
In
June 2021, the holder of the convertible note issued in September 2020 converted
50
% principal balance of the note and accrued interests
to the Company's ordinary shares in an aggregate of
29,871
ordinary shares (see Note 16). The total amount of principal and accrued
interest converted into the ordinary shares was approximately $
766,000
.
In
July 2021, the Company issued a total of
120,000
ordinary shares in a registered direct offering at $
41.5
per share, which generated
approximately $
4.7
million net proceeds for the Company.
In
September 2021, the Company issued
61,225
ordinary shares at a price of $
26.0
per share with discounts for lack of marketability, as
the consideration of approximately $
1.8
million for acquiring
100
% equity interest of iASPEC.
In
November 2021, the Company issued
4,500
restricted shares with a fair value of $
136,350
to a financial intermediary service organization
as a compensation for the intermediary service.
In
December 2021, the Company issued
1,000
ordinary shares with a fair value of $
29,200
to a consultant as a compensation for his service.
In
February 2022, the Company issued the first phase of approximately
6,718
restricted ordinary shares with a fair value of approximately
$
118,000
, for the acquisition of ZJIOT. The Company agreed to issue to the shareholders of ZJIOT a total of approximately
20,154
restricted
ordinary shares in three phases, conditioned upon the satisfaction of certain performance targets.
In
March 2022 and July 2022, the Company issued
2,000
ordinary shares with a fair value of $
23,100
to a consultant as a compensation for
his service.
In
April 2023, the Company issued the second phase of approximately
6,718
restricted ordinary shares with a fair value of approximately
$
49,000
, for the acquisition of ZJIOT, upon the satisfaction of certain performance targets.
In
May 2023, the Company issued
50,000
restricted shares to a consultant as its service compensation for the service period from May 26,
2023 to May 25, 2024. The fair value of the
50,000
ordinary shares was $
340,000
, which was amortized over the service period.
In
May 2023, the Company issued
200,000
ordinary shares with fair value of approximately $
1,360,000
to certain directors, executive officers,
and employees as compensations for their services.
In
July 2023, the Company issued
4,339
and
43,394
ordinary shares, as commitment fee shares to an investor, with fair value of approximately
$
23,000
and $
230,000
, respectively, pursuant to a public standby equity purchase agreement and a private standby equity purchase agreement.
In
August 2023, the Company issued
80,000
ordinary shares to a certain investor at $
4.626
per share, which generated net proceeds of $
370,080
for the Company.
In
October 2023, the Company issued a total of
300,000
ordinary shares to a certain investor at $
1.97
and $
1.84
per share, which generated
net proceeds of $
570,200
for the Company.
In
November 2023, the Company issued
200,000
ordinary shares to a certain investor at $
1.37
per share, which generated net proceeds of $
274,000
for the Company.
In
December 2023, the Company issued a total of
420,000
ordinary shares to a certain investor at $
1.24
and $
1.11
per share, respectively,
which generated net proceeds of $
494,800
for the Company.
F-
40
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b)
Stock-based compensation
The
following table provides the details of the share-based payments expense during the year ended December 31, 2023, 2022, and 2021:
For the Year Ended
December 31, 2023
December 31, 2022
December 31, 2021
Employees and directors share-based payments
$
1,360,000
(a)
$
-
$
2,950,000
(a)(c)
Shares issued for services
$
204,000
(a)
$
23,100
(a)
$
187,000
(a)
$
1,564,000
$
23,100
$
3,137,000
(c)
Stock options to employees and directors
On
May 9, 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan, or the 2016 Plan. Pursuant to the 2016 Plan
and its amendment in May 2021, the Company may offer up to five hundred thousand ordinary shares as equity incentives to its directors,
employees and consultants. Such number of shares is subject to adjustment in the event of certain reorganizations, mergers, business
combinations, recapitalizations, stock splits, stock dividends, or other change in the corporate structure of the Company affecting the
issuable shares under the 2016 Plan. The Company accounts for its stock option awards to employees and directors pursuant to the provisions
of ASC 718, Compensation – Stock Compensation. The fair value of each option award is estimated on the date of grant using the
Black-Scholes Merton valuation model. The Company recognizes the fair value of each option as compensation expense ratably using the
straight-line attribution method over the service period, which is generally the vesting period.
