# EDGAR Filing Document

**Accession Number:** 0001552670
**File Stem:** 0001493152-26-020596
**Filing Date:** 2026-4
**Character Count:** 810943
**Document Hash:** 2b847bc2d7a7dddbd6a509d5ebe0974e
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001493152-26-020596.hdr.sgml**: 20260430

**ACCESSION NUMBER**: 0001493152-26-020596

**CONFORMED SUBMISSION TYPE**: 20-F

**PUBLIC DOCUMENT COUNT**: 153

**CONFORMED PERIOD OF REPORT**: 20251231

**FILED AS OF DATE**: 20260430

**DATE AS OF CHANGE**: 20260430

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Taoping Inc.
- **CENTRAL INDEX KEY:** 0001552670
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-PREPACKAGED SOFTWARE [7372]
- **ORGANIZATION NAME:** 06 Technology
- **EIN:** 000000000
- **STATE OF INCORPORATION:** D8
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 20-F
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-35722
- **FILM NUMBER:** 26926184

**BUSINESS ADDRESS:**
- **ADDRESS IS A NON US LOCATION:** YES
- **STREET 1:** 21ST FLOOR, BUILDING 3, TIANJIN
- **STREET 2:** SCIENCE AND TECHNOLOGY PLAZA, KEYAN
- **CITY:** WEST ROAD, NANKAI DISTRICT
- **NON US STATE TERRITORY:** TIANJIN
- **PROVINCE COUNTRY:** F4
- **ZIP:** 300192
- **BUSINESS PHONE:** 86-22-87089858

**MAIL ADDRESS:**
- **ADDRESS IS A NON US LOCATION:** YES
- **STREET 1:** 21ST FLOOR, BUILDING 3, TIANJIN
- **STREET 2:** SCIENCE AND TECHNOLOGY PLAZA, KEYAN
- **CITY:** WEST ROAD, NANKAI DISTRICT
- **NON US STATE TERRITORY:** TIANJIN
- **PROVINCE COUNTRY:** F4
- **ZIP:** 300192

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** China Information Technology, Inc.
- **DATE OF NAME CHANGE:** 20120620

?xml version='1.0' encoding='ASCII'?

**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, 2025

**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)**

**<u>Not Applicable</u>**

(Translation of Registrant's Name Into English)

**<u>British Virgin Islands</u>**

(Jurisdiction of Incorporation or Organization)

**21st Floor, Building 3, Tianjin Science and Technology Plaza**

**Keyan West Road**

**Nankai District, Tianjin, 300192**

**People's Republic of China**

(Address of Principal Executive Offices)

**Mr. Jianghuai Lin, Co-Chief Executive Officer**

**21st Floor, Building 3, Tianjin Science and Technology Plaza**

**Keyan West Road**

**Nankai District, Tianjin, 300192**

**People's Republic of China** 

**Tel: +86-22-87089858**

**Email: ir@taop.com**

(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, 2025): 9,552,783 ordinary shares, no par value and 50,418 class A 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 ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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 Standards as issued by the International Accounting Standards Board ☐ Other ☐

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 ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

**Annual Report on Form 20-F**

**Year Ended December 31, 2025**

**<u>**TABLE OF CONTENTS**</u>**

---

| | |
|:---|:---|
| [PART I](#JA_001) | 2 |
| &nbsp;&nbsp;&nbsp;[ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS](#JA_002) | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[A. Directors and Senior Management](#JA_003) | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[B. Advisers](#JA_004) | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[C. Auditors](#JA_005) | 2 |
| &nbsp;&nbsp;&nbsp;[ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE](#JA_006) | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[A. Offer Statistics](#JA_007) | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[B. Method and Expected Timetable](#JA_008) | 2 |
| &nbsp;&nbsp;&nbsp;[ITEM 3. KEY INFORMATION](#JA_009) | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[A. \[Reserved\]](#JA_010) | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[B. Capitalization and Indebtedness](#JA_011) | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[C. Reasons for the Offer and Use of Proceeds](#JA_012) | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[D. Risk Factors](#JA_013) | 12 |
| &nbsp;&nbsp;&nbsp;[ITEM 4. INFORMATION ON THE COMPANY](#JA_014) | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[A. History and Development of the Company](#JA_015) | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[B. Business Overview](#JA_016) | 42 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[C. Organizational Structure](#JA_017) | 67 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[D. Property, Plant and Equipment](#JA_018) | 67 |
| &nbsp;&nbsp;&nbsp;[ITEM 4A. UNRESOLVED STAFF COMMENTS](#JA_019) | 67 |
| &nbsp;&nbsp;&nbsp;[ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS](#JA_020) | 67 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[A. Operating Results](#JA_021) | 67 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[B. Liquidity and Capital Resources](#JA_022) | 74 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[C. Research and Development, Patents and Licenses, Etc.](#JA_030) | 78 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[D. Trend Information](#JA_023) | 79 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[E. Critical Accounting Policies and Accounting Estimates](#JA_024) | 79 |
| &nbsp;&nbsp;&nbsp;[ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](#JA_025) | 83 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[A. Directors and Senior Management](#JA_026) | 83 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[B. Compensation](#JA_027) | 85 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[C. Board Practices](#JA_028) | 88 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[D. Employees](#JA_029) | 90 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[E. Share Ownership](#sat_027) | 91 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[F. Disclosure of a registrant's action to recover erroneously awarded compensation](#sat_001) | 92 |
| &nbsp;&nbsp;&nbsp;[ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](#sat_002) | 92 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[A. Major Shareholders](#sat_003) | 92 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[B. Related Party Transactions](#sat_004) | 92 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[C. Interests of Experts and Counsel](#sat_005) | 93 |
| &nbsp;&nbsp;&nbsp;[ITEM 8. FINANCIAL INFORMATION](#sat_006) | 93 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[A. Consolidated Statements and Other Financial Information](#sat_007) | 93 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[B. Significant Changes](#sat_008) | 93 |

---

i

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;[ITEM 9. THE OFFER AND LISTING](#sat_009) | 94 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[A. Offer and Listing Details](#sat_010) | 94 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[B. Plan of Distribution](#sat_011) | 94 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[C. Markets](#sat_012) | 94 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[D. Selling Shareholders](#sat_013) | 94 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[E. Dilution](#sat_014) | 94 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[F. Expenses of the Issue](#sat_015) | 94 |
| &nbsp;&nbsp;&nbsp;[ITEM 10. ADDITIONAL INFORMATION](#sat_016) | 94 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[A. Share Capital](#sat_017) | 94 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[B. Memorandum and Articles of Association](#sat_018) | 94 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[C. Material Contracts](#sat_019) | 102 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[D. Exchange Controls](#sat_020) | 102 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[E. Taxation](#sat_021) | 105 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[F. Dividends and Paying Agents](#sat_022) | 109 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[G. Statement by Experts](#sat_023) | 109 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[H. Documents on Display](#sat_024) | 109 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[I. Subsidiary Information](#sat_025) | 109 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[J. Annual Report to Security Holders](#sat_026) | 109 |
| &nbsp;&nbsp;&nbsp;[ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](#sh_001) | 110 |
| &nbsp;&nbsp;&nbsp;[ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES](#sh_002) | 111 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[A. Debt Securities](#sh_003) | 111 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[B. Warrants and Rights](#sh_004) | 111 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[C. Other Securities](#sh_005) | 111 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[D. American Depositary Shares](#sh_006) | 111 |
| [PART II](#sh_007) | 112 |
| &nbsp;&nbsp;&nbsp;[ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES](#sh_008) | 112 |
| &nbsp;&nbsp;&nbsp;[ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF PROCEEDS](#sh_009) | 112 |
| &nbsp;&nbsp;&nbsp;[ITEM 15. CONTROLS AND PROCEDURES](#sh_010) | 113 |
| &nbsp;&nbsp;&nbsp;[ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT](#sh_011) | 114 |
| &nbsp;&nbsp;&nbsp;[ITEM 16B. CODE OF ETHICS](#sh_012) | 115 |
| &nbsp;&nbsp;&nbsp;[ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES](#sh_013) | 115 |
| &nbsp;&nbsp;&nbsp;[ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES](#sh_014) | 115 |
| &nbsp;&nbsp;&nbsp;[ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS](#sh_015) | 115 |
| &nbsp;&nbsp;&nbsp;[ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT](#sh_016) | 115 |
| &nbsp;&nbsp;&nbsp;[ITEM 16G. CORPORATE GOVERNANCE](#sh_017) | 115 |
| &nbsp;&nbsp;&nbsp;[ITEM 16H. MINE SAFETY DISCLOSURE](#sh_018) | 116 |
| &nbsp;&nbsp;&nbsp;[ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](#sh_019) | 116 |
| &nbsp;&nbsp;&nbsp;[ITEM 16J. INSIDER TRADING POLICIES](#sh_020) | 116 |
| &nbsp;&nbsp;&nbsp;[ITEM 16K. CYBERSECURITY](#sh_021) | 116 |
| [PART III](#sh_022) | 117 |
| &nbsp;&nbsp;&nbsp;[ITEM 17. FINANCIAL STATEMENTS](#sh_023) | 117 |
| &nbsp;&nbsp;&nbsp;[ITEM 18. FINANCIAL STATEMENTS](#sh_024) | 117 |
| &nbsp;&nbsp;&nbsp;[ITEM 19. EXHIBITS](#sh_025) | 118 |

---

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;

● "Skyladder Group" or "SGL" are to Skyladder Group Limited, a Hong Kong company and a wholly owned subsidiary of the Company;

● "CBT" are to cloud based technology;

● "BVI" are to the British Virgin Islands;

● "BVI Act" are to the BVI Business Companies Act (As Revised);

● "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, excluding, for the purpose of this report only, Taiwan and the special administrative regions of Hong Kong and Macau;

● "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 August 1, 2023, we completed a share combination of Taoping's issued and outstanding ordinary shares at a ratio of one-for-ten. On May 29, 2025, we completed another share combination of Taoping's issued and outstanding ordinary shares at a ratio of one-for-thirty. These share combinations 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 such share combinations.

**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 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.

**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. If the regulations related to the business operations of our PRC subsidiaries change significantly in the future and our PRC subsidiaries are not able to substantially comply with such regulations, the business operations of our PRC subsidiaries may be materially and adversely affected, and the value of our ordinary shares may significantly decrease. 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 and for the Offering of Securities to Foreign Investors" 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.

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 behaviour 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 The New York Stock Exchange (the "NYSE") and The Nasdaq Stock Market LLC (the "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") 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. PKF is subject to full inspection by the PCAOB and the PCAOB is able to perform its inspection. 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 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."

**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.

The table below presents the cash flows between our subsidiaries for the fiscal years ended December 31, 2025 and 2024.

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| <br>**Cash Flows Between Subsidiaries** | **2025** | **2024** |
| Advances between subsidiaries<sup>(1)</sup> | 2317709 | 3216717 |
| Settlement of trade credits between subsidiaries<sup>(2)</sup> |  |  |
| Additional paid-in capital by immediate parent company | 600000 | 69868 |
| Intercompany dividends or other distributions | - | - |

---

(1) Represent the sum of advances among offshore subsidiaries (including then-existing BVI subsidiary and Hong Kong subsidiary), 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 services, sales of products, and sublease of office between PRC subsidiaries. For the years ended December 31, 2025 and 2024, the trade credits between subsidiaries amounted to $96,727 and $264,785, 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.

**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 (2024), or the Negative List, which was promulgated by the MOFCOM and the National Development and Reform Commission ("NDRC") on September 6, 2024, and took effect on November 1, 2024. 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 amended.

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 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 28.

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 other than the filing requirements mandated by the Trial Measures, (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 20.

Given the recent nature of the introduction of the above Trial Measures, Listing Guidelines, and Revised Provisions, the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities are still evolving. 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;

● 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*

It shall be subject to certain procedures 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. The enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities are still evolving. 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 20 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 over our business could result in a material adverse change in our operations and the value of our ordinary shares. The evolvement in laws, regulations and policies in China might materially and adversely affect us. In addition, rules and regulations in China can change quickly with little advance notice*" on pages 19.

● 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. We may be exposed to compliance costs and regulatory risks if we fail to fully and accurately understand the laws and regulations under the PRC legal system and our business operation may be adversely affected, 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. 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 our securities.*" on pages 22.

● 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 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. PKF is subject to full inspection by the PCAOB and the PCAOB is able to perform its inspection. 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 27.

● 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 28.

● If the regulations related to the business operations of our PRC subsidiaries change significantly in the future and our PRC subsidiaries are not able to substantially comply with such regulations, the business operations of our PRC subsidiaries may be materially and adversely affected, and the value of our ordinary shares may significantly decrease. For additional information, see Item 3 "*Key Information-D. Risk Factors-Risks Related to Doing Business in China-If the regulations related to the business operations of our PRC subsidiaries change significantly in the future and our PRC subsidiaries are not able to substantially comply with such regulations, the business operations of our PRC subsidiaries may be materially and adversely affected, and the value of our ordinary shares may significantly decrease.*" on pages 23.

● We may encounter difficulties integrating Skyladder Group's operations with our existing business, and failure to successfully integrate the acquisition could adversely affect our results of operations. For additional information, see Item 3 "*Key Information-D. Risk Factors-Risks Relating to Our Business-We may encounter difficulties integrating Skyladder Group's operations with our existing business, and failure to successfully integrate the acquisition could adversely affect our results of operations"* on page 12.

● Our business has evolved significantly since 2013, and we 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-Our business has evolved significantly since 2013, and we 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 34.

● The trading price of Taoping's ordinary shares has been and likely continues 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 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 38 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 38.

● 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 37.

● 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 37.

**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 PRIMARILY IN CHINA.** 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.*

***<u>Risks Relating to Our Business</u>***

***We may encounter difficulties integrating Skyladder Group's operations with our existing business, and failure to successfully integrate the acquisition could adversely affect our results of operations.***

 

On September 29, 2025, we entered into a share purchase agreement to acquire 100% equity interest in Skyladder Group Limited for approximately RMB 152 million (approximately US$21.36 million), payable in 7,882,921 ordinary shares of our company. Skyladder Group, through its wholly owned operating entities in China including Skyladder (Tianjin) Technology Development Co., Ltd., provides services throughout the entire elevator lifecycle including sales, installation, repair, maintenance, renovation, and upgrades. This acquisition represents a significant strategic transformation and expansion into a new industry segment for us.

We may encounter difficulties integrating Skyladder Group's operations, personnel, and corporate culture with our existing business. Our existing business has focused primarily on cloud-based technologies for Smart City IoT platforms, digital advertising delivery, and internet-based information distribution systems. The elevator services business represents a new industry vertical that requires different operational capabilities, regulatory expertise, technical knowledge, and customer relationships. We may not be able to successfully combine the two businesses or realize the anticipated synergies, technological advantages, and revenue growth opportunities that we expect from this acquisition, which could materially and adversely affect our business, financial condition, and results of operations.

***Our success following the Skyladder acquisition depends on retaining key personnel and customers, and our failure to do so could materially reduce the anticipated benefits of the acquisition.***

 

The success of the Skyladder business depends significantly on retaining key personnel who possess specialized knowledge of elevator systems and related techniques. We may not be able to retain these key employees following the acquisition, which could result in loss of institutional knowledge, and operational capabilities. Additionally, Skyladder's customers may choose to terminate or not renew their contracts following the change in ownership, which could materially reduce the anticipated revenue streams from the acquisition.

***The performance-based consideration structure for the Skyladder acquisition creates risks if performance targets are not achieved, which could result in disputes, litigation, and management distraction.***

 

The purchase price for the Skyladder acquisition will be paid in the form of our ordinary shares, with shares being proportionally unlocked or adjusted based on Skyladder Group achieving specified revenue and net profit targets over an approximately four-year period from December 2025 through 2029. Specifically, the agreement requires Skyladder Group to achieve revenue of RMB 74.14 million and net profit of RMB 3.80 million in 2026; revenue of RMB 101.98 million and net profit of RMB 7.74 million in 2027; revenue of RMB 135.06 million and net profit of RMB 14.90 million in 2028; and revenue of RMB 180.66 million and net profit of RMB 22.14 million in 2029. If Skyladder Group fails to achieve these performance targets, it could result in adjustments to the shares to be unlocked, which may therefore result in disputes with the sellers, potential litigation, management distraction, and damage to our reputation. Furthermore, the pressure to meet these aggressive performance targets may incentivize short-term decision making that is detrimental to the long-term sustainability of the business.

***We may discover unforeseen or hidden liabilities associated with Skyladder Group's business after closing, which could expose us to significant legal liability, regulatory penalties, and reputational damage.***

 

Despite our due diligence efforts, we may discover unforeseen or hidden liabilities associated with Skyladder Group's business after closing, including undisclosed contractual obligations, regulatory compliance issues, product liability claims, intellectual property disputes, employee matters, or environmental liabilities. The elevator services industry is highly regulated and subject to stringent safety standards, and any past or future safety incidents, equipment failures, or regulatory violations could expose us to significant legal liability, regulatory penalties, and reputational damage.

***Skyladder Group's elevator services business operates in a heavily regulated industry, and failure to maintain required licenses and permits could result in fines, sanctions, or suspension of operations.***

 

The elevator services business operates in a heavily regulated industry that requires various licenses, permits, and certifications from Chinese government authorities at national and local levels. We may face challenges in maintaining existing licenses or obtaining new licenses required for the business operations. If Skyladder Group or its subsidiaries fail to maintain required permissions, approvals, licenses or permits, or if applicable laws, regulations, or interpretations change and require new approvals, we could be subject to fines, legal sanctions, or orders to suspend business operations, which would materially and adversely affect our business, financial condition, and results of operations.

***Integrating and growing the Skyladder business may require substantial capital investments, and we may not have adequate financial resources to support both our existing business and the newly acquired operations.***

Integrating and growing the Skyladder business may require substantial capital investments in technology infrastructure, equipment, personnel, sales and marketing, and working capital. Given our history of operating losses and our independent auditors' expression of substantial doubt about our ability to continue as a going concern, we may not have adequate financial resources to support both our existing business and the newly acquired Skyladder operations. This could force us to curtail growth plans, seek additional financing on unfavorable terms, or divest assets.

***The issuance of ordinary shares as consideration for the Skyladder acquisition will result in significant dilution to our existing shareholders.***

 

The issuance of 7,882,921 ordinary shares as consideration for the acquisition will result in significant dilution to our existing shareholders. If the market price of our ordinary shares declines following the acquisition, the value delivered to the sellers will be lower than anticipated, potentially resulting in disputes or claims. Conversely, if our share price increases substantially, existing shareholders may perceive that they have paid too much for the acquisition.

***We may be unable to generate anticipated returns from the Skyladder acquisition, which could materially and adversely affect our operating results.***

 

The acquisition is premised on our belief that integrating Skyladder's elevator lifecycle service capabilities with our existing resource advantages will create substantial value and stable revenue returns for shareholders. However, market conditions in the elevator services industry, competitive pressures, technological changes, or execution failures could prevent us from realizing these anticipated benefits. If we fail to generate sufficient revenues to offset the acquisition costs and ongoing operational expenses of the Skyladder business, our operating results will be materially and adversely affected, and we may not gain anticipated economic returns on this investment.

***The Chinese elevator services market is highly competitive, and we may not be able to compete effectively, which could result in loss of market share, pricing pressure, and lower profitability than anticipated.***

 

The Chinese elevator services market is highly competitive, with numerous established domestic and international competitors. These competitors may have greater financial resources, more extensive service networks, stronger brand recognition, more advanced technology, or better relationships with equipment manufacturers and building owners. We may not be able to compete effectively in this market, which could result in loss of market share, pricing pressure, and lower profitability than anticipated.

***Our business has evolved significantly since 2013, and we 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 sold most of 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.

In 2021, we enhanced our presence in digital advertising and new media sectors by acquiring Taoping New Media Co., Ltd. In 2023 and 2024, as an application expansion of our cloud-based platform, we started to explore new business opportunities in AI-related products and solutions and smart agriculture business. In April 2024, we established a subsidiary Taoping Industrial (Yunnan) Co., Ltd. to explore smart agricultural related businesses in Yunnan Province. In February 2025, we entered into a strategic cooperation agreement with the Government of Mengla County, Yunnan Province, which outlines plans for extensive collaboration in the modern agricultural industry, with the objective of boosting regional economic growth. The agreement was terminated soon after as a result of our stepping out of the agricultural business in 2025.

Since 2013, our business continues to evolve with new initiatives, which makes it difficult to evaluate our current business and future prospects and may increase the risk of your investment. In 2025, 2024 and 2023, we generated approximately $30.8 million, $36.6 million and $38.4 million in revenue, respectively. 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.

***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 $0.7 million in 2023, $1.8 million in 2024 and $10.1 million in 2025. However, the Company plans to 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 Russia-Ukraine conflict, the Hamas-Israel conflict, the tensions involving Iran 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 and fluctuations in the volume of purchase by our customers as a result of changes in their operations. 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.

***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 in 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 the 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.

***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 $1.7 million, $2.4 million and $3.0 million for the years ended December 31, 2025, 2024 and 2023, 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.

***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, patent 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 years ended December 31, 2025, 2024 and 2023, approximately 18%, 22% and 30%, 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. 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.

***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.***

Other than the elevator safety liability insurance we purchased for the elevators we install and maintain, 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.

***Health concerns arising from outbreaks of viruses or other illnesses could have a material adverse impact on our business, operating results and financial condition.***

Our business could be materially and adversely affected by the outbreak of a widespread health epidemic, such as COVID-19, avian flu or African swine flu. The COVID-19 outbreak had 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 had 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 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 health concerns arising from outbreaks of viruses or other illnesses on the global market, we cannot assure you that we will be able to maintain the growth rate we have experienced or projected.

***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 Co-Chief Executive Officer, Bin Ma, Co-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, 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 2025 to minimize deficiencies identified in Item 15 of this report. Although we have made improvements to overcome such concern, we can provide no assurance that these deficiencies will be entirely remediated in a timely manner. As a result, investors and others may lose confidence in the reliability of our financial statements.

***<u>Risks Relating to Doing Business in China</u>***

***The PRC government exerts substantial influence over the manner in which we conduct our business activities. Its oversight over our business could result in a material 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.***

Our operations are primarily 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 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. For instance, our financial condition and results of operations could be materially affected by certain administrative requirements 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 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 influence on our operations, and as a result, 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.

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:

&nbsp;&nbsp;&nbsp;&nbsp;(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). 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, (iv) a voluntary or mandatory delisting, and (v) material change of its principal business operations to the extent that it ceases to be subject to the filing requirements of the Trial Measures.

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.

***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 our securities.***

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, former Chair of the SEC, issued a Statement on Investor Protection Related to Recent Developments in China, pursuant to which former 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.

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, former President Biden issued an executive order 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. On October 28, 2024, the U.S. Department of Treasury issued a final rule to implement the executive order (the "Outbound Investment Rule"), providing details on technical specifications and other aspects of the operative regulations, which came into effect on January 2, 2025. The Outbound Investment Rule imposes investment prohibitions and notification requirements on U.S. persons for a wide range of investments in entities associated with "countries of concern," currently only China, that are engaged in activities relating to (i) semiconductors and microelectronics, (ii) quantum information technologies, and (iii) artificial intelligence systems. Even though U.S. persons' acquisitions of publicly traded securities (such as our ordinary shares) will be exempted from the scope of covered transactions under the Outbound Investment Rule, the rule could still limit our ability to raise capital or contingent equity capital from U.S. investors given that the relevant laws, regulations, and policies continue to evolve and we cannot rule out the possibility of being deemed a Covered Foreign Person as defined under the Outbound Investment Rule in the future due to different views taken by the U.S. Department of Treasury, potential amendments to the Outbound Investment Rule or the introduction of additional regulations. Therefore, there are substantial uncertainties on whether the Outbound Investment Rule will have a material adverse impact on our business, results of operations, financial condition, and prospects.

On the other hand, the United States and China have imposed new or higher tariffs on goods imported from each other, including tariff increases announced by both countries since early 2025. As of the date of this annual report, there is still a high degree of uncertainty surrounding U.S. tariff policy, how it will be implemented, and how other countries will react to it. It also remains uncertain whether increased tariffs and trade war between United States and China will create further disruptions and uncertainties to the international trade and lead to a downturn to the global economy. If the United States or China continues imposing such tariffs, or if additional tariffs or trade restrictions are implemented by the United States or by China, the resulting trade barriers could have a significant adverse impact on our business. The adoption and expansion of trade restrictions and tariffs, quotas and embargoes, sanctions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies, has the potential to adversely impact costs, our suppliers and the world economy in general, which in turn could have a material adverse effect on our business, results of operations and financial condition.

We cannot foresee whether and how developments in similar policy actions or any other policy actions taken by the U.S. or Chinese government will impact our business and financial performance. In addition, changes in political, business, economic and trade relations between the U.S. and China, including the potential for heightened tensions under the current U.S. administration, may result in a negative impact on our business, results of operations and financial condition.

***If the regulations related to the business operations of our PRC subsidiaries change significantly in the future and our PRC subsidiaries are not able to substantially comply with such regulations, the business operations of our PRC subsidiaries may be materially and adversely affected, and the value of our ordinary shares may significantly decrease.***

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 and 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, because these laws, rules and regulations, especially those relating to the internet, are relatively new, the relevant interpretation and guidance are still evolving. We may be exposed to compliance costs and regulatory risks if we fail to fully and accurately understand the laws and regulations under the PRC legal system and our business operation may be adversely affected.

***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, as well as additional laws, regulations and guidelines that the Chinese government promulgates 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. On September 24, 2024, the State Council issued the Regulations on the Administration of Network Data Security, which took effect on January 1, 2025, prescribing that the network data processors processing personal information of over 10 million individuals shall fulfill certain requirements for processing important data and require network data processors to take certain precautionary measures.

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 December 28, 2021, the CAC and certain other PRC regulatory authorities revised the Cybersecurity Review Measures (2021) (the "revised Cybersecurity Review Measures"), 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 September 24, 2024, the State Council released the Regulations on Network Data Security, which became effective on January 1, 2025. The 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 Regulations on Network Data Security follow the principle that the state will regulate based on a data classification and multi-level protection scheme. 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 service provider under the Regulations on Network Data Security, because our PRC subsidiary Biznest is operating a smart cloud platform that publishes commercial ads of our advertiser clients. Online platform service provider under the Regulations on Network Data Security will be required, among other things, to disclose terms and privacy policies and the algorithms they use.

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 are 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.

However, any failure to comply with applicable data security regulations in the future could result in regulatory enforcement actions against us, and misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against us by governmental authorities or other authorities, damage to our reputation and credibility and could have a negative impact on revenues and profits.

***PRC laws and regulations establish certain 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.

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.

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.

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 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 the 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 Special Administrative Measures (Negative List) for Foreign Investment Access, or the Negative List, as amended, 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.

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 are 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.

***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 subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries' 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 examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment registration, under SAFE Circular 37 since 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.

***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.

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.

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.

***<u>Risks Relating to Our Securities</u>***

***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." Historically, we have received multiple notifications from Nasdaq Listing Qualifications 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 (the "Minimum Bid Price Requirements"). Most recently, on June 21, 2024, we received a notice from the Nasdaq Listing Qualifications, announced in a report on Form 6-K with the SEC on June 24, 2024, that we were not in compliance with the Minimum Bid Price Requirements for continued listing on the Nasdaq. 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 Requirements. The notification letter provided that the Company had 180 calendar days, or until December 18, 2024, to regain compliance. On December 19, 2024, we received a second notice from the Nasdaq Listing Qualifications, in which Nasdaq granted us an additional 180 days, or until June 16, 2025, to regain compliance. On May 29, 2025, we implemented a one-for-thirty reverse stock split of our issued and outstanding ordinary shares, to increase the per share trading price to satisfy the $1.00 Minimum Bid Price Requirements, and regained compliance with the requirements on June 13, 2025.

However, there is no assurance that we will be able to continue to maintain our compliance with Nasdaq continued listing requirements. If we fail to do 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.

***Our dual class share structure concentrates voting power in holders of Class A Shares, which may limit the ability of holders of ordinary shares to influence corporate decisions and may adversely affect the trading price of our ordinary shares.***

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On August 18, 2025, our shareholders approved the creation of a new class—class A shares, with no par value each (the "Class A Shares"), with each Class A Share entitled to one hundred (100) votes on all matters subject to vote at general meetings of the Company, compared to one (1) vote per ordinary share. Following this approval, Mr. Jianghuai Lin, our Co-Chief Executive Officer and Chairman of the board of directors of the Company (the "Board of Directors"), received 50,418 Class A Shares through the redemption and reissuance of his previously held ordinary shares. As a result, Mr. Lin currently beneficially owns more than 35% of the aggregate voting power of our total issued and outstanding shares.

