Filed
Pursuant to Rule 424(b)(5)
Registration
No. 333-229323
PROSPECTUS
SUPPLEMENT
(To Prospectus dated February 11, 2019)
222,222
Ordinary Shares
Pursuant
to this prospectus supplement and the accompanying prospectus, we are offering up to 222,222 ordinary shares, no par value (the
“Ordinary Shares”) of Taoping Inc. (the “Company”) at a price of $2.70 per share directly to an individual
investor. In a concurrent private placement, for a purchase price of $1,400,000, we are selling to the same investor a Convertible
Promissory Note (the “Note”), with a principal amount of $1,480,000 and a warrant to purchase up to 53,333 Ordinary
Shares at $9.00 per share within three years following the issue date (the “Warrants”). The Note carries an original
issue discount of $80,000 (the “OID”) matures in 12 months from the issue date, bearing interest at a rate of 5.0%
per annum. The Note, the Warrant and the Ordinary Shares issuable upon the conversion of Note and the exercise of the Warrant
are not being registered under the Securities Act of 1933, as amended (the “Securities Act”), and are not being offered
pursuant to this prospectus supplement and the accompanying prospectus and are being offered pursuant to an exemption from the
registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and/or Rule 506(b) promulgated
thereunder.
Our
Ordinary Shares trade on the NASDAQ Capital Market under the symbol “TAOP.” The last reported sale price of our Ordinary
Shares on the NASDAQ Capital Market on September 10, 2020 was $2.80 per share. As of the date of this prospectus supplement, the
aggregate market value of our outstanding Ordinary Shares held by non-affiliates is approximately $39.13 million, based on 7,432,983
Ordinary Shares issued and outstanding, of which approximately 4,446,989 Ordinary Shares are held by non-affiliates, and a per
share price of $8.80 based on the closing price of our Ordinary Shares on July 30, 2020, which is the highest closing sale price
of our Ordinary Shares on The Nasdaq Capital Market within the prior 60 days.
During
the 12 calendar months prior to and including the date of this Prospectus Supplement, we have sold $600,000 of our Ordinary Shares
pursuant to General Instruction I.B.5 of Form F-3. Pursuant to General Instruction I.B.5 of Form F-3, in no event will we sell
securities registered in a public primary offering with a value exceeding more than one-third of our public float in any 12 calendar
month period that ends on, and includes, the date of this prospectus supplement, so long as our public float remains below $75.0
million.
We
have not retained an underwriter or placement agent with respect to this offering and therefore are not paying any underwriting
discounts or commissions. We estimate the total expenses of this offering will be approximately $0.08 million.
Please
read “Risk Factors” beginning on page S-5 of this prospectus supplement and on page 2 of the accompanying
prospectus.
Neither
the Securities and Exchange Commission nor any states securities commission has approved or disapproved of these securities or
determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
We
expect that delivery of the Ordinary Shares offered pursuant to this prospectus supplement and the accompanying prospectus will
be made on or about September 14, 2020, subject to customary closing conditions.
The
date of this prospectus supplement is September 10, 2020
TABLE
OF CONTENTS
You
should rely only on the information contained in this prospectus supplement and the accompanying prospectus. We have not authorized
anyone else to provide you with additional or different information. We are offering to sell, and seeking offers to buy Ordinary
Shares only in jurisdictions where offers and sales are permitted. You should not assume that the information in this prospectus
supplement or the accompanying prospectus is accurate as of any date other than the date on the front of those documents or that
any document incorporated by reference is accurate as of any date other than its filing date.
No
action is being taken in any jurisdiction outside the United States to permit a public offering of the Ordinary Shares or possession
or distribution of this prospectus supplement or the accompanying prospectus in that jurisdiction. Persons who come into possession
of this prospectus supplement or the accompanying prospectus in jurisdictions outside the United States are required to inform
themselves about and to observe any restrictions as to this offering and the distribution of this prospectus supplement and the
accompanying prospectus applicable to that jurisdiction.
ABOUT
THIS PROSPECTUS SUPPLEMENT
On
January 22, 2019, we filed with the Securities and Exchange Commission, or the SEC, a registration statement on Form F-3 (File
No. 333-229323) utilizing a shelf registration process relating to the securities described in this prospectus supplement. The
registration statement was declared effective on February 11, 2019. Under this shelf registration process, we have registered,
among others, to sell, from time to time, up to $80,000,000 in the aggregate of Ordinary Shares, debt securities, warrants and
units.
This
document is in two parts. The first part is the prospectus supplement, which describes the specific terms of this offering and
adds, updates and changes information contained in the accompanying prospectus. The second part is the accompanying prospectus,
which gives more general information, some of which may not apply to this offering. To the extent there is a conflict between
the information contained in this prospectus supplement, on the one hand, and the information contained in the accompanying prospectus
or any document incorporated by reference in this prospectus supplement or the accompanying prospectus, on the other hand, you
should rely on the information in this prospectus supplement. However, if any statement in one of these documents is inconsistent
with a statement in another document having a later date — for example, a document incorporated by reference
in this prospectus supplement or the accompanying prospectus — the statement in the document having the later
date modifies or supersedes the earlier statement as our business, financial condition, results of operations and prospects may
have changed since the earlier dates.
This
prospectus supplement and the accompanying prospectus include important information about us, our Ordinary Shares and other information
you should know before investing. You should carefully read this prospectus supplement, the accompanying prospectus, all information
incorporated by reference herein and therein, as well as the additional information described under the heading “Where You
Can Find More Information.”
This
prospectus supplement and the accompanying prospectus and any free writing prospectus may contain and incorporate by reference,
market data and industry statistics and forecasts that are based on independent industry publications and other publicly available
information. Although we believe these sources are reliable, we do not guarantee the accuracy or completeness of this information,
and we have not independently verified this information. In addition, the market and industry data and forecasts that may be included
or incorporated by reference in this prospectus supplement and the accompanying prospectus or any applicable free writing prospectus
may involve estimates, assumptions and other risks and uncertainties and are subject to change based on various factors, including
those discussed under the heading “Risk Factors” contained in this prospectus supplement and the accompanying prospectus
and any applicable free writing prospectus, and under similar headings in other documents that are incorporated by reference into
this prospectus supplement. Accordingly, investors should not place undue reliance on this information.
FORWARD-LOOKING
INFORMATION
This
prospectus supplement contains “forward-looking statements” that involve substantial risks and uncertainties. All
statements other than statements of historical facts contained in this prospectus supplement, including statements regarding our
future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking
statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended, or 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. Our actual results may differ materially
or perhaps significantly from those discussed herein, or implied by, these forward-looking statements. Forward-looking statements
included or incorporated by reference in this prospectus supplement or our other filings with the SEC, include, but are not necessarily
limited to, those relating to:
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our
limited operating history of selling cloud-based products and services;
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our
independent registered auditors’ substantial doubt about our ability to continue as a going concern
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lack
of insurance coverage for our product-related liabilities and other business liability;
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outbreak
of coronavirus;
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uncertainties
related to China’s legal system and economic, political and social events in China;
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a
general economic downturn; and
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our
potential failure to maintain compliance with NASDAQ continued listing requirements.
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The
foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein
or risk factors with which we are faced that may cause our actual results to differ from those anticipated in our forward-looking
statements. Please see “Risk Factors” in our reports filed or furnished with the SEC or in this prospectus supplement
and the accompanying prospectus for additional risks which could adversely impact our business and financial performance.
Moreover,
new risks regularly emerge and it is not possible for our management to predict or articulate all risks we face, nor can we assess
the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to
differ from those contained in any forward-looking statements. All forward-looking statements included in this prospectus supplement
and the accompanying prospectus are based on information available to us on the date of this prospectus supplement or the accompanying
prospectus, as applicable. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update
or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
PROSPECTUS
SUMMARY
This
summary highlights information about us and the offering contained elsewhere in, or incorporated by reference into, this prospectus
supplement and the accompanying prospectus. It is not complete and may not contain all the information that may be important to
you. You should carefully read the entire prospectus supplement and the accompanying prospectus, as well as the information incorporated
by reference, before making an investment decision, especially the information presented under the heading “Risk Factors”
beginning on page S-5 of this prospectus supplement, and our financial statements and the notes to those financial statements,
which are incorporated by reference, and the other financial information appearing elsewhere in or incorporated by reference into
this prospectus supplement. See “Incorporation of Certain Information by Reference.” In this prospectus supplement,
except as otherwise indicated or as the context otherwise requires, “Taoping,” “the Company,” “we,”
“our” and “us” refer to Taoping Inc. and its subsidiaries and other consolidated entities.
Unless
otherwise indicated, all share amounts and per share amounts in this prospectus supplement have been presented on a retroactive
basis to reflect a share combination of our outstanding ordinary shares at a ratio of one for six (1 for 6) which was implemented
on July 30, 2020.
About
Taoping Inc.
Company
Overview
We
are a leading 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 and are headquartered in Shenzhen, China. As of December 31, 2019, we had approximately 78 full-time employees.
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 2018 and 2019, 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, 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 $3.6 million in 2019. 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.