On
July 24, 2020, the Company granted options to employees and directors to purchase an aggregate of
33,335
ordinary shares under the 2016
Plan. The fair value of these options was approximately $
0.3
million at the date of the grant, of which approximately $
160,000
and $
140,000
was recorded as compensation and included in administrative expenses in the consolidated statements of operations for the services provided
for the year ended December 31, 2021, and 2020 respectively.
Stock
option activity for the year ended December 31, 2023, 2022 and 2021 is summarized as follows:
Weighted
Average
Remaining
Options
Weighted
Average
Contractual
Life
Aggregated
Intrinsic
Outstanding *
Exercise Price*
(Year)
Value
Outstanding at January 1, 2021
32,635
$
24.0
2.6
$
143,587
Granted
-
-
-
-
Exercised
-
-
-
-
Canceled
(
2,867
)
$
24.0
-
-
Outstanding at December 31, 2021
29,768
$
24.0
1.6
$
714,400
Granted
-
-
-
-
Exercised
-
-
-
-
Canceled
(
1,518
)
$
24.0
-
-
Outstanding at December 31, 2022
28,250
$
24.0
0.6
-
Granted
-
-
-
-
Exercised
-
-
-
-
Canceled
(
400
)
$
24.0
-
$
-
Expired
(
27,850
)
$
24.0
-
$
-
Outstanding at December 31, 2023
-
-
-
-
F-
41
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
There
were
no
stock options granted to employees during the year ended December 31, 2023, 2022 and 2021. There was
no
option exercised during
the years ended December 31, 2023, 2022 and 2021. The Company did not receive any proceeds related to the cashless exercise of stock
options from employees for the years ended December 31, 2023, 2022 and 2021.
As
of December 31, 2023 and 2022,
no
unrecognized compensation expense related to non-vested share options expected to be recognized. The
total fair value of options vested during the year ended December 31, 2023, 2022 and 2021 was approximately $
nil
, $
nil
and $
0.2
million,
respectively. To the extent the actual forfeiture rate is different from what the Company has anticipated; stock-based compensation related
to these awards will be different from its expectations.
*
On
    August 1, 2023, the Company implemented a one-for-ten reverse stock split of the Company's issued and outstanding ordinary
    shares. Except shares authorized, all share and per share information has been retroactively adjusted to give effect to the reverse
    stock split for all periods presented, unless otherwise indicated.
(d)
Stock options and warrants to non-employees
Pursuant
to the Company's 2016 Equity Incentive Plan and its amendment, in July 2020, the Company granted options to certain consultants
to purchase an aggregate of
5,737
ordinary shares of the Company with an exercise price at $
26.4
per share. The options were fully vested
at the grant date as a rewarding for the past service of the consultants. For the years ended December 31, 2023, 2022 and 2021, the Company
issued
nil
,
nil
and
191,500
warrants to consultants, respectively. The Company expensed to administrative expense approximately $
nil
,
$
nil
and $
77,000
for the years ended December 31, 2023, 2022 and 2021, respectively.
The
issuance of warrants to purchase up to
100,000
and
1,500
ordinary shares to certain consultants in February 2021 has been expired as
of December 31, 2021 and December 31, 2022, respectively. The issuance of warrants to purchase up to
90,000
ordinary shares to certain
consultants in April 2021 has been cancelled as of December 31, 2021.
As
of December 31, 2022, the exercise price for the stock options issued to non-employees was $
26.4
and remaining life was
0.6
years. The
stock options granted to non-employees were expired in three years after the grant date. The following table outlines the options outstanding
and exercisable as of December 31, 2022:
2022
Number of
Options
Outstanding
Exercise
Expiration
and Exercisable *
Price*
Date
July 2020 stock options to consultants
5,737
$
26.4
07/09/2023
Total
5,737
As
of December 31, 2023, there was no stock options outstanding.
*
On
    August 1, 2023, the Company implemented a one-for-ten reverse stock split of the Company's issued and outstanding ordinary
    shares. Except shares authorized, all share and per share information has been retroactively adjusted to give effect to the reverse
    stock split for all periods presented, unless otherwise indicated.
F-
42
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
20.
CONSOLIDATED SEGMENT DATA
Segment
information is consistent with how the Chief Operating Decision Maker, i.e., the Directors of the Company, review the businesses, make
investing and resource allocation decisions and assess operating performance. Transfers and sales between reportable segments, if any,
are recorded at cost.