This concentration of voting control limits the ability of holders of ordinary shares to influence the outcome of important corporate matters. Holders of Class A Shares have considerable influence over matters such as decisions regarding mergers and consolidations, election of directors, amendments to our memorandum and articles of association, and other significant corporate actions. The holders of Class A Shares may vote in a manner with which you disagree or which may be adverse to your interests.

Our dual-class share structure may also adversely affect the trading market for our ordinary shares. Certain index providers, including S&P Dow Jones and FTSE Russell, have announced restrictions on companies with dual-class or multi-class share structures in their indices. These restrictions exclude companies with multiple classes of shares from being added to indices such as the Russell 2000, the S&P 500, the S&P MidCap 400, and the S&P SmallCap 600. As a result of our dual-class structure, we are ineligible for inclusion in these indices, and mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track these indices will not invest in our ordinary shares. Exclusion from indices could make our ordinary shares less attractive to investors and, as a result, the market price of our ordinary shares could be adversely affected.

Additionally, our amended and restated memorandum and articles of association do not prohibit us from issuing additional Class A Shares in the future. Class A Shares may only be issued to eligible recipients, which include incumbent directors, executive officers, and members of the Company, or companies wholly owned by such persons. Any future issuances of Class A Shares, and the conversion of Class A Shares into ordinary shares, may be dilutive to holders of ordinary shares.

***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.

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***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 on 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 cover 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.

***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 of Directors deems relevant.

***The Company's outstanding voting securities are concentrated in a few shareholders.***

As of April 27, 2026, our officers and directors beneficially own or control, directly or indirectly, approximately 38.94% of the aggregate voting power of our outstanding and issued shares. As a result, though we are currently not aware of any voting agreement between them, they possess significant influence over our company if they voted together with other shareholders in the same manner. 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 ordinary shares.

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. 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.

On the other hand, we would lose our foreign private issuer status if, for example, more than 50% of our voting securities are directly or indirectly held by residents of the United States and we fail to meet additional requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors, and principal shareholders will become subject to the short-swing profit recovery provisions of Section 16 of the Exchange Act. As a U.S.-listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting, and other expenses that we will not incur as a foreign private issuer in order to maintain a listing on a U.S. securities exchange.

***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.***

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.

Specifically, the Company has followed or intends to follow the provisions of the laws of the BVI and its memorandum and articles of association in lieu of certain corporate governance requirements under the Nasdaq listing rules with respect to the following matters:

● Rule 5635(a), pursuant to which shareholder approval is required in certain circumstances prior to an issuance of securities in connection with the acquisition of the stock or assets of another company.

● Rule 5635(b), pursuant to which shareholder approval is required prior to the issuance of securities when the issuance or potential issuance will result in a change of control of the company.

● Rule 5635(c), pursuant to which shareholder approval is required for the establishment of or any material amendments to our equity compensation arrangements for officers, directors, employees or consultants.

● Rule 5635(d), pursuant to which shareholder approval is required prior to the issuance of securities in connection with a transaction other than a public offering where such transaction involves the issuance of securities representing 20% or more of our shares or voting power outstanding before the issuance at a price lower than the "Minimum Price."

● Rule 5620(a), pursuant to which holding annual shareholders' meetings is required.

Although we may rely on certain home country corporate governance practices, we must comply with Nasdaq's notification of non-compliance requirement (Nasdaq Rule 5625). Further, we must have a written charter for our audit committee specifying the authority and responsibilities required by Exchange Act Rule 10A-3 and requiring that the audit committee consist of members who meet the independence requirements of Nasdaq Rule 5605(c)(2)(A)(ii).

If we rely on home country practice exemptions, 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.

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.

***<u>General Risk Factors</u>***

***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.

***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 (the "FDIC"); 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.

Although the U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of government securities with interest rates below current market interest rates, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediately liquidity may exceed the capacity of such program. Additionally, there is no guarantee that the U.S. Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.

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.

***Ongoing instability in the Middle East, including conflicts involving Iran, and other geopolitical tensions could materially and adversely affect our business, results of operations, and financial condition.***

Ongoing geopolitical instability and armed conflicts in various regions, including the Middle East, pose significant risks to global economic conditions and could materially impact our business. The continuing conflicts in the region, including tensions involving Iran, attacks on commercial shipping in the Red Sea, and broader regional instability, have contributed to disruptions in global supply chains, increased energy prices, heightened inflation, and general economic uncertainty. Such macro-economic deterioration could reduce demand for our products and services, delay or cancel customer orders, impair our ability to collect receivables, and negatively impact our revenue and profitability. Higher energy costs resulting from Middle East instability can also increase our operational expenses and reduce our profitability, while geopolitical instability typically leads to increased volatility in global financial markets, which can negatively impact investor sentiment, reduce our share price, and impair our ability to raise capital on favorable terms. Additionally, geopolitical instability can lead to significant fluctuations in currency exchange rates, and since substantially all of our revenues and costs are denominated in RMB while we report in U.S. dollars, adverse movements in exchange rates resulting from geopolitical events could materially affect the U.S. dollar value of our financial results.

Beyond the Middle East, we face risks from other geopolitical tensions, including the ongoing Russia-Ukraine conflict, tensions in U.S.-China relations, potential trade wars, and sanctions regimes. These broader geopolitical factors can compound the risks described above and create additional uncertainty regarding the global economic outlook, international trade policies, and cross-border investment flows. The extent and duration of current and future geopolitical conflicts are highly unpredictable, and their ultimate impact on our business cannot be fully assessed. Any severe or prolonged geopolitical instability, particularly if it leads to broader regional conflicts, could have material adverse effects on global economic conditions, financial markets, and our business, results of operations, financial condition, and the value of our ordinary shares.

**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<sup>st</sup> Floor, Building 3, Tianjin Science and Technology Plaza, Keyan West Road, Nankai District, Tianjin 300192 China. Our telephone number is 86-22-87089858. 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.

***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.

On May 29, 2025, Taoping completed a share combination of the Company's ordinary shares at a ratio of one-for-thirty, which decreased its outstanding ordinary shares to approximately 0.89 million 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.

On August 18, 2025, at a special meeting of shareholders, the Company's shareholders approved the adoption of Amended and Restated Memorandum and Articles of Association, which, among other things, created two new classes of shares: Class A shares and preferred shares, and increased the Company's authorized share capital from 100,000,000 ordinary shares to 5,060,000,000 shares divided into (i) 5,000,000,000 ordinary shares, (ii) 50,000,000 Class A Shares, and (iii) 10,000,000 preferred shares (the "Preferred Shares"), each with no par value. Each Class A Share entitles its holder to 100 votes on all matters subject to a vote at general meetings. In connection with the foregoing, on September 1, 2025, 50,418 ordinary shares held by Mr. Jianghuai Lin were redeemed and reissued as 50,418 Class A Shares. The Amended and Restated Memorandum and Articles of Association also effected certain corporate governance changes, including increasing the required vote for shareholders to require a meeting of members from 10% to one-third of all votes and increasing the required vote at board meetings from a majority to a two-thirds majority.

***Corporate Structure***

The following diagram illustrates our corporate structure as of the date of this report.

![](form20-f_001.jpg)

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 <u>http://www.taop.com</u>. 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, 2025, our total capital expenditures and divestitures were $1.3 million and $0 million, respectively. For the year ended December 31, 2024, our total capital expenditures and divestitures were $1.1 million and $0 million, respectively. For the year ended December 31, 2023, our total capital expenditures and divestitures were $1.2 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 Tianjin, China. As of December 31, 2025, we had approximately 118 full-time employees.

We are a provider of cloud-based technologies for Smart City IoT platforms, elevator products and related services, digital advertising delivery, and other internet-based information systems in China. 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.

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 $10.1 million, $1.8 million, and $0.7 million respectively in 2025, 2024, and 2023.

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.

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.

In January 2022, the Company completed the acquisition of 100% equity interest of Zhenjiang Taoping IoT Tech. Co., Ltd ("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. ("TEPH") 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. ("TPGXT") to expand its wastewater treatment business in Guangxi Province.

In April 2024, the Company established a subsidiary Taoping Industrial (Yunnan) Co., Ltd. to explore smart agricultural related businesses in Yunnan Province.

In June 2024, ZJIOT was dissolved as a result of the Company's business realignment.

In January 2025, Taoping Digital Tech. (Jiangsu) Co., Ltd. ("TDTJS") was dissolved as a result of the Company's business realignment.

In April 2025, TEPH was dissolved as a result of the Company's business realignment.

In June 2025, TPGXT was dissolved as a result of the Company's business realignment.

In September 2025, through its wholly owned subsidiary Taoping Holdings Limited, the Company entered into a share purchase agreement with Skyladder Holding Limited, as amended by a supplemental agreement dated November 25, 2025, to acquire 100% of Skyladder Group, a Hong Kong company, for consideration of RMB 152 million (approximately US$21.36 million), payable in an aggregate of 7,882,921 ordinary shares of the Company. Such consideration shares are subject to transfer restrictions, released in tranches upon achievement of audited revenue and net profit targets for 2025–2029. The acquisition was closed on November 26, 2025. Skyladder Group is a provider of elevator products and related physical and cloud-based services. It provides services throughout the entire elevator lifecycle including sales, installation, repair, maintenance, renovation, and upgrades. Skyladder Group operates through subsidiaries in China.

We report financial and operational information in the following three segments:

&nbsp;&nbsp;&nbsp;&nbsp;**(**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 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.

&nbsp;&nbsp;&nbsp;&nbsp;(2) 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. Nevertheless, due
 to the difference business nature from the other segments, the Chief Operating Decision Maker
 considers it is a separate operating segment of which the performance is separately assessed
 and financial information for this segment is separately disclosed for financial reporting
 purpose.

(3) Smart
 Elevator (SE) segment - Following the acquisition of Skyladder Group in November 2025, the Company added the Smart Elevator (SE)
 segment. As a provider of elevator services, the Company provides services throughout the entire elevator lifecycle, including sales,
 installation, repair, cloud-based maintenance, renovation, and upgrades. The segment serves a diverse user base, including governments,
 businesses, and households. In this segment,
 the Company generates revenues from elevator sales and installation contracts, as well as maintenance, repair, and other service
 agreements. The SE segment diversifies the Company's cloud-based product offerings and expands the Company's presence
 in the smart building and urban infrastructure market.

***Industry Overview***

*<u>General</u>*

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. 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 the 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.

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.

*<u>Out-of-Home Digital Advertising Market in China</u>*

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 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.

*<u>Market Trends</u>*

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, the 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.

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 into 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.

Elevator Service Market in China

China's elevator modernization market represents a substantial and rapidly expanding opportunity. According to official data from the State Administration for Market Regulation, China currently has approximately 12 million elevators in operation, with nearly 10% having been in service for more than 15 years. The large-scale renewal of aging elevators has become a national priority, supported by the July 2024 and January 2025 State-issued policy, "Several Measures on Strengthening Support for Large-scale Equipment Renewal and Consumer Goods Trade-in."

***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.

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.

Backed by favorable government policy and through the acquisition of SGL, Taoping aims to apply technology-driven, data- and cloud-based business model in the elevator field. Moving beyond the traditional single-equipment upgrade approach, Taoping leverages core technologies such as deep IoT perception and AI-powered autonomous decision-making to collect real-time elevator operational data through intelligent sensors. By integrating its proprietary platforms, the Company delivers a comprehensive, full life-cycle smart service system that enhances safety, efficiency, and operational intelligence, creating a clear and differentiated competitive advantage.

*<u>Our Technology Platform</u>*

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.

*<u>Our Resource Exchange and Sharing</u>*

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.

*<u>Our Big Data Services</u>*

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.

*<u>Our Industry-Specific Ecosystems</u>*

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 and SE segments, we provide a one-year warranty for our elevators, digital displays and high-end data servers. The actual warranty service is carried out by our suppliers or 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 suppliers and 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.

 ****

***Customers***

In fiscal year 2025, no single customer accounted for greater than 10% of total revenues in 2025. In fiscal year 2024, no single customer accounted for greater than 10% of total revenues in 2024. In fiscal year 2023, one customer accounted for greater than 10% of total revenues in 2023. The following tables provide revenue by our major customers of continuing operations for the years ended December 31, 2025, 2024, and 2023.

**Year 2025**

---

| | | |
|:---|:---|:---|
|  | **Revenues**<br>**(Thousands)** | **% of**<br>**Revenues** |
| Sichuan Yunkong Transportation Technology Co., Ltd | 1235 | 4% |
| Shenzhen Tianxin Langming Technology Co., Ltd | 1101 | 4% |
| Wuhan Nanbei Xingyou Network Technology Co., Ltd | 1093 | 4% |
| Shenzhen Yueshi Technology Co., Ltd | 1048 | 3% |
| Wuhan Jinyi Youshi Network Technology Co., Ltd | 972 | 3% |
| **TOTAL** | $**5449** | **18%** |

---

**Year 2024**

---

| | | |
|:---|:---|:---|
|  | **Revenues**<br>**(Thousands)** | **% of**<br>**Revenues** |
| Yayu Technology (Jiangsu) Co., Ltd | 2618 | 7% |
| Guangzhou Qiaocheng Information Technology Co., Ltd | 1720 | 5% |
| Guangxi Wancang Technology Group Co., Ltd | 1383 | 4% |
| Shenzhen Chuangzhi Tiancheng Technology Co., Ltd | 1335 | 4% |
| Shenzhen Beidian Zhengguang Technology Co., Ltd | 867 | 2% |
| **TOTAL** | $**7923** | **22%** |

---

**Year 2023**

---

| | | |
|:---|:---|:---|
|  | **Revenues**<br>**(Thousands)** | **% of**<br>**Revenues** |
| Fujian Haixia Xingyun Information Technology Co., Ltd | $6020 | 16% |
| Shenzhen Chuangzhi Tiancheng Technology Co., Ltd | 1714 | 4% |
| Fuzhou Shenpeng Technology Co., Ltd | 1487 | 4% |
| Guangzhou Shengzhuo Intelligent Technology Co., Ltd | 1234 | 3% |
| Shenzhen Dashan Intelligent Technology Co., Ltd | 1113 | 3% |
| **TOTAL** | $**11568** | **30%** |

---

 ****

***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.

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.

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 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 and 2024, as an application expansion of its cloud-based platform, the Company started to explore new business opportunities in AI-related products and solutions.

In November 2025, the Company expanded into the smart elevator services and cloud-based smart supervision sector, through its acquisition of SGL. SGL's platform spans the full elevator lifecycle, encompassing sales, installation, repair, maintenance, renovation, and upgrades, and is enhanced by cloud-based supervision capabilities. Following this acquisition, the Company now has a direct presence in the rapidly evolving smart building infrastructure market.

***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, 2025, through our wholly-owned subsidiaries IST, TopCloud, Biznest, Bocom, ISIOT, TIYN, TJZY, TJWD, SNCT and SZSS, we had 196 registered and copyrighted software products, 502 registered trademarks and held 36 patents. We also own four domain names <u>(http://www.taop.com; http://www.taoping.cn; http://www.pubds.com; and http://www.helloyunti.com</u>).

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 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 the 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.

 ****

***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.

*<u>Permits and Certificates</u>*

Through our subsidiaries, we hold the following permits and certificates:

---

| | | |
|:---|:---|:---|
| **Name** | **Expiration Date** | **Company** |
| National High-tech Enterprise | Valid till December 25, 2027, subject to renewal every three years. | IST |
| National High-tech Enterprise | Valid till December 25, 2027, subject to renewal every three years. | Biznest |
| License of Special Equipment - Elevator Installation (Including Repair) | Valid till December 4, 2026, subject to renewal every four years. | TJWD |
| License of Special Equipment - Elevator Installation (Including Repair) | Valid till June 19, 2028, subject to renewal every four years. | TJZY |
| License of Special Equipment - Installation (Including Repair) of Lifting Appliances | Valid till March 10, 2029, subject to renewal every four years. | TJZY |

---

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 (2024), or the Negative List, which was promulgated by the MOFCOM and the National Development and Reform Commission ("NDRC") on September 6, 2024, and took effect on November 1, 2024. 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.

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.

*<u>Amended Company Law</u>*

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.

*<u>Regulations on Mobile Internet Applications Information Services</u>*

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.

*<u>Regulations on Internet Information Security</u>*

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.

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.

*<u>Regulations Relating to Advertising Business</u>*

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;

● 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.

*<u>Regulations on Privacy Protection</u>*

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.

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.

*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.

*<u>Regulations Related to Intellectual Property</u>*

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, 2010 and 2020 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.

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.

*<u>Regulations Related to Employment</u>*

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 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.

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.

*<u>Regulations on Foreign Currency Exchange</u>*

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.

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.

*<u>Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents</u>*

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 subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries' ability to increase their registered capital or distribute profits."

 

*<u>Regulations on Stock Incentive Plans</u>*

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 equity incentive plans, 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 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."

*<u>Regulations on Dividend Distribution</u>*

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."

 

*<u>Dividend Withholding Tax</u>*

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.

*<u>Enterprise Income Tax</u>*

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."

 

*<u>Value-Added Tax</u>*

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. On December 25, 2024, the prevailing VAT regulations were enacted into the Value-Added Tax Law of the People's Republic of China, which came into effect on January 1, 2026.

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.

*<u>New Overseas Listing Rules issued by the Chinese Government</u>*

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.

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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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.

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 that 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.

*<u>Regulations Relating to Anti-Monopoly</u>*

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 May 6, 2024, the SAMR issued the Interim Provisions on Prohibition of Unfair Competition on the Internet, 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, the accounts receivable collection is very slow and we also need to prepare for upcoming busier seasons by making payments for inventory.

**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<sup>st</sup> Floor, Building 3, Tianjin Science and Technology Plaza, Keyan West Road, Nankai District, Tianjin 300192 China. This office facility consists of approximately 764.81 square meters and is leased from a non-related party by our subsidiary, Skyladder New Century (Tianjin) IoT Technology Co., Ltd., with a lease term from May 6, 2025 to December 31, 2027, and serves as the Company's headquarters in China. The rental is priced on a daily basis. The rental rate is RMB 2.5 per day per square meter, and the property management fee is RMB 0.8 per day per square meter. Our office facility in Shenzhen China, located at 21st Floor, Everbright Bank Building, Zhuzilin, Futian District, Shenzhen, Guangdong, 518040, China, serves as our southern headquarters and innovation hub, of which IST currently has property use rights. The Shenzhen 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. The acquisition of SGL in November 2025 did not result in a material addition to our property, plant and equipment.

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, 2025, we had approximately 118 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.

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.

In March and April 2023, the Company entered into two long-term strategic cooperation 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.

In May 2024, the Company unveiled a new, upgraded AI-powered smart terminal. This cutting-edge platform integrates AI Generative Artificial Intelligence (AIGC) with Taoping's intelligent cloud platform technology and product capabilities, paving the way for intelligent, AI-driven smart terminals.

In December 2024, the Company signed a non-binding letter of intent to acquire 100% of the equity of Shenzhen Yunti Internet of Things Co., Ltd. ("Yunti"), a Chinese company based in Shenzhen, Guangdong Province. Taoping's acquisition of Yunti, if consummated, is expected to open new revenue growth opportunities for the Company, while further consolidating and expanding the Company's market share in the lucrative elevator equipment and service industry. Under the letter of intent, Yunti's shareholders agree to transfer their ownership of Yunti to the Company in exchange for newly issued ordinary shares of the Company. The final valuation and timeline of the acquisition will be determined based on a mutually agreed upon independent third party's comprehensive evaluation of Yunti. The parties expect to close and integrate the acquisition over the next 12 months.

 ****

***Recent Developments***

In February 2025, the Company entered into a non-binding strategic cooperation framework agreement with the Government of Mengla County, Yunnan Province. The agreement outlines plans for extensive collaboration in the modern agricultural industry, with the objective of boosting regional economic growth. The agreement was terminated soon after as a result of the Company's stepping out of the agricultural business in 2025.

In September 2025, through its wholly owned subsidiary Taoping Holdings Limited, the Company entered into a share purchase agreement with Skyladder Holding Limited, as amended by a supplemental agreement dated November 25, 2025, to acquire 100% of Skyladder Group Limited, or Skyladder Group, a Hong Kong company, for consideration of RMB 152 million (approximately US$21.36 million), payable in an aggregate of 7,882,921 ordinary shares of the Company. Such consideration shares are subject to transfer restrictions, released in tranches upon achievement of audited revenue and net profit targets for 2025–2029. The acquisition was closed on November 26, 2025. Skyladder Group is a provider of elevator products and related physical and cloud-based services. It provides services throughout the entire elevator lifecycle including sales, installation, repair, maintenance, renovation, and upgrades. Skyladder Group operates through subsidiaries in China.

***Principal Factors Affecting Our Financial Performance***

*<u>Demand for Software Products and Services, Advertising, and High-End Server</u>*

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. The COVID-19 pandemic has changed the 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 to take on new customers in the public sector. As a result, the TIT business has diminished throughout the years and gradually being phased out.

*<u>Taxation</u>*

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 was 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 a software enterprises and enjoys EIT at the tax rate of 12.5%. TopCloud, ISIOT, Bocom and TNM 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, allocate 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:

&nbsp;&nbsp;&nbsp;&nbsp;(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 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.

&nbsp;&nbsp;&nbsp;&nbsp;(2) 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. Nevertheless, due to the difference business nature from the other segments, the Chief Operating Decision Maker
 considers it is a separate operating segment of which the performance is separately assessed and financial information for this segment
 is separately disclosed for financial reporting purpose.

(3) Smart
 Elevator (SE) segment - Following the acquisition of Skyladder Group in November 2025, the Company added the Smart Elevator (SE)
 segment. As a provider of elevator services, the Company provides services throughout the entire elevator lifecycle, including sales,
 installation, repair, cloud-based maintenance, renovation, and upgrades. The segment serves a diverse user base, including governments,
 businesses, and households. In this segment,
 the Company generates revenues from elevator sales and installation contracts, as well as maintenance, repair, and other service
 agreements. The SE segment diversifies the Company's cloud-based product offerings and expands the Company's presence
 in the smart building and urban infrastructure market.

For more information regarding our operating segments, see Note 20 (Consolidated Segment Data) to our audited consolidated financial statements included elsewhere in this report.

***Results of Operations***

 ****

*<u>Comparison of Years Ended December 31, 2025 and 2024</u>*

The following table sets forth key components of our results of operations for fiscal years ended December 31, 2025 and 2024, both in dollars and as a percentage of our revenue.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2025** | **December 31, 2024** | **December 31, 2024** |
|  | **Amount** | **% of Revenue** | **Amount** | **% of Revenue** |
| Revenue | $30816535 | 100.00% | $36672512 | 100.00% |
| Costs of revenue | 27447829 | 89.07% | 28902062 | 78.81% |
| **Gross profit** | 3368706 | 10.93% | 7770450 | 21.19% |
| Administrative expenses | (9831502) | (31.90)% | (6209596) | (16.93)% |
| Research and development expenses | (1712152) | (5.56)% | (2424127) | (6.61)% |
| Selling expenses | (1058728) | (3.44)% | (745289) | (2.03)% |
| **(Loss) from operations** | (9233676) | (29.96)% | (1608562) | (4.39)% |
| Subsidy income | 32634 | 0.11% | 58540 | 0.16% |
| Other income (loss), net | 159950 | 0.52% | 203081 | 0.55% |
| Interest income | 1356 | 0.00% | 2241 | 0.01% |
| Interest expense | (978900) | (3.18)% | (460544) | (1.26)% |
| **(Loss) before income taxes** | (10018636) | (32.51)% | (1805244) | (4.92)% |
| Income tax (expense) | (43087) | (0.14)% | (14143) | (0.04)% |
| **Net (loss)** | (10061723) | (32.65)% | (1819387) | (4.96)% |
| Less: Net loss attributable to non- controlling interest | - | - | - | - |
| **Net (loss) attributable to Company** | $(10061723) | (32.65)% | $(1819387) | (4.96)% |

---

*Revenue.* We generate revenues from advertising, selling hardware, software maintenance, other technology-related services, and elevator projects and services to customers. For the year ended December 31, 2025, our total revenue was $30.8 million, of which approximately $3,800 was from related parties, compared to total revenue of $36.7 million for the year ended December 31, 2024, a decrease of $5.9 million, or 16.0%. The decrease was primarily due to a decrease of $6.0 million in software revenue, $1.6 million in products revenue, offset by an increase of $1.8 million in project revenue. The decrease was mainly due to the declining customer demand on our traditional software and products. In addition to the new elevator business acquired in November 2025, the Company will continue to explore more product offerings of enhanced integration of popular cloud-based and AI components into its current products and solutions.

The following table shows our revenue, percentage of revenue, cost of revenue and gross margin, by revenue categories:

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** |
|  |<br>**Revenue** | **% of**<br>**Revenue** | **Cost of**<br>**Revenue** | **Gross**<br>**Margin** |<br>**Revenue** | **% of**<br>**Revenue** | **Cost of**<br>**Revenue** | **Gross**<br>**Margin** |
| Products | $23056364 | 74.82% | 21073537 | 8.60% | $24628580 | 67.16% | 22148743 | 10.07% |
| Software | 1413898 | 4.59% | 645600 | 54.34% | 7446966 | 20.31% | 2430562 | 67.36% |
| Advertising | 4198309 | 13.62% | 4168477 | 0.71% | 4290173 | 11.70% | 4307542 | (0.40)% |
| Project | 1778336 | 5.77% | 1520046 | 14.52% |  |  |  |  |
| MRO | 67440 | 0.22% | 31551 | 53.22% |  |  |  |  |
| Service | 55129 | 0.18% | 3337 | 93.95% |  |  |  |  |
| Others | 247059 | 0.80% | 5281 | 97.86% | 306793 | 0.83% | 15215 | 95.04% |
| Total | $30816535 | 100.00% | 27447829 | 10.93% | $36672512 | 100.00% | 28902062 | 21.19% |

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A breakdown of revenue, percentage of revenue, cost of revenue and gross margin by segments is as follows:

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** |
|  |<br>**Revenue** | **% of**<br>**Revenue** | **Cost of**<br>**Revenue** | **Gross**<br>**Margin** |<br>**Revenue** | **% of**<br>**Revenue** | **Cost of**<br>**Revenue** | **Gross**<br>**Margin** |
| TIT Segment | $17730 | 0.06% | 15674 | 11.60% | $85145 | 0.23% | 73473 | 13.71% |
| CBT Segment | 28120328 | 91.25% | 25100852 | 10.74% | 36587367 | 99.77% | 28828589 | 21.21% |
| SE Segment | 2678477 | 8.69% | 2331303 | 12.96% | - | - | - | - |
| Total | $30816535 | 100.00% | 27447829 | 10.93% | $36672512 | 100.00% | 28902062 | 21.19% |

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*Cost of revenue and gross profit*. As indicated in the tables above, our cost of revenue decreased by $1.5 million, which was mainly attributed to decreases in cost of software of $1.8 million and cost of products of $1.1 million, offset by an increase in cost of project of $1.5 million, or 5.0%, to $27.4 million, for the year ended December 31, 2025, from $28.9 million for the year ended December 31, 2024. As a percentage of revenue, our cost of revenue increased to 89.1% during the year ended December 31, 2025, from 78.8% during the year ended December 31, 2024. As a result, gross profit as a percentage of revenue decreased to 10.9% for the year ended December 31, 2025 from 21.2% for the year ended December 31, 2024. The decrease in the overall gross margin was mainly due to the declining competitiveness of our traditional software and product.

*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 increased by $3.6 million, or 58.3%, to $9.8 million for the year ended December 31, 2025, from $6.2 million for the year ended December 31, 2024. As a percentage of revenue, administrative expenses increased to 31.9% for 2025, from 16.9% for 2024. Such increase was primarily due to an increase of $1.4 million in allowance for credit losses, an increase of impairments expense for obsolete inventories of $0.2 million and losses on inventories due to customers' improbable fulfillment on the sales considerations of $0.9 million., an increase of $0.5 million in payroll and benefits primarily in stock-based compensation, and an increase of $0.3 million in professional service fee.

*Research and development expenses*. Our research and development expenses consist primarily of personnel-related expenses, as well as costs associated with new system and hardware development and enhancement. Our research and development expenses decreased by $0.7 million, or 29.4%, to $1.7 million for the year ended December 31, 2025, from $2.4 million for the year ended December 31, 2024. Such a decrease was primarily due to a decrease in depreciation of R&D-related hardware equipment and software of $0.5 million, and a decrease in payroll and benefits to R&D staff of $0.2 million. As a percentage of revenue, research and development expenses decreased to 5.6% for 2025, from 6.6% for 2024.