Starting
from January 2020, the coronavirus outbreak, also known as COVID-19, has caused the Chinese government to take quarantine measures,
such as nationwide lockdowns, transportation restrictions, public gathering prohibitions and temporary closures of non-essential
businesses, which had put economic activities in a suspension mode until late March, in addition to the regular Chinese New Year
Holiday. Although the COVID-19 epidemic has largely been contained in China since then and businesses have gradually resumed to
operations, China’s economic recovery still faces great challenges. Facing this challenge, we believe China’s out-of-home
advertising market and our revenue in 2020 so far have been negatively affected.
Our
customers are located across different provinces of China, including certain areas severely affected by the epidemic, the coronavirus
outbreak may have a negative impact on revenue in the short run. We had a year-over-year decrease of approximately 26% in revenue
in the first quarter of 2020, according to unaudited financial information, and a potential slowdown in collection of accounts
receivable in 2020. However, we have seen sales starting to increase in the second quarter compared with the first quarter in
2020, and yet a year-over-year decrease compared with the same period of 2019. Nevertheless, the Company does not expect a significant
impact on the Company’s operations and financial results in the long run unless the COVID-19 epidemic is not contained in
the year of 2020. The epidemic in China is currently under control. Businesses around China have largely returned to normal since
April 2020. The operations of our customers and our supply chain have been back to normal since most cities in China have lifted
the lockdown restrictions.
We
report financial and operational information in the following two segments:
(1)
Cloud-based Technology (CBT) segment — The CBT segment is our current and future focus of corporate development. It includes
our cloud-based products and services offered to customers in the private sector including new media, healthcare, education, and
residential community management. In this segment, we generate revenues from the sales of hardware, and the provision of total
solutions of interactive advertisement display terminals integrated with proprietary software, out-of-home digital advertising
distribution, and advertising time slot programmed trading transactions. We also generate revenue from monthly software subscription
and Software-as-a Service (SaaS) fees.
(2)
Traditional Information Technology (TIT) segment — The TIT segment includes our project-based technology products and services
offered to the public sector, including Digital Public Security Technology (DPST) and Multi-screen Digital Display Systems (MDDS).
In this segment, we generate revenues from the sales of software and systems integration services.
Corporate
Information
We
were incorporated in the British Virgin Islands on June 18, 2012. Our principal executive office is located at 21st Floor, Everbright
Bank Building, Zhuzilin, Futian District, Shenzhen, Guangdong Province 518040, People’s Republic of China. Our telephone
number is (+86) 755-8831-9888.
The
following chart reflects our organizational structure as of the date of this prospectus supplement.
THE
OFFERING
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Ordinary
Shares Offered by Us
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222,222
shares
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Offering
Price Per Share
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$2.70
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Ordinary
Shares Outstanding Immediately Before the Offering*
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7,432,983
shares
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Ordinary
Shares to be Outstanding Immediately After the Offering (assumes all Ordinary Shares offered in this offering are sold and
excludes the shares underlying the Note and the Warrant)*
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7,655,205
shares
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Market
for the Ordinary Shares
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Our
Ordinary Shares are traded on the Nasdaq Capital Market under the symbol “TAOP.”
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Use
of Proceeds
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We
intend to use the net proceeds from this offering for working capital and other general corporate purposes. See “Use
of Proceeds” on page S-8 of this prospectus supplement.
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Risk
Factors
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Investing
in our securities involves a high degree of risk. For a discussion of factors you should consider carefully before deciding
to invest in our Ordinary Shares. See “Risk Factors” beginning on page S-5 of this prospectus supplement and on
page 2 of the accompanying prospectus and other information included or incorporated by reference in this prospectus supplement
and the accompanying prospectus.
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Concurrent
Private Placement
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In
a concurrent private placement, for a purchase price of $1,400,000, we are selling to the same investor a Note with a principal
amount of $1,480,000 and a Warrant to purchase up to 53,333 Ordinary Shares at $9.00 per share within three years following
the issue date. The Note, the Warrant and the Ordinary Shares issuable upon the conversion of the Note and the exercise
of the Warrant are not being offered pursuant to this prospectus supplement and the accompanying prospectus. See “Private
Placement Transaction.”
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Transfer
Agent and Registrar
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Transhare
Corporation
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*The
number of our Ordinary Shares to be outstanding after this offering is based on 7,432,983 Ordinary Shares outstanding on September
10, 2020.
The
number of our Ordinary Shares outstanding immediately before and immediately after this offering excludes:
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up
to 26,667 Ordinary Shares issuable upon exercise of the warrants issued in October 2019;
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up
to 53,334 Ordinary Shares issuable upon exercise of the warrants issued in March 2020;
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up
to 16,667 Ordinary Shares issuable upon exercise of the warrants issued in April 2020;
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up
to 1,000,000 Ordinary Shares issuable upon conversion of the convertible notes issued in March 2020 (the “March 2020
Notes”);
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up
to 470,000 Ordinary Shares issuable upon conversion of the convertible note issued in October 2019 (the “2019 Note”);
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up
to 53,333 Ordinary Shares issuable upon exercise of the Warrant issued in the concurrent private placement;
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up
to 1,000,000 Ordinary Shares issuable upon conversion of the Note issued in the concurrent private placement; and
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up
to 390,714 Ordinary Shares issuable upon the exercise of outstanding options, which were granted to our officers, employees
and consultants in July 2020 under our equity incentive plans.
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RISK
FACTORS
Any
investment in our securities involves a high degree of risk. You should consider carefully the risks described below as well as
the risks described in the section captioned “Risk Factors” in our annual report on Form 20-F for the year ended December
31, 2019, and as updated by any document that we subsequently file with the SEC that is incorporated by reference in this prospectus
supplement or the accompanying prospectus, together with other information in this prospectus supplement, the accompanying prospectus
and the information and documents incorporated by reference in this prospectus supplement and the accompanying prospectus before
you make a decision to invest in our securities. If any of such risks actually occur, our business, operating results, prospects
or financial condition could be materially and adversely affected. This could cause the trading price of our Ordinary Shares to
decline and you may lose all or part of your investment. The risks described below are not the only ones that we face. Additional
risks not presently known to us or that we currently deem immaterial may also affect our business operations. The risks discussed
below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking
statements. See “Forward-Looking Information.”
RISKS
RELATED TO THIS OFFERING
Our
business operations have been and may continue to be materially and adversely affected by the outbreak of the coronavirus (COVID-19).
An
outbreak of respiratory illness caused by COVID-19 emerged in late 2019 and has spread within the PRC and globally. The coronavirus
is considered to be highly contagious and poses a serious public health threat. The World Health Organization labeled the coronavirus
a pandemic on March 11, 2020, given its threat beyond a public health emergency of international concern the organization had
declared on January 30, 2020.
Any
outbreak of health epidemics in the PRC or elsewhere in the world may materially and adversely affect the global economy, our
markets and business. For most of the first quarter of 2020, we scaled back operations, as our employees worked remotely or at
premises in shifts for limited periods of time in response to nationwide lockdowns and quarantines. We only resumed full operations
since late March. The pandemic has also depressed customers’ demand for our products and services, since businesses across
China largely suspended or reduced operations in the past few months. In addition, it now takes longer time to collect accounts
receivable. As a provider of digital advertising distribution networks, we are sensitive to the overall business environment and
vulnerable to any market downturns.
With
the coronavirus epidemic expanding globally, the world economy is suffering a noticeable slowdown. Commercial activities throughout
the world have been curtailed with decreased consumer spending, business operation disruptions, interrupted supply chain, difficulties
in travel, and reduced workforces. The duration and intensity of disruptions resulting from the coronavirus outbreak is uncertain.
It is unclear as to when the outbreak will be contained, and we also cannot predict if the impact will be short-lived or long-lasting.
The extent to which the coronavirus impacts our financial results will depend on its future developments. If the outbreak of the
coronavirus persists, our business operation and financial condition may be materially and adversely affected as a result of slowdown
in economic growth, operation disruptions or other factors that we cannot predict.
We
will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.
Subject
to certain limited exceptions set forth in the offering documents, we have agreed to use the net proceeds from this offering solely
for working capital and general corporate purposes; provided, however, that none of such proceeds will be used, directly or indirectly,
for (i) the satisfaction of any of our indebtedness, other than payment of trade payables incurred in the ordinary course of business
and consistent with prior practices; (ii) the redemption or repurchase of any of our securities; or (iii) the settlement of any
outstanding litigation. We have considerable discretion in the application of the net proceeds of this offering. You will not
have the opportunity, as part of your investment decision, to assess whether the net proceeds are being used in a manner agreeable
to you. You must rely on our judgment regarding the application of the net proceeds of this offering. The net proceeds may be
used for corporate purposes that do not improve our profitability or increase the price of our shares. The net proceeds may also
be placed in investments that do not produce income or that lose value. The failure to use such funds by us effectively could
have a material adverse effect on our business, financial condition, operating results and cash flow.
A
large number of shares may be sold in the market following this offering, which may significantly depress the market price of
our Ordinary Shares.
The
Ordinary Shares sold in the offering will be freely tradable without restriction or further registration under the Securities
Act. As a result, a substantial number of our Ordinary Shares may be sold in the public market following this offering. If there
are significantly more Ordinary Shares offered for sale than buyers are willing to purchase, then the market price of our Ordinary
Shares may decline to a market price at which buyers are willing to purchase the offered Ordinary Shares and sellers remain willing
to sell the Ordinary Shares.