The
Company ceased the operation of cryptocurrency mining business by December 2022, and the operations of cryptocurrency mining business
have been presented as "discontinued operations" in the Company's consolidated financial statements. Please refer to
Note 10.
The
Company reports financial and operating information in the following three segments:
(1)
Cloud-based
    Technology (CBT) segment — It includes the Company's cloud-based products, high-end data storage servers and related
    services sold to private sectors including new media, healthcare, education and residential community management, and among other
    industries and applications. In this segment, the Company generates revenues from the sales of hardware and software total solutions
    with proprietary software and content as well as from designing and developing software products specifically customized for private
    sector customers' needs for a fixed price. The Company includes the revenue and cost of revenue of high-end data storage servers
    in the CBT segment. Advertising services is included in the CBT segment, after the Company consummated the acquisition of TNM. Advertisements
    are delivered to the ads display terminals and vehicular ads display terminals through the Company's cloud-based new media
    sharing platform. Incorporation of advertising services complements the Company's out-of-home advertising business strategy.
(2)
Blockchain
    Technology (BT) segment — The BT segment is the Company's newly formed business sector in 2021. Cryptocurrency mining
    is the first initiative implemented in the BT segment. However, due to the decreased output and the highly volatile cryptocurrency
    market, the Company had ceased the operation of the BT segment by December 2022.
(3)
Traditional
    Information Technology (TIT) segment — The TIT segment includes the Company's project-based technology products and services
    sold to the public sector. The solutions the Company has sold primarily include Geographic Information Systems (GIS), Digital Public
    Security Technology (DPST), and Digital Hospital Information Systems (DHIS). In this segment, the Company generates revenues from
    sales of hardware and system integration services. As a result of the business transformation, the TIT segment is gradually being
    phased out in 2021.
F-
43
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Selected
information by segment is presented in the following tables for the year ended December 31, 2023, 2022, and 2021.
2023
2022
2021
Revenues
(1)
TIT Segment
$
214,980
$
235,128
$
636,743
CBT Segment
38,420,655
23,998,335
18,753,836
$
38,635,635
$
24,233,463
$
19,390,579
(1)
Revenues
    by operating segments exclude intercompany transactions.
2023
2022
2021
(Loss)
    income from operations
TIT
    Segment
$
(
110,113
)
$
(
617,180
)
$
570,220
CBT
    Segment
2,838,305
(
181,454
)
(
7,668,616
)
Corporate
    and others
(2)
(
2,925,890
)
(
2,367,003
)
(
3,042,360
)
(
Loss)
    from operations
(
197,698
)
(
3,165,637
)
(
10,140,756
)
Corporate
    other income (loss), net
552,058
3,201,613
(
692,687
)
Corporate
    interest income
2,100
7,956
4,631
Corporate
    interest expense
(
580,630
)
(
556,434
)
(
928,352
)
(Loss)
    before income taxes
(
224,170
)
(
512,502
)
(
11,757,164
)
Income
    tax (expense) benefit
(
7,980
)
(
69,869
)
(
5,321
)
Net
    (loss) from continuing operations
(
232,150
)
(
582,371
)
(
11,762,485
)
Net
    (loss) income from discontinued operations
(
465,791
)
(
6,499,276
)
1,837,626
Net
    (loss)
(
697,941
)
(
7,081,647
)
(
9,924,859
)
Less:
    Loss (income) attributable to the non-controlling interest
-
-
-
Net
    (loss) attributable to the Company
$
(
697,941
)
$
(
7,081,647
)
$
(
9,924,859
)
(2)
Includes
    non-cash compensation, professional fees and consultancy fees for the Company.