*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 increased by $0.3 million, or 42.1%, to $1.0 million for the year ended December 31, 2025, from $0.7 million for the year ended December 31, 2024. This increase was mainly due to the increase of the selling activities related costs as a result of exploring new business collaborations.

*Subsidy income*. Our subsidy income consists primarily of the compensation and benefits to governmental subsidies. Our subsidy income decreased by $0.03 million, or 44.3%, to $0.03 million for the year ended December 31, 2025, from $0.06 million for the year ended December 31, 2024.

*Other income (loss)*. Our other income was $0.2 million for the year ended December 31, 2025, compared to other income of $0.2 million for the year ended December 31, 2024. Other income in 2025 was mainly generated from the gains on recovery of previously written-off bad debt of other receivables of approximately $0.1 million and the gains on derivative financial liabilities of approximately $0.4 million, offset by the loss of payment for previously written-off liabilities of approximately $0.3 million.

*Interest expense*. Interest expense for the year ended December 31, 2025 was approximately $1.0 million, compared to interest expense of approximately $0.5 million in 2024.

*Income tax expense*. We recorded income tax expense of $43,087 for the year ended December 31, 2025, as compared to $14,143 of income tax expense in 2024.

*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 $10.1 million for the year ended December 31, 2025, as compared to net loss of $1.8 million for the year ended December 31, 2024.

*<u>Comparison of Years Ended December 31, 2024 and 2023</u>*

The following table sets forth key components of our results of operations for fiscal years ended December 31, 2024 and 2023, both in dollars and as a percentage of our revenue.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2023** | **December 31, 2023** |
|  | **Amount** | **% of Revenue** | **Amount** | **% of Revenue** |
| Revenue | $36672512 | 100.00% | $38635635 | 100.00% |
| Costs of revenue | 28902062 | 78.81% | 29783354 | 77.09% |
| **Gross profit** | 7770450 | 21.19% | 8852281 | 22.91% |
| Administrative expenses | (6209596) | (16.93)% | (5600578) | (14.50)% |
| Research and development expenses | (2424127) | (6.61)% | (2967043) | (7.68)% |
| Selling expenses | (745289) | (2.03)% | (482358) | (1.25)% |
| **(Loss) from operations** | (1608562) | (4.39)% | (197698) | (0.51)% |
| Subsidy income | 58540 | 0.16% | 292797 | 0.76% |
| (Loss) from equity method investment |  |  | (8031) | (0.02)% |
| Other income (loss), net | 203081 | 0.55% | 267292 | 0.69% |
| Interest income | 2241 | 0.01% | 2100 | 0.01% |
| Interest expense | (460544) | (1.26)% | (580630) | (1.50)% |
| **(Loss) before income taxes** | (1805244) | (4.92)% | (224170) | (0.58)% |
| Income tax (expense) | (14143) | (0.04)% | (7980) | (0.02)% |
| **Net loss from continuing operations** | (1819387) | (4.96)% | (232150) | (0.60)% |
| **Net loss from discontinued operations** | - | - | (465791) | (1.21)% |
| **Net (loss)** | (1819387) | (4.96)% | (697941) | (1.81)% |
| Less: Net loss attributable to non- controlling interest | - | - | - | - |
| **Net (loss) attributable to Company** | $(1819387) | (4.96)% | $(697941) | (1.81)% |

---

*Revenue.* We generate revenues from advertising, selling hardware, software, and other technology-related services to customers. For the year ended December 31, 2024, our total revenue was $36.7 million, of which approximately $0.1 million was from related parties, compared to total revenue of $38.6 million for the year ended December 31, 2023, a decrease of $1.9 million, or 5.1%. The decrease was primarily due to a decrease of $0.7 million in advertising revenue, and a decrease of $1.3 million in software revenue, driven by the Company's transition toward providing enhanced integration of popular AI components into its current products and solutions.

The following table shows our revenue, percentage of revenue, cost of revenue and gross margin, by revenue categories:

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** |
|  |<br>**Revenue** | **% of**<br>**Revenue** | **Cost of**<br>**Revenue** | **Gross**<br>**Margin** |<br>**Revenue** | **% of**<br>**Revenue** | **Cost of**<br>**Revenue** | **Gross**<br>**Margin** |
| Products | $24628580 | 67.16% | 22148743 | 10.07% | $24239113 | 62.74% | 21389832 | 11.75% |
| Software | 7446966 | 20.31% | 2430562 | 67.36% | 8798802 | 22.77% | 4145233 | 52.89% |
| Advertising | 4290173 | 11.70% | 4307542 | (0.40)% | 5001695 | 12.95% | 3945211 | 21.12% |
| Others | 306793 | 0.83% | 15215 | 95.04% | 596025 | 1.54% | 303078 | 49.15% |
| Total | $36672512 | 100.00% | 28902062 | 21.19% | $38635635 | 100.00% | 29783354 | 22.91% |

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A breakdown of revenue, percentage of revenue, cost of revenue and gross margin by segments is as follows:

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** |
|  |<br>**Revenue** | **% of**<br>**Revenue** | **Cost of**<br>**Revenue** | **Gross**<br>**Margin** |<br>**Revenue** | **% of**<br>**Revenue** | **Cost of**<br>**Revenue** | **Gross**<br>**Margin** |
| TIT Segment | $85145 | 0.23% | 73473 | 13.71% | $214980 | 0.56% | 183381 | 14.70% |
| CBT Segment | 36587367 | 99.77% | 28828589 | 21.21% | 38420655 | 99.44% | 29599973 | 22.96% |
| Total | $36672512 | 100.00% | 28902062 | 21.19% | $38635635 | 100.00% | 29783354 | 22.91% |

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*Cost of revenue and gross profit*. As indicated in the tables above, our cost of revenue decreased by $0.9 million, which was mainly attributed to decreases in cost of software of $1.7 million, offset by increase in cost of products of $0.8 million, or 3.0%, to $28.9 million, for the year ended December 31, 2024, from $29.8 million for the year ended December 31, 2023. As a percentage of revenue, our cost of revenue increased to 78.8% during the year ended December 31, 2024, from 77.1% during the year ended December 31, 2023. As a result, gross profit as a percentage of revenue decreased to 21.2% for the year ended December 31, 2024 from 22.9% for the year ended December 31, 2023. The decrease in the overall gross margin primarily resulted from significantly lower margin of advertising business, which was due to the slight decrease of advertising revenue and the fixed depreciation and amortization of related advertising costs.

*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 increased by $0.6 million, or 10.9%, to $6.2 million for the year ended December 31, 2024, from $5.6 million for the year ended December 31, 2023. As a percentage of revenue, administrative expenses increased to 16.9% for 2024, from 14.5% for 2023. Such increase was primarily due to an increase of $2.2 million in allowance for credit losses, offset by a decrease of $0.6 million in share-based compensation to certain directors, executive officers, and employees, a decrease of $0.3 million in depreciation expenses, a decrease of $0.2 million in professional service fee, a decrease of $0.2 million in office expenses, and a decrease of $0.2 million in foreign currency exchange loss.

*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 18.3%, to $2.4 million for the year ended December 31, 2024, from $3.0 million for the year ended December 31, 2023. Such a 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 6.6% for 2024, from 7.7% for 2023.

*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 increased by $0.2 million, or 54.5%, to $0.7 million for the year ended December 31, 2024, from $0.5 million for the year ended December 31, 2023. This increase was due to the redundancy compensation for the sales employees and the increase of the selling activities related costs.

*Subsidy income*. Our subsidy income consists primarily of the compensation and benefits to governmental subsidies. Our subsidy income decreased by $0.23 million, or 80.0%, to $0.06 million for the year ended December 31, 2024, from $0.29 million for the year ended December 31, 2023.

*Other income (loss)*. Our other income decreased by $0.1 million, or 24.0%, to $0.2 million for the year ended December 31, 2024, from $0.3 million for the year ended December 31, 2023. Other income in 2024 was mainly generated from the write-off of approximately $0.4 million of accounts payable, other payables and advances from customers, offset by approximately $0.1 million in loss on disposal of property, equipment and software, and approximately $0.1 million in loss on disposals/dissolutions of subsidiaries.

*Interest expense*. Interest expense for the year ended December 31, 2024 was approximately $0.5 million, compared to interest expense of approximately $0.6 million in 2023.

*Income tax expense*. We recorded income tax expense of $14,143 for the year ended December 31, 2024, as compared to $7,980 of income tax expense in 2022.

*Net loss (income) from discontinued operations.* Net loss from discontinued operations for the year ended December 31, 2024 was $nil, compared to a net loss of approximately $0.5 million in 2023.

*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 $1.8 million for the year ended December 31, 2024, as compared to net loss of $0.7 million for the year ended December 31, 2023.

***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, 2025, we had cash and cash equivalents of $2.1 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 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. The normal credit term for elevator project, maintenance, repair and operations supply and services is ranging from 3 month to 6 months. However, because of various factors related to the business cycle, the actual collection of outstanding accounts receivable may be beyond the normal credit terms.

The allowance for credit losses at December 31, 2025 and 2024, totaled approximately $8.7 million and $7.7 million, respectively, representing management's best estimate. The following table describes the movement for allowance for credit losses during the year ended December 31, 2025.

---

| | |
|:---|:---|
| Balance at December 31, 2024 | $7688491 |
| Increase in allowance for credit losses | 4931702 |
| Amounts recovered during the year | (19167) |
| Decrease from dissolution of a subsidiary | (228958) |
| Amounts written off as uncollectible | (4001169) |
| Foreign exchange difference | 287799 |
| Balance at December 31, 2025 | $8658698 |

---

The following table summarizes the key cash flow components from our consolidated statements of cash flows for the periods indicated.

**<u>Cash Flows</u>**

---

| | | | |
|:---|:---|:---|:---|
|  | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| **Net cash used in operating activities** | **(2551230)** | **(2384588)** | **(2326017)** |
| **Net cash used in investing activities** | **(1346754)** | **(1075839)** | **(1209024)** |
| **Net cash provided by financing activities** | **4417360** | **3748976** | **3839344** |
| Effects of exchange rate changes on cash and cash equivalents | 35853 | (12772) | (26688) |
| **Net increase in cash and cash equivalents** | **555229** | **275777** | **277615** |
| Cash and cash equivalents at beginning of the year | 1576632 | 1300855 | 1023240 |
| **Cash and cash equivalents at end of the year** | **2131861** | **1576632** | **1300855** |

---

***Operating Activities***

Net cash used in operating activities was $2.6 million for the year ended December 31, 2025, $2.4 million for the year ended December 31, 2024 and $2.3 million for the year ended December 31, 2023. Net cash used in operating activities in the fiscal year 2025 was primarily attributed to the decrease in advances from customers and the increase in accounts receivable. For the fiscal year 2024, net cash used in operating activities was primarily attributed to the increase in inventories and advances to suppliers. For the fiscal year 2023, net cash used in operating activities was primarily attributed to increase in advances to suppliers, increase in inventories and the decrease in accounts payable.

***Investing Activities***

Net cash used in investing activities was $1.3 million for the year ended December 31, 2025, $1.1 million for the year ended December 31, 2024 and $1.2 million for the year ended December 31, 2023. Net cash used in investing activities was $1.2 million for the year ended December 31, 2023. Net cash used in investing activities in 2025 was mainly due to the purchase of property and equipment of approximately 1.3 million. Net cash used in investing activities in 2024 was mainly due to the purchase of property and equipment of approximately $1.1 million. Net cash used in investing activities in 2023 was mainly due to purchase of property and equipment of approximately $1.2 million.

***Financing Activities***

Net cash provided by financing activities was $4.4 million for the year ended December 31, 2025, mainly attributable to proceeds from borrowings under short-term loans of $2.4 million, proceeds from issuance of ordinary shares of $3.0 million, and proceeds from issuance of convertible note of $1.2 million, offset by repayment of short-term loans of $1.8 million and repayment of long-term loans of $0.3 million. Net cash provided by financing activities was $3.7 million for the year ended December 31, 2024, mainly attributable to proceeds from borrowings under short-term loans of $1.8 million, proceeds from borrowings under long-term loans of $6.2 million, and proceeds from issuance of ordinary shares of $4.2 million, offset by repayment of short-term loans of $8.4 million. 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.

***Loan Facilities***

As of December 31, 2025 and 2024, our loan facilities were as follows:

*<u>Short-term bank loans</u>*

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Secured short-term loans | $2144025 | $1780948 |
| Unsecured short-term loans | 1542269 |  |
| Add: amounts due within one year under long-term loan contracts | 319031 | 305775 |
| Total short-term bank loans | $4005325 | $2086723 |

---

*<u>Long-term bank loans</u>*

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Secured long-term loans | $6052583 | $6106871 |
| Less: amounts due within one year under long-term loan contracts | (319031) | (305775) |
| Total long-term bank loans | $5733552 | $5801096 |

---

As of December 31, 2025, the Company had short-term and long-term bank loans in total of approximately $9.7 million, which mature on various dates from January 12, 2026 to October 31, 2027. 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 and Mr. Lin. These short-term borrowings bear fixed interest rates ranging from 3.00% to 3.85% per annum. These long-term borrowings bear floating interest rates at the 1-year China Loan Prime Rate ("LPR") plus 40 to 105 basis points, ranging from 3.40% to 4.15% per annum. The weighted average interest rates on short-term and long-term debts were approximately 3.78%, 4.11% and 4.15% for the year ended December 31, 2025, 2024, and 2023, respectively. The interest expenses were approximately $0.3 million, $0.3 million, and $0.4 million, respectively, for the same periods, respectively.

Management's Plans

As a result of business transformation, the Company's revenue for the year ended December 31, 2025 was decreased as compared to the year 2024. The Company incurred a net loss of $10.1 million for year ended December 31, 2025, compared to a net loss of $1.8 million for 2024. Cash and cash equivalents at December 31, 2025 was $2.1 million, compared to cash and cash equivalents of $1.6 million a year ago. As of December 31, 2025, the Company had a working capital surplus of approximately $12.3 million, significantly decrease from a working capital surplus of $16.0 million as of December 31, 2024. As of December 31, 2025, the Company had short term bank loans of $4.0 million due within one year while the cash and cash equivalents was $2.1 million.

The Company will continue to invest efforts on diversifying its existing cloud-based product and service lines through strategic collaborations and acquisitions. In November 2025, the Company completed the acquisition of Skyladder Group, a provider of elevator products and related physical and cloud-based services. Based on the government policies which advocate the modification and replacement of old elevators, confirmed orders/contracts were obtained by Skyladder Group in late 2025 and early 2026. From the confirmed orders/contracts on hand, it is expected that Skyladder Group could achieve significant improvement in revenue and net profit in year 2026, which would improve the operating cashflow of the Company.

The Company considers the market in China is competitive, in particular the escalated tariff environment and geopolitical disorders would raise significant uncertainty to the Company's businesses. If Skyladder Group cannot effectively execute the confirmed orders/contracts for achieving more positive operating cashflow, additional capital raise from issuing equity security or debt instrument or additional loan facility may have to be considered to support required cash flows. The Company's existing $4.0 million short-term bank loans and $5.7 million long-term bank loans, which were guaranteed and/or collateralized with the Company's office properties, provides important capital support for its operation.

 

*July 2023 Standby Equity Purchase Agreements*

On July 17, 2023, the Company entered into a private standby equity purchase agreement with an investor. Pursuant to the agreement, the Company has the right, but not the obligation, to sell to the investor up to $10,000,000 of its ordinary shares within 36 months from the date of the agreement. As of April 2026, the Company has raised a total of $6.9 million through this equity line offering with $3.1 million outstanding amount available.

*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 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 has been fully amortized through September 27, 2024. As of December 31, 2024, the remaining balance of the convertible note was nil. See "Notes to Consolidated Financial Statements- 16. Convertible Note Payable" on page F-37 for additional information.

*January 2025 Securities Purchase Agreement and Convertible Promissory Note*

On January 13, 2025, the Company entered into a securities purchase agreement with Streeterville Capital, LLC, a Utah limited liability company, pursuant to which the Company issued an unsecured convertible promissory note with a 12-month maturity (the "Convertible Note") to Investor. The Convertible Note has the original principal amount of $1,311,000 including the original issue discount of $96,000 and Investor's legal and other transaction costs of $15,000. As a result, the Company received net proceeds of $1,200,000. As of December 31, 2025, the remaining balance of the Convertible Note was nil. See "Notes to Consolidated Financial Statements- 16. Convertible Note Payable" on page F-37 for additional information.

*February 2025 Securities Purchase Agreement*

On February 26, 2025, the Company entered into a securities purchase agreement with certain investors (the "Investors"), pursuant to which the Company agreed to issue an aggregate of maximum 333,334 ordinary shares of no par value of the Company, at an offering price of $6.0 per share, to the Investors for a total purchase price of $2,000,000.

From above, the Company believes that it has the ability to raise needed capital to maintain its operations, repay short term loans and fund business growth, and is able to operate as a going concern.

However, the Company considered the recent fluctuation in Nasdaq market and can make no assurances that financing will be always available for the amounts we need, or on terms commercially acceptable to us, if at all. If one or all of the businesses and/or strategies do not go well 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.

***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.

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, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| PRC general reserve - restricted net assets | $10209086 | $10209086 |
| Consolidated net assets | $19540689 | $15869331 |
| Restricted net assets as percentage of consolidated net assets | 52.25% | 64.33% |

---

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, 2025 and 2024, the breakdown of our cash and cash equivalents (including restricted cash) was as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Cash located outside of the PRC | $113907 | $670452 |
| Cash held by other entities located in the PRC | 2017954 | 906180 |
|  | $2131861 | $1576632 |

---

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.

**E. Critical Accounting Policies and Accounting Estimates**

Below sets out the key accounting policies of the Group:

*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 six sources: (1) product sales, (2) software sales, (3) advertising, (4) elevator project, and (5) elevator Maintenance, Repair and Operations ("MRO") and (6) elevator services. 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), high-end data storage servers, supercomputing servers and graphic cards. Although manufacturing of the products has been outsourced to the Company's Original Equipment Manufacturer (OEM) suppliers or directly sourced from the 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

Revenue – software represents software upgrade and maintenance services provided for customers by the Company. The Company recognized the software revenue for software upgrade and maintenance service on a straight-line basis over the contracted service period.

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.

The Company also generates its advertising revenue through facilitating internet promotion advertising service and recognizes the revenue over the contracted advertising duration. The Company provides advertising services to customers for promotion of their brands and products through internet. For the network promotion advertising contracts, the Company generally recognizes revenue over time, because the customer simultaneously receives and consumes the benefits as the Company performs throughout a fixed contract term.

Revenue - Project

Project represents two types of revenue, i.e. sales of elevators and elevator installation services.

Product revenues are generated from the sale of elevators. The transfer of control is initiated when ordered equipment is delivered to a customer site as then the customer has the ability to direct the use of and obtain substantially all the remaining benefits from. The Company has acted as the principal of the contract. The Company recognized the product sales at the point of delivery.

Installation services provide mobility solutions with elevators for all applications and needs. The control is transferred continuously to the customer from the start of the installation of the unit, as the work performed enhances an asset controlled by the customer. Revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress. Incurred costs represent work performed, which corresponds with and best depicts transfer of control or the enhancement of the customer's assets. Contract costs included in the calculation are comprised of materials, subcontractors' costs or other direct costs. In developing the total cost estimates, the Company utilizes a combination of its historical cost experience and expected costs considering current circumstances.

Revenue - MRO

MRO represents two types of revenue, i.e. revenues from maintenance services and repairs services.

Maintenance services are rendered by the Company for the installations carried out by us and other service providers. Control is transferred to the customer over the contract period based on the time elapsed. Maintenance revenue is recognized over the contract period as the service is provided, according to the agreed contractual terms and conditions.

Wide range of repair services are rendered by the Company to the installations carried out by us and other service providers. For repairs, the customer benefits from the service once the repair is completed, revenue is therefore recognized at the point of service completion.

Revenue - Services

Elevator service represents two types of revenue, i.e. revenues from platform service and consultation services.

The Company owns a software which serves a platform providing elevator operational data to the customers through intelligent sensors installed in the elevators and connected to the platform. The customers purchase platform service will be granted periodic access rights to access the platform for the review of operational data of elevators. Given the continuous nature of this service, the Company recognizes revenue from platform service on a straight-line basis which aligns with the cost and benefit profile of this service. Platform revenue is recognized over the contract period as the service is provided.

Consultation services include the provision of solutions on technical issues relating to elevators. The revenue is recognized when the service is completed and accepted by the customer.

Revenue - Other

The Company also reports other revenue, which comprises: (i) revenue from system upgrade and technical support services; (ii) platform service fee; and (iii) 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. The first unit is leased to a third party with lease term of two years starting from May 1, 2022 to April 30, 2024, which was subsequently extended by two years to April 30, 2026. The second unit was leased to another third party with lease term of three years starting from January 1, 2024 to December 31, 2026, but was early terminated on June 30, 2025. 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 $243,000 and $264,000 rental income for the years ended December 31, 2025 and 2024, respectively.

Contract balances

When the Company conducts elevator project in advance of receiving consideration, unbilled amounts resulting from in-transit project would be recognized as contract assets as the Company can only have the unconditional right to payment until a certain stage of project has been completed. As of December 31, 2025 and 2024, the Company had contract assets of $789,320 and $nil, respectively. The amounts of contract assets are expected to be recovered within one year. During the years ended December 31, 2025 and 2024, no provision was made to contract assets.

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.

In addition, 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.

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 discontinued the operation of cryptocurrency mining business by December 2022. The subsidiaries engaged in the discontinued cryptocurrency mining business were disposed of in 2022 and 2023.

 

*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 (if applicable plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer).

For equity investments that the Company elects to measure at cost, less any impairment, 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 leases 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.

*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.

*Critical Accounting 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 estimates used in business acquisition, goodwill assessment, going concern assessment and assessment of credit losses. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ from those estimates.

*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 | 57 | Director, Chairman of the Board of Directors and Co-Chief Executive Officer (Principal Executive Officer) |
| Bin Ma | 57 | Co-Chief Executive Officer |
| Zhiqiang Zhao | 55 | President and Director |
| Liqiong (Iris) Yan | 49 | Chief Financial Officer |
| Zhixiong Huang | 57 | Chief Operating Officer |
| Guangzeng Chen | 47 | Chief Technology Officer and Chief Product Officer |
| Huan Li | 41 | Chief Marketing Officer |
| Ping Cai | 66 | Independent Director |
| Yong Jiang | 52 | Independent Director |
| Remington C.H. Hu | 60 | Independent Director |

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**Mr. Jianghuai Lin.** Mr. Lin has been the Chairman of the 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. Bin Ma.** Mr. Ma became a Co-Chief Executive Officer of the Company on March 2, 2026. Mr. Ma has over two decades of experience in real estate development and corporate management. Since 2023, Mr. Ma has served as Chairman and Chief Executive Officer of Skyladder Group Limited, a Hong Kong company and wholly owned subsidiary of the Company. Since 2016, Mr. Ma has also served as Chairman of Shenzhen Smart Skyladder IoT Limited and Tianjin Haizhi Ronggang Industrial Co., Ltd. Mr. Ma holds a Bachelor's Degree in Economics from Jinan University.

**Mr. Zhiqiang Zhao.** Mr. Zhao has been the President of the Company since August 2015 and a member of the 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 Directors since 2007. During her tenure, Ms. Yan assisted in Company's Nasdsq 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.

**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 the Board of Directors 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 the Board of Directors 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.

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 2025, we paid an aggregate of approximately $1,940,000 in cash compensation and share-based 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.

Additionally, on July 8, 2025, the Company granted 266,666 ordinary shares under the 2024 Equity Incentive Plan to certain directors, executive officers, and employees, including Jianghuai Lin (133,332 shares), Zhiqiang Zhao (36,000 shares), Zhixiong Huang (36,000 shares), Iris Yan (36,000 shares), Huan Li (13,630 shares), Guangzeng Chen (2,000 shares), Ping Cai (1,012 shares), Yong Jiang (1,012 shares), and Remington C.H. Hu (1,012 shares). All shares vested immediately on the grant date.

*2016 Equity Incentive Plan, as amended*

On May 9, 2016, the Board of Directors 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 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. On May 29, 2025, Taoping completed a share combination of the Company's ordinary shares at a ratio of one-for-thirty, which effectively reduced the ordinary shares authorized to be issued under the 2016 Plan from 500,000 to 16,666.

The following paragraphs summarize the principal features of the 2016 Plan and are qualified in its entirety by reference to the full text of the 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 of Directors 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.

*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 (16,666 post-reverse split effective May 29, 2025), (b) to the extent consistent with Section 422 of the Code, not more than an aggregate of 500,000 ordinary shares (16,666 post-reverse split effective May 29, 2025) may be issued under ISOs, and (c) not more than 50,000 ordinary shares (16,666 post-reverse split effective May 29, 2025) (or for Awards denominated in cash, the Fair Market Value of 50,000 ordinary shares (16,666 post-reverse split effective May 29, 2025) 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 of Directors 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 of Directors.

On May 26, 2023, the Board of Directors granted restricted shares in an aggregate amount of 6,667 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, 3,334 shares;

● Zhiqiang Zhao, 900 shares;

● Zhixiong Huang, 900 shares;

● Iris Yan, 900 shares;

● Huan Li, 267 shares;

● Guangzeng Chen, 67 shares;

● Yong Jiang, 50 shares;

● Remington C.H. Hu, 50 shares.

All of the restricted shares vested immediately upon the grant date.

*2024 Equity Incentive Plan*

On December 9, 2024, the Board of Directors adopted the 2024 Equity Incentive Plan, or the 2024 Plan, pursuant to which the Company may offer up to ten million (10,000,000) 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 2024 Plan. On May 29, 2025, Taoping completed a share combination of the Company's ordinary shares at a ratio of one-for-thirty, which effectively reduced the ordinary shares authorized to be issued under the 2024 Plan from 10,000,000 to 333,333.

The 2024 Plan has a term of 10 years following the effective date, unless sooner terminated by the Board of Directors.

The following paragraphs summarize the principal features of the 2024 Plan and are qualified in its entirety by reference to the full text of the 2024 Plan:

*Purpose*. The purposes of the 2024 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 2024 Plan permits the grant of Incentive Share Options (ISOs), Nonstatutory Share Options (NSOs), Restricted Shares, Restricted Share Units, Share Appreciation Rights, Performance Units and Performance Shares as the Administrator may determine.

*Administration*. The 2024 Plan may be administered by our Board of Directors or a committee. The 2024 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 2024 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 2024 Plan.

 

*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 2024 Plan*. Subject to adjustment as described below, (a) the maximum aggregate number of Shares that may be issued under the 2024 Plan is 10,000,000 (333,333 post-reverse split effective May 29, 2025) ordinary shares, (b) to the extent consistent with Section 422 of the Code, not more than an aggregate of 5,000,000 (166,666 post-reverse split effective May 29, 2025) ordinary shares may be issued under ISOs, and (c) not more than 500,000 (16,666 post-reverse split effective May 29, 2025) ordinary shares (or for Awards denominated in cash, the Fair Market Value of 500,000 (16,666 post-reverse split effective May 29, 2025) 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 2024 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 2024 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 2024 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 2024 Plan*. The Board of Directors may at any time amend, alter, suspend or terminate the 2024 Plan, provided that the Company will obtain shareholder approval of any 2024 Plan amendment to the extent necessary and desirable to comply with Applicable Laws. No amendment, alteration, suspension or termination of the 2024 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 2024 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.

On December 27, 2024, the Board of Directors granted restricted shares in an aggregate amount of 66,666 ordinary shares, no par value under the 2024 Plan to certain of its directors, executive officers and employees as compensation for their services. The following shares were granted to the executive officers and directors of the Company:

● Jianghuai Lin, 33,333 shares;

● Zhiqiang Zhao, 9,000 shares;

● Zhixiong Huang, 9,000 shares;

● Iris Yan, 9,000 shares;

● Huan Li, 2,667 shares;

● Guangzeng Chen, 500 shares;

● Ping Cai, 500 shares;

● Yong Jiang, 500 shares;

● Remington C.H. Hu, 500 shares.

All of the restricted shares vested immediately upon the grant date.

On July 8, 2025, the Company granted 266,666 ordinary shares under the 2024 Plan to certain directors, executive officers, and employee. The directors and officers who received such shares include Jianghuai Lin (133,332 shares), Zhiqiang Zhao (36,000), Zhixiong Huang (36,000 shares), Iris Yan (36,000 shares), Huan Li (13,630 shares), Guangzeng Chen (2,000 shares), Ping Cai (1,012 shares), Yong Jiang (1,012 shares), and Remington C.H. Hu (1,012 shares). All shares vested immediately on the grant date.