If
we fail to maintain compliance with the continued listing requirements of NASDAQ, we would face possible delisting, which would
result in a limited public market for trading 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.” Our shares may be delisted,
if we fail to regain compliance with certain continued listing requirements of the Nasdaq Stock Market, or NASDAQ, in a timely
manner.
On
June 18, 2019, we received a notification letter from the Listing Qualifications Staff of NASDAQ notifying us that the minimum
bid price per share for our Ordinary Shares has been below $1.00 for a period of 30 consecutive business days and we therefore
no longer meet the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2). We regained the compliance with
the minimum bid price rule on August 20, 2020 by implementing a 1-for-6 share combination of our outstanding Ordinary Shares effective
on July 30, 2020.
If
we fail to maintain compliance with the NASDAQ continued listing requirements, our Ordinary Shares may lose their status on Nasdaq
Capital Market and they would likely be traded on the over-the-counter market. As a result, selling our 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 our Ordinary Shares are delisted, broker dealers would
have bear certain regulatory burdens which may discourage broker dealers from effecting transactions in our Ordinary Shares and
further limiting the liquidity of our shares. These factors could result in lower prices and larger spreads in the bid and ask
prices for our Ordinary Shares. Such delisting from NASDAQ and continued or further declines in our 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 our issuing equity in financing or other transactions.
If
our Ordinary Shares 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 our Ordinary 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 specific exemptions. One such exemption is to be listed on NASDAQ. The market price of our Ordinary
Shares is currently below $5.00 per share. Therefore, were we to be delisted from NASDAQ, our Ordinary Shares will 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 our 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 our 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 our Ordinary Shares.
Because the broker, not us, prepares this information, we would not be able to assure that such information is accurate, complete
or current.
The
market price of our Ordinary Shares has been volatile, leading to the possibility that their value may be depressed at a time
when you want to sell your holdings.
The
market price of our Ordinary Shares has been volatile, and this volatility may continue. From January 2, 2020 through September
10, 2020 the closing price of our Ordinary Shares on the NASDAQ Capital Market has ranged from a high of $8.80 to a low
of $1.92. Numerous factors, many of which are beyond our control, may cause the market price of our Ordinary Shares to
fluctuate significantly. These factors include, among others:
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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;
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changes
in financial estimates by us or by any securities analysts who might cover our share;
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speculation
about our business in the press or the investment community;
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significant
developments relating to our relationships with our customers or suppliers;
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stock
market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industry;
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customer
demand for our services and products;
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investor
perceptions of our industry in general and our company in particular;
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the
operating and share performance of comparable companies;
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general
economic conditions and trends;
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major
catastrophic events;
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announcements
by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures;
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changes
in accounting standards, policies, guidance, interpretation or principles;
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loss
of external funding sources;
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sales
of our Ordinary Shares, including sales by our directors, officers or significant shareholders;
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additions
or departures of key personnel; and
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investor
perception of litigation, investigation or other legal proceedings involving us or certain of our individual shareholders
or their family members.
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Any
of these factors may result in large and sudden changes in the volume and price at which our Ordinary Shares will trade. We cannot
give any assurance that these factors will not occur in the future again. In addition, the securities market has from time to
time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies.
These market fluctuations may also have a material adverse effect on the market price of our Ordinary Shares. In the past, following
periods of volatility in the market price of their stock, many companies have been the subject of securities class action litigation.
If we become involved in similar securities class action litigation in the future, it could result in substantial costs and diversion
of our management’s attention and resources and could harm our stock price, business, prospects, financial condition and
results of operations.
There
is no public market for the Note or the Warrant.
There
is no established public trading market for the Note or the Warrant being offered in the concurrent private placement and we do
not expect a market to develop. In addition, we do not intend to apply for listing of the Note or the Warrant on any securities
exchange or automated quotation system. Without an active market, investors in this offering may be unable to readily sell the
Note or the Warrant.
Conversion
of the Note or exercise of the Warrant being offered concurrently may dilute the ownership interest of existing shareholders.
The
conversion or exercise of the Note and the Warrant, respectively, will dilute the ownership interests of existing shareholders.
Any sales in the public market of the Ordinary Shares issuable upon such conversion or exercise could adversely affect prevailing
market prices of our Ordinary Shares. In addition, the existence of the Note or Warrant may encourage short selling by market
participants because the conversion of the Note or the exercise of Warrant could depress the price of our Ordinary Shares.
USE
OF PROCEEDS
We
estimate that the net proceeds from this offering will be approximately $1.92 million, after deducting the estimated expenses
of this registered direct offering and the concurrent private placement payable by us.
We
intend to use the net proceeds from this offering for working capital and general corporate purposes; provided, however, that
none of such proceeds will be used, directly or indirectly, for (i) the satisfaction of any of our indebtedness, other than payment
of trade payables incurred in the ordinary course of business and consistent with prior practices; (ii) the redemption or repurchase
of any of our securities; or (iii) the settlement of any outstanding litigation.
The
amounts and timing of our use of proceeds will vary depending on a number of factors, including the amount of cash generated or
used by our operations, and the rate of growth, if any, of our business. As a result, we will retain broad discretion in the allocation
of the net proceeds of this offering. In addition, while we have not entered into any agreements, commitments or understandings
relating to any significant transaction as of the date of this prospectus supplement, we may use a portion of the net proceeds
to pursue acquisitions, joint ventures and other strategic transactions. Depending on future events and others changes in the
business climate, we may determine at a later time to use the net proceeds for different purposes.
CAPITALIZATION
AND INDEBTEDNESS
The
table below sets forth our capitalization and indebtedness as of December 31, 2019:
|
|
●
|
on
an actual basis;
|
|
|
|
|
|
|
●
|
on
a pro forma basis, given the effect of (i) the issuance and sale of 285,714 Ordinary Shares in the registered direct offering
in March 2020 at the offering price of $2.10 per share; and (ii) the issuance and sale of $1.48 million principal amount of
the March 2020 Notes and warrants to purchase up to 53,334 Ordinary Shares of the Company resulting in net proceeds of approximately
$1.92 million after deducting estimated offering expenses payable by us; (iii) the issuance of 30,000 Ordinary Shares to a
consultant as compensation for investor relations service in the first half of 2020; (iv) the issuance of 16,667 Ordinary
Shares and warrants to purchase up to 16,667 Ordinary Shares as compensation for a consultant’s service in April 2020;
(v) the issuance of 5,000 Ordinary Shares to certain employees in July 2020 as equity awards; (vi) the issuance of 6,250 Ordinary
Shares to certain consultant in July 2020 as a result of non-cash exercise of the warrants issued in March 2019; (vii) the
issuance of 72,414 Ordinary Shares to certain employees as a result of non-cash exercise of share options granted in 2016
and 2017; (viii) the issuance of 14,000 Ordinary Shares to a consultant as compensation for its investor relations service
for July and August of 2020; and (ix) the issuance of stock options to certain consultants to purchase up 57,366 Ordinary
Shares in July, 2020
|
|
|
|
|
|
|
●
|
on
a pro forma as adjusted basis to give effect to (i) the issuance and sale of 222,222 Ordinary Shares in the registered direct
offering pursuant to this prospectus supplement at the offering price of $2.70 per share; and (ii) the issuance and sale of
$1.48 million principal amount of the Note and warrant to purchase up to 53,333 Ordinary Shares in the concurrent private
placement, resulting in net proceeds of approximately $1.92 million after deducting estimated offering expenses payable by
us.
|
|
|
|
As of December 31, 2019
|
|
|
|
|
Actual**
|
|
|
Pro Forma(1)
|
|
|
Pro Forma
As Adjusted(1)
|
|
|
Total Current Liabilities
|
|
$
|
26,007,161
|
|
|
$
|
27,174,001
|
|
|
$
|
28,124,168
|
|
|
Short-term bank loans
|
|
|
6,584,664
|
|
|
|
6,584,664
|
|
|
|
6,584,664
|
|
|
Convertible note payable
|
|
|
916,511
|
|
|
|
2,083,351
|
|
|
|
3,033,518
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary Shares,
|
|
|
126,257,156
|
|
|
|
129,087,069
|
|
|
|
129,663,069
|
|
|
Additional paid-in capital*
|
|
|
16,461,333
|
|
|
|
14,732,766
|
|
|
|
15,126,599
|
|
|
Reserve
|
|
|
14,044,269
|
|
|
|
14,044,269
|
|
|
|
14,044,269
|
|
|
Accumulated deficit
|
|
|
(174,517,769
|
)
|
|
|
(174,654,077
|
)
|
|
|
(174,654,077
|
)
|
|
Accumulated other comprehensive income
|
|
|
23,022,845
|
|
|
|
23,022,845
|
|
|
|
23,022,845
|
|
|
Total equity of the Company
|
|
$
|
5,267,834
|
|
|
$
|
6,232,872
|
|
|
$
|
7,202,705
|
|
|
Non-controlling interest
|
|
|
9,340,551
|
|
|
|
9,340,551
|
|
|
|
9,340,551
|
|
|
Total Equity
|
|
|
14,608,385
|
|
|
|
15,573,423
|
|
|
|
16,543,256
|
|
|
Total capitalization
|
|
$
|
22,109,560
|
|
|
$
|
24,241,438
|
|
|
$
|
26,161,438
|
|
|
*
|
Does
not include any potential proceeds from the exercise of Warrant issued in the concurrent private placement at an exercise
price of $9.00 per share.
|
|
**
|
Based
on 7,000,027 Ordinary Shares issued and outstanding as of December 31, 2019
|
(1) The pro forma information is illustrative only. You should read the above table together with our financial statements and the related notes and the information included in our annual report on Form 20-F, dated June 12, 2020, which is incorporated by reference herein.