Non-cash
employee compensation by segment for the year ended December 31, 2023, 2022, and 2021 are as follows:
2023
2022
2021
Non-cash employee compensation:
Corporate and others
1,360,000
-
2,950,070
$
1,360,000
$
-
$
2,950,070
Depreciation
and amortization by segment for the year ended December 31, 2023, 2022, and 2021 are as follows:
2023
2022
2021
Depreciation and amortization:
TIT Segment
$
43,832
$
44,678
$
13,173
CBT Segment
2,472,741
3,499,253
2,219,247
$
2,516,573
$
3,543,931
$
2,232,420
F-
44
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
2023
2022
2021
Provisions for allowance for credit losses on accounts receivable, other receivable and advances to suppliers:
TIT Segment
$
6,097
$
(
43,741
)
$
(
658,035
)
CBT Segment
1,407,119
689,234
6,192,425
Corporate and others
-
-
7,327
$
1,413,216
$
645,493
$
5,541,717
2023
2022
2021
Inventory obsolescence provision:
TIT Segment
$
2,753
$
-
$
-
CBT Segment
(
56,067
)
63,716
(
82,255
)
$
(
53,314
)
$
63,716
$
(
82,255
)
Total
assets by segment as at December 31, 2023 and 2022 are as follows:
2023
2022
Total assets
TIT Segment
$
131,137
$
254,579
CBT Segment
31,384,549
27,200,882
Assets from discontinued operations
-
1,326,265
Corporate and others
1,310,628
427,089
$
32,826,314
$
29,208,815
F-
45
TAOPING
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
21.
COMMITMENTS AND CONTINGENCIES
The
Company may from time to time be subject to legal proceedings, investigations, and claims incidental to conduct of our business.
In
September 2023, Guangdong Zexun Advertising Co., Ltd. filed a lawsuit against the Company which claimed a payment of RMB
231,866
(approximately
$
32,200
) from the Company resulted from its failure of performance for a business subcontract agreement signed by both parties in 2017.
The Company anticipated an unfavorable outcome from the lawsuit and accrued a contingent liability of $
32,200
for probable loss in 2023.
The lawsuit was settled in a court mediation on January 30, 2024, and the Company agreed to pay the above claimed amount in three installments
in 2024.
The
Company received a notification from Nasdaq Listing Qualifications on September 16, 2022, as announced in a report on Form 6-K filed
with the SEC on September 16, 2022, that the Company was not in compliance with the minimum bid price requirements set forth in Nasdaq
Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. On March 16, 2023, the Company received a letter from The
Nasdaq Stock Market LLC confirming the Company has been granted an additional 180 calendar day period for compliance under its minimum
bid price requirement through September 11, 2023. On August 15, 2023, the Company regained compliance with the NASDAQ listing requirements,
after the one-for-ten reverse stock split effective on August 1, 2023, according to the NASDAQ notice.
22.
CONCENTRATIONS
For
the year ended December 31, 2023, 2022 and 2021, the revenue from cryptocurrency mining consisted -
0
-%,
14
% and
22
% of total revenues,
and one customer accounted for greater than
10
% of total revenues in 2023, and no single customer accounted for greater than
10
% of total
revenues in 2022 and 2021. For the year ended December 31, 2023, 2022 and 2021, the Company's top five customers accounted for
30
%,
24
% and
29
% of the Company's revenues of continuing operations, respectively.
The
Company's top five accounts receivable accounted for
48
% and
30
% of accounts receivable as of December 31, 2023 and 2022, respectively.
One customer each accounted for greater than
10
% of accounts receivable as of December 31, 2023 and 2022, respectively.
For
the year ended December 31, 2023, 2022 and 2021, approximately
59
%,
37
% and
69
%, respectively, of total inventory purchases were from
five unrelated suppliers. Two supplier each accounted for greater than
10
% of total inventory purchases in 2023, one and three suppliers
each accounted for greater than
10
% of total inventory purchases in 2022 and 2021, respectively.
23.
SUBSEQUENT EVENTS
On
January 2, 2024, January 11, 2024, February 27, 2024, February 28, 2024, March 7, 2024, March 18, 2024, and March 28, 2024, the Company
issued
280,000
,
300,000
,
150,000
,
160,000
,
160,000
,
180,000
, and
250,000
ordinary shares, respectively, to SHANJING CAPITAL GROUP CO.,
LTD (the "Investor") at a price of approximately $
1.21
, $
1.06
, $
1.09
. $
1.08
, $
1.06
, $
0.99
, and $
0.945
per share, respectively,
pursuant to a Standby Equity Purchase Agreement (the "Private SEPA"). The total proceeds the Company received from the above
sales of the shares are $
1,577,150
. These shares were issued as part of the commitment by Investor to purchase from time to time, at
our option, up the Company's $
10,000,000
of our ordinary shares pursuant to the Private SEPA, as described in the Form 6-K dated
July 19, 2023.
F-
46