**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 of Directors 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 of Directors, 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.

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 the directors.

The chairman of the Board of Directors shall not 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 of Directors 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 of Directors may establish other committees. The Board of Directors has adopted a written charter for each of the Committees which are available on the corporate governance page of our website at <u>www.taop.com</u>. Printed copies of these charters may be obtained, without charge, by contacting the Corporate Secretary, Taoping Inc., 21<sup>st</sup> Floor, Building 3, Tianjin Science and Technology Plaza, Keyan West Road, Nankai District, Tianjin 300192 China.

*<u>Audit Committee and Audit Committee Financial Expert</u>*

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.

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.

*<u>Compensation Committee</u>*

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 of Directors 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 of Directors 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.

*<u>Governance and Nominating Committee</u>*

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 of Directors in identifying individuals qualified to become our directors and in determining the composition of the Board of Directors and its committees.

The Governance and Nominating Committee is responsible for, among other things:

● identifying and recommending to the Board of Directors nominees for election or re-election of the Board of Directors, or for appointment to fill any vacancy;

● reviewing annually with the Board of Directors the current composition of the Board of Directors in light of the characteristics of independence, age, skills, experience and availability of service to us;

● identifying and recommending to the Board of Directors the directors to serve as members of the Board of Directors' committees; and

● monitoring compliance with our code of ethics.

**D. Employees** 

As of December 31, 2023 and 2024, 2025 we had a total of 56, 33 and 118 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, 2025.

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| | |
|:---|:---|
| **Department** | **Number of Employees** |
| Software Development | 19 |
| Sales & Marketing | 16 |
| Engineering Department | 52 |
| Administration & Human Resources | 7 |
| Operation | 5 |
| Finance and Accounting | 11 |
| Management | 8 |
| **TOTAL** | **118** |

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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 standard 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 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 27, 2026 (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, 21st Floor, Building 3, Tianjin Science and Technology Plaza, Keyan West Road, Nankai District, Tianjin 300192 China.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| Name and Address of Beneficial Owner | Office, If Any | Title of Class | Amount and <br>Nature of <br>Beneficial <br>Ownership<sup>(1)</sup> | Percent of Class<sup>(2)</sup> | Percent of Total Voting Power |
| **Officers and Directors** | **Officers and Directors** | **Officers and Directors** | **Officers and Directors** | **Officers and Directors** | **Officers and Directors** |
| Jianghuai Lin | Chairman and CEO | Class A Shares | 50418 | 100.00% | 34.55% |
|  |  | Ordinary Shares | 133332 | 1.40% | \* |
| Bin Ma<sup>(3)</sup> | Co-CEO | Ordinary Shares | 345529 | 3.62% | 2.37% |
| Zhiqiang Zhao | President and Director | Ordinary Shares | 45907 | \* | \* |
| Liqiong (Iris) Yan | Chief Financial Officer | Ordinary Shares | 45910 | \* | \* |
| Zhixiong Huang | Chief Operating Officer | Ordinary Shares | 45900 | \* | \* |
| Guangzeng Chen | Chief Technology Officer | Ordinary Shares | 2567 | \* | \* |
| Huan Li | Chief Marketing Officer | Ordinary Shares | 16564 | \* | \* |
| Ping Cai | Director | Ordinary Shares | 1512 | \* | \* |
| Yong Jiang | Director | Ordinary Shares | 1562 | \* | \* |
| Remington C.H. Hu | Director | Ordinary Shares | 1562 | \* | \* |
| **All officers and directors as a group (Ten persons named above)** |  | Class A Shares | 50418 | 100.00% | 34.55% |
|  |  | Ordinary Shares | 640345 | 6.70% | 4.39% |
| **5% Security Holders** |  |  |  |  |  |
| Sunshine Utsa Capital Inc. <sup>(4)</sup> |  | Ordinary Shares | 950502 | 9.95% | 6.51% |
| Lightning Mit Capital Inc. <sup>(5)</sup> |  | Ordinary Shares | 950502 | 9.95% | 6.51% |
| Violay Capital Inc. <sup>(6)</sup> |  | Ordinary Shares | 950502 | 9.95% | 6.51% |
| Hana International Holdings Limited <sup>(7)</sup> |  | Ordinary Shares | 950502 | 9.95% | 6.51% |
| Luminary Capital Global Co., Ltd. <sup>(8)</sup> |  | Ordinary Shares | 950502 | 9.95% | 6.51% |
| Dichromatic Technology Inc. <sup>(9)</sup> |  | Ordinary Shares | 950502 | 9.95% | 6.51% |

---

\* 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 27, 2026, a total of 9,552,783 ordinary shares and 50,418 Class A Shares are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1). There are no Preferred Shares outstanding. For each Beneficial Owner above, any securities that are exercisable or convertible within 60 days have been included in the denominator.

(3) Bin
 Ma's beneficial ownership of 345,529 ordinary Shares is held indirectly through Mabin Second Co., Ltd. MaBin Second Co., Ltd. is incorporated in the British Virgin Islands. Bin Ma, is the sole director and sole shareholder
of MaBin Second Co., Ltd., and has sole voting and investment power over the shares held by MaBin Second Co., Ltd. The address of the
registered office of MaBin Second Co., Ltd. is No. 2101, Building 3, Tianjin Science and Technology Plaza, Keyan West Road, Nankai District,
Tianjin, China.

(4) Sunshine Utsa Capital Inc.is incorporated in the British Virgin Islands. Wei Fu, is the sole director and sole shareholder
of Sunshine Utsa Capital Inc., and has sole voting and investment power over the shares held by Sunshine Utsa Capital Inc. The address
of the registered office of Sunshine Utsa Capital Inc. is No. 2101, Building 3, Tianjin Science and Technology Plaza, Keyan West Road,
Nankai District, Tianjin, China.

(5) Lightning Mit Capital Inc. is incorporated in the British Virgin Islands. Yue Zhang, is the sole director and sole
shareholder of Lightning Mit Capital Inc., and has sole voting and investment power over the shares held by Lightning Mit Capital Inc.
The address of the registered office of Lightning Mit Capital Inc. is No. 2101, Building 3, Tianjin Science and Technology Plaza, Keyan
West Road, Nankai District, Tianjin, China.

(6) Violay Capital Inc. is incorporated in the British Virgin Islands. Junping Sun, is the sole director and sole shareholder
of Violay Capital Inc., and has sole voting and investment power over the shares held by Violay Capital Inc. The address of the registered
office of Violay Capital Inc. is No. 2101, Building 3, Tianjin Science and Technology Plaza, Keyan West Road, Nankai District, Tianjin,
China.

(7) Hana International Holdings Limited is incorporated in the British Virgin Islands. Zhiqian Liu, is the sole director
and sole shareholder of Hana International Holdings Limited, and has sole voting and investment power over the shares held by Hana International
Holdings Limited. The address of the registered office of Hana International Holdings Limited is No. 2101, Building 3, Tianjin Science
and Technology Plaza, Keyan West Road, Nankai District, Tianjin, China.

(7) Luminary Capital Global Co., Ltd. is incorporated in the British Virgin Islands. Fuyuan Chu, is the sole director
and sole shareholder of Luminary Capital Global Co., Ltd., and has sole voting and investment power over the shares held by Luminary Capital
Global Co., Ltd. The address of the registered office of Luminary Capital Global Co., Ltd. is No. 2101, Building 3, Tianjin Science and
Technology Plaza, Keyan West Road, Nankai District, Tianjin, China.

(8) Dichromatic Technology Inc. is incorporated in the British Virgin Islands. Zhenlan Wang, is the sole director and
sole shareholder of Dichromatic Technology Inc., and has sole voting and investment power over the shares held by Dichromatic Technology
Inc. The address of the registered office of Dichromatic Technology Inc. is No. 2101, Building 3, Tianjin Science and Technology Plaza,
Keyan West Road, Nankai District, Tianjin, China.

On August 18, 2025, at a special meeting of shareholders, the Company's shareholders approved the adoption of Amended and Restated Memorandum and Articles of Association, which, among other things, created two new classes of shares: Class A Shares and Preferred Shares, and increased the Company's authorized share capital from 100,000,000 ordinary shares to 5,060,000,000 shares divided into (i) 5,000,000,000 ordinary shares, (ii) 50,000,000 Class A Shares, and (iii) 10,000,000 Preferred Shares, each with no par value. Each Class A Share entitles its holder to 100 votes on all matters subject to a vote at general meetings. In connection with the foregoing, on September 1, 2025, 50,418 ordinary shares held by Mr. Jianghuai Lin were redeemed and reissued as 50,418 Class A Shares. See "Item 10.B. Additional Information—Memorandum and Articles of Association" for a more detailed description of our ordinary shares, Class A Shares and Preferred Shares.

We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our Company.

**F. Disclosure of a Registrant's Action to Recover Erroneously Awarded Compensation**

Not applicable.

**ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

**A. Major Shareholders**

Please refer to Item 6 "Directors, Senior Management and Employees-E. Share Ownership."

**B. Related Party Transactions** 

The following includes a summary of transactions since January 1, 2023 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.

● As of December 31, 2025, the net amounts due to related parties were $1.8 million, which consist of amounts due to related parts of $2.4 million and amounts due from related parties of $0.6 million. The amounts due to related parties included (i) borrowing from the Company's Chairman and Co-Chief Executive Officer, Mr. Jianghuai Lin ("Mr. Lin"), of approximately $0.3 million, with an interest rate of 3%, and with maturity dates ranging from November 6, 2026 to December 30, 2026; and (ii) a loan balance of approximately $2.1 million (RMB15 million) from a related company 100% owned by Mr. Lin for 12-month at an interest rate of 4.75% per annum, which mature on April 15, 2026 and May 31, 2026. The amounts due from related parties included the advances to the Company's Co-Chief Executive Officer, Mr. Bin Ma, of approximately $0.6 million, which was interest-free and was due on demand. The amounts due from related parties incurred before the Company's acquisition of Skyladder Group in November 2025, and had been fully collected by April 2026. As of the date of this report, the outstanding balance owed to Mr. Lin is approximately 0.3 million and the outstanding balance of the loan owed to the related company owned by Mr. Lin is approximately $2.1 million (RMB15 million). As of December 31, 2024 and 2023, the amounts due to related parties was $1.7 million and $3.0 million, respectively, which included the borrowing from Mr. Lin, of approximately $0.4 million and $0.9 million, respectively, without interest and matures on December 31, 2025, and a loan balance of approximately $1.3 million (RMB10 million) and approximately $2.1 million (RMB15 million), respectively, from a related company 100% owned by Mr. Lin for 12-month at the interest of 5.85% per annum, which matured on April 15, 2025.

● As of December 31, 2025, 2024 and 2023, the Company had short-term and long-term bank loans of approximately $9.7 million, $7.9 million and $8.5 million, respectively. These loans were guaranteed by Mr. Lin and other Company assets.

● On September 1, 2025, upon shareholders' approval, 50,418 ordinary shares held by Mr. Lin were redeemed and reissued as 50,418 Class A Shares.

See also Item 6 "Directors, Senior Management and Employees-B. Compensation."

**C. Interests of Experts and Counsel**

Not applicable.

**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. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial costs and diversion of our resources, including our management's time and attention.

In 2025, during the compulsory liquidation of Anhui Taoping New Media Co., Ltd., a former affiliate of the Company, the liquidation team claimed unpaid subscribed capital contributions from Taoping New Media Co., Ltd., a subsidiary of the Company and former shareholder of the liquidating entity. Pursuant to the first-instance judgment in April 2025 and the second-instance (final) judgment in December 2025, Taoping New Media Co., Ltd. was ordered to pay the subscribed capital contribution of RMB 200,000 (approximately $27,800), plus case acceptance fee and announcement fee totaling RMB 3,382 (approximately $500). The Company accrued a provision of approximately $27,800 for the loss in 2025. This matter is not material to the Company's consolidated financial condition or results of operations.

***Dividend Policy***

To date, we have not paid any cash dividends on the Company's ordinary shares or Class A 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.

**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 current 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. On August 18, 2025, the shareholders of Taoping approved the adoption of amended and restated memorandum and articles of association, which authorizes the issuance of up to 5,060,000,000 shares divided into three classes: (1) 5,000,000,000 ordinary shares with no par value each; (2) 50,000,000 Class A Shares with no par value; and (3) 10,000,000 Preferred Shares with no par value each, which may be issued from time to time at the discretion of the Board of Directors without shareholder approval. The Preferred Shares shall have such rights as specified by the Board of Directors at the time of issuance of such Preferred Shares and the Board of Directors may amend and restate the Company's memorandum and articles of association to reflect any such rights, any or all of which may be greater than the powers and rights associated with the ordinary shares.

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.

On May 29, 2025, Taoping completed a share combination of the Company's ordinary shares at a ratio of one-for-thirty, which decreased its outstanding ordinary shares to approximately 0.89 million 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 of Directors 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 of Directors. 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.

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.

Questions arising at any meeting of directors shall be decided by a two-thirds majority of votes. In case of an equality in votes the Chairman of the Board of Directors shall not have a second or casting vote.

***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 the Company to its 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 or each Class A 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. Each Class A Share confers on the holder the right to one hundred (100) votes on all matters subject to 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 or each Class A 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.

***Class A Shares***

Class A Shares may only be issued to the following eligible recipients: (1) an incumbent director of the Company, (2) an incumbent executive officer of the Company, (3) incumbent members of the Company, or (4) companies wholly owned by such directors, executive officers, or members, at such times and on such terms, for such consideration, and subject to such conditions as the directors, in their absolute discretion, may think fit.

Each Class A Share is convertible into one ordinary share at the option of the holder upon giving five days' notice to the Company. Ordinary shares are not convertible into Class A Shares under any circumstances.

Unless a holder of Class A Shares otherwise notifies the Company prior to any transfer that the proposed transferee is a "Permitted Transferee" (as defined in the amended and restated memorandum and articles of association) and provides satisfactory evidence thereof, as determined by the directors in their sole discretion, any Class A Shares that it purports to transfer shall automatically be converted into ordinary shares immediately prior to the consummation of such transfer. The directors shall have the authority to review and approve or reject the proposed transfer based on the transferee's status.

Notwithstanding any other provision of the articles of association, each Class A Share shall be automatically converted into an ordinary share immediately upon the holders of Class A Shares in aggregate beneficially owning less than 5% of the total issued and outstanding Class A Shares as of the date of registration of the amended and restated memorandum and articles of association.

On September 1, 2025, upon the shareholders' approval, the Company redeemed 50,418 ordinary shares held by Mr. Jianghuai Lin and reissued 50,418 Class A Shares to Mr. Lin.

***Preferred Shares***

The amended and restated memorandum and articles of association provide that Preferred Shares may be issued from time to time in one or more series. The Board of Directors is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series.

The Board of Directors is able to, without shareholder approval, issue Preferred Shares with voting and other rights that could adversely affect the voting power and other rights of the holders of other voting shares of the Company and could have anti-takeover effects.

***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 voting rights of the issued shares of the class.

***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 one-third 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.

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 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.

***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 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. Except that the board of directors may amend the memorandum and articles of association to reflect Preferred Share rights without shareholder approval, the memorandum of association cannot be amended the directors.

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 directors shall give notice of any 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 (as the case may be), 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.

*<u>Protection for Minority Shareholders</u>*

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.

*<u>Powers of Directors</u>*

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.

*<u>Conflict of Interests</u>*

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 of Directors. 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.

*<u>Written Consent and Cumulative Voting</u>*

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.

*<u>Takeover Provisions</u>*

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 Preferred Shares in different series and, with respect to each 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 or Class A 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.

*<u>Shareholder's Access to Corporate Records</u>*

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.

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.

*<u>Indemnification</u>*

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.

*<u>Mergers and Similar Arrangements</u>*

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.

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:

&nbsp;&nbsp;&nbsp;&nbsp;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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.

*<u>Dissenter Rights</u>*

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.

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:

&nbsp;&nbsp;&nbsp;&nbsp;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:

&nbsp;&nbsp;&nbsp;&nbsp;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

&nbsp;&nbsp;&nbsp;&nbsp;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.

*<u>Shareholders' Suits</u>*

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.

**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 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 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 shares.

***PRC Exchange Controls***

*<u>Regulations on Foreign Currency Exchange</u>*

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.

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.

*<u>Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents</u>*

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 subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries' ability to increase their registered capital or distribute profits."

*<u>Regulations on Stock Incentive Plans</u>*

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 equity incentive plans, 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.

***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 shares, and any gain realized from the transfer of the Company's 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 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 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.

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:

&nbsp;&nbsp;&nbsp;&nbsp;(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>U.S. Federal Income Tax Consequences for U.S. Holders</u>*

*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.

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>U.S. Federal Income Tax Consequences for Non-U.S. Holders</u>*

*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.

*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.

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 viewed from the SEC's Internet site at <u>http://www.sec.gov.</u> In accordance with Nasdaq Stock Market Rule 5250(d), we will also post this annual report on Form 20-F on our website at <u>www.taop.com</u>. 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 certain provisions of Section 16 of the Exchange Act.

**I. Subsidiary Information**

Not applicable.

**J. Annual Report to Security Holders**

If we are required to provide an annual report to security holders, we will submit the annual report to security holders in electronic format in accordance with the EDGAR Filer Manual.

**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. The long-term debt outstanding was $5.7 million and $5.8 million as of December 31, 2025 and 2024, respectively. 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, 2025 would increase net loss before income taxes by approximately $97,000 or less than 1% for the year ended December 31, 2025. 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.

***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, 2025. As of December 31, 2025, our accumulated other comprehensive income was approximately $23.8 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.

**PART II**

**ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES**

None.

**ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF PROCEEDS**

On August 18, 2025, the Company's shareholders adopted the Amended and Restated Memorandum and Articles of Association (the "Amended Articles"), which became effective on August 19, 2025. The Amended Articles made the following material modifications to the rights of the Company's security holders:

**Reclassification of Share Capital**

Prior to the adoption of the Amended Articles, the Company was authorized to issue 100,000,000 ordinary shares of a single class with no par value. Under the Amended Articles, the Company's authorized share capital has been restructured into three classes, authorizing the issuance of up to 5,060,000,000 shares, consisting of: (i) 5,000,000,000 ordinary shares, (ii) 50,000,000 Class A Shares, and (iii) 10,000,000 Preferred Shares, each with no par value.

**Voting Rights**

Each ordinary share entitles its holder to one (1) vote on any resolution of members. Each Class A Share entitles its holder to one hundred (100) votes on any resolution of members. Ordinary shares are not convertible into Class A Shares.

The rights, preferences, and privileges of the Preferred Shares shall be determined by the Board of Directors of the Company pursuant to a resolution of directors, and the Board of Directors is empowered to amend and restate the Company's memorandum and articles of association to reflect such rights without requiring member approval.

**Issuance Restrictions on Class A Shares**

Class A Shares may only be issued to "Eligible Class A Holders," defined as persons who are, at the time of issuance, incumbent directors, executive officers, or incumbent members of the Company, or companies wholly owned by such persons.

**Conversion of Class A Shares**

Holders of fully paid Class A Shares may convert their shares into ordinary shares at any time on a one-for-one basis (the "Conversion Ratio") by providing five (5) days' prior written notice to the Company. Conversion is effected by way of re-designation of Class A Shares as ordinary shares, rather than by redemption and reissue, and becomes effective upon entry in the register of members. The Company is required at all times to reserve and keep available a sufficient number of authorized but unissued ordinary shares to satisfy the conversion of all outstanding Class A Shares.

The Conversion Ratio is subject to adjustment in the event of any subdivision, combination, bonus issue, or similar recapitalization affecting the ordinary shares or Class A Shares. Ordinary shares issued upon conversion are credited as fully paid, rank pari passu with all existing ordinary shares, and entitle the holder to a pro rata share of any dividends declared after the date of conversion.

**Automatic Conversion of Class A Shares**

All outstanding Class A Shares will automatically convert into ordinary shares at the then-applicable Conversion Ratio if the holders of Class A Shares in aggregate beneficially own less than five percent (5%) of the total number of Class A Shares originally issued by the Company.

**Transfer Restrictions on Class A Shares**

Any transfer of Class A Shares to a person who is not a "Permitted Transferee" (as defined in the Amended Articles) will result in the automatic conversion of such Class A Shares into ordinary shares immediately prior to the registration of the transfer. The Board of Directors has the authority to review, approve, or reject any proposed transfer of Class A Shares.

**Changes to Governance Thresholds**

The threshold for members to requisition a meeting of members has been increased from ten percent (10%) to one-third (1/3) of the votes of the shares entitled to vote on the matter. The voting standard for decisions of the Board of Directors has been changed from a simple majority to a two-thirds majority of the votes of those directors present and entitled to vote. Written resolutions of directors now require the approval of all directors entitled to receive notice, replacing the prior standard of a majority.

The foregoing description of the Amended Articles is qualified in its entirety by reference to the full text of the Amended Articles, a copy of which is filed as Exhibit 1.1 to this report and incorporated herein by reference.

**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 Co-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, 2025. Based upon, and as of the date of this evaluation, Mr. Lin and Ms. Yan, determined that, as of December 31, 2025, our disclosure controls and procedures were not effective due to the deficiencies 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 Co-Chief Executive Officers 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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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, 2025. 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 deficiencies described below, we determined that, as of December 31, 2025, 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 as of December 31, 2025: (1) We lack of formal process in respect of management going concern assessment; (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; (3) We do not have relevant training to current finance team with the latest US GAAP accounting and reporting knowledge; and (4) We lack of formal procedures for the board to identify related parties and related party transactions.

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, 2025 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, 2025 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 <u>www.taop.com</u>. During the fiscal year ended December 31, 2025, 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,** | **Fiscal Year Ended December 31,** |
|  | **2025** | **2024** |
| Audit Fees | $631887 | $231821 |
| Tax Fees | 40000 | 40000 |
| **TOTAL** | $671887 | $271821 |

---

"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, and 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 2025, we followed the home country practice and did not hold an annual meeting of shareholders.

**ITEM 16H. MINE SAFETY DISCLOSURE**

Not applicable.

**ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS**

Not Applicable.

**ITEM 16J. INSIDER TRADING POLICIES**

Effective March 31, 2025, we adopted a new insider trading policy that applies to all our executive officers, directors and key employees. The insider trading policy codifies the legal and ethical principles that govern trading in our securities by persons associated with the Company that may possess material nonpublic information relating to the Company. A copy of the insider trading policy is filed as Exhibit 11.2 to this report.

**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.

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*."

**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**

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| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| 1.1 | [Amended and Restated Memorandum and Articles of Association of the registrant](ex1-1.htm) |
| 2.1 | [Description of Rights of Ordinary Shares Registered Pursuant to Section 12 of the Exchange Act as of December 31, 2025](ex2-1.htm) |
| 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)](https://www.sec.gov/Archives/edgar/data/1552670/000120445912001414/exhibit10-1.htm) |
| 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)](https://www.sec.gov/Archives/edgar/data/1552670/000120445912001414/exhibit10-2.htm) |
| 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)](https://www.sec.gov/Archives/edgar/data/1552670/000106299316010050/exhibit99-1.htm) |
| 4.4 | [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)](https://www.sec.gov/Archives/edgar/data/1552670/000149315221010848/ex4-1.htm) |
| 4.5 | [Form of Standby Equity Purchase Agreement (Private), 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)](https://www.sec.gov/Archives/edgar/data/1552670/000149315223024944/ex4-2.htm) |
| 4.6 | [Form of Securities Purchase Agreement, dated February 26, 2025 (incorporated by reference to Exhibit 10.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on February 27, 2025)](https://www.sec.gov/Archives/edgar/data/1552670/000149315225008528/ex10-1.htm) |
| 4.7 | [English Translation of Form of Bank Facility Agreement (incorporated by reference to Exhibit 4.10 to the Annual Report on Form 20-F filed on April 29, 2025)](https://www.sec.gov/Archives/edgar/data/1552670/000164117225006699/ex4-10.htm) |
| 4.8 | [Taoping Inc. 2024 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 filed by the registrant on December 9, 2024)](https://www.sec.gov/Archives/edgar/data/1552670/000149315224049314/ex99-1.htm) |
| 4.9 | [Share Purchase Agreement, dated September 29, 2025, by and among Taoping Holdings Limited, Taoping Inc., Skyladder Holdings Limited and Skyladder Group Limited (incorporated by reference to Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on September 30, 2025)](https://www.sec.gov/Archives/edgar/data/1552670/000149315225016209/ex99-1.htm) |
| 4.10 | [Share Purchase Agreement – Supplemental Agreement, dated November 25, 2025 by and among Taoping Holdings Limited, Taoping Inc., Skyladder Holdings Limited and Skyladder Group Limited (incorporated by reference to Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K furnished by the registrant on December 1, 2025)](https://www.sec.gov/Archives/edgar/data/1552670/000149315225025569/ex99-1.htm) |
| 4.11 | [English Translation of Office Lease Agreement, dated May 6, 2025, between Tianjin Tiankai Development Group Co., Ltd. and Skyladder New Century (Tianjin) IoT Technology Co., Ltd.](ex4-11.htm) |
| 8.1 | [List of the registrant's subsidiaries](ex8-1.htm) |
| 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)](https://www.sec.gov/Archives/edgar/data/1552670/000106299318001433/exhibit11-1.htm) |
| 11.2 | [Insider Trading Policy (incorporated by reference to Exhibit 11.2 to the Annual Report on Form 20-F filed on April 29, 2025)](https://www.sec.gov/Archives/edgar/data/1552670/000164117225006699/ex11-2.htm) |
| 12.1 | [Certifications of Principal Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)](ex12-1.htm) |
| 12.2 | [Certifications of Principal Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)](ex12-2.htm) |
| 13.1 | [Certifications of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](ex13-1.htm) |
| 13.2 | [Certifications of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](ex13-2.htm) |
| 15.1 | [Consent from PKF Littlejohn LLP, Independent Registered Public Accounting Firm](ex15-1.htm) |
| 97.1 | [Clawback Policy of the Registrant (incorporated by reference to Exhibit 97.1 to the Annual Report on Form 20-F furnished by the registrant on April 25, 2024)](https://www.sec.gov/Archives/edgar/data/1552670/000149315224015948/ex97-1.htm) |
| 101.INS | Inline XBRL Instance Document |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

**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 30, 2026 | **TAOPING INC.** |
|  | */s/ Jianghuai Lin* |
|  | Jianghuai Lin |
|  | Co-Chief Executive Officer (Principal Executive Officer) |

---

**TAOPING INC.**

**CONSOLIDATED FINANCIAL STATEMENTS**

---

| | |
|:---|:---|
| **Contents** | **Page(s)** |
| [Report of Independent Registered Public Accounting Firm](#ap_001) (PCAOB ID No. 2814) | F-2 |
| [Consolidated Balance Sheets as of December 31, 2025 and 2024](#ap_002) | F-4 |
| [Consolidated Statements of Operations for the years ended December 31, 2025, 2024 and 2023](#ap_003) | F-5 |
| [Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2025, 2024 and 2023](#ap_004) | F-6 |
| [Consolidated Statements of Changes in Stockholders' (Deficits) Equity for the years ended December 31, 2025, 2024 and 2023](#ap_005) | F-7 |
| [Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023](#ap_006) | F-8 |
| [Notes to Consolidated Financial Statements](#ap_007) | F-10 |

---

**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, 2025 and 2024, the related consolidated statements of operations, the consolidated statements of comprehensive income (loss), the consolidated statements of changes in equity and the consolidated statements of cash flows for each of the years in the three-year period ended December 31, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, 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 consolidated 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 competitive market in China impacting the legacy business, potential financial consequence from the escalated tariff and geopolitical disorders and the uncertainty about the availability of future financing raise substantial doubt about the Company's ability to continue as a going concern in the shorter term. 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 audits, 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.

 **

***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 Going Concern section of this report and Note 1 to the consolidated financial statements, the competitive market in China impacting the legacy business, potential financial consequence from the escalated tariff and geopolitical disorders and the uncertainty about the availability of future financing raise substantial doubt about the Company's ability to continue as a going concern in the shorter term. 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, 2025.

Our audit procedures related to the evaluation of management's going concern assessment included the following, among others:

&nbsp;&nbsp;&nbsp;&nbsp;a. assessing
 the overall reasonableness of the Company's going concern assessment, including significant
 assumptions utilized by the Company;

&nbsp;&nbsp;&nbsp;&nbsp;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; and

&nbsp;&nbsp;&nbsp;&nbsp;c. evaluating
 the adequacy of the Company's consolidated financial statements disclosures.