DESCRIPTION
OF ORDINARY SHARES WE ARE OFFERING
In
this offering, we are offering 222,222 Ordinary Shares pursuant to this prospectus supplement and the accompanying prospectus.
A description of the Ordinary Shares that we are offering pursuant to this Prospect Supplement is set forth under the heading
“Description of Share Capital” starting on page 4 of the accompanying prospectus.
PRIVATE
PLACEMENT TRANSACTION
The
material terms and provisions of the Note and Warrant being offered in the concurrent private placement are summarized below.
This summary is subject to, and qualified in its entirety by, the terms of the Note and Warrant as set forth in the form of Note
and the form of Warrant to be furnished as exhibits to our report on Form 6-K filed with the SEC on or about September 11, 2020.
In
a concurrent private placement, we will issue and sell to the investor a Note with a principal amount of $1,480,000, and a Warrant
to purchase up to 53,333 Ordinary Shares at an exercise price equal to $9.00 per share.
The
Notes, Warrants and the Ordinary Shares issuable upon the conversion of such notes and the exercise of such warrants are not being
registered under the Securities Act, are not being offered pursuant to this prospectus supplement and the accompanying prospectus
and are being offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and/or Rule 506(b) promulgated
thereunder. Accordingly, the investors may only sell Ordinary Shares issued upon the conversion of Notes or the exercise of Warrants
pursuant to an effective registration statement under the Securities Act covering the resale of those shares, an exemption under
Rule 144 under the Securities Act or another applicable exemption under the Securities Act.
Note
The
Note carries an OID of $80,000 and matures in 12 months from the issue date, bearing interest at a rate of 5.0% per annum. The
Note is convertible into Ordinary Shares in the following situations:
Fixed
Price Conversion. At any time prior to the maturity, the Note, at the investor’s option, may be convertible into fully
paid Ordinary Shares of the Company at a conversion price of $9.00 per share.
Alternate
Conversion. At any time after the occurrence of an event of default (as defined in the Note), the investor may convert all
of the outstanding balance of the Note into Ordinary Shares at the lowest of: (i) $9.00 per share; (ii) 90% of the volume-weighted
average closing price of Ordinary Shares during the 20 consecutive trading day period ending on the trading day immediately prior
to the applicable conversion date; (iii) 90% of the volume-weighted average closing price of Ordinary Shares during the 175 consecutive
trading day period ending on the trading day immediately prior to the applicable conversion date; (iv) 95% of the per share purchase
price of Ordinary Shares offered in a subsequent private placement transaction of the Company consummated during the term of the
Note; and (v) the purchase price of Ordinary Shares offered in a subsequent underwritten public offering of the Company that takes
place during the term of the Note. However in no event will the number of Ordinary Shares issuable upon such conversion of the
Notes exceed 1,000,000 shares in aggregate.
Quarterly
Conversion. In the event the Notes are outstanding in each of the months of March and June 2021, the investor has a one-time
option during the first three weeks in each of March and June 2021 to convert no more than one half of the then outstanding balance
of the Note into Ordinary Shares at the lowest of: (i) $9.00 per share; (ii) 90% of the volume-weighted average closing price
of Ordinary Shares during the 20 consecutive trading day period ending on the trading day immediately prior to the applicable
conversion date; (iii) 90% of the volume-weighted average closing price of Ordinary Shares during the 175 consecutive trading
day period ending on the trading day immediately prior to the applicable conversion date; (iv) 95% of the per share purchase price
of Ordinary Shares offered in a subsequent private placement transaction of the Company consummated during the term of the Note;
(v) the purchase price of Ordinary Shares offered in a subsequent underwritten public offering of the Company that takes place
during the term of the Note; and (vi) volume-weighted average trade price of Ordinary Shares on the trading day immediately prior
to the applicable conversion date. However, in no event will the conversion price be less than $2.40 per share.
Conversion
upon Maturity Date. In the event the Notes remain outstanding on the maturity date, the investors may convert all but not
less than all of the outstanding balance of the Notes into Ordinary Shares at the lowest of the prices as set forth thereunder.
Same as Quarterly Conversion, in no event will the conversion price be less than $2.4 per share.
Warrant
Exercisability.
The Warrant issued in the concurrent private placement is exercisable for a period of three years, at the initial exercise
price of $9.00 per share, in whole or in part by delivering to us a duly executed exercise notice and by payment in full in immediately
available funds for the number of Ordinary Shares purchased upon such exercise. In addition, the holder may, in its sole discretion,
elect to exercise the Warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number
of Ordinary Shares determined according to the formula set forth in the Warrant.
Exercise
Price Adjustment. The exercise price of the Warrant is subject to appropriate adjustment in the event of certain share dividends
and distributions, share splits, share combinations, reclassifications or similar events affecting our Ordinary Shares and also
upon any distributions of assets, including cash, stock or other property to our shareholders.
Rights
as a Shareholder. Prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a Holder, be entitled
to any rights of a shareholder with respect to the shares underlying the Warrant.
PLAN
OF DISTRIBUTION
We
are selling 222,222 Ordinary Shares in a registered direct offering to one individual investor in a privately negotiated transaction
pursuant to this prospectus supplement and accompanying prospectus at a price of $2.70 per share. The Ordinary Shares were offered
directly to the investor without a placement agent, underwriter, broker or dealer.
Transfer
Agent and Registrar
The
transfer agent and registrar for our Ordinary Shares is Transhare Corporation, 2849 Executive Dr., Suite 200, Clearwater FL 33762
and its telephone number is (303) 662-1112.
Listing
Our
Ordinary Shares are traded on the Nasdaq Capital Market under the symbol “TAOP.”
LEGAL
MATTERS
The
validity of the issuance of the Ordinary Shares offered hereby will be passed upon for us by Maples and Calder, British Virgin
Islands counsel.
EXPERTS
The
consolidated financial statements of Taoping Inc. as of December 31, 2019 and 2018 and for the years ended December 31, 2019,
2018 and 2017 have been incorporated by reference herein in reliance upon the reports of UHY LLP, independent registered public
accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The
SEC allows us to “incorporate by reference” the information we file with them. This means that we can disclose important
information to you by referring you to those documents. Each document incorporated by reference is current only as of the date
of such document, and the incorporation by reference of such documents shall not create any implication that there has been no
change in our affairs since the date thereof or that the information contained therein is current as of any time subsequent to
its date. The information incorporated by reference is considered to be a part of this prospectus supplement and should be read
with the same care. When we update the information contained in documents that have been incorporated by reference by making future
filings with the SEC, the information incorporated by reference in this prospectus supplement is considered to be automatically
updated and superseded. In other words, in the case of a conflict or inconsistency between information contained in this prospectus
supplement and information incorporated by reference in this prospectus supplement, you should rely on the information contained
in the document that was filed later.
The
documents we are incorporating by reference as of their respective dates of filing are:
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|
●
|
Our
Annual Report on Form 20-F for the fiscal year ended December 31, 2019, filed with the SEC on June 12, 2020.
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|
|
|
|
|
|
●
|
Our
Report of Foreign Private Issuer on Form 6-K furnished on July 29, 2020; and
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|
|
|
|
|
|
●
|
The
description of the Company’s Ordinary Shares contained in the Form 8-K12B, filed with the SEC on October 31, 2012, and
any further amendment or report filed hereafter for the purpose of updating such description.
|
All
subsequent annual reports on Form 20-F and all subsequent reports on Form 6-K submitted by us to the SEC, that are identified
by us as being incorporated by reference, shall be deemed to be incorporated by reference into this prospectus supplement and
deemed to be a part hereof after the date of this prospectus supplement but before the termination of the offering under this
prospectus supplement. Unless expressly incorporated by reference, nothing in this prospectus supplement and the accompanying
prospectus shall be deemed to incorporate by reference information furnished to, but not filed with, the SEC.
Any
statement contained in a document incorporated or deemed to be incorporated by reference into this prospectus supplement will
be deemed to be modified or superseded for purposes of this prospectus supplement to the extent that a statement contained in
this prospectus supplement or any other subsequently filed document that is deemed to be incorporated by reference into this prospectus
supplement modifies or supersedes the statement. Any statement so modified or superseded will not be deemed, except as so modified
or superseded, to constitute a part of this prospectus supplement.
Copies
of all documents incorporated by reference in this prospectus supplement, including exhibits to these documents, will be provided
at no cost to each person, including any beneficial owner, who receives a copy of this prospectus supplement on the written or
oral request of that person made to:
Taoping
Inc.
21st
Floor, Everbright Bank Building, Zhuzilin
Futian
District, Shenzhen, Guangdong 518040
People’s
Republic of China
Telephone
number (+86)755-8370-8333.