***Business acquisition***

 ****

As disclosed in Note 3 to the consolidated financial statements, on September 29, 2025, the Company and Taoping Holdings Limited, a wholly owned subsidiary of the Company, entered into a share purchase agreement with Skyladder Holding Limited to acquire a 100% equity interest in Skyladder Group Limited (the "Acquisition"). The Acquisition was consummated on November 26, 2025.

The accounting for the Acquisition is complex due to the significant judgements and estimates that are required to determine the values of the consideration transferred and the identification and measurement of the fair value of the assets acquired and liabilities assumed. In addition, due to the size of the acquisition, we considered this to be a critical audit matter.

Our audit procedures in respect of the business combination included:

&nbsp;&nbsp;&nbsp;&nbsp;a. involving
 our own valuation specialists to support us in challenging the methodologies used to identify
 the assets acquired and liabilities assumed;

&nbsp;&nbsp;&nbsp;&nbsp;b. challenging
 the fair value of the contingent consideration, which included assessing forecast business
 performance against underlying contracts and comparing forecasts against historical performance
 and results since acquisition date;

&nbsp;&nbsp;&nbsp;&nbsp;c. challenging
 management's assessment relating to the lack of additional identifiable intangible
 assets on acquisition by pointing to corroborating evidence; and

&nbsp;&nbsp;&nbsp;&nbsp;d. evaluating
 the adequacy of the Company's consolidated financial statements disclosures.

***Revenue recognition***

 ****

As disclosed in Note 2 to the consolidated financial statements, the Company recognizes revenue from product, software, advertising service, project, maintenance, repair and operations supply and services. These revenues are recognized upon transfer of control of promised products or completion of service. Judgment is exercised by the management of the Company in determining recognition criteria through evaluation on the terms and conditions in the contracts with customers and the identification of performance obligations in the recognition of revenue. Given the volume of transactions and susceptibility of revenue to fraud risk, there is a risk that fictitious revenue may be recorded. The principal considerations for our determination that revenue recognition is a critical audit matter are:

&nbsp;&nbsp;&nbsp;&nbsp;a. revenue
 is material to the consolidated financial statements;

&nbsp;&nbsp;&nbsp;&nbsp;b. judgement
 by management of the Company in determining the recognition criteria to recognize revenue
 and the identification of performance obligations was extensive and it required a high degree
 of auditor judgement; and

&nbsp;&nbsp;&nbsp;&nbsp;c. revenue
 carries presumed fraud risk.

Our audit procedures in respect of the revenue recognition included:

&nbsp;&nbsp;&nbsp;&nbsp;a. updating
 our understanding of revenue system and reviewing related internal controls relevant to the
 revenue;

&nbsp;&nbsp;&nbsp;&nbsp;b. examining
 sales contracts with major customers in different revenue streams and evaluating the recognition
 criteria determined and the performance obligations identified by the management of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;c. performing
 data analytical procedures to identify any fictitious revenue through the posting of manual
 journals during the last month of the financial year and, where relevant, obtained supporting
 evidence for the journals;

&nbsp;&nbsp;&nbsp;&nbsp;d. conducting
 substantive transaction and cut-off test to a combination of supporting contracts, customer-signed
 acceptance forms, delivery notes and cash receipts;

&nbsp;&nbsp;&nbsp;&nbsp;e. conducting
 analytical review on revenue; and

&nbsp;&nbsp;&nbsp;&nbsp;f. evaluating
 the adequacy of the Company's consolidated financial statements disclosures.

 

*/s/ PKF Littlejohn LLP*

PKF Littlejohn LLP

We have served as the Company's auditor since 2021.

 

London, United Kingdom

April 30, 2026

PCAOB ID No.: 2814

 

**TAOPING INC.**

**CONSOLIDATED BALANCE SHEETS**

**DECEMBER 31, 2025 AND 2024**

---

| | | | |
|:---|:---|:---|:---|
|  | **NOTES** | **December 31, 2025** | **December 31, 2024** |
| **ASSETS** |  |  |  |
| **CURRENT ASSETS** |  |  |  |
| Cash and cash equivalents |  | $2131861 | $1576632 |
| Accounts receivable, net | 2(e) | 8981264 | 7881089 |
| Accounts receivable-related parties, net | 2(e) | 258742 | 43455 |
| Advances to suppliers | 2(f) | 10333314 | 12838970 |
| Contract assets |  | 789320 |  |
| Prepaid expenses |  | 71719 | 103243 |
| Inventories, net | 8 | 790207 | 6317173 |
| Other current assets | 13 | 3057741 | 727584 |
| **TOTAL CURRENT ASSETS** |  | **26414168** | **29488146** |
| Property, equipment and software, net | 9 | 5670216 | 5554328 |
| Long-term investments | 15 |  | 86271 |
| Right-of-use assets |  | 85868 |  |
| Goodwill | 3 | 7277374 | - |
| **TOTAL ASSETS** |  | $**39447626** | $**35128745** |
| **LIABILITIES AND EQUITY** |  |  |  |
| **CURRENT LIABILITIES** |  |  |  |
| Short-term bank loans | 11(a) | $4005325 | $2086723 |
| Accounts payable |  | 3071456 | 993103 |
| Advances from customers | 2(g) | 588446 | 3435512 |
| Advances from customers-related parties | 2(g) | 2672 | 37044 |
| Amounts due to related parties, net | 7(c) | 1804565 | 1725133 |
| Accrued payroll and benefits |  | 660410 | 884949 |
| Other payables and accrued expenses | 17 | 3931171 | 4292657 |
| Income tax payable |  | 3981 | 3197 |
| Lease liability-current | 14 | 42663 | - |
| **TOTAL CURRENT LIABILITIES** |  | **14110689** | **13458318** |
| Lease liability | 14 | 62696 |  |
| Long-term bank loans | 11(b) | 5733552 | 5801096 |
| **TOTAL LIABILITIES** |  | **19906937** | **19259414** |
| **EQUITY** |  |  |  |
| Ordinary shares, 2025 and 2024: par $0; authorized capital 5,000,000,000 shares; shares issued and outstanding, December 31, 2025: 9,552,783 shares; December 31, 2024: 472,764 shares; | 19 | 194458213 | 170757735 |
| Class A shares, 2025 and 2024: par $0; authorized capital 50,000,000 shares; shares issued and outstanding, December 31, 2025: 50,418 shares; December 31, 2024: 0 shares; | 19 | 100836 | - |
| Preferred shares, 2025 and 2024: par $0; authorized capital 10,000,000 shares; shares issued and outstanding, December 31, 2025 and 2024: 0 shares\* | 19 |  |  |
| Additional paid-in capital | 19 | 11568652 | 22447083 |
| Reserve | 18 | 10209086 | 10209086 |
| Accumulated deficit |  | (220633658) | (210571935) |
| Accumulated other comprehensive income |  | 23837560 | 23027362 |
| **Total equity of the Company** |  | **19540689** | **15869331** |
| **Non-controlling interest** |  | - | - |
| **TOTAL EQUITY** |  | **19540689** | **15869331** |
| **TOTAL LIABILITIES AND EQUITY** |  | $**39447626** | $**35128745** |

---

\* On May 29, 2025, the Company implemented a one-for-thirty 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

**TAOPING INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**YEARS ENDED DECEMBER 31, 2025, 2024 AND 2023**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **NOTES** | **2025** | **2024** | **2023** |
| Revenue – Products |  | $23056364 | $24494503 | $24073593 |
| Revenue – Products-related parties | 7(a) |  | 134077 | 165520 |
| Revenue – Advertising |  | 4198309 | 4290173 | 5001695 |
| Revenue – Software |  | 1413898 | 7446966 | 8792781 |
| Revenue – Software-related parties | 7(a) |  |  | 6021 |
| Revenue – Project |  | 1778336 |  |  |
| Revenue – MRO |  | 67440 |  |  |
| Revenue – Service |  | 55129 |  |  |
| Revenue - Others |  | 243254 | 304484 | 596025 |
| Revenue – Others-related parties | 7(b) | 3805 | 2309 | - |
| **TOTAL REVENUE** |  | **30816535** | **36672512** | **38635635** |
| Cost – Products |  | 21073537 | 22148743 | 21389832 |
| Cost – Advertising | 2(t) | 4168477 | 4307542 | 3945211 |
| Cost – Software |  | 645600 | 2430562 | 4145233 |
| Cost – Project |  | 1520046 |  |  |
| Cost – MRO |  | 31551 |  |  |
| Cost – Service |  | 3337 |  |  |
| Cost – Others |  | 5281 | 15215 | 303078 |
| **TOTAL COST** |  | **27447829** | **28902062** | **29783354** |
| **GROSS PROFIT** |  | **3368706** | **7770450** | **8852281** |
| Administrative expenses |  | 9831502 | 6209596 | 5600578 |
| Research and development expenses |  | 1712152 | 2424127 | 2967043 |
| Selling expenses |  | 1058728 | 745289 | 482358 |
| **LOSS FROM OPERATIONS** |  | **(9233676)** | **(1608562)** | **(197698)** |
| Subsidy income |  | 32634 | 58540 | 292797 |
| (Loss) from equity method investment |  |  |  | (8031) |
| Other income, net |  | 159950 | 203081 | 267292 |
| Interest income |  | 1356 | 2241 | 2100 |
| Interest expense and debt discounts expense |  | (978900) | (460544) | (580630) |
| **Loss before income taxes** |  | **(10018636)** | **(1805244)** | **(224170)** |
| Income tax (expense) | 12 | (43087) | (14143) | (7980) |
| **Net (loss) from continuing operations** |  | **(10061723)** | **(1819387)** | **(232150)** |
| **Net (loss) from discontinued operations** | 10 | - | - | (465791) |
| **NET LOSS** |  | **(10061723)** | **(1819387)** | **(697941)** |
| **Less: net loss attributable to the non-controlling interest** | 4 | - | - | - |
| **NET LOSS ATTRIBUTABLE TO THE COMPANY** |  | $**(10061723)** | $**(1819387)** | $**(697941)** |
| **(Loss) per share - Basic and Diluted\*** |  |  |  |  |
| **CONTINUING OPERATIONS** |  |  |  |  |
| Basic | 6 | $(7.88) | $(7.60) | $(2.57) |
| Diluted | 6 | $(7.88) | $(7.60) | $(2.57) |
| **DISCONTINUED OPERATIONS** |  |  |  |  |
| Basic | 6 | $- | $- | $(5.16) |
| Diluted | 6 | $- | $- | $(5.16) |
| **LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY\*** |  |  |  |  |
| Basic | 6 | $(7.88) | $(7.60) | $(7.73) |
| Diluted | 6 | $(7.88) | $(7.60) | $(7.73) |

---

\* On May 29, 2025, the Company implemented a one-for-thirty 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

**TAOPING INC.**

**CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)**

**YEARS ENDED DECEMBER 31, 2025, 2024 AND 2023**

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Net loss | $(10061723) | $(1819387) | $(697941) |
| Other comprehensive income (loss): |  |  |  |
| Foreign currency translation gain (loss) | 810198 | (559936) | (23035) |
| Comprehensive loss | (9251525) | (2379323) | (720976) |
| Comprehensive loss attributable to the non- controlling interest | - | - | - |
| **Comprehensive loss attributable to the Company** | $**(9251525)** | $**(2379323)** | $**(720976)** |

---

The accompanying notes are an integral part of these consolidated financial statements

**TAOPING INC.**

**CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY**

**YEARS ENDED DECEMBER 31, 2025, 2024 AND 2023**

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Ordinary shares\*** | **Ordinary shares\*** | **Class A Shares** | **Class A Shares** | | | | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Additional**<br> **Paid-in**<br>**Capital** |<br>**Reserve** | **Accumulated**<br>**deficit** | **Accumulated**<br> **other**<br> **comprehensive**<br>**income** | **Non**<br> **controlling**<br>**interest** |<br>**Total** |
| **BALANCE AS AT JANUARY 1, 2023** | **79538** | **161404797** |  | **-** | **22447083** | **10209086** | **(208054607)** | **23610333** |  | **9616692** |
| Stock-based payment for consulting fee (Note 19) | 1666 | 340000 |  | **-** |  |  |  |  |  | 340000 |
| Conversion of convertible note (Note 16) |  |  |  | **-** | 156440 |  |  |  |  | 156440 |
| Issuance of ordinary shares for Equity Incentive Plan (Note 19) | 6666 | 1360000 |  | **-** |  |  |  |  |  | 1360000 |
| Issuance of ordinary shares for financing (Note 19) | 34924 | 1961923 |  | **-** |  |  |  |  |  | 1961923 |
| Net loss for the year |  |  |  | **-** |  |  | (697941) |  |  | (697941) |
| Foreign currency translation (loss) |  |  |  | **-** |  |  |  | (23035) |  | (23035) |
| Ordinary shares issued for business acquisition | 227 | 49218 | - | - | - | - | - | - |  | 49218 |
| **BALANCE AS AT DECEMBER 31, 2023** | **123021** | **165115938** | **-** | **-** | **22603523** | **10209086** | **(208752548)** | **23587298** |  | **12763297** |
| Conversion of convertible note (Note 16) | 48408 | 652007 | **-** | **-** | (156440) |  |  |  |  | 495567 |
| Issuance of ordinary shares for Equity Incentive Plan (Note 19) | 66666 | 820400 | **-** | **-** |  |  |  |  |  | 820400 |
| Issuance of ordinary shares for financing (Note 19) | 234669 | 4169390 | **-** | **-** |  |  |  |  |  | 4169390 |
| Net loss for the year |  |  | **-** | **-** |  |  | (1819387) |  |  | (1819387) |
| Foreign currency translation (loss) | - | - | **-** | **-** | - | - | - | (559936) |  | (559936) |
| **BALANCE AS AT DECEMBER 31, 2024** | **472764** | **170757735** | **-** | **-** | **22447083** | **10209086** | **(210571935)** | **23027362** |  | **15869331** |
| Conversion of convertible note (Note 16) | 364516 | 1344552 |  |  |  |  |  |  |  | 1344552 |
| Issuance of ordinary shares for Equity Incentive Plan (Note 19) | 266666 | 1354663 |  |  |  |  |  |  |  | 1354663 |
| Issuance of ordinary shares for financing (Note 19) | 616334 | 2971380 |  |  |  |  |  |  |  | 2971380 |
| Net loss for the year |  |  |  |  |  |  | (10061723) |  |  | (10061723) |
| Foreign currency translation (loss) |  |  |  |  |  |  |  | 810198 |  | 810198 |
| Ordinary shares issued for business acquisition | 7882921 | 18130719 |  |  | (10878431) |  |  |  |  | 7252288 |
| Cancellation and reissuance of shares | (50418) | (100836) | 50418 | 100836 | - | - | - | - |  | - |
| **BALANCE AS AT DECEMBER 31, 2025** | **9552783** | **194458213** | **50418** | **100836** | **11568652** | **10209086** | **(220633658)** | **23837560** |  | **19540689** |

---

\* On May 29, 2025, the Company implemented a one-for-thirty 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

**TAOPING INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**YEARS ENDED DECEMBER 31, 2025, 2024 AND 2023**

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| **OPERATING ACTIVITIES** |  |  |  |
| Net loss | $(10061723) | $(1819387) | $(697941) |
| **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 | 5612429 | 4065699 | 1413216 |
| (Reversal of) provision for obsolete inventories | 159145 | (14310) | (53314) |
| Losses on inventories | 859077 |  |  |
| Depreciation | 1646805 | 2006996 | 2993285 |
| Amortization of intangible assets and other asset | 31522 | 110315 |  |
| Amortization of convertible note discount | 144552 | 3345 | 68241 |
| Loss on disposal of property, equipment and software |  | 49963 | 96131 |
| Stock-based payments for consulting services |  | 136000 | 204000 |
| Stock-based compensation to employees | 1354663 | 820400 | 1360000 |
| Loss on disposals/dissolutions of subsidiaries | 68380 | 136456 | 16184 |
| (Gain) loss on long-term investment | (4900) | 19044 | 8031 |
| Exchange difference | 295372 | (92464) | 594137 |
| **Changes in operating assets and liabilities:** |  |  |  |
| Accounts receivable | (1662248) | (2424728) | (393934) |
| Accounts receivable from related parties | (215287) | 321971 | (197096) |
| Inventories | 5108318 | (5171430) | (1786825) |
| Contract assets | (768302) |  |  |
| Other non-current assets |  | 799664 | 919081 |
| Other receivables and prepaid expenses | (893946) | 709355 | (53329) |
| Advances to suppliers | 2076813 | (2543069) | (6266842) |
| Amounts due to/from related parties | 98055 | (1348744) | 494889 |
| Other payables and accrued expenses | (1523763) | (567733) | (465678) |
| Advances from customers | (3756709) | 2304752 | 593429 |
| Advances from related parties |  | (52001) | 509 |
| Payroll payable and benefits | (330447) | 272408 | 199360 |
| Lease liability |  |  | (4082) |
| Accounts payable | (761997) | (110335) | (1364282) |
| Income tax payable | (27039) | 3245 | (3187) |
| **Net cash used in operating activities** | **(2551230)** | **(2384588)** | **(2326017)** |
| **INVESTING ACTIVITIES** |  |  |  |
| Purchases of property, equipment and software | (1349319) | (1053587) | (1209613) |
| Acquisition of cash in connection with a business acquisition | 24826 |  | 589 |
| Cash paid for equity investments | (22261) | (22252) | - |
| **Net cash used in investing activities** | **(1346754)** | **(1075839)** | **(1209024)** |
| **FINANCING ACTIVITIES** |  |  |  |
| Proceeds from borrowings under short-term loans | 2365193 | 1807936 | 8766614 |
| Proceeds from borrowings under long-term loans |  | 6258240 |  |
| Repayment of short-term loans | (1808677) | (8427763) | (7225528) |
| Repayment of long-term loans | (310536) | (58827) |  |
| Proceeds from issuance of ordinary shares | 2971380 | 4169390 | 1748258 |
| Proceeds from issuance of convertible note | 1200000 | - | 550000 |
| **Net cash provided by financing activities** | **4417360** | **3748976** | **3839344** |
| Effect of exchange rate changes on cash and cash equivalents | 35853 | (12772) | (26688) |
| **NET INCREASE IN CASH AND CASH EQUIVALENTS** | **555229** | **275777** | **277615** |
| **CASH AND CASH EQUIVALENTS, BEGINNING** | **1576632** | **1300855** | **1023240** |
| **CASH AND CASH EQUIVALENTS, ENDING** | $**2131861** | $**1576632** | $**1300855** |
| **Supplemental disclosure of cash flow information:** |  |  |  |
| **Cash paid during the year** |  |  |  |
| **Income taxes** | $34493 | $10896 | $8180 |
| **Interest** | $419563 | $404708 | $512389 |

---

**Supplemental disclosure of significant non-cash transactions\*:**

\* On May 29, 2025, the Company implemented a one-for-thirty 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 April 2023, the Company issued the second phase of approximately 227 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 1,666 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 1,666 ordinary shares was $340,000, of which $204,000 and $136,000 was amortized during the year ended December 31, 2023 and 2024 respectively.

In May 2023, the Company issued 6,666 ordinary shares with fair value of approximately $1,360,000 to certain directors, executive officers, and employees as compensations for their services.

In March 2024, the holder of the Company's convertible promissory note issued in September 2023 converted an amount of $50,000 of partial principal and accrued interest with a conversion price at $26.37 per share into 1,896 ordinary shares of the Company.

In April 2024, the holder of the Company's convertible promissory note issued in September 2023 converted an amount of $75,000 of partial principal and accrued interest with a conversion price at $25.737 per share into 2,914 ordinary shares of the Company.

In May 2024, the holder of the Company's convertible promissory note issued September 2023 converted an amount of $100,000 of partial principal and accrued interest with a conversion price at $20.01 per share into 4,998 ordinary shares of the Company.

In August 2024, the holder of the Company's convertible promissory note issued in September 2023 converted an amount of $100,000 of partial principal and accrued interest with a conversion price at $14.328 per share into 6,979 ordinary shares of the Company.

In September 2024, the holder of the Company's convertible promissory note issued in September 2023 converted an amount of $75,000 of partial principal and accrued interest with a conversion price at $9.822 per share into 7,636 ordinary shares of the Company.

In October 2024, the holder of the Company's convertible promissory note issued in September 2023 converted an amount of $75,000 of partial principal and accrued interest with a conversion price at $13.398 per share into 5,598 ordinary shares of the Company.

In November 2024, the holder of the Company's convertible promissory note issued in September 2023 converted partial principal and accrued interest in an amount of $75,000 and the remaining principal and accrued interest in an amount of $102,507 into 7,650 and 10,737 ordinary shares of the Company, with a conversion price at $9.804 and $9.546 per share, respectively.

In December 2024, the Company issued 66,666 ordinary shares with fair value of approximately $820,400 to certain directors, executive officers, and employees as compensations for their services.

In January 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $50,000, $100,000, and $125,000 of partial principal, into a total of 39,741 ordinary shares of the Company, with a conversion price at $7.398, $7.299, and $6.483 per share, respectively.

In February 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $125,000 of partial principal with a conversion price at $6.249 per share into 20,003 ordinary shares of the Company.

In March 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $100,000 of partial principal with a conversion price at $6.258 per share into 15,980 ordinary shares of the Company.

In April 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $100,000 of partial principal with a conversion price at $4.596 per share into 21,758 ordinary shares of the Company.

In May 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $108,500 of partial principal with a conversion price at $4.818 per share into 22,520 ordinary shares of the Company.

In July 2025, the Company issued 266,666 ordinary shares with fair value of approximately $1,355,000 to certain directors, executive officers, and employees as compensations for their services.

In July 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $100,000 of partial principal with a conversion price at $3.1209 per share into 32,042 ordinary shares of the Company.

In August 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $100,000 of partial principal with a conversion price at $2.9494 per share into 33,905 ordinary shares of the Company.

In September 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $100,000, $125,000, and $75,000 of partial principal, into a total of 121,637 ordinary shares of the Company, with a conversion price at $2.5066, $2.4602, and $2.4244 per share, respectively.

In October 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of approximately $136,000 of partial principal with a conversion price at $2.3898 per share into 56,930 ordinary shares of the Company.

In November 2025, the Company issued 7,882,921 ordinary shares for the acquisition of Skyladder Group Limited. The fair value of consideration as of the completion date was approximately $7,252,000, as determined on the basis of the probability-weighted assessment of achieving the specified revenue and net profit (after tax) targets.

The accompanying notes are an integral part of these consolidated financial statements

**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-based technologies for Smart City IoT platforms, elevator products and related services, digital advertising delivery, and other internet-based information systems in China. The Company has built a far-reaching city partner ecosystem and comprehensive portfolio for its products and services, which are aligned together with its smart cloud platform, cloud services and solutions.

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.

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.

In January 2022, the Company completed the acquisition of 100% equity interest of Zhenjiang Taoping IoT Tech. Co., Ltd ("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. ("TEPH") 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. ("TPGXT") to expand its wastewater treatment business in Guangxi Province.

In April 2024, the Company established a subsidiary Taoping Industrial (Yunnan) Co., Ltd. to explore smart agricultural related businesses in Yunnan Province.

In June 2024, ZJIOT was dissolved as a result of the Company's business realignment.

In January 2025, Taoping Digital Tech. (Jiangsu) Co., Ltd. ("TDTJS") was dissolved as a result of the Company's business realignment.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

In April 2025, TEPH was dissolved as a result of the Company's business realignment.

In June 2025, TPGXT was dissolved as a result of the Company's business realignment.

In September 2025, through its wholly owned subsidiary Taoping Holdings Limited, the Company entered into a share purchase agreement with Skyladder Holding Limited, as amended by a supplemental agreement dated November 25, 2025, to acquire 100% of Skyladder Group Limited, or Skyladder Group, a Hong Kong company, for consideration of RMB 152 million (approximately US$21.36 million), payable in an aggregate of 7,882,921 ordinary shares of the Company. Such consideration shares are subject to transfer restrictions, released in tranches upon achievement of audited revenue and net profit targets for 2025–2029. The acquisition was closed on November 26, 2025. Skyladder Group is a provider of elevator products and related physical and cloud-based services. It provides services throughout the entire elevator lifecycle including sales, installation, repair, maintenance, renovation, and upgrades. Skyladder Group operates through subsidiaries in China.

SCHEDULE OF SUBSIDIARIES AND VARIABLE INTEREST ENTITY

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <br>**Entities** | <br>**Subsidiaries** | **December 31,**<br> **2025**<br>**% owned** | **December 31,**<br> **2024**<br>**% owned** | **December 31,**<br> **2023**<br>**% owned** | <br>**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 |
| 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 |
| 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 |
| Taoping Digital Tech. (Jiangsu) Co., Ltd. (TDTJS) | Subsidiary |  | 100% | 100% | Jiangsu, China |
| Zhenjiang Taoping IoT Tech. Co., Ltd (ZJIOT) | Subsidiary |  |  | 100% | Zhenjiang, China |
| Taoping EP Holdings (Shenzhen) Co., Ltd. (TEPH) | Subsidiary |  | 51% | 51% | Shenzhen, China |
| Fujian Taoping Investment Co., Ltd. (FJTI) | Subsidiary | 100% | 100% | 100% | Fujian, China |
| Taoping (Guangxi) EP Tech. Co., Ltd. (TPGXT) | Subsidiary |  | 100% | 100% | Guangxi, China |
| Taoping Industrial (Yunnan) Co., Ltd. (TIYN) | Subsidiary | 100% | 100% |  | Yunnan, China |
| Skyladder Group Limited (SGL) | Subsidiary | 100% |  |  | Hong Kong, China |
| Skyladder (Tianjin) Technology Development Co., Ltd. (STTD) | Subsidiary | 100% |  |  | Tianjin, China |
| Shenzhen Smart Skyladder IoT Co., Ltd. (SZSS) | Subsidiary | 100% |  |  | Shenzhen, China |
| Tianjin Zeyuan Elevator Co., Ltd. (TJZY) | Subsidiary | 100% |  |  | Tianjin, China |
| Skyladder New Century (Tianjin) IoT Technology Co., Ltd. (SNCT) | Subsidiary | 100% |  |  | Tianjin, China |
| Tianjin Weida Elevator Co., Ltd. (TJWD) | Subsidiary | 100% |  |  | Tianjin, China |

---

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

Going Concern and Management's Plans

As a result of business transformation, the Company's revenue for the year ended December 31, 2025 was decreased as compared to the year 2024. The Company incurred a net loss of $10.1 million for year ended December 31, 2025, compared to a net loss of $1.8 million for 2024. Cash and cash equivalents at December 31, 2025 was $2.1 million, compared to cash and cash equivalents of $1.6 million a year ago. As of December 31, 2025, the Company had a working capital surplus of approximately $12.3 million, significantly decrease from a working capital surplus of $16.0 million as of December 31, 2024. As of December 31, 2025, the Company had short term bank loans of $4.0 million due within one year while the cash and cash equivalents was $2.1 million.

The Company will continue to invest efforts on diversifying its existing cloud-based product and service lines through strategic collaborations and acquisitions. In November 2025, the Company completed the acquisition of Skyladder Group, a provider of elevator products and related physical and cloud-based services. Based on the government policies which advocate the modification and replacement of old elevators, more confirmed orders/contracts were obtained by Skyladder Group in late 2025 and early 2026. From the confirmed orders/contracts on hand, it is expected that Skyladder Group could achieve significant improvement in revenue in year 2026, which would then improve the operating cashflow of the Company.

The Company considers the legacy market in China is competitive, in particular the escalated tariff environment and geopolitical disorders would raise significant uncertainty to the Company's businesses. If Skyladder Group cannot effectively execute the confirmed orders/contracts for achieving more positive operating cashflow, additional capital raise from issuing equity security or debt instrument or additional loan facility may have to be considered to support required cash flows. The Company's existing $4.0 million short-term bank loans and $5.7 million long-term bank loans, which were guaranteed and/or collateralized with the Company's office properties, provides important capital support for its operation.

On July 17, 2023, the Company entered into a private standby equity purchase agreement with an investor. Pursuant to the agreement, the Company has the right, but not the obligation, to sell to the investor up to $10,000,000 of its ordinary shares within 36 months from the date of the agreement. As of April, 2026, the Company has raised a total of $6.9 million through this equity line offering with $3.1 million outstanding amount available.

In January 2025, the Company issued an unsecured convertible promissory note with proceeds received of $1,200,000. In February 2025, the Company issued an aggregate of 8,000,000 ordinary shares of no par value of the Company, at an offering price of $0.20 per share, to certain investors for proceeds received of $1,600,000.