You
may also obtain information about us by visiting our website at www.taop.com. Information contained in our website is not
part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed with the SEC a registration statement on Form F-3 (File No. 333-229323) under the Securities Act with respect to the
securities offered by this prospectus supplement. This prospectus supplement and the accompanying prospectus, which constitute
a part of our registration statement on Form F-3, omit some information contained in the registration statement in accordance
with SEC rules and regulations. You should review the information and exhibits in the registration statement for further information
on us and the securities we are offering. Statements in this prospectus supplement and the accompanying prospectus concerning
any document we filed as an exhibit to the registration statement or that we otherwise filed with the SEC are not intended to
be comprehensive and are qualified by reference to these filings. You should review the complete document to evaluate these statements.
We
are subject to the reporting requirements of the Exchange Act that are applicable to a foreign private issuer. In accordance with
the Exchange Act, we file reports, including annual reports on Form 20-F containing financial statements audited by an independent
accounting firm. We also furnish to the SEC, under cover of Reports of Foreign Private Issuer on Form 6-K, material information
required to be made public by us or filed by us with and made public by any stock exchange or distributed by us to our shareholders.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy
statements to shareholders, and our officers, directors and principal shareholders are exempt from the “short-swing profits”
reporting and liability provisions contained in Section 16 of the Exchange Act and related Exchange Act rules. In addition, we
are not required under the Exchange Act to file periodic reports and financial statements as frequently or as promptly as U.S.
companies whose securities are registered under the Exchange Act.
The
SEC maintains an Internet site that contains reports, information statements and other information regarding issuers, such as
us, that file electronically with the SEC (http://www.sec.gov).
Additionally,
we make these filings available, free of charge, on our website at www.taop.com as soon as reasonably practicable after
we electronically file such materials with, or furnish them to, the SEC. The information on our website, other than these filings,
is not, and should not be, considered part of this prospectus supplement and is not incorporated by reference into this document.
PROSPECTUS
TAOPING
INC.
$80,000,000
Ordinary
Shares
Debt
Securities
Warrants
Units
Offered
by Taoping Inc.
And
500,000
Ordinary Shares Offered by the Selling Shareholder Named Herein
This
prospectus relates to a primary offering by us and a secondary offering by the selling shareholder named in this prospectus (the
“Selling Shareholder”).
In
the primary offering, we may offer, issue and sell from time to time our ordinary shares, no par value (“Ordinary Shares”),
debt securities, warrants, or units up to $80,000,000 or its equivalent in any other currency, currency units, or composite currency
or currencies in one or more issuances. We may sell any combination of these securities in one or more offerings.
In
addition, the Selling Shareholder may offer and sell from time to time up to 500,000 Ordinary Shares, covered by this prospectus.
This
prospectus describes some of the general terms that may apply to these securities and the general manner in which they may be
offered. The specific terms of any securities to be offered, and the specific manner in which they may be offered, will be described
in a supplement to this prospectus or incorporated into this prospectus by reference. You should read this prospectus and any
supplement carefully before you invest. Each prospectus supplement will indicate if the securities offered thereby will be listed
or quoted on a securities exchange or quotation system.
The
information contained or incorporated in this prospectus or in any prospectus supplement is accurate only as of the date of this
prospectus, or such prospectus supplement, as applicable, regardless of the time of delivery of this prospectus or any sale of
our securities.
Our
Ordinary Shares are listed on the NASDAQ Capital Market under the symbol “TAOP.” On January 17, 2019, the last reported
per share sale price of our Ordinary Share was $1.15. As of January 17, 2019, the aggregate market value of our outstanding Ordinary
Shares held by non-affiliates was approximately $27.61 million, which was calculated based on approximately 41,760,163 shares
of outstanding ordinary shares, of which approximately 24,011,452 shares were held by non-affiliates. We have not offered and
sold any securities pursuant to General Instruction I.B.5 of Form F-3 during the prior 12 calendar month period that ends on,
and includes, the date of this prospectus.
We
may offer securities through underwriting syndicates managed or co-managed by one or more underwriters, through agents, or directly
to purchasers. The prospectus supplement for each offering of securities will describe the plan of distribution for that offering.
For general information about the distribution of securities offered, please see “Plan of Distribution” in this prospectus.
Investing
in our securities involves risks. You should carefully consider the risk factors beginning on page 2 of this prospectus, in any
accompanying prospectus supplement and in any related free writing prospectus, and in the documents incorporated by reference
into this prospectus, any accompanying prospectus supplement and any related free writing prospectus before making any decision
to invest in our securities.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is February 11, 2019
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or the SEC, using a
“shelf” registration process. Under this shelf registration process, we may sell our securities described in this
prospectus in one or more offerings up to a total dollar amount of $80,000,000 (or its equivalent in foreign or composite currencies).
In addition, this prospectus relates to the resale, from time to time, by the Selling Shareholder identified in this prospectus
under the caption “Selling Shareholder,” of up to 500,000 Ordinary Shares.
This
prospectus provides you with a general description of the securities that may be offered. Each time we offer our securities, we
will provide you with a supplement to this prospectus that will describe the specific amounts, prices and terms of the securities
we offer. The prospectus supplement may also add, update or change information contained in this prospectus. This prospectus,
together with applicable prospectus supplements and the documents incorporated by reference in this prospectus and any prospectus
supplements, includes all material information relating to this offering. Please read carefully both this prospectus and any prospectus
supplement together with additional information described below under “Where You Can Find More Information.”
You
should rely only on the information contained in or incorporated by reference in this prospectus and any applicable prospectus
supplement. Neither we nor the Selling Shareholder have authorized anyone to provide you with different or additional information.
If anyone provides you with different or inconsistent information, you should not rely on it. We nor the Selling Shareholder take
no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you.
The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery
of this prospectus or any sale of securities described in this prospectus. This prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
You
should not assume that the information contained in this prospectus and the accompanying prospectus supplement is accurate on
any date subsequent to the date set forth on the front of the document or that any information that we have incorporated by reference
is correct on any date subsequent to the date of the document incorporated by reference. Our business, financial condition, results
of operations and prospects may have changed since those dates.
TAOPING
INC.
We
are a leading provider of cloud-app technologies for Smart City IoT (Internet of Things) 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, 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 and are headquartered in Shenzhen, China. As of September 30, 2018, we had approximately 110 employees.
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. Since 2014, we have expanded and diversified our customer
base to 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. Starting in 2015, with the introduction of our cloud-based software as a service (SaaS) offering, we expect
to generate additional recurring monthly revenues from SaaS fees. In 2016 and 2017, a small portion of our revenue was generated
from SaaS, which is expected to increase in the coming years with the roll-out of our cloud-based elevator IoT and ad display
terminals.
In
May 2017, we completed our transformation to a provider of Cloud-App-Terminal (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. During
the nine months of 2018, we continued to expand the market and our revenue increased by 34.8% to $16.5 million from $12.2 million
and net income attributable to the Company increased 67.4% to $1.9 million from $1.1 million, compared to the same period of last
year.
We
report financial and operational information in the following two segments:
|
|
(1)
|
Cloud-based Technology (CBT) segment —
The CBT segment is our current and future focus of corporate development. It includes our cloud-based products and services
offered to customers in the private sector including new media, healthcare, education, and residential community management.
In this segment, we generate revenues from the sales of hardware, and total solutions of interactive advertisement display
terminals integrated with proprietary software, Out-of-Home digital advertising distribution and advertising time slot programmed
trading transactions. We also generate revenue from monthly software subscription and Software-as-a Service (SaaS) fees.
|
|
|
|
|
|
|
(2)
|
Traditional Information Technology (TIT) segment
— The TIT segment includes our project-based technology products and services offered to the public sector, including
Digital Public Security Technology (DPST) and Multi-screen Digital Display Systems (MDDS). In this segment, we generate revenues
from the sales of software and systems integration services.
|
RISK
FACTORS
An
investment in our securities involves a high degree of risk. Some of these risks include:
|
|
●
|
We have
a limited operating history of selling our cloud-based products and services and may be unable to achieve or sustain profitability
or reasonably predict our future results.
|
|
|
|
|
|
|
●
|
Our independent
registered auditors have expressed substantial doubt about our ability to continue as a going concern.
|
|
|
|
|
|
|
●
|
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.
|
|
|
|
|
|
|
●
|
PRC laws and regulations
governing our businesses and the validity of certain of our contractual relationships with iASPEC are uncertain. If we are
found to be in violation of such PRC laws and regulations, our business may be negatively affected and we may be forced to
relinquish our interests in those operations.
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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 trading our shares and make obtaining future debt or equity financing more difficult for us.
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Because we are incorporated
under the laws of the British Virgins Islands, or BVI, it may be more difficult for our shareholders to protect their rights
than it would be for a shareholder of a corporation incorporated in another jurisdiction.
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We
operate in a highly competitive environment in which there are numerous factors which can influence our business, financial position
or results of operations and which can also cause the market value of our ordinary shares to decline. Many of these factors are
beyond our control and therefore, are difficult to predict. Prior to making a decision about investing in our securities, you
should carefully consider the risk factors noted above, the risk factors discussed in the sections entitled “Risk Factors”
contained in our most recent Annual Report on Form 20-F filed with the SEC, and in any applicable prospectus supplement and our
other filings with the SEC and incorporated by reference in this prospectus or any applicable prospectus supplement, together
with all of the other information contained in this prospectus or any applicable prospectus supplement. If any of the risks or
uncertainties described in our SEC filings or any prospectus supplement or any additional risks and uncertainties actually occur,
our business, financial condition and results of operations could be materially and adversely affected. In that case, the trading
price of our securities could decline and you might lose all or part of your investment.
FORWARD-LOOKING
STATEMENTS
This
prospectus contains or incorporates forward-looking statements within the meaning of section 27A of the Securities Act and section
21E of the Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements are management’s beliefs
and assumptions. In addition, other written or oral statements that constitute forward-looking statements are based on current
expectations, estimates and projections about the industry and markets in which we operate and statements may be made by or on
our behalf. Words such as “should,” “could,” “may,” “expect,” “anticipate,”
“intend,” “plan,” “believe,” “seek,” “estimate,” variations of such
words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. There are a number
of important factors that could cause our actual results to differ materially from those indicated by such forward-looking statements.
We
describe material risks, uncertainties and assumptions that could affect our business, including our financial condition and results
of operations, under “Risk Factors” and may update our descriptions of such risks, uncertainties and assumptions in
any prospectus supplement. We base our forward-looking statements on our management’s beliefs and assumptions based on information
available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially
from what is expressed, implied or forecast by our forward-looking statements. Accordingly, you should be careful about relying
on any forward-looking statements. Reference is made in particular to forward-looking statements regarding growth strategies,
financial results, product and service development, competitive strengths, intellectual property rights, litigation, mergers and
acquisitions, market acceptance or continued acceptance of our products, accounting estimates, financing activities, ongoing contractual
obligations and sales efforts. Except as required under the federal securities laws, the rules and regulations of the SEC, stock
exchange rules, and other applicable laws, regulations and rules, we do not have any intention or obligation to update publicly
any forward-looking statements after the distribution of this prospectus, whether as a result of new information, future events,
changes in assumptions, or otherwise.
USE
OF PROCEEDS
Except
as described in any prospectus supplement and any free writing prospectus in connection with a specific offering, we currently
intend to use the net proceeds from the sale of the securities offered by us under this prospectus to fund the growth of our business,
primarily working capital, and for general corporate purposes.
We
may also use a portion of the net proceeds to acquire or invest in technologies, products and/or businesses that we believe will
enhance the value of our Company, although we do not currently have any agreements or understandings with third parties to make
any material acquisitions of, or investment in, other businesses. Depending on future events and others changes in the business
climate, we may determine at a later time to use the net proceeds for different purposes. As a result, our management will have
broad discretion in the allocation of the net proceeds and investors will be relying on the judgment of our management regarding
the application of the proceeds of any sale of the securities. Additional information on the use of net proceeds from the sale
of securities covered by this prospectus may be set forth in the prospectus supplement relating to the specific offering.
We
will not receive any proceeds from any sale of our Ordinary Shares by the Selling Shareholder.
SELLING
SHAREHOLDER
This
prospectus relates to the possible resale by the Selling Shareholder, Mr. Jianghuai Lin, our President, Chief Executive Officer
and Chairman of the Board of Directors, of up to 500,000 of our Ordinary Shares. These shares were acquired by the Selling Shareholder
in November 2018 pursuant to a securities purchase agreement that the Selling Shareholder entered into with the Company on September
11, 2018. The Selling Shareholder purchased 500,000 Ordinary Shares from the Company at a price of $1.50 per share.
Pursuant
to this prospectus, the Selling Shareholder may from time to time offer and sell any or all of the Ordinary Shares set forth below.
When we refer to the “Selling Shareholder” in this prospectus, we mean Mr. Lin and the pledgees, donees, transferees,
assignees, successors and others who later come to hold any of the Selling Shareholder’s interest in Ordinary Shares other
than through a public sale.
The
following table is based on information supplied to us by the Selling Shareholder and sets forth, as of January 17, 2019, information
regarding the Selling Shareholders’ beneficial ownership of our Ordinary Shares offered by him. Beneficial ownership is
determined in accordance with the rules of the SEC. In computing the number of Ordinary Shares beneficially owned by the Selling
Shareholder and the percentage of ownership of the Selling Shareholder, Ordinary Shares and underlying shares of convertible securities,
options or warrants held by the Selling Shareholder that are convertible or exercisable, as the case may be, within 60 days of
January 17, 2019 are included. The Selling Shareholder’s percentage of ownership in the following table is based upon 41,760,163
Ordinary Shares of the Company outstanding as of January 17, 2019.
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Before the Offering
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Number of
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After the Offering
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Name and Address of Beneficial Owner
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Number of Ordinary Shares
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Percentage of Outstanding Ordinary
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Ordinary Shares Being Offered
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Number of Ordinary Shares
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Percentage of Outstanding Ordinary Shares
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Jianghuai Lin
c/o Taoping Inc.
21st Floor, Everbright Bank Building
Zhuzilin, Futian District
Shenzhen, Guangdong, 518040
People’s Republic of China
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17,458,134
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41.8
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%
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500,000
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16,958,134
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40.6
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%
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The
registration of these Ordinary Shares does not mean that the Selling Shareholder will sell or otherwise dispose of all or any
of those securities. The Selling Shareholder may sell or otherwise dispose of all, a portion or none of such shares from time
to time. We do not know the number of shares, if any, that will be offered for sale or other disposition by the Selling Shareholder
under this prospectus. Furthermore, the Selling Shareholder may have sold, transferred or disposed of the shares covered hereby
in transactions exempt from the registration requirements of the Securities Act since the date on which we filed this prospectus.
We
will not receive any proceeds from the sales by the Selling Shareholder. We have agreed to bear expenses incurred by the Selling
Shareholder that relate to the registration of the shares being offered and sold by the Selling Shareholder, including the SEC
registration fee and legal, accounting, printing and other expenses of this offering.
DESCRIPTION
OF SHARE CAPITAL
The
following describes our share capital, summarizes the material provisions of our amended and restated memorandum and articles
of association, which is based upon, and is qualified by reference to, our amended and restated memorandum and articles of association.
This summary does not purport to be a summary of all of the provisions of our amended and restated memorandum and articles of
association. You should read our amended and restated memorandum and articles of association which are filed as exhibits to the
registration statement of which this prospectus forms a part, for the provisions that are important to you.
The
Company is authorized to issue 100,000,000 Ordinary Shares, with no par value each. The Ordinary Shares may be issued from time
to time at the discretion of the Board of Directors without shareholder approval. The Board of Directors of the Company is authorized
to issue these shares in different classes and series and, with respect to each class or series, to determine the designations,
powers, preferences, privileges and other rights, including dividend rights, conversion rights, terms of redemption and liquidation
preferences, any or all of which may be greater than the powers and rights associated with the Ordinary Shares, at such times
and on such other terms as they think proper.
As
of January 17, 2019, there were 41,760,163 Ordinary Shares outstanding, all of which
were fully paid.
Register
of Members
Under
BVI law, a share in a BVI company is duly issued only when the name of the shareholder is entered in the register of members of
a company, and the register of members is by statute regarded as prima facie evidence of the shareholders of a company. A person
becomes a shareholder of a BVI company, and is therefore able to benefit from the rights attaching to such shares, only on the
date that such person is entered on the register of members.
Rights
and Obligations of Shareholders
Dividends.
Subject to the BVI Business Companies Act (as amended), or 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 and cease to remain
owing by us. The directors may, before authorizing any distribution, set aside out of our profits such sum as they think proper
as a reserve fund, and may invest the sum so set apart as a reserve fund upon such securities as they may select. The holder of
each ordinary share has the right to an equal share in any distribution paid by us.
Voting
Rights. Each ordinary share confers on the shareholder the right to one vote at a meeting of the shareholders or on any resolution
of shareholders on all matters before our shareholders.
Winding
Up. The holder of each ordinary share is entitled to an equal share in the distribution of the surplus assets of us on a winding
up.
Redemption.
The directors may, on behalf of the Company, purchase, redeem or otherwise acquire any of our 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 our own shares unless immediately after such purchase, redemption or other acquisition, the value
of our assets exceeds our liabilities and we are able to pay our debts as they fall due.
Changes
in Rights of Shareholders
Under
our memorandum and articles of association, if at any time the shares which we are authorized to issue are divided into different
classes of shares, the rights attaching to any class may only be changed by a consent in writing of the holders of a majority
of the issued shares of that class or with the sanction of a resolution passed by the holders of at least a majority of the shares
of the class present in person or by proxy at a separate general meeting of the holders of the shares of the class. At such a
separate general meeting, the quorum shall be at least one person holding or representing by proxy a majority of the issued shares
of the class.
Meetings
Under
the BVI Act, there is no requirement for an annual meeting of shareholders. Under our articles of association, we are required
to hold an annual meeting of shareholders at the time designated by the Board of Directors. Our annual shareholders’ meetings
may be held in such place within or outside the BVI as our Board of Directors considers appropriate.
Our
Board of Directors shall call a shareholders’ meeting if requested in writing to do so by shareholders entitled to exercise
at least 10% of the voting rights in respect of the matter for which the meeting is being requested.
Our
Board of Directors shall give not less than 10 days and not more than 60 days prior written notice of a shareholders’ meeting
to those persons whose names on, either (a) the date the notice is given or (b) on a date fixed by the directors as the record
date (which must be a date that is not less than 10 days nor more than 60 days prior to the meeting), appear as shareholders in
our register and are entitled to vote at the meeting. The inadvertent failure of the directors to give notice of a meeting to
a shareholder, or the fact that a shareholder has not received notice, does not invalidate the meeting.