From above, the Company believes that it has the ability to raise needed capital to maintain its operations, repay short term loans and fund business growth, and is able to operate as a going concern.

However, the Company considered the recent fluctuation in Nasdaq market and can make no assurances that financing will be always available for the amounts we need, or on terms commercially acceptable to us, if at all. If one or all of these businesses and/or strategies do not go well 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-thirty reverse stock split of the Company's issued and outstanding ordinary shares was effective on May 29, 2025 (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 estimates used in business acquisition, goodwill assessment, going concern assessment and assessment of credit losses. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ from those estimates.

**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 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, 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, 2025 or 2024.

The Company maintains its bank accounts at credit worthy financial institutions and closely monitors the movements of its cash positions. As of December 31, 2025 and 2024, approximately $2.1 million and $1.6 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.

In addition, 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, 2025 has increased by approximately $1.0 million from the year ended December 31, 2024.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

Accounts receivable as at December 31, 2025 and 2024 are as follows:

SCHEDULE OF ACCOUNTS RECEIVABLE

---

| | | |
|:---|:---|:---|
|  | December 31, 2025 | December 31, 2024 |
| Accounts Receivable | $17500166 | $15317545 |
| Allowance for credit losses | (8518902) | (7436456) |
| Accounts Receivable, net | $8981264 | $7881089 |
| Accounts Receivable - related parties | $398538 | $295490 |
| Allowance for credit losses | (139796) | (252035) |
| Accounts Receivable - related parties, net | $258742 | $43455 |

---

The normal credit term is ranging from 1 month to 3 months after the customers' acceptance of 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. The normal credit term for elevator project, maintenance, repair and operations supply and services is ranging from 3 month to 6 months. However, because of various factors related to the business cycle, the actual collection of outstanding accounts receivable may be beyond the normal credit terms

The allowance for credit losses at December 31, 2025 and 2024, totaled approximately $8.7 million and $7.7 million, respectively, representing management's best estimate. The following table describes the movements for allowance for credit losses during the years ended December 31, 2025 and 2024

SCHEDULE OF ALLOWANCE FOR CREDIT LOSSES

---

| | |
|:---|:---|
| Balance at January 1, 2024 | $25591946 |
| Increase in allowance for credit losses | 2646969 |
| Amounts recovered during the year | (62786) |
| Decrease from dissolution of a subsidiary | (1122) |
| Amounts written off as uncollectible | (19505099) |
| Foreign exchange difference | (981417) |
| Balance at December 31, 2024 | $7688491 |
| Increase in allowance for credit losses | 4931702 |
| Amounts recovered during the year | (19167) |
| Decrease from dissolution of a subsidiary | (228958) |
| Amounts written off as uncollectible | (4001169) |
| Foreign exchange difference | 287799 |
| Balance at December 31, 2025 | $8658698 |

---

(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. As of December 31, 2025 and 2024, the increase in allowance for credit losses for advances to suppliers was approximately $0.9 million and $1.4 million, respectively.

(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.

For the year ended December 31, 2025, 2024 and 2023, the Company recognized revenue of approximately $2,227,000, $699,000 and $290,000, respectively, that was included in the advances from customers balance at the beginning of each reporting period.

**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, contract assets, other current assets, short-term bank loans, long-term bank loans, accounts payable, advances from customers, advances from customers - related parties, accrued payroll and benefits, 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). |

---

(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:

SCHEDULE OF PROPERTY , EQUIPMENT AND SOFTWARE ESTIMATED USEFUL LIVES

---

| | |
|:---|:---|
| 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 | 5-10 years |
| Media display equipment | 5 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.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

(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 discontinued the operation of cryptocurrency mining business by December 2022. The subsidiaries engaged in the discontinued cryptocurrency mining business were disposed of in 2022 and 2023.

(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.

The Company evaluates goodwill for impairment on an annual basis or more frequently if indicators of impairment exist that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company conducts a quantitative goodwill impairment test, which involves comparing the estimated fair value of the reporting unit with its carrying value, including goodwill. The Company estimates the fair value of a reporting unit using the income approach. If the carrying value of the reporting unit exceeds its estimated fair value, an impairment loss is recorded for the difference.

(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.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

(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 (if applicable plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer).

For equity investments that the Company elects to measure at cost, less any impairment, 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.

(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 no impairment charges for the years ended December 31, 2023, 2024 and 2025. Assets held for disposal, if any, are reported at the lower of the carrying amount or fair value less costs to sell.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

(r) Operating leases - Right-of-use assets and lease liabilities

The Company accounts for leases 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 six sources: (1) product sales, (2) software sales, (3) advertising, (4) elevator project, and (5) elevator Maintenance, Repair and Operations ("MRO") and (6) elevator services. 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), high-end data storage servers, supercomputing servers and graphic cards. Although manufacturing of the products has been outsourced to the Company's Original Equipment Manufacturer (OEM) suppliers or directly sourced from the 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

Revenue – software represents software upgrade and maintenance services provided for customers by the Company. The Company recognized the software revenue for software upgrade and maintenance service on a straight-line basis over the contracted service period.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

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.

The Company also generates its advertising revenue through facilitating internet promotion advertising service and recognizes the revenue over the contracted advertising duration. The Company provides advertising services to customers for promotion of their brands and products through internet. For the network promotion advertising contracts, the Company generally recognizes revenue over time, because the customer simultaneously receives and consumes the benefits as the Company performs throughout a fixed contract term.

Revenue - Project

Project represents two types of revenue, i.e. sales of elevators and elevator installation services.

Product revenues are generated from the sale of elevators. The transfer of control is initiated when ordered equipment is delivered to a customer site as then the customer has the ability to direct the use of and obtain substantially all the remaining benefits from. The Company has acted as the principal of the contract. The Company recognized the product sales at the point of delivery.

Installation services provide mobility solutions with elevators for all applications and needs. The control is transferred continuously to the customer from the start of the installation of the unit, as the work performed enhances an asset controlled by the customer. Revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress. Incurred costs represent work performed, which corresponds with and best depicts transfer of control or the enhancement of the customer's assets. Contract costs included in the calculation are comprised of materials, subcontractors' costs or other direct costs. In developing the total cost estimates, the Company utilizes a combination of its historical cost experience and expected costs considering current circumstances.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

Revenue - MRO

MRO represents two types of revenue, i.e. revenues from elevator maintenance services and repairs services.

Maintenance services are rendered by the Company for the installations carried out by us and other service providers. Control is transferred to the customer over the contract period based on the time elapsed. Maintenance revenue is recognized over the contract period as the service is provided, according to the agreed contractual terms and conditions.

Wide range of repair services are rendered by the Company to the installations carried out by us and other service providers. For repairs, the customer benefits from the service once the repair is completed, revenue is therefore recognized at the point of service completion.

Revenue - Services

Elevator service represents two types of revenue, i.e. revenues from platform service and consultation services.

The Company owns a software which serves a platform providing elevator operational data to the customers through intelligent sensors installed in the elevators and connected to the platform. The customers purchase platform service will be granted periodic access rights to access the platform for the review of operational data of elevators. Given the continuous nature of this service, the Company recognizes revenue from platform service on a straight-line basis which aligns with the cost and benefit profile of this service. Platform revenue is recognized over the contract period as the service is provided.

Consultation services include the provision of solutions on technical issues relating to elevators. The revenue is recognized when the service is completed and accepted by the customer.

Revenue - Other

The Company also reports other revenue, which comprises: (i) revenue from system upgrade and technical support services; (ii) platform service fee; and (iii) 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. The first unit is leased to a third party with lease term of two years starting from May 1, 2022 to April 30, 2024, which was subsequently extended by two years to April 30, 2026. The second unit was leased to another third party with lease term of three years starting from January 1, 2024 to December 31, 2026, but was early terminated on June 30, 2025. 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 $243,000 and $264,000 rental income for the years ended December 31, 2025 and 2024, respectively.

SCHEDULE OF ANNUAL MINIMUM RENTAL INCOME RECEIVED

---

| | |
|:---|:---|
| Annual minimum rental income to be received in the next 5 years: |  |
| 2026 | 76958 |
| 2027 | - |
| Total | 76958 |

---

Contract balances

When the Company conducts elevator project in advance of receiving consideration, unbilled amounts resulting from in-transit project would be recognized as contract assets as the Company can only have the unconditional right to payment until a certain stage of project has been completed. As of December 31, 2025 and 2024, the Company had contract assets of $789,320 and $nil, respectively. The amounts of contract assets are expected to be recovered within one year. During the years ended December 31 2025 and 2024, no provision was made to contract assets.

Practical expedients and exemptions

The Company generally expenses sales commissions if any incurred because the amortization period would have been one year or less.

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

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.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

(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.

During the year ended December 31, 2025, 2024, and 2023, the Company recognized approximately $1,355,000, $956,400, and $1,564,000, respectively, of stock-based compensation expense.

(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 profit or 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 profit or loss but are included in other comprehensive income or loss, a component of equity.

The exchange rates adopted are as follows:

SCHEDULE OF FOREIGN CURRENCY TRANSLATION

---

| | | |
|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2024** |
| Year-end RMB to US$ exchange rate | 6.9962 | 7.2995 |
| Average yearly RMB to US$ exchange rate | 7.1876 | 7.1905 |
| Year-end HKD to US$ exchange rate | 7.7830 | 7.7655 |
| Average yearly HKD to US$ exchange rate | 7.7953 | 7.8024 |

---

The average yearly RMB to US$ exchange rate adopted for the year ended December 31, 2023 was 7.0723.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

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.

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.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

(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 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) 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. Nevertheless,
due to the difference business nature from the other segments, the Chief Operating Decision Maker considers it is a separate operating
segment of which the performance is separately assessed and financial information for this segment is separately disclosed for financial
reporting purpose.

(3) Smart
 Elevator (SE) segment - Following the acquisition of Skyladder Group Limited in November 2025, the Company added the Smart Elevator
 (SE) segment. As a provider of elevator services, the Company provides services throughout the entire elevator lifecycle, including
 sales, installation, repair, cloud-based maintenance, renovation, and upgrades. The segment serves a diverse user base, including
 governments, businesses, and households.
 In this segment, the Company generates revenues from elevator sales and installation contracts, as well as maintenance, repair, and
 other service agreements. The SE segment diversifies the Company's cloud-based product offerings and expands the Company's
 presence in the smart building and urban infrastructure market.

For more information regarding our operating segments, see Note 20 (Consolidated Segment Data).

(ab) Recent Accounting Pronouncements

&nbsp;&nbsp;&nbsp;&nbsp;(i) Recently
 adopted accounting pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, ("ASU 2023-09"). The ASU enhances the transparency and decision usefulness of income tax disclosures by requiring additional disaggregation of information related to the effective tax rate reconciliation, income taxes paid, and income tax expense and pretax income by jurisdiction. The Company adopted ASU 2023 09 on a prospective basis effective January 1, 2025. Accordingly, the enhanced income tax disclosures are presented beginning in fiscal year 2025, and prior period disclosures have not been recast. The adoption of this guidance did not have an impact on the Company's consolidated results of operations, financial position, or cash flows, as the amendments relate solely to disclosure requirements.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

In March 2024, the FASB issued ASU 2024-02, "Codification Improvements – Amendments to Remove References to the Concept Statements" ("ASU 2024-02"). ASU 2024-02 contains amendments to the FASB Accounting Standards Codification that remove references to various FASB Concepts Statements. In most instances, the references are extraneous and not required to understand or apply the guidance. In other instances, the references were used in prior Statements to provide guidance in certain topical areas. The Company adopted ASU 2024-02 for the annual period ending December 31, 2025. The adoption of this standard did not have a material impact to our results of operations, cash flows or financial condition

&nbsp;&nbsp;&nbsp;&nbsp;(ii) Recently
 issued accounting pronouncements not yet adopted

In January 2025, the FASB issued ASU 2025-01, "Income Statement – Comprehensive Income – Expense Disaggregation Disclosure (Subtopic 220-40): Clarifying the Effective Date." This pronouncement revises the effective date of ASU 2024-03 and clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Entities within the ASU's scope are permitted to early adopt the accounting standard update. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.

In November 2024, the FASB issued ASU 2024-03, "Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses." This pronouncement introduces new disclosure requirements aimed at enhancing transparency in financial reporting by requiring disaggregation of specific income statement expense captions. Under the new guidance, entities are required to disclose a breakdown of certain expense categories, such as: employee compensation; depreciation; amortization, and other material components. The disaggregated information can be presented either on the face of the income statement or in the notes to the financial statements, often using a tabular format. The ASU is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. Early adoption is permitted. In January 2025, the FASB issued ASU 2025-01, which revises the effective date of ASU 2024-03 (on disclosures about disaggregation of income statement expenses) "to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027." Entities within the ASU's scope are permitted to early adopt the ASU. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact

Other accounting standards issued by FASB do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent standards that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.

**3. BUSINESS ACQUISITION**

On September 29, 2025, the Company and Taoping Holdings Limited ("THL"), a wholly owned subsidiary of the Company, entered into a share purchase agreement with Skyladder Holding Limited to acquire 100% equity interest in Skyladder Group Limited ("SGL") (the "Acquisition"). SGL is a provider of elevator services throughout the entire elevator lifecycle, including sales, installation, repair, maintenance, renovation, and upgrades. The Acquisition was consummated on November 26, 2025, and as a result, SGL became a wholly owned subsidiary of THL. Pursuant to the share purchase agreement, as amended (the "Purchase Agreement"), the total maximum consideration for the Acquisition on the Purchase Agreement date is RMB 152 million (approximately US$21.36 million), payable in 7,882,921 ordinary shares of the Company, with no par value per share (the "Consideration Shares"). The Consideration Shares were issued in a single batch after all closing conditions were satisfied or waived and the equity transfer of SGL had been completed in Hong Kong. All of the Consideration Shares are subject to forfeiture in the event that SGL fails to meet specified revenue and net profit (after tax) targets (the "Performance Targets") for various time periods as set forth in the Purchase Agreement. The fair value of the Consideration Shares as of the acquisition date, determined based on the probability-weighted assessment of achieving the Performance Targets, is reflected in the purchase price allocation set out below.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

The Company completed the valuations necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed, resulting from which the amount of goodwill was determined and recognized as of the acquisition closing date. The following table summarizes the estimated aggregate fair values of the assets acquired, and liabilities assumed as of the completion closing date:

The total maximum consideration under the Purchase Agreement is RMB 152 million (approximately US$21.36 million), representing the aggregate value of all 7,882,921 Consideration Shares if all Performance Targets are achieved and no forfeiture occurs. All of the Consideration Shares are subject to forfeiture contingent upon the achievement of the Performance Targets; accordingly, the fair value of the Consideration Shares recognized in the purchase price allocation reflects the probability-weighted fair value of the Consideration Shares expected to be unlocked as of the acquisition date. The fair value of consideration of $7,252,286 reflected herein represents management's best estimate as of the acquisition closing date, based on the closing market price of TAOP's ordinary shares on that date and the best estimated probability of achieving the Performance Targets.

SCHEDULE OF BUSINESS ACQUISITION ASSETS ACQUIRED, AND LIABILITIES ASSUMED

---

| | |
|:---|:---|
| Fair value of consideration on November 26, 2025 (closing date) | $7252286 |
| Assets acquired (liabilities assumed): |  |
| Cash and cash equivalents | $24826 |
| Accounts receivable | 3643799 |
| Contract assets | 257894 |
| Advances to suppliers | 687945 |
| Inventories | 487455 |
| Other current assets | 284779 |
| Amounts due from related parties | 116752 |
| Property, plant and equipment | 52436 |
| Right of use assets | 88416 |
| Short-term bank loans | (1241930) |
| Accounts payable | (2855540) |
| Advances from customers | (1068002) |
| Accrued payroll and benefit | (97627) |
| Other payables and accrued expenses | (273158) |
| Income tax payable | (28987) |
| Lease liabilities | (104146) |
| Total net liabilities acquired | (25088) |
| Goodwill | 7277374 |
| Total fair value of Consideration | $7252286 |

---

The transaction resulted in allocation of $7,277,374 to goodwill, representing the financial, strategic and operational value of the transaction to the Company. Goodwill is attributed to the premium that the Company paid to obtain the value of the business of SGL and the synergies expected from the combined operations of SGL and the Company, the assembled workforce and their knowledge and experience in provision of elevator services. The total amount of the goodwill acquired is not deductible for tax purposes.

The Company's consolidated statement of operations for the year ended December 31, 2025 included revenue of $2.7 million and net profit of $0.3 million attributable to SGL since November 26, 2025, the acquisition closing date, to the end of December 31, 2025.

**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.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

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.

**5. DISPOSALS OF CONSOLIDATED ENTITIES**

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.

ZJIOT was dissolved on June 25, 2024. The dissolution resulted in a recorded loss of $98,887 for the year ended December 31, 2024.

TDTJS was dissolved on January 15, 2025. The dissolution resulted in a recorded loss of $68,545 for the year ended December 31, 2025.

TEPH and TPGXT was dissolved on April 29, 2025 and June 11, 2025, respectively. The dissolution of these companies results in minimal gain or loss for the year ended December 31, 2025.

The disposals of TDL, TDAL, and TCL represented a strategic shift in the Company's strategy and had a major effect on the Company's operations and financial results. Operations of the three companies have been presented as "discontinued operations" in the Company's consolidated financial statement (Note 10).

The dissolution of TCTCZ, ZJIOT, TDTJS, TEPH and TPGXT were not 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.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

Components of basic and diluted loss per share were as follows for the year ended December 31, 2025, 2024, and 2023:

SCHEDULE OF COMPONENTS OF BASIC AND DILUTED EARNINGS PER SHARE

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024\*** | **2023\*** |
| Net loss attributable to the Company | $(10061723) | $(1819387) | $(697941) |
| Weighted average outstanding ordinary shares-Basic | 1277310 | 239335 | 90319 |
| -dilutive effect of stock options- employees |  |  |  |
| -dilutive effect of stock options- nonemployees |  |  |  |
| Weighted average outstanding ordinary shares- Diluted | 1277310 | 239335 | 90319 |
| Loss per share: |  |  |  |
| Basic | $(7.88) | $(7.60) | $(7.73) |
| Diluted | $(7.88) | $(7.60) | $(7.73) |
| **CONTINUING OPERATIONS** |  |  |  |
| Net loss attributable to the Company | $(10061723) | $(1819387) | $(232150) |
| Weighted average outstanding ordinary shares-Basic | 1277310 | 239335 | 90319 |
| -dilutive effect of stock options- employees |  |  |  |
| -dilutive effect of stock options- nonemployees |  |  |  |
| Weighted average outstanding ordinary shares- Diluted | 1277310 | 239335 | 90319 |
| Loss per share: |  |  |  |
| Basic | $(7.88) | $(7.60) | $(2.57) |
| Diluted | $(7.88) | $(7.60) | $(2.57) |
| **DISCONTINUED OPERATIONS** |  |  |  |
| Net loss attributable to the Company | $- | $- | $(465791) |
| Weighted average outstanding ordinary shares-Basic | 1277310 | 239335 | 90319 |
| -dilutive effect of stock options- employees |  |  |  |
| -dilutive effect of stock options- nonemployees |  |  |  |
| Weighted average outstanding ordinary shares-Diluted | 1277310 | 239335 | 90319 |
| Loss per share: |  |  |  |
| Basic | $- | $- | $(5.16) |
| Diluted | $- | $- | $(5.16) |

---

For the years ended December 31, 2025, 2024, and 2023, there were 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 and the effect would be anti-dilutive. There were -0- stock options for employees, -0- stock options and -0- warrants for nonemployees outstanding that were not included in the computation of dilutive weighted average shares outstanding for the years ended December 31, 2025 and 2024. 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.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

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.

On January 13, 2025, the Company issued an unsecured convertible promissory note with a 12-month maturity (the "Convertible Note") to Investor. The Convertible Note has the original principal amount of $1,311,000 including the original issue discount of $96,000 and Investor's legal and other transaction costs of $15,000. Interest accrues on the outstanding balance of the Convertible Note at 7% per annum. In addition, subject to certain restrictions, Investor may redeem all or any portion of the Convertible Note into ordinary shares of the Company at a price equal to the lesser of (i) $3.00, and (ii) 80% multiplied by the lowest daily volume-weighted average price during the 10 trading days immediately preceding the applicable redemption, subject to a floor price of $0.10.

The computation of diluted loss per share for years ended December 31, 2025, 2024 and 2023 did not assume the conversion of the Note since the assumed conversion would result in decrease in loss per share.

\* On May 29, 2025, the Company implemented a one-for-thirty 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.

**7. RELATED PARTY TRANSACTIONS**

(a) Revenue – related parties

For the years ended December 31, 2025, 2024 and 2023, revenues from Taoping alliance companies, a new media operating organization that includes numerous advertising agencies throughout China, for sales of products, software, and advertising were approximately $nil, $0.1 million and $0.2 million, respectively. Accounts receivable from related parties, net of allowance for credit losses, as of December 31, 2025, 2024 and 2023 were approximately $0.3 million, $0.04 million and $0.6 million, respectively. Advances received from related parties were approximately $0.003 million, $0.04 million and $0.1 million as of December 31, 2025, 2024 and 2023, respectively.

(b) Other revenue – related parties

Other revenue generated from related parties includes system maintenance service provided to Taoping alliance companies, which was approximately $3,800, $2,300 and $nil, for the years ended December 31, 2025, 2024 and 2023, respectively.

(c) Amounts due to related parties

As of December 31, 2025, the net amounts due to related parties were $1.8 million, which consist of amounts due to related parts of $2.4 million and amounts due from related parties of $0.6 million. The amounts due to related parties included (i) borrowing from the Company's Chairman and Co-Chief Executive Officer, Mr. Jianghuai Lin ("Mr. Lin"), of approximately $0.3 million, with an interest rate of 3%, and with maturity dates ranging from November 6, 2026 to December 30, 2026; and (ii) a loan balance of approximately $2.1 million (RMB15 million) from a related company 100% owned by Mr. Lin for 12-month at an interest rate of 4.75% per annum, which mature on April 15, 2026 and May 31, 2026. The amounts due from related parties included the advances to the Company's Co-Chief Executive Officer, Mr. Bin Ma, of approximately $0.6 million, which was interest-free and was due on demand. The amounts due from related parties incurred before the Company's acquisition of SGL in November 2025, and had been fully collected by April 2026.

As of December 31, 2024, the amounts due to related parties were $1.7 million, which included the borrowing from Mr. Lin of approximately $0.4 million, without interest and matured on December 31, 2025, and a loan balance of approximately $1.3 million (RMB10 million) from a related company 100% owned by Mr. Lin for 12-month at an interest rate of 5.85% per annum, which matured on April 15, 2025.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

**8. INVENTORIES**

As of December 31, 2025 and 2024, inventories consist of:

SCHEDULE OF INVENTORIES

---

| | | |
|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2024** |
| Raw materials | $3 | $- |
| Finished goods | 1039671 | 6385905 |
| Inventories, gross | $1039674 | $6385905 |
| Allowance for slow-moving or obsolete inventories | (249467) | (68732) |
| Inventories, net | $**790207** | $**6317173** |

---

For the year ended December 31, 2025, impairments expense for obsolete inventories were approximately $159,000, and losses on inventories due to customers' improbable fulfillment on the sales considerations were approximately $859,000. For the year ended December 31, 2024, there was a reversal of impairments for obsolete inventories in the amount of approximately $14,000. Impairment charges on inventories and losses on inventories due to customers' improbable fulfillment on the sales consideration are included within administrative expenses.

**9. PROPERTY, EQUIPMENT AND SOFTWARE**

As of December 31, 2025 and 2024, property, equipment and software consist of:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Office buildings | $3997682 | $3831577 |
| Electronic equipment, furniture and fixtures | 3925955 | 2966868 |
| Media display equipment | 943864 | 904646 |
| Purchased software | 9355192 | 8149803 |
| Motor vehicle | 11770 | - |
|  | 18234463 | 15852894 |
| Less: accumulated depreciation | (12564247) | (10298566) |
| Property, equipment and software, net | $**5670216** | $**5554328** |

---

Depreciation expense for the year ended December 31, 2025, 2024, and 2023 were approximately $1.6 million, $2.0 million and $2.5 million for continuing operations, and -0- million, -0- million and $0.5 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.

Company's office buildings, with net carrying value of approximately $2.4 million, are used as collateral for its bank loans.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

**10. DISCONTINUED OPERATIONS**

In December 2022, the Company ceased/discontinued 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:

---

| | | | |
|:---|:---|:---|:---|
|  | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| Revenue - Cryptocurrency mining | $- | $- | $- |
| Cost - Cryptocurrency mining |  |  | 488104 |
| Administrative expenses |  |  | (94284) |
| Impairment losses on cryptocurrencies |  |  |  |
| (Gain) on sales of cryptocurrencies |  |  |  |
| Impairment on property, equipment and software | - | - | - |
| Operating (loss) from discontinued operations |  |  | (393820) |
| Subsidy income |  |  |  |
| Other (loss) |  |  | (71984) |
| Interest income |  |  | 13 |
| Interest expense | - | - | - |
| (Loss) from discontinued operations before income taxes |  |  | (465791) |
| Income tax expense | - | - | - |
| Net (loss) from discontinued operations | $- | $- | $**(465791)** |

---

As of December 31, 2025 and 2024, no assets and liabilities of discontinued operations were included within the Consolidated Balance Sheets. Schedule of cashflows is illustrated below:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
|  | **2025** | **2024** | **2023** | **2023** |
| **Net cash provided by operating activities** |  |  |  | 106207 |
| **Net cash provided by investing activities** |  |  |  |  |

---

*CRYPTOCURRENCIES*

As of December 31, 2025, 2024, and 2023, no cryptocurrencies were held by the Company.

**11. BANK LOANS**

(a) Short-term bank loans

---

| | | |
|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2024** |
| Secured short-term loans <sup>(1)</sup> | $2144025 | $1780948 |
| Unsecured short-term loans <sup>(2)</sup> | 1542269 |  |
| Add: amounts due within one year under long-term loan contracts | 319031 | 305775 |
| Total short-term bank loans | $**4005325** | $**2086723** |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) Detailed information
of secured short-term loan balances as of December 31, 2025 and 2024 were as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2024** |
| Guaranteed by Guaranteed by Mr. Lin and IST HK | $1429350 | $1095968 |
| Guaranteed by Mr. Lin and Mr. Du Yong | 714675 | 684980 |
| Total | $**2144025** | $**1780948** |

---

(2) Unsecured short-term loans are fiduciary bank loans, bearing fixed interest rates, ranging from 3.05% to 3.85%, due within one year.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

(b) Long-term bank loans

SCHEDULE OF LONG-TERM BANK LOANS

---

| | | |
|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2024** |
| Secured long-term loans | $6052583 | $6106871 |
| Less: amounts due within one year under long-term loan contracts | (319031) | (305775) |
| Total long-term bank loans | $**5733552** | $**5801096** |

---

Detailed information of secured long-term loan balances as of December 31, 2025 and 2024 were as follows:

SCHEDULE OF SECURED LONG-TERM BANK LOAN BALANCES

---

| | | |
|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2024** |
| Guaranteed by ISIOT and Mr. Lin and Collateralized by real property of ISIOT, future rental income of ISIOT, patents of Biznest, and equity investment of IST HK | $1066296 | $1202825 |
| Collateralized by office buildings of IST and guaranteed by Mr. Lin | 4364520 | 4234135 |
| Guaranteed by Biznest, ISIOT, IST, and Mr. Lin and Collateralized by real property of ISIOT, office buildings of IST, patents of TNM, and future rental income of ISIOT | 621767 | 669911 |
| Total | $**6052583** | $**6106871** |

---

As of December 31, 2025, the Company had short-term and long-term bank loans in total of approximately $9.7 million, which mature on various dates from January 12, 2026 to October 31, 2027. 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 and Mr. Lin. These short-term borrowings bear fixed interest rates ranging from 3.00% to 3.85% per annum. These long-term borrowings bear floating interest rates at the 1-year China Loan Prime Rate ("LPR") plus 40 to 105 basis points, ranging from 3.40% to 4.15% per annum. The weighted average interest rates on short-term and long-term debts were approximately 3.78%, 4.11% and 4.15% for the year ended December 31, 2025, 2024, and 2023, respectively. The interest expenses were approximately $0.3 million, $0.3 million, and $0.4 million, respectively, for the same periods, respectively.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

**12. INCOME TAXES**

Pre-tax (loss) income from continuing operations and discontinued operations for the year ended December 31, 2025, 2024, and 2023 in the following jurisdictions:

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| PRC | $(7130558) | $211617 | $2769080 |
| Hong Kong | (490) | (1278) | (123008) |
| BVI | (2887588) | (2015583) | (3336033) |
| Total (loss) before income taxes | $**(10018636)** | $**(1805244)** | $**(689961)** |

---

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.

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, 2025.

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 is subject to a profit tax rate of 16.5%.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

PRC

Income tax expense (benefit) from continuing operations consists of the following:

SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE (BENEFIT)

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Current taxes | $43087 | $14143 | $7980 |
| Income tax expense | $43087 | $14143 | $7980 |

---

Current income tax expense (benefit) was recorded in 2025, 2024 and 2023 and was related to differences between the book and corporate income tax returns.

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| PRC statutory tax rate | 25% | 25% | 25% |
| Expected income tax (benefit) | $(2504659) | $(451311) | $(172490) |
| Tax rate difference | 479660 | (124003) | (187321) |
| Permanent differences | 645036 | (109077) | (265279) |
| Tax effect of tax losses unrecognized | 1407152 | 698534 | 633070 |
| Under-provision in prior year | 15898 | - | - |
| Income tax expense | $**43087** | $**14143** | $**7980** |

---

The Company's tax loss carry forwards totaling RMB138.9 million ($19.8 million) as of December 31, 2025, substantially all of which were from PRC subsidiaries and will expire on various dates through December 31, 2035. 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 2023 to 2025. 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, 2025, 2024, and 2023.

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**

As of December 31, 2025 and 2024, other current assets consist of:

---

| | | |
|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2024** |
| Advances to unrelated-parties <sup>(i)</sup> | $2097054 | $380144 |
| Advances to a related party | 837606 | 232589 |
| Advances to employees | 46783 | 29497 |
| Other current assets | 76298 | 85354 |
|  | $**3057741** | $**727584** |

---

(i) The
 advances to unrelated parties for business development are non-interest bearing and are due on demand.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

**14. OPERATING LEASES**

The Company leases an office space, a warehouse, and seven dormitories in Tianjin. The office space lease commenced in May 2025 and expires in December 2027; the warehouse lease commenced in November 2024 and expired in October 2025; and the seven dormitories have varying lease terms, with the earliest commencement date in September 2024 and the latest expiration date in November 2026.

The fixed monthly lease payment for the long-term lease of office space is RMB 11,000, RMB 27,000, and RMB 37,000 in 2025, 2026 and 2027 (approximately $1,500, $3,800, and $5,100, respectively), exclusive of applicable taxes and property management fees. The fixed monthly lease payment for the short-term lease of warehouse and seven dormitories ranges from RMB 950 to RMB 3,500 (approximately $100 to $500), exclusive of applicable taxes and property management fees.

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 for short-term lease of approximately $2,000 for the year ended December 31, 2025.

The Company has elected to apply the short-term lease exception to all leases with a term of one year or less.

Weighted-average remaining lease term as of December 31, 2025, and discount rate for its operating leases are as follows:

SCHEDULE OF WEIGHTED AVERAGE LEASE TERM

---

| | |
|:---|:---|
| Weighted-average remaining lease term | 24 months |
| Weighted-average discount rate | 3.50% |

---

The weighted-average discount rate was based on the five-year interest rate of People's Bank of China.

The following table outlines maturities of operating lease liabilities as of December, 2025:

SCHEDULE OF MATURITIES OPERATING LEASE LIABILITIES

---

| | |
|:---|:---|
| Year ending December 31 | Lease for office |
| 2026 | 45758 |
| 2027 | 64061 |
| Total lease payments | 109819 |
| Less: Imputed interest | (4460) |
| **Present value of lease liabilities** | 105359 |

---

**15. LONG-TERM INVESTMENTS**

As of December 31, 2025, the carrying value of the Company's equity investments were $nil, which consisted of the followings:

(1) Equity method investments:

As of December 31, 2025, 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% | $&nbsp;&nbsp;&nbsp;&nbsp; - |
| 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 recognized no losses from equity method investments and no impairment on equity method investments for the year ended December 31, 2025 and 2024. 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.

(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 (if applicable plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer).

As of December 31, 2025 and 2024, the carrying value for the equity investments without readily determinable fair value was $nil and $86,271, respectively. The total initial investments to the equity investments without readily determinable fair value were approximately $647,000. For the year ended December 31, 2025, the additional investments to the equity investments without readily determinable fair value was approximately $23,000. Gain on disposal of approximately $57,000 was recognized for the year ended December 31, 2025. Impairment of approximately $65,000 was recognized for the year ended December 31, 2025. Impairment of approximately $0.02 million was recognized for the year ended December 31, 2024.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

**16. CONVERTIBLE NOTE PAYABLE**

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 $240.0 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 $60.0 per share ("Floor Price"), which is subject to adjustment by consents of both parties.

The Note is recognized initially at fair value, net of debt discounts including original issue discount and Transaction Expense Amount. Amortizations of issuance costs and other Discounts accretion are recorded as interest expenses in the consolidated statement of operations.

The Company recognized interest expense of approximately $34,000 for the year ended December 31, 2024 including interest relating to contractual interest obligation approximately of $30,000 and amortization of the discounts and debt issuance cost approximately of $4,000. As of December 31, 2024, the total amount of principal and accrued interest of the Note was fully converted to the Company's ordinary shares (see Note 19 Equity), and there was no outstanding balance and unamortized debt issuance cost of the Note as at December 31, 2025.

On January 13, 2025, the Company issued another Convertible Promissory Note ("Note-2") in a private placement in aggregate principal amount of $1,311,000. Note-2 matures in 12 months from the issue date (the "Note-2 Maturity Date"), with an annual interest rate of 7%. Note-2 carries an original issue discount of $96,000. 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 ("Note-2 Transaction Expense Amount"). Thus, the net proceeds of Note-2 were $1,200,000. Note-2 is convertible into the Company's ordinary shares at $90.0 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. On the Note-2 Maturity Date, the holder of Note-2 has the right to convert all of the outstanding balance of Note-2 at a price of no less than $3.0 per share ("Note-2 Floor Price"), which is subject to adjustment by consents of both parties.

Note-2 is recognized initially at fair value, net of debt discounts including original issue discount, and Note-2 Transaction Expense Amount, in the amount of $111,000. As of December 31, 2025, the remaining unamortized debt discount was $nil. Amortizations of issuance costs and other Discounts accretion are recorded as interest expenses in the consolidated statement of operations.

The Company recognized interest expense of approximately $570,000 for the year ended December 31, 2025 including interest relating to contractual interest obligation approximately of $34,000 and amortization of the discounts and debt issuance cost approximately of $539,000. As of December 31, 2025, the principal balance and accrued interest of Note-2 was fully converted to the Company's ordinary shares in January, February, March, April, May, July, August, and September, and October 2025 (see Note 19 Equity), and the outstanding balance of Note-2 net of unamortized debt discount was $nil.

**17. OTHER PAYABLES AND ACCRUED EXPENSES**

As of December 31, 2025 and 2024, other payables and accrued expenses consist of:

---

| | | |
|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2024** |
| Advances from unrelated third-parties <sup>(i)</sup> | $332331 | $1190422 |
| Other taxes payable <sup>(ii)</sup> | 2656643 | 2499528 |
| Accrued professional fees | 547350 | 255000 |
| Amount due to employees<sup>(iii)</sup> | 275242 | 257354 |
| Others | 119605 | 90353 |
|  | $**3931171** | $**4292657** |

---

(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.

**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, 2025 and 2024, 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.

**19. EQUITY**

(a) Ordinary shares

The maximum number of shares that the Company authorized to issue is changed from 100,000,000 Ordinary Shares of one class each with no par value to 5,060,000,000 shares dividing into: (1) 5,000,000,000 Ordinary Shares with no par value each; (2) 50,000,000 class A shares with no par value each, and (3)10,000,000 preferred shares with no par value each.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

In April 2023, the Company issued the second phase of approximately 227 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 1,666 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 1,666 ordinary shares was $340,000, which was amortized over the service period.

In May 2023, the Company issued 6,666 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 144 and 1,447 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 2,667 ordinary shares to a certain investor at $138.78 per share, which generated net proceeds of $370,080 for the Company.

In October 2023, the Company issued a total of 10,000 ordinary shares to a certain investor at $59.10 and $55.20 per share, which generated net proceeds of $570,200 for the Company.

In November 2023, the Company issued 6,666 ordinary shares to a certain investor at $41.10 per share, which generated net proceeds of $274,000 for the Company.

In December 2023, the Company issued a total of 14,000 ordinary shares to a certain investor at $37.20 and $33.30 per share, respectively, which generated net proceeds of $494,800 for the Company.

In January 2024, the Company issued a total of 19,333 ordinary shares to an investor at $36.3 and $31.8 per share, respectively, which generated net proceeds of $656,800 for the Company.

In February 2024, the Company issued a total of 10,333 ordinary shares to an investor at $32.7 and $32.4 per share, respectively, which generated net proceeds of $336,300 for the Company.

In March 2024, the Company issued a total of 19,667 ordinary shares to an investor at $31.8, $29.7, and $28.35 per share, respectively, which generated net proceeds of $584,050 for the Company.

In March 2024, the holder of the Company's convertible promissory note issued in September 2023 converted an amount of $50,000 of partial principal and accrued interest with a conversion price at $26.37 per share into 1,896 ordinary shares of the Company.

In April 2024, the holder of the Company's convertible promissory note issued in September 2023 converted an amount of $75,000 of partial principal and accrued interest with a conversion price at $25.737 per share into 2,914 ordinary shares of the Company.

In May 2024, the Company issued a total of 46,000 ordinary shares to an investor at $23.1, $19.89, and $19.5 per share, respectively, which generated net proceeds of $951,240 for the Company.

In May 2024, the holder of the Company's convertible promissory note issued in September 2023 converted an amount of $100,000 of partial principal and accrued interest with a conversion price at $20.01 per share into 4,998 ordinary shares of the Company.

In June 2024, the Company issued 19,334 ordinary shares to an investor at $18.6 per share, which generated net proceeds of $359,600 for the Company.

In July 2024, the Company issued 20,000 ordinary shares to an investor at $18.0 per share, which generated net proceeds of $360,000 for the Company.

In August 2024, the holder of the Company's convertible promissory note issued in September 2023 converted an amount of $100,000 of partial principal and accrued interest with a conversion price at $14.328 per share into 6,979 ordinary shares of the Company.

In September 2024, the holder of the Company's convertible promissory note issued in September 2023 converted an amount of $75,000 of partial principal and accrued interest with a conversion price at $9.822 per share into 7,636 ordinary shares of the Company.

In October 2024, the holder of the Company's convertible promissory note issued in September 2023 converted an amount of $75,000 of partial principal and accrued interest with a conversion price at $13.398 per share into 5,598 ordinary shares of the Company.

In November 2024, the holder of the Company's convertible promissory note issued in September 2023 converted partial principal and accrued interest in an amount of $75,000 and the remaining principal and accrued interest in an amount of $102,507 into 7,650 and 10,737 ordinary shares of the Company, with a conversion price at $9.804 and $9.546 per share, respectively.

In November 2024, the Company issued a total of 40,000 ordinary shares to an investor at $11.46 and $9.0 per share, respectively, which generated a total of net proceeds of $417,400 for the Company.

In December 2024, the Company issued a total of 60,000 ordinary shares to an investor at $8.7 and $8.16 per share, respectively, which generated net proceeds of $504,000 for the Company.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

In December 2024, the Company issued 66,666 ordinary shares with fair value of approximately $820,400 to certain directors, executive officers, and employees as compensations for their services.

In January 2025, the Company issued 40,000 ordinary shares to an investor at $7.947 per share, which generated a total of net proceeds of $317,880 for the Company.

In January 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $50,000, $100,000, and $125,000 of partial principal, into a total of 39,741 ordinary shares of the Company, with a conversion price at $7.398, $7.299, and $6.483 per share, respectively.

In February 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $125,000 of partial principal with a conversion price at $6.249 per share into 20,003 ordinary shares of the Company.

In February 2025, the Company issued 16,667 ordinary shares to an investor at $8.16 per share, which generated a total of net proceeds of $136,000 for the Company.

In March 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $100,000 of partial principal with a conversion price at $6.258 per share into 15,980 ordinary shares of the Company.

In April 2025, the Company issued a total of 266,667 ordinary shares to certain individual investors at $6.0 per share, which generated $1,600,000 net proceeds for the Company.

In April 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $100,000 of partial principal with a conversion price at $4.596 per share into 21,758 ordinary shares of the Company.

In May 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $108,500 of partial principal with a conversion price at $4.818 per share into 22,520 ordinary shares of the Company.

In June 2025, the Company issued 86,000 ordinary shares to an investor at $3.38 per share, which generated net proceeds of $290,680 for the Company.

In July 2025, the Company issued 87,000 ordinary shares to an investor at $3.66 per share, which generated a total of net proceeds of $318,420 for the Company.

In July 2025, the Company issued 266,666 ordinary shares with fair value of approximately $1,355,000 to certain directors, executive officers, and employees as compensations for their services.

In July 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $100,000 of partial principal with a conversion price at $3.1209 per share into 32,042 ordinary shares of the Company.

In August 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $100,000 of partial principal with a conversion price at $2.9494 per share into 33,905 ordinary shares of the Company.

In September 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of $100,000, $125,000, and $75,000 of partial principal, into a total of 121,637 ordinary shares of the Company, with a conversion price at $2.5066, $2.4602, and $2.4244 per share, respectively.

In September 2025, the Company issued 120,000 ordinary shares to an investor at $2.5700 per share, which generated a total of net proceeds of $308,400 for the Company.

In October 2025, the holder of the Company's convertible promissory note issued in January 2025 converted an amount of approximately $136,000 of partial principal with a conversion price at $2.3898 per share into 56,930 ordinary shares of the Company.

In November 2025, the Company issued 7,882,921 ordinary shares for the acquisition of Skyladder Group Limited. The fair value of consideration as of the completion date was approximately $7,252,000, determined based on the probability-weighted assessment of achieving the specified revenue and net profit (after tax) targets.

(b) Stock-based compensation

The following table provides the details of the share-based payments expense during the year ended December 31, 2025, 2024, and 2023:

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended** | **For the Year Ended** | **For the Year Ended** |
|  | **December 31, 2025** | **December 31, 2024** | **December 31, 2023** |
| Employees and directors share-based payments | $1354663 (a) | $820400 (a) | $1360000 (a) |
| Shares issued for services | $- | $136000 (a) | $204000 (a) |
| Total share based payments expenses | $**1354663** | $**956400** | $**1564000** |

---

(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.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

There were no stock options granted to employees during the year ended December 31, 2025, 2024 and 2023. There was no option exercised during the years ended December 31, 2025, 2024 and 2023. The Company did not receive any proceeds related to the cashless exercise of stock options from employees for the years ended December 31, 2025, 2024 and 2023.

As of December 31, 2025 and 2024, no unrecognized compensation expense related to non-vested share options expected to be recognized.

(d) Stock options and warrants to non-employees

Pursuant to the Company's 2016 Equity Incentive Plan and its amendment, for the years ended December 31, 2025, 2024 and 2023, the Company issued nil, nil and nil stock options and warrants to consultants, respectively. The Company expensed to administrative expense approximately $ nil, $ nil and $ nil for the years ended December 31, 2025, 2024 and 2023, respectively. During the year ended December 31, 2025, no options or warrants were exercised.

The warrants and the stock options granted to non-employees in 2021 and 2022 have all been expired as of December 31, 2024.

As of December 31, 2025 and 2024, there was no stock options and warrants outstanding and exercisable.

**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 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) 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. Nevertheless, due to the difference business nature from the other segments, the Chief Operating Decision Maker
 considers it is a separate operating segment of which the performance is separately assessed and financial information for this segment
 is separately disclosed for financial reporting purpose.

(3) Smart
 Elevator (SE) segment - Following the acquisition of Skyladder Group Limited in November 2025, the Company added the Smart Elevator
 (SE) segment. As a provider of elevator services, the Company provides services throughout the entire elevator lifecycle, including
 sales, installation, repair, cloud-based maintenance, renovation, and upgrades. The segment serves a diverse user base, including
 governments, businesses, and households.
 In this segment, the Company generates revenues from elevator sales and installation contracts, as well as maintenance, repair, and
 other service agreements. The SE segment diversifies the Company's cloud-based product offerings and expands the Company's
 presence in the smart building and urban infrastructure market.

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

Selected information by segment is presented in the following tables for the year ended December 31, 2025, 2024, and 2023.

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| **Revenues<sup>(1)</sup>** |  |  |  |
| &nbsp;&nbsp;&nbsp;TIT Segment <sup>(1)</sup> | $17730 | $85145 | $214980 |
| &nbsp;&nbsp;&nbsp;CBT Segment <sup>(1)</sup> | 28120328 | 36587367 | 38420655 |
| &nbsp;&nbsp;&nbsp;SE Segment <sup>(1)</sup> | 2678477 | - | - |
|  | $**30816535** | $**36672512** | $**38635635** |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) Revenues
 by operating segments exclude intercompany transactions.

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| **(Loss) income from operations** |  |  |  |
| &nbsp;&nbsp;&nbsp;TIT Segment | $(42206) | $(87794) | $(110113) |
| &nbsp;&nbsp;&nbsp;CBT Segment | (6631818) | 453726 | 2838305 |
| &nbsp;&nbsp;&nbsp;SE Segment | 307338 |  |  |
| &nbsp;&nbsp;&nbsp;Corporate and others<sup>(2)</sup> | (2866990) | (1974494) | (2925890) |
| (**Loss) from operations** | **(9233676)** | **(1608562)** | **(197698)** |
| &nbsp;&nbsp;&nbsp;Corporate other income (loss), net | 192584 | 261621 | 552058 |
| &nbsp;&nbsp;&nbsp;Corporate interest income | 1356 | 2241 | 2100 |
| &nbsp;&nbsp;&nbsp;Corporate interest expense | (978900) | (460544) | (580630) |
| **(Loss) before income taxes** | **(10018636)** | **(1805244)** | **(224170)** |
| Income tax (expense) benefit | (43087) | (14143) | (7980) |
| Net (loss) from continuing operations | (10061723) | (1819387) | (232150) |
| Net (loss) income from discontinued operations | - | - | (465791) |
| **Net (loss)** | **(10061723)** | **(1819387)** | **(697941)** |
| Less: Loss (income) attributable to the non-controlling interest | - | - | - |
| **Net (loss) attributable to the Company** | $**(10061723)** | $**(1819387)** | $**(697941)** |

---

&nbsp;&nbsp;&nbsp;&nbsp;(2) Includes
 non-cash compensation, professional fees and consultancy fees for the Company.

Non-cash compensation by segment for the year ended December 31, 2025, 2024, and 2023 are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| **Non-cash compensation:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Corporate and others | 1354663 | 956400 | 1564000 |
|  | $**1354663** | $**956400** | $**1564000** |

---

Depreciation and amortization by segment for the year ended December 31, 2025, 2024, and 2023 are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| **Depreciation and amortization:** |  |  |  |
| &nbsp;&nbsp;&nbsp;TIT Segment | $- | $13085 | $43832 |
| &nbsp;&nbsp;&nbsp;CBT Segment | 1642163 | 1993911 | 2472741 |
| &nbsp;&nbsp;&nbsp;SE Segment | 4642 | - | - |
|  | $**1646805** | $**2006996** | $**2516573** |

---

**TAOPING INC.**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| **Provisions for allowance for credit losses on accounts receivable, other receivable and advances to suppliers:** |  |  |  |
| &nbsp;&nbsp;&nbsp;TIT Segment | $1238 | $3996 | $6097 |
| &nbsp;&nbsp;&nbsp;CBT Segment | 5628639 | 4061703 | 1407119 |
| &nbsp;&nbsp;&nbsp;SE Segment | (17448) | - | - |
|  | $**5612429** | $**4065699** | $**1413216** |

---

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| **Inventory obsolescence (reversal) provision:** |  |  |  |
| TIT Segment | $117 | $913 | $2753 |
| CBT Segment | 158997 | (15223) | (56067) |
| SE Segment | 31 | - | - |
|  | $**159145** | $**(14310)** | $**(53314)** |

---

Total assets by segment as at December 31, 2025 and 2024 are as follows:

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| **Total assets** |  |  |
| TIT Segment | $40950 | $84501 |
| CBT Segment | 27179664 | 34261293 |
| SE Segment | 4755802 |  |
| Corporate and others | 7471210 | 782951 |
|  | $**39447626** | $**35128745** |

---

**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 2025, during the compulsory liquidation of Anhui Taoping New Media Co., Ltd., a former affiliate of the Company, the liquidation team claimed unpaid subscribed capital contributions from Taoping New Media Co., Ltd., a subsidiary of the Company and former shareholder of the liquidating entity. Pursuant to the first-instance judgment in April 2025 and the second-instance (final) judgment in December 2025, Taoping New Media Co., Ltd. was ordered to pay the subscribed capital contribution of RMB 200,000 (approximately $27,800), plus case acceptance fee and announcement fee totaling RMB 3,382 (approximately $500). The Company accrued a provision of approximately $27,800 for the loss in 2025. This matter is not material to the Company's consolidated financial condition or results of operations.

**22. CONCENTRATIONS**

For the year ended December 31, 2025, 2024 and 2023, no single customer accounted for greater than 10% of total revenues in 2025 and 2024, one customer accounted for greater than 10% of total revenues in 2023. For the year ended December 31, 2025, 2024 and 2023, the Company's top five customers accounted for 18%, 22% and 30% of the Company's revenues, respectively.

The Company's top five accounts receivable accounted for 26% and 45% of accounts receivable as of December 31, 2025 and 2024, respectively. No single customer accounted for greater than 10% of accounts receivable as of December 31, 2025. Two customers each accounted for greater than 10% of accounts receivable as of December 31, 2024.

For the year ended December 31, 2025, 2024 and 2023, approximately 83%, 78% and 59%, respectively, of total inventory purchases were from five unrelated suppliers. Two suppliers each accounted for greater than 10% of total inventory purchases in 2025, one and two suppliers accounted for greater than 10% of total inventory purchases in 2024 and 2023, respectively.

**23. SUBSEQUENT EVENTS**

On March 2, 2026, the board of directors of the Company, appointed Mr. Bin Ma ("Mr. Ma") as a Co-Chief Executive Officer (the "Co-CEO") of the Company. As the Co-CEO, Mr. Ma will serve alongside Jianghuai Lin, who will continue as the Company's Chairman of the Board and the Co-CEO.

## Exhibit 1.1

**Exhibit 1.1**

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## Exhibit 2.1

**Exhibit 2.1**

**DESCRIPTION OF RIGHTS OF SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE EXCHANGE ACT AS OF DECEMBER 31, 2025**

As of December 31, 2025, Taoping Inc. had one class of securities registered under Section 12 of the Exchange Act—its ordinary shares, no par value. References herein to "we," "us," "our" and "Company" refer to Taoping Inc.

The following represents a summary of our securities and does not purport to be complete. It is subject to and qualified in its entirety by reference to our Amended and Restated Memorandum and Articles of Association. We encourage you to read our memorandum and articles of association, listed as an exhibit to this report, as well as the applicable provisions of British Virgin Islands ("BVI") law for additional information.

***Type and Class of Securities (Item 9.A.5 of Form 20-F)***

Our Amended and Restated Memorandum and Articles of Association authorize the issuance of up to 5,060,000,000 shares divided into three classes as follows: (a) 5,000,000,000 ordinary shares with no par value each; (b) 50,000,000 class A shares with no par value each (the "Class A Shares"); and (c) 10,000,000 preferred shares with no par value each (the "Preferred Shares").

As of December 31, 2025, there were 9,552,783 ordinary shares, 50,418 Class A Shares, and no Preferred Shares issued and outstanding. Our ordinary shares are listed on the Nasdaq Capital Market under the trading symbol "TAOP." Our shares may be held in either certificated or uncertificated form. We may issue registered shares only and are not authorized to issue bearer shares.

***Preemptive Rights (Item 9.A.3 of Form 20-F)***

Our shareholders do not have preemptive rights.

***Limitations or Qualifications (Item 9.A.6 of Form 20-F)***

None.

***Rights of Other Types of Securities (Item 9.A.7 of Form 20-F)***

Not applicable.

***Rights of Securities (Item 10.B.3 of Form 20-F)***

*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 or each Class A 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 our shareholders. Each Class A Share confers on the shareholder the right to 100 votes at a meeting of the shareholders or on any resolution of shareholders on all matters before our shareholders.

*Winding Up*. The holder of each ordinary share or each Class A 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.

*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 one-third 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.

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.

***Rights of Class A Shares***

*Conversion*. Each Class A Share is convertible into one ordinary share at the option of the holder upon giving five days' notice to the Company. Ordinary shares are not convertible into Class A Shares under any circumstances.

*Automatic Conversion*. Notwithstanding any other provision of the articles of association, each Class A Share shall be automatically converted into an ordinary share immediately upon the holders of Class A Shares in aggregate beneficially owning less than 5% of the total issued and outstanding Class A Shares as of the date of registration of the Amended and Restated Memorandum and Articles of Association.

*Eligible Holders*. Class A Shares may only be issued to the following eligible recipients: (1) an incumbent director of the Company, (2) an incumbent executive officer of the Company, (3) incumbent members of the Company, or (4) companies wholly owned by such directors, executive officers, or members, at such times and on such terms, for such consideration, and subject to such conditions as the directors, in their absolute discretion, may think fit.

*Transfer Restrictions*. Unless a holder of Class A Shares otherwise notifies the Company prior to any transfer that the proposed transferee is a "Permitted Transferee" (as defined below) and provides satisfactory evidence thereof, as determined by the directors in their sole discretion, any Class A Shares that it purports to transfer shall automatically be converted into ordinary shares immediately prior to the consummation of such transfer. The directors shall have the authority to review and approve or reject the proposed transfer based on the transferee's status. A "Permitted Transferee" includes: (1) any eligible Class A holders; and (2) in respect of a person, any other person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such person, and (a) in the case of a natural person, includes, without limitation, such person's spouse, parents, children, siblings, mother-in-law and father-in-law and brothers and sisters-in-law, whether by blood, marriage or adoption or anyone residing in such person's home, a trust for the benefit of any of the foregoing, a company, partnership or any natural person or entity wholly or jointly owned by any of the foregoing and (b) in the case of an entity, includes a partnership, a corporation or any natural person or entity which directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such entity.

***Rights of Preferred Shares***

Preferred Shares may be issued from time to time in one or more series. The Board of Directors is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series.

***Requirements to Change the Rights of Holders of Ordinary Shares (Item 10.B.4 of Form 20-F)***

Under our 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 voting rights of the issued shares of the class.

***Limitations on the Rights to Own Ordinary Shares (Item 10.B.6 of Form 20-F)***

There are no limitations on the right of non-residents or foreign persons to own our securities imposed by BVI law or by our memorandum and articles of association.

***Provisions Affecting Any Change of Control (Item 10.B.7 of Form 20-F)***

The ability of our Board of Directors to issue Preferred Shares without shareholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management.

***Ownership Threshold (Item 10.B.8 of Form 20-F)***

There are no provisions governing the ownership threshold above which shareholder ownership must be disclosed imposed by BVI law or by our memorandum and articles of association.

***Differences Between the Law of Different Jurisdictions (Item 10.B.9 of Form 20-F)***

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.

*<u>Protection for Minority Shareholders</u>*

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.

*<u>Powers of Directors</u>*

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 our total assets.

*<u>Conflict of Interests</u>*

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 of Directors. 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.

*<u>Written Consent and Cumulative Voting</u>*

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.

*<u>Takeover Provisions</u>*

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 Preferred Shares in different series and, with respect to each 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 or Class A 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.

*<u>Shareholder's Access to Corporate Records</u>*

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 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.

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.

*<u>Indemnification</u>*

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.

*<u>Mergers and Similar Arrangements</u>*

Under the BVI Act two or more BVI companies or a BVI company and a 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.

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:

&nbsp;&nbsp;&nbsp;&nbsp;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;

&nbsp;&nbsp;&nbsp;&nbsp;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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.

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:

&nbsp;&nbsp;&nbsp;&nbsp;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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.

*<u>Shareholders' Suits</u>*

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.

***Changes in Capital (Item 10.B.10 of Form 20-F)***

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 number of shares authorized to be issued.

***Debt Securities (Item 12.A of Form 20-F)***

Not applicable.

***Warrants and Rights (Item 12.B of Form 20-F)***

As of December 31, 2025, the Company had no outstanding warrants and convertible notes.

***Other Securities (Item 12.C of Form 20-F)***

Not applicable.

***American Depositary Shares (Items 12.D.1 and 12.D.2 of Form 20-F)***

Not applicable.