Our
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 such purpose. A shareholder shall be deemed
to be present at the meeting if he participates by telephone or other electronic means and all shareholders participating in the
meeting are able to hear each other.
Holders
of our ordinary shares are entitled to one vote for each share held of record on all matters at all meetings of shareholders,
except at a meeting where holders of a particular class or series of shares are entitled to vote separately. Our shareholders
have no cumulative voting rights. Our shareholders take action by a majority of votes cast, unless otherwise provided by the BVI
Act or our memorandum and articles of association.
Limitations
on Ownership of Securities
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.
Change
in Control of Company
Our
Board of Directors is authorized to issue our ordinary shares in different classes and series and, with respect to each class
or series, to determine the designations, powers, preferences, privileges and other rights, including dividend rights, conversion
rights, terms of redemption and liquidation preferences, any or all of which may be greater than the powers and rights associated
with the ordinary shares, at such times and on such other terms as they think proper. Such power could be used in a manner that
would delay, defer or prevent a change of control of our Company.
Ownership
Threshold
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.
Changes
in Capital
Subject
to the provisions of our amended and restated memorandum and articles of association, the BVI Act and the rules of NASDAQ, our
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 or class or series of 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.
Subject
to the provisions of the amended and restated memorandum of association relating to changes in the rights of shareholders and
the powers of directors in relation to shareholders, we may, by a resolution of members, amend our memorandum of association to
increase or decrease the number of ordinary shares authorized to be issued.
DESCRIPTION
OF DEBT SECURITIES
The
following is a summary of the general terms of the debt securities that we may issue. We will file a prospectus supplement that
may contain additional terms when we issue debt securities. The terms presented here, together with the terms in a related prospectus
supplement, will be a description of the material terms of the debt securities. You should also read the indenture under which
the debt securities are to be issued. We have filed a form of indenture governing different types of debt securities with the
SEC as an exhibit to the registration statement of which this prospectus is a part. All capitalized terms have the meanings specified
in the indenture.
We
may issue, from time to time, debt securities, in one or more series, that will consist of senior debt, senior subordinated debt
or subordinated debt. We refer to the subordinated debt securities and the senior subordinated debt securities together as the
subordinated securities. The debt securities that we may offer will be issued under an indenture between us and an entity, identified
in the applicable prospectus supplement, as trustee. Debt securities, whether senior, senior subordinated or subordinated, may
be issued as convertible debt securities or exchangeable debt securities. The following is a summary of the material provisions
of the indenture filed as an exhibit to the registration statement of which this prospectus is a part.
As
you read this section, please remember that for each series of debt securities, the specific terms of your debt security as described
in the applicable prospectus supplement will supplement and, if applicable, may modify or replace the general terms described
in the summary below. The statement we make in this section may not apply to your debt security.
General
Terms of the Indenture
The
indenture does not limit the amount of debt securities that we may issue. It provides that we may issue debt securities up to
the principal amount that we may authorize and may be in any currency or currency unit that we may designate. We may, without
the consent of the holders of any series, increase the principal amount of securities in that series in the future, on the same
terms and conditions and with the same CUSIP numbers as that series. Except for the limitations on consolidation, merger and sale
of all or substantially all of our assets contained in the indenture, the terms of the indenture do not contain any covenants
or other provisions designed to give holders of any debt securities protection against changes in our operations, financial condition
or transactions involving us.
We
may issue the debt securities issued under the indenture as “discount securities,” which means they may be sold at
a discount below their stated principal amount. These debt securities, as well as other debt securities that are not issued at
a discount, may be issued with “original issue discount”, or OID, for U.S. federal income tax purposes because of
interest payment and other characteristics. Material U.S. federal income tax considerations applicable to debt securities issued
with original issue discount will be described in more detail in any applicable prospectus supplement.
The
applicable prospectus supplement for a series of debt securities that we issue will describe, among other things, the following
terms of the offered debt securities:
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the title and authorized
denominations of the series of debt securities;
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any limit on the aggregate principal amount
of the series of debt securities;
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whether such debt securities will be issued
in fully registered form without coupons or in a form registered as to principal only with coupons or in bearer form with
coupons;
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whether issued in the form of one or more global
securities and whether all or a portion of the principal amount of the debt securities is represented thereby;
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the price or prices at which the debt securities
will be issued;
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the date or dates on which principal is payable;
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the place or places where
and the manner in which principal, premium or interest, if any, will be payable and the place or places where the debt securities
may be presented for transfer and, if applicable, conversion or exchange;
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interest rates, and the dates from which interest,
if any, will accrue, and the dates when interest is payable and the maturity;
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the right, if any, to extend the interest payment
periods and the duration of the extensions;
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our rights or obligations to redeem or purchase
the debt securities;
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any sinking fund or other provisions that would
obligate us to repurchase or otherwise redeem some or all of the debt securities;
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conversion or exchange provisions, if any, including
conversion or exchange prices or rates and adjustments thereto;
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the currency or currencies of payment of principal
or interest;
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the terms applicable to any debt securities
issued at a discount from their stated principal amount;
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the terms, if any, under which any debt securities
will rank junior to any of our other debt;
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whether and upon what terms the debt securities
may be defeased, if different from the provisions set forth in the indenture;
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if the amount of payments of principal or interest
is to be determined by reference to an index or formula, or based on a coin or currency other than that in which the debt
securities are stated to be payable, the manner in which these amounts are determined and the calculation agent, if any, with
respect thereto;
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the provisions, if any, relating to any collateral
provided for the debt securities;
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if other than the entire principal amount of
the debt securities when issued, the portion of the principal amount payable upon acceleration of maturity as a result of
a default on our obligations;
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the events of default and covenants relating
to the debt securities that are in addition to, modify or delete those described in this prospectus;
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the nature and terms of any security for any
secured debt securities; and
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any other specific terms of any debt securities.
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The
applicable prospectus supplement will present material U.S. federal income tax considerations for holders of any debt securities
and the securities exchange or quotation system on which any debt securities are to be listed or quoted.
Senior
Debt Securities
Payment
of the principal of, premium and interest, if any, on senior debt securities will rank on a parity with all of our other secured/unsecured
and unsubordinated debt.
Senior
Subordinated Debt Securities
Payment
of the principal of, premium and interest, if any, on senior subordinated debt securities will be junior in right of payment to
the prior payment in full of all of our unsubordinated debt, including senior debt securities and any credit facility. We will
state in the applicable prospectus supplement relating to any senior subordinated debt securities the subordination terms of the
securities as well as the aggregate amount of outstanding debt, as of the most recent practicable date, that by its terms would
be senior to the senior subordinated debt securities. We will also state in such prospectus supplement limitations, if any, on
issuance of additional senior debt.
Subordinated
Debt Securities
Payment
of the principal of, premium and interest, if any, on subordinated debt securities will be subordinated and junior in right of
payment to the prior payment in full of all of our senior debt, including our senior debt securities and senior subordinated debt
securities. We will state in the applicable prospectus supplement relating to any subordinated debt securities the subordination
terms of the securities as well as the aggregate amount of outstanding indebtedness, as of the most recent practicable date, that
by its terms would be senior to the subordinated debt securities. We will also state in such prospectus supplement limitations,
if any, on issuance of additional senior indebtedness.
Conversion
or Exchange Rights
Debt
securities may be convertible into or exchangeable for other securities being registered in this registration statement, including,
for example, shares of our equity securities. The terms and conditions of conversion or exchange will be stated in the applicable
prospectus supplement. The terms will include, among others, the following:
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the conversion or exchange
price;
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the conversion or exchange period;
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provisions regarding the ability of us or the
holder to convert or exchange the debt securities;
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events requiring adjustment to the conversion
or exchange price; and
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provisions affecting conversion or exchange
in the event of our redemption of the debt securities.
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Consolidation,
Merger or Sale
We
cannot consolidate or merge with or into, or transfer or lease all or substantially all of our assets to, any person, and we cannot
permit any other person to consolidate with or merge into us, unless (1) we will be the continuing corporation or (2) the successor
corporation or person to which our assets are transferred or leased is a corporation organized under the laws of the United States,
any state of the United States or the District of Columbia and it expressly assumes our obligations under the debt securities
and the indenture. In addition, we cannot complete such a transaction unless immediately after completing the transaction, no
event of default under the indenture, and no event which, after notice or lapse of time or both, would become an event of default
under the indenture, shall have occurred and be continuing. When the person to whom our assets are transferred or leased has assumed
our obligations under the debt securities and the indenture, we shall be discharged from all our obligations under the debt securities
and the indenture except in limited circumstances.
This
covenant would not apply to any recapitalization transaction, a change of control of us or a highly leveraged transaction, unless
the transaction or change of control were structured to include a merger or consolidation or transfer or lease of all or substantially
all of our assets.
Events
of Default
The
term “Event of Default,” when used in the indenture, unless otherwise indicated, means any of the following:
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failure
to pay interest for 30 days after the date payment is due and payable;
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failure
to pay principal or premium, if any, on any debt security when due, either at maturity, upon any redemption, by declaration
or otherwise;
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failure
to make sinking fund payments when due;
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failure
to perform other covenants for 60 days after notice that performance was required;
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events
in bankruptcy, insolvency or reorganization relating to us; or
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any
other Event of Default provided in the applicable officer’s certificate, resolution of our board of directors or the
supplemental indenture under which we issue a series of debt securities.