## Exhibit 4.11

**Exhibit 4.11**

No: __________

**OFFICE LEASE AGREEMENT**

Party A (Lessor): Tianjin Tiankai Development Group Co., Ltd.

Legal Representative: Zhang Xueying

Mailing Address: Building 2, Tianjin Science and Technology Plaza, Keyan West Road,

Nankai District, Tianjin

Contact Phone: __________

Party B (Lessee): Skyladder New Century (Tianjin) IoT Technology Co., Ltd.

Legal Representative: Ma Bin

Mailing Address: Unit 2106-1, Building 2, Tianjin Science and Technology Plaza, Keyan West Road, Nankai District, Tianjin (Tiankai Park)

Contact Phone: __________

In accordance with the Civil Code of the People's Republic of China and other relevant laws and regulations, Party A and Party B, based on the principles of voluntariness, equality, fairness, and good faith, have reached the following agreement regarding the lease of Party A's house by Party B through mutual consultation:

I. Basic Information of the Property

(i) The leased premises are located at Rooms 3-1-2101, 3-1-2102, 3-1-2103, 3-1-2104, and 3-1-2105, Building 3, Tianjin Science and Technology Plaza, west of Keyan East Road, Nankai District, Tianjin. During the lease term, Party A reserves the exclusive right to use the roof of the building where the leased premises are located.

(ii) The gross floor area of the leased premises is 764.81 square meters. The rent, property management fees, and other charges calculated based on the area of the premises shall all be calculated using the area stipulated in this clause as the basis.

The aforementioned gross floor area shall be subject to the area recorded in the Real Estate Title Certificate. If the Real Estate Title Certificate for the leased premises has not yet been issued, the area recorded in the currently valid survey report shall prevail; if a Real Estate Title Certificate is subsequently obtained for the leased premises and the area recorded therein is inconsistent with the survey report, the area recorded in the Real Estate Title Certificate shall prevail. Any resulting rent adjustment shall be settled on a pro-rata basis, with any overpayment refunded and any underpayment supplemented.

(iii) Party B must use the premises according to the purpose specified at the time of delivery and shall not use the leased premises for any purpose other than the aforementioned purpose. If Party B violates the above provisions, Party A has the right to terminate this Contract immediately and repossess the leased premises, and Party B shall indemnify Party A for all losses suffered as a result.

**II. Lease Term and Delivery**

(i) The lease term shall commence on May 6, 2025 (the "Commencement Date") and expire on December 31, 2027 (the "Lease Expiration Date"). Party A shall deliver the premises and their ancillary facilities and equipment to Party B in the agreed condition prior to May 6, 2025. Party A and Party B shall jointly inspect the condition of the premises and their ancillary facilities and equipment and shall jointly execute a handover record. If the handover is delayed due to reasons attributable to Party B, as of the Commencement Date, Party A shall be deemed to have delivered the premises to Party B in satisfactory condition, and Party B shall remain obligated to pay the rent, property management fees, and other expenses as stipulated in this Contract.

(ii) Upon expiration or early termination of the lease term, Party B shall immediately restore the leased premises and their fixtures, fittings, and equipment to their original condition as existed at the time of delivery by Party A, and shall return the leased premises to Party A in good, clean, leasable, structurally sound, and well-maintained condition. Upon expiration of the lease term, if Party B is unable to return the premises on schedule due to special circumstances, Party B shall provide prior written notice to Party A. After obtaining Party A's written consent, Party B may vacate the premises and complete the return procedures within a reasonable grace period, provided that Party B shall continue to pay rent, property management fees, and other expenses during such grace period. Party B shall, within thirty (30) days from the date of termination or rescission of this Contract, complete the industrial and commercial deregistration or change of address procedures for the registered address or business address located at the leased premises.

(iii) If Party B intends to renew the lease prior to the expiration of the lease term, Party B shall provide written notice to Party A three (3) months before the Lease Expiration Date. The rent for the renewal term shall be negotiated and determined by the parties in good faith. If the parties reach a renewal agreement, they shall execute a new lease contract. If Party B does not renew upon expiration or the parties fail to reach a renewal agreement, Party A or its authorized representative may, within one (1) month prior to the Lease Expiration Date, upon prior notice to Party B, accompany prospective tenants to inspect the leased premises. Party B shall make preparations for moving out and shall vacate the premises upon expiration of this Contract.

**III. Rent and Property Management Fees**

(i) Standards and Amounts of Rent and Property Management Fees Calculated on a daily basis: Rent is RMB 2.5 per day per square meter; Property management fee is RMB 0.8 per day per square meter.

(ii) Payment Schedule Within three (3) days from the date of signing this Contract, the Lessee shall pay 20% of the standard rent and property management fees (including tax) for the initial installment period (from May 6, 2025 to June 30, 2025), amounting to RMB 28,268 (in words: Twenty-Eight Thousand Two Hundred Sixty-Eight Renminbi Only), of which: rent excluding tax is RMB 19,646.79, tax amount is RMB 1,768.21 (tax rate 9%); property management fees excluding tax is RMB 6,465.09, tax amount is RMB 387.91 (tax rate 6%). Thereafter, during the first lease year (May 6, 2025 to December 31, 2025), the Lessee shall pay 20% of the standard rent and property management fees (including tax) for each calendar quarter within ten (10) days prior to the beginning of such quarter.

During the second lease year (January 1, 2026 to December 31, 2026), Party B shall pay 50% of the standard rent and property management fees (including tax) for each quarter within ten (10) days prior to the beginning of such quarter.

During the third lease year (January 1, 2027 to December 31, 2027), the Lessee shall pay 70% of the standard rent and property management fees (including tax) for each quarter within ten (10) days prior to the beginning of such quarter.

(iii) Payment Method Party B shall pay rent and property management fees in Renminbi (RMB) in accordance with relevant laws and regulations, and remit the amount to the account designated by Party A or by other means acceptable to Party A.

Account Name: __________<br> Account Number: __________<br> Bank: __________

(iv) If the Lessee fails to pay the rent and property management fees to the Lessor in accordance with the provisions of this Contract, the Lessee shall pay a late payment penalty of 0.05% of the total overdue amount for each day of delay. If the delay exceeds 60 days, this Contract shall automatically terminate, and the Lessor shall have the right to claim all losses caused by the Lessee's default.

(v) Settlement and Invoicing of Rent and Property Management Fees<br>

1. The Lessor shall conduct assessment on the Lessee for rent and property management fees refund during the fourth quarter of the first year, the fourth quarter of the second calendar year, and the fourth quarter of the third calendar year (collectively, the "Assessment Dates"), based on the assessment indicators and content set forth in Appendix 1.

2. The Lessor shall determine the actual amount of rent and property management fees to be borne by the Lessee based on the assessment results. If the assessment result is "Good" or above, the Lessor shall refund the corresponding proportion of the rent and property management fees already paid by the Lessee for the relevant assessment year in accordance with this Contract. If the assessment result is "Unsatisfactory," no refund shall be made.

3. The Lessor shall issue an invoice to the Lessee based on the assessment results.

4. The Lessor shall remit the refundable rent and property management fees to the account designated by the Lessee (the Lessee shall provide a written explanation of the account information with its company seal affixed).

(vi) Adjustment of Rent and Property Management Fees

The Lessor shall conduct two assessments for adjustment of rent and property management fees based on the first two assessments (assessment indicators and content are set forth in Appendix 1), as follows:

1. If the first assessment is unsatisfactory, the rent and property management fees for the second lease year (January 1, 2026 to December 31, 2026) shall be RMB 4.3 per day per square meter (rent: RMB 3.3 per day per square meter; property management fees: RMB 1.0 per day per square meter);

2. If the first assessment is passed but the second assessment is unsatisfactory, the rent and property management fees for the third lease year (January 1, 2027 to December 31, 2027) shall be RMB 4.3 per day per square meter (rent: RMB 3.3 per day per square meter; property management fees: RMB 1.0 per day per square meter);

3. If both the first and second assessments are unsatisfactory, the rent and property management fees for the third lease year (January 1, 2027 to December 31, 2027) shall be RMB 6.6 per day per square meter (rent: RMB 5.0 per day per square meter; property management fees: RMB 1.6 per day per square meter).

In the event of adjustment of rent and property management fees due to unsatisfactory assessments, the adjusted amounts shall be paid in accordance with the payment schedule set forth in this Contract.

IV. Security Deposit

(i) Payment of Security Deposit

When paying the first installment of rent, the Lessee shall simultaneously pay the Lessor a security deposit of RMB 10,000. The Lessor shall issue a receipt as security for the Lessee's compliance with and performance of the provisions of this Contract.

(ii) Refund of Security Deposit

The Lessor shall refund the security deposit without interest within 10 business days after all of the following conditions are satisfied:

This Contract is terminated, the Lessee vacates all leased property and restores the property to its original condition; within 30 days from the expiration of the lease term or termination of the Contract, the Lessee completes all procedures for changing (or canceling) its industrial and commercial registration and tax registration; the Lessee has no outstanding fees during the lease term and has no unpaid liquidated damages, compensation, or other amounts payable to the Lessor.

(iii) Deduction from Security Deposit.

If the Lessee commits any of the following acts, the Lessor shall have the right to directly deduct the corresponding amount from the security deposit, and the Lessee shall have no defense or objection:

1. If the Lessee terminates this Contract prior to its expiration for reasons other than those stipulated by law or contract, or if the Contract is terminated due to the Lessee's violation of laws, regulations, or the parties' agreement, the Lessor shall have the right to deduct the entire security deposit.

2. If the Lessee fails to restore the property to its original condition after termination or cancellation of this Contract, the Lessor shall have the right to deduct the entire security deposit. If the restoration cost assessed by the Lessor exceeds the security deposit amount, the Lessee shall pay the Lessor full compensation for the excess amount.

3. If the Lessee fails to complete the change or cancellation of its registered address within 30 days from the date of vacating, the Lessee shall be deemed to have automatically forfeited the entire security deposit.

4. During the lease term, if the Lessee defaults on rent, property management fees, or other charges, or if the Lessee causes losses that require compensation, the Lessor shall have the right to immediately deduct the relevant amount from the security deposit. If the security deposit is fully deducted and still insufficient to cover the amount owed, the Lessee shall make up the shortfall, and the Lessee shall replenish the deducted portion of the security deposit within seven (7) days after the Lessor makes a written request.

**V. Energy and Other Related Charges**

From the Rent Commencement Date, the Lessee shall bear the responsibility for the use and management of the property and the energy costs incurred, including water, electricity, and heating, as specifically provided below:

(i) During the lease term, the Lessee shall pay in full and on time the water, electricity, and heating costs incurred by using the property to the Lessor, a third party designated by the Lessor, or the park property management entity in accordance with relevant regulations.

(ii) If the Lessee renovates the leased property, it shall pay a corresponding renovation deposit to the Lessor's property management entity in accordance with the provisions of the "Tiankai Higher Education Science and Technology Innovation Park Renovation Manual," and the renovation matters shall be carried out in accordance with that manual.

(iii) In addition to the above fees, if there are other charges, the Lessee shall pay them in accordance with relevant regulations. If the Lessor advances payment of fees that should have been paid by the Lessee, the Lessee shall pay the corresponding amount to the Lessor based on the relevant payment vouchers provided by the Lessor, and the Lessor may also directly deduct such fees from the security deposit.

**VI. Use and Maintenance of the Property**

(i) Use of the Property

1. During the lease term, the Lessee shall use the leased property, equipment, and facilities reasonably. If issues arise due to defects or quality problems in the structure, fire protection, or air conditioning of the property, the Lessor shall promptly repair and maintain them. If such issues are caused by the Lessee's renovation, demolition, or alteration, the Lessee shall be responsible for repair and maintenance. From the date the Lessee confirms acceptance of the property handover, the Lessee shall be responsible for the maintenance of interior doors and windows, wall and floor surfaces, electrical wiring (both high and low voltage), furniture, etc. If damage occurs during the lease term due to the Lessee's actions, the Lessee shall repair, maintain, and restore the same at its own expense.

2. The Lessee shall comply with national and Tianjin municipal laws, regulations, and policies regarding safety management. The Lessee and its legal representative or principal responsible person shall bear primary responsibility for safety management in relation to fire safety, electrical safety, food safety, work safety, environmental safety, and the management of facilities and equipment within the leased property.

3. The Lessee shall use electrical power in accordance with the designed electrical standards of the property and shall comply with energy management regulations (including electricity, gas, water, etc.) of the Lessor and the building's property management company. The Lessee shall not overload electrical circuits or install unauthorized wiring. If the Lessee intends to modify existing electrical wiring, it shall obtain the Lessor's written consent and engage a qualified professional design and construction unit. The use of high-power electrical appliances (those using 220V AC and exceeding 1200W, such as small space heaters, induction cookers, iodine tungsten lamps, etc.) is prohibited within the leased property.

4. The Lessee is prohibited from storing or using hazardous chemicals within the leased property, including but not limited to explosives, compressed gases and liquefied gases, flammable liquids, flammable solids, substances that are spontaneously combustible or become flammable when wet, oxidizers and organic peroxides, toxic and infectious substances, radioactive materials, and corrosive materials.

5. Except for signage and nameplates uniformly designed and provided by the Lessor, the Lessee shall not display any advertising, light boxes, signage, decorations, flags, posters, or other objects visible from outside the building on the interior or exterior of the leased property. The Lessor shall have the right to remove any advertising, light boxes, signage, decorations, flags, posters, or other objects installed or displayed by the Lessee in violation of this clause, and all costs incurred as a result shall be borne by the Lessee.

(ii) Renovation of the Property

1. If the Lessee intends to carry out any renovation work on the property (including but not limited to interior partitioning, construction, alteration, or installation/replacement of equipment or devices), the Lessee shall obtain the Lessor's written consent and obtain all necessary approvals from relevant government authorities before officially commencing office use. The Lessee shall not damage the main structure of the property. All costs arising from such activities shall be borne by the Lessee. The Lessee shall be responsible for the legality, reasonableness, and consequences of any renovation plan, and shall bear corresponding liability. The Lessor and designated property management company's consent to the Lessee's renovation plan shall not be deemed to constitute their acceptance of responsibility or liability for any disputes or damages arising from such plan. Any disputes or liability arising from the Lessee's renovation shall be independently borne by the Lessee. Upon expiration of the lease term, the Lessee shall restore the property to its original condition.

2. The Lessee shall comply with the Lessor's requirements regarding renovation or decoration of the leased property, shall file a declaration with the competent fire safety authority as required, and shall carry out construction in accordance with the fire safety authority's approved drawings. Fire safety management shall be strengthened during construction, and hot work procedures shall be completed with the property management company for any construction involving hot work. The Lessee shall not carry out any interior renovation or equipment installation on the leased property until the above procedures are completed.

3. The Lessee shall ensure that its renovation work does not cause any damage to the leased property, the building structure, or its equipment, and does not affect other users' normal use of the building or their leased properties. If this provision is violated, the Lessee shall compensate the Lessor for all losses incurred and for any personal injury or property damage caused to any person.

4. The Lessee warrants that the renovation work will not affect the normal office operations of other tenants in the park. Any disputes or liability arising from the Lessee's renovation (including but not limited to personal injury, property damage, and complaints from neighboring parties) shall be solely resolved and borne by the Lessee. The Lessor shall have the right to regulate and manage the Lessee's renovation, partitioning, construction, equipment installation, or alteration of the property, including managing the entry and exit of the Lessee's construction personnel, material transportation, construction hours, and construction safety, to ensure the safe operation of the overall project and to prevent the Lessee's actions from causing nuisance to other users or tenants of the property. The Lessee shall comply with and actively cooperate with the Lessor's management.

5. The Lessee shall ensure that the leased property is free from noise, odors, or other disturbances that would affect others' office work. The Lessee shall collect and store all renovation garbage and waste in the area designated by the Lessor and shall arrange for the regular collection and transportation of garbage or waste at its own expense. If the Lessee fails to clean up for an extended period, affecting the Lessor's project operations, all costs incurred by the Lessor for disposal shall be borne by the Lessee.

(iii) Maintenance of the Property

1. The Lessor may enter the leased property for inspection and maintenance after giving reasonable prior notice to the Lessee. However, in an emergency, the Lessor may enter the leased property without prior notice and, if necessary, use force and break doors and windows to gain entry.

2. The Lessee shall maintain the leased property and its facilities in good, clean, rentable, and well-maintained condition (except for normal wear and tear). If the Lessee discovers issues requiring repair by the Lessor (such as structural or fire safety issues), it shall promptly notify the Lessor.

3. During the lease term, the Lessee shall maintain the rentable and good condition of the property and its equipment and facilities, and at its own expense, perform ongoing repairs, maintenance, and painting from time to time in accordance with the Lessor's regulations to keep the property and its interior neat and aesthetically pleasing. Any personal injury, property damage, falling of suspended objects, collapse, or any personal or property losses or safety issues arising from the Lessee's renovation, decoration, or daily maintenance of related facilities and equipment shall be the responsibility of the Lessee and shall be borne legally, with no liability on the part of the Lessor. During the lease term, any accidents (including but not limited to equipment falling, collapse, machinery overturning, electric shock, electric leakage, etc.) caused by construction quality issues in the Lessee's renovation and decoration works, the Lessee's negligence in maintenance, aging of facilities and equipment, or malfunctions, resulting in any personal or property damage, the Lessee shall be fully liable.

4. The Lessee shall take all preventive measures to protect the interior of the leased property from damage by fire, water, storms, high winds, typhoons, etc., and shall ensure that all windows are securely closed when severe weather threatens. If any defects or damage to any part of the interior of the leased property occur due to the Lessee's inaction or negligence, the Lessee shall repair the same.

5. No employee, worker, or related person of the Lessee shall enter or approach any technical or maintenance facilities of the building, especially electrical rooms, without the Lessor or the Lessor's designated personnel being present.

6. If any electrical device, wire, conduit, or pipe installed by the Lessee becomes hazardous, the Lessee shall promptly dismantle, repair, or replace the same.

**VII. Representations and Warranties**

(i) The Lessor makes the following representations and warranties to the Lessee:

1. Inspection and Maintenance of Common Areas and Common Facilities:

The management entity designated by the Lessor shall be responsible for conducting regular safety inspections and maintenance of the common areas and common facilities of the building, keeping them in good and serviceable condition. Upon discovering damage or malfunction, or receiving written notice from the Lessee regarding damage or malfunction, the management entity designated by the Lessor shall promptly carry out repairs and maintenance.

2. Security, Fire Protection, Environmental Sanitation:

The management entity designated by the Lessor shall be responsible for matters relating to security, fire protection, and environmental sanitation of the common areas and common facilities.

(ii) The Lessee makes the following representations and warranties to the Lessor:

1. Without the Lessor's written consent, the Lessee shall not sublease, sublet, or otherwise transfer the right to use the leased property or any part thereof in any form or manner.

2. The Lessee shall comply with all provisions of Article VI regarding the use and maintenance of the property.

3. Given the unique nature of the leased property under this Contract, the Lessee waives its right of first refusal with respect to the leased property.

**VIII. Amendment and Termination of the Contract**

(i) This Contract may be terminated by mutual agreement of the parties through negotiation.

(ii) If the Contract cannot be performed due to force majeure, the affected party shall notify the other party, and this Contract shall terminate upon the notice reaching the other party.

(iii) If one party intentionally conceals material facts related to the conclusion of this Contract or provides false information, the other party shall have the right to terminate this Contract.

(iv) The Lessor shall have the right to unilaterally terminate this Contract and take back the property under any of the following circumstances:

1. The Lessee violates any provision of this Contract and fails to remedy the violation within seven days after receiving written notice from the Lessor;

2. The Lessee fails to complete the registration of a company at the leased property address or complete the change of registered address for an enterprise relocating into the property within three months from the Rent Commencement Date;

3. The Lessee sublets, subleases, or otherwise transfers the right to use the leased property during the lease term;

4. The Lessee fails to complete renovation, carry out substantive business operations, or substantially commence its project within three months from the Rent Commencement Date;

5. The Lessee has an average daily attendance of less than 4 employees per 100 square meters for 20 consecutive business days;

6. If the Lessee fails two consecutive assessments, the Lessor shall have the right to terminate this Contract or reallocate leased space for the Lessee; or if the Lessor agrees to allow the Lessee to continue leasing the space, the provisions of Article III(vi) of this Contract shall apply, in each case with the Lessee's unconditional cooperation;

7. The Lessee's tax payment amount and operating revenue both fall below 50% of the assessment targets for two consecutive assessments;

8. The Lessee defaults on rent, property management fees, security deposit, water/electricity/heating charges, or other fees and refuses to pay after written demand from the Lessor;

9. The Lessee is ordered to cease operations or has its business license revoked by the market supervision and administration authority, is adjudicated bankrupt or placed into liquidation by a judicial authority, or is included in the list of judgment debtors subject to enforcement for dishonored judgments or the list of parties involved in major tax law violation cases;

10. The Lessee engages in illegal activities or violates Tiankai Park management regulations, causing economic or reputational harm to Tiankai Park;

11. A safety accident occurs within Tiankai Park due to the Lessee's actions;

12. Other circumstances stipulated by laws, regulations, policy documents, and relevant occupancy legal agreements.

(v) Other circumstances for termination of the contract as provided by law.

**IX. Liability for breach of contract**

Both parties shall comply with all provisions of this Contract. If either party violates any provision of this Contract, it shall bear the corresponding default liability and compensate for all losses caused. Such losses include all direct losses and provable indirect losses suffered by the non-defaulting party as a result of the termination or early termination of this Contract.

**X. Confidentiality**

Unless required by law, both parties agree that during the term of this Contract and after its termination, they shall not provide the content of this Contract and all appendices to any other party in any manner without the other party's written consent. Both parties have a confidentiality obligation regarding material information and matters, including the other party's commercial secrets, obtained during the performance of this Contract. If this confidentiality obligation is breached, the breaching party shall bear all losses caused to the non-breaching party.

**XI. Exemption Clause**

If this Contract cannot be performed or cannot be fully performed due to force majeure, neither party shall be held liable for breach of contract. However, the party affected by force majeure shall notify the other party within three (3) days after the occurrence of the force majeure event.

**XII. Dispute Resolution**

Any disputes arising between the parties in connection with this Contract shall first be resolved through negotiation. If negotiation fails, the dispute shall be submitted to the competent people's court of the place where the leased property is located.

**XIII. Miscellaneous**

(i) Any notices or demands in connection with this Contract shall be made in writing and sent to the correspondence address set forth at the beginning of this Contract. If either party changes its address, it shall notify the other party within five (5) days after such change.

(ii) During the term of this Contract, if relevant laws, regulations, or policies of the State or Tianjin Municipality change, the terms of this Contract may be adjusted accordingly.

(iii) Matters not covered in this Contract shall be resolved by the parties through negotiation, and a supplementary agreement shall be signed. The supplementary agreement shall have the same legal effect as this Contract. In the event of any inconsistency, the supplementary agreement shall prevail.

(iv) This Contract shall become effective upon the affixation of the official seals of both parties.

(v) This Contract is executed in four (4) originals, with each party holding two (2) originals, all having equal legal effect.

(Signature page below, no text)

---

| | |
|:---|:---|
| Party A: | Party B: |
| (Signature) | (Signature) |
| Date: | Date: |

---

## Exhibit 8.1

**Exhibit 8.1**

**List of Subsidiaries**

---

| | | |
|:---|:---|:---|
| **Name of Subsidiary** | **Jurisdiction of Incorporation or Organization** | **Percentage of <br> Ownership** |
| Taoping Holdings Limited | British Virgin Islands | 100% |
| Taoping Group (China) Ltd. | Hong Kong | 100% |
| Information Security IoT Tech. Co., Ltd. | PRC | 100% |
| TopCloud Software (China) Co., Ltd. | PRC | 100% |
| Information Security Tech. (China) Co., Ltd. | PRC | 100% |
| Biznest Internet Technology Co., Ltd. | PRC | 100% |
| iASPEC Bocom IoT Tech. Co., Ltd. | PRC | 100% |
| Taoping New Media Co., Ltd. | PRC | 100% |
| Fujian Taoping Investment Co., Ltd. | PRC | 100% |
| Taoping Industrial (Yunnan) Co., Ltd. | PRC | 100% |
| Skyladder Group Limited. | Hong Kong | 100% |
| Skyladder (Tianjin) Technology Development Co., Ltd. | PRC | 100% |
| Shenzhen Smart Skyladder IoT Co., Ltd. | PRC | 100% |
| Tianjin Zeyuan Elevator Co., Ltd. | PRC | 100% |
| Skyladder New Century (Tianjin) IoT Technology Co., Ltd. | PRC | 100% |
| Tianjin Weida Elevator Co., Ltd. | PRC | 100% |

---

## Exhibit 12.1

**Exhibit 12.1**

**CERTIFICATIONS**

I, Jianghuai Lin, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I
 have reviewed this annual report on Form 20-F of Taoping Inc.;

2. Based
 on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
 to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
 the period covered by this report;

3. Based
 on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
 respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this
 report;

4. The
 company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
 (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
 Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed
 such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
 to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others
 within those entities, particularly during the period in which this report is being prepared;

(b) Designed
 such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
 supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
 for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated
 the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the
 effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
 and

(d) Disclosed
 in this report any change in the company's internal control over financial reporting that occurred during the period covered
 by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control
 over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;5. The
 company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
 reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing
 the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All
 deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
 the company's ability to record, process, summarize and report financial information; and

(b) Any
 fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal
 control over financial reporting.

Date: Aprile 30, 2026

---

| |
|:---|
| */s/ Jianghuai Lin* |
| Jianghuai Lin |
| Co-Chief Executive Officer (Principal Executive Officer) |

---

## Exhibit 12.2

**Exhibit 12.2**

**CERTIFICATIONS**

I, Liqiong (Iris) Yan, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I
 have reviewed this annual report on Form 20-F of Taoping Inc.;

2. Based
 on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
 to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
 the period covered by this report;

3. Based
 on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
 respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this
 report;

4. The
 company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
 (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
 Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed
 such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
 to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others
 within those entities, particularly during the period in which this report is being prepared;

(b) Designed
 such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
 supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
 for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated
 the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the
 effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
 and

(d) Disclosed
 in this report any change in the company's internal control over financial reporting that occurred during the period covered
 by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control
 over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;5. The
 company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
 reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing
 the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All
 deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
 the company's ability to record, process, summarize and report financial information; and

(b) Any
 fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal
 control over financial reporting.

Date: April 30, 2026

---

| |
|:---|
| */s/ Liqiong (Iris) Yan* |
| Liqiong (Iris) Yan |
| Chief Financial Officer |

---

## Exhibit 13.1

**Exhibit 13.1**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO SECTION 906<br> OF THE SARBANES-OXLEY ACT OF 2002**

The undersigned, Jianghuai Lin, the Co-Chief Executive Officer (Principal Executive Officer) of TAOPING INC. (the "Company"), DOES HEREBY CERTIFY that:

1. The Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2025 (the "Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has executed this statement this 30<sup>th</sup> day of April, 2026.

---

| |
|:---|
| */s/ Jianghuai Lin* |
| Jianghuai Lin |
| Co-Chief Executive Officer |
| *(Principal Executive Officer)* |

---

A signed original of this written statement required by Section 906 has been provided to Taoping Inc. and will be retained by Taoping Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

## Exhibit 13.2

**Exhibit 13.2**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO SECTION 906**

**OF THE SARBANES-OXLEY ACT OF 2002**

The undersigned, Liqiong (Iris) Yan, the Chief Financial Officer of TAOPING INC. (the "Company"), DOES HEREBY CERTIFY that:

1. The Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2025 (the "Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has executed this statement this 30<sup>th</sup> day of April, 2026.

---

| |
|:---|
| */s/ Liqiong (Iris) Yan* |
| Liqiong (Iris) Yan |
| Chief Financial Officer |
| *(Principal Financial and Accounting Officer)* |

---

A signed original of this written statement required by Section 906 has been provided to Taoping Inc. and will be retained by Taoping Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

## Exhibit 15.1

**Exhibit 15.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We hereby consent to the incorporation by reference in the Registration Statements of Taoping Inc. (the "Company") on Form S-8 (No. 333-211363, No. 333-256600 and No. 333-283697) and on Form F-3 (No. 333-262181 and No. 333-288404) of our report dated April 30, 2026, relating to the Company's consolidated financial statements as of December 31, 2025 and 2024, and for the three years period ended December 31, 2025, which appears in this Annual Report on Form 20-F of the Company for the year ended December 31, 2025.

---

| |
|:---|
| /s/ PKF Littlejohn LLP |
| London, United Kingdom |
| April 30, 2026 |

---