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An
Event of Default for a particular series of debt securities does not necessarily constitute an Event of Default for any other
series of debt securities issued under the indenture.
If
an Event of Default with respect to any series of senior debt securities occurs and is continuing, then either the trustee for
such series or the holders of a majority in aggregate principal amount of the outstanding debt securities of such series, by notice
in writing, may declare the principal amount of and interest on all of the debt securities of such series to be due and payable
immediately; provided, however, unless otherwise provided in the applicable prospectus supplement, if such an Event of Default
occurs and is continuing with respect to more than one series of senior debt securities under the indenture, the trustee for such
series or the holders of a majority in aggregate principal amount of the outstanding debt securities of all such series of senior
debt securities of equal ranking (or, if any of such senior debt securities are discount securities, such portion of the principal
amount as may be specified in the terms of that series), voting as one class, may make such declaration of acceleration as to
all series of such equal ranking and not the holders of the debt securities of any one of such series of senior debt securities.
If
an Event of Default with respect to any series of subordinated securities occurs and is continuing, then either the trustee for
such series or the holders of a majority in aggregate principal amount of the outstanding debt securities of such series, by notice
in writing, may declare the principal amount of and interest on all of the debt securities of such series to be due and payable
immediately; provided, however, unless otherwise provided in the applicable prospectus supplement, if such an Event of Default
occurs and is continuing with respect to more than one series of subordinated securities under the indenture, the trustee for
such series or the holders of a majority in aggregate principal amount of the outstanding debt securities of all such series of
subordinated securities of equal ranking (or, if any of such subordinated securities are discount securities, such portion of
the principal amount as may be specified in the terms of that series), voting as one class, may make such declaration of acceleration
as to all series of equal ranking and not the holders of the debt securities of any one of such series of subordinated securities.
The holders of not less than a majority in aggregate principal amount of the debt securities of all affected series of equal ranking
may, after satisfying certain conditions, rescind and annul any of the above-described declarations and consequences involving
such series.
If
an Event of Default relating to events in bankruptcy, insolvency or reorganization of us occurs and is continuing, then the principal
amount of all of the debt securities outstanding, and any accrued interest, will automatically become due and payable immediately,
without any declaration or other act by the trustee or any holder.
The
indenture imposes limitations on suits brought by holders of debt securities against us. Except for actions for payment of overdue
principal or interest, no holder of debt securities of any series may institute any action against us under the indenture unless:
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the
holder has previously given to the trustee written notice of default and continuance of such default;
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the
holders of not less than a majority in principal amount of the outstanding debt securities of the affected series of equal
ranking have requested that the trustee institute the action;
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the
requesting holders have offered the trustee reasonable indemnity for expenses and liabilities that may be incurred by bringing
the action;
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the
trustee has not instituted the action within 60 days of the request; and
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the
trustee has not received inconsistent direction by the holders of a majority in principal amount of the outstanding debt securities
of the affected series of equal ranking.
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We
will be required to file annually with the trustee a certificate, signed by one of our officers, stating whether or not the officer
knows of any default by us in the performance, observance or fulfillment of any condition or covenant of the indenture.
Registered
Global Securities and Book Entry System
The
debt securities of a series may be issued in whole or in part in book-entry form and may be represented by one or more fully registered
global securities or in unregistered form with or without coupons. We will deposit any registered global securities with a depositary
or with a nominee for a depositary identified in the applicable prospectus supplement and registered in the name of such depositary
or nominee. In such case, we will issue one or more registered global securities denominated in an amount equal to the aggregate
principal amount of all of the debt securities of the series to be issued and represented by such registered global security or
securities. This means that we will not issue certificates to each holder.
Unless
and until it is exchanged in whole or in part for debt securities in definitive registered form, a registered global security
may not be transferred except as a whole:
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by
the depositary for such registered global security to its nominee;
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by
a nominee of the depositary to the depositary or another nominee of the depositary; or
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by
the depositary or its nominee to a successor of the depositary or a nominee of the successor.
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The
prospectus supplement relating to a series of debt securities will describe the specific terms of the depositary arrangement involving
any portion of the series represented by a registered global security. We anticipate that the following provisions will apply
to all depositary arrangements for registered debt securities:
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ownership
of beneficial interests in a registered global security will be limited to persons that have accounts with the depositary
for such registered global security, these persons being referred to as “participants,” or persons that may hold
interests through participants;
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upon
the issuance of a registered global security, the depositary for the registered global security will credit, on its book-entry
registration and transfer system, the participants’ accounts with the respective principal amounts of the debt securities
represented by the registered global security beneficially owned by the participants;
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any
dealers, underwriters, or agents participating in the distribution of the debt securities represented by a registered global
security will designate the accounts to be credited; and
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ownership
of beneficial interest in such registered global security will be shown on, and the transfer of such ownership interest will
be effected only through, records maintained by the depositary for such registered global security for interests of participants,
and on the records of participants for interests of persons holding through participants.
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The
laws of some states may require that specified purchasers of securities take physical delivery of the securities in definitive
form. These laws may limit the ability of those persons to own, transfer or pledge beneficial interests in registered global securities.
So
long as the depositary for a registered global security, or its nominee, is the registered owner of such registered global security,
the depositary or such nominee, as the case may be, will be considered the sole owner or holder of the debt securities represented
by the registered global security for all purposes under the indenture. Except as stated below, owners of beneficial interests
in a registered global security:
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will
not be entitled to have the debt securities represented by a registered global security registered in their names;
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will
not receive or be entitled to receive physical delivery of the debt securities in the definitive form; and
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will
not be considered the owners or holders of the debt securities under the relevant indenture.
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Accordingly,
each person owning a beneficial interest in a registered global security must rely on the procedures of the depositary for the
registered global security and, if the person is not a participant, on the procedures of a participant through which the person
owns its interest, to exercise any rights of a holder under the indenture.
We
understand that under existing industry practices, if we request any action of holders or if an owner of a beneficial interest
in a registered global security desires to give or take any action that a holder is entitled to give or take under the indenture,
the depositary for the registered global security would authorize the participants holding the relevant beneficial interests to
give or take the action, and the participants would authorize beneficial owners owning through the participants to give or take
the action or would otherwise act upon the instructions of beneficial owners holding through them.
We
will make payments of principal and premium, if any, and interest, if any, on debt securities represented by a registered global
security registered in the name of a depositary or its nominee to the depositary or its nominee, as the case may be, as the registered
owners of the registered global security. None of us, the trustee or any other agent of ours or the trustee will be responsible
or liable for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the registered
global security or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests.
We
expect that the depositary for any debt securities represented by a registered global security, upon receipt of any payments of
principal and premium, if any, and interest, if any, in respect of the registered global security, will immediately credit participants’
accounts with payments in amounts proportionate to their respective beneficial interests in the registered global security as
shown on the records of the depositary. We also expect that standing customer instructions and customary practices will govern
payments by participants to owners of beneficial interests in the registered global security held through the participants, as
is now the case with the securities held for the accounts of customers in bearer form or registered in “street name.”
We also expect that any of these payments will be the responsibility of the participants.
If
the depositary for any debt securities represented by a registered global security is at any time unwilling or unable to continue
as depositary or stops being a clearing agency registered under the Exchange Act, we will appoint an eligible successor depositary.
If we fail to appoint an eligible successor depositary within 90 days, we will issue the debt securities in definitive form in
exchange for the registered global security. In addition, we may at any time and in our sole discretion decide not to have any
of the debt securities of a series represented by one or more registered global securities. In that event, we will issue debt
securities of the series in a definitive form in exchange for all of the registered global securities representing the debt securities.
The trustee will register any debt securities issued in definitive form in exchange for a registered global security in the name
or names as the depositary, based upon instructions from its participants, shall instruct the trustee.
We
may also issue bearer debt securities of a series in the form of one or more global securities, referred to as “bearer global
securities.” The prospectus supplement relating to a series of debt securities represented by a bearer global security will
describe the applicable terms and procedures. These will include the specific terms of the depositary arrangement and any specific
procedures for the issuance of debt securities in definitive form in exchange for a bearer global security, in proportion to the
series represented by a bearer global security.
Discharge,
Defeasance and Covenant Defeasance
We
can discharge or decrease our obligations under the indenture as stated below.
We
may discharge obligations to holders of any series of debt securities that have not already been delivered to the trustee for
cancellation and that have either become due and payable or are by their terms to become due and payable, or are scheduled for
redemption, within sixty (60) days. We may effect a discharge by irrevocably depositing with the trustee cash or U.S. government
obligations, as trust funds, in an amount certified to be enough to pay when due, whether at maturity, upon redemption or otherwise,
the principal of, premium and interest, if any, on the debt securities and any mandatory sinking fund payments.
Unless
otherwise provided in the applicable prospectus supplement, we may also discharge any and all of our obligations to holders of
any series of debt securities at any time, which we refer to as defeasance. We may also be released from the obligations imposed
by any covenants of any outstanding series of debt securities and provisions of the indenture, and we may omit to comply with
those covenants without creating an event of default under the trust declaration, which we refer to as covenant defeasance. We
may effect defeasance and covenant defeasance only if, among other things:
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we
irrevocably deposit with the trustee cash or U.S. government obligations, as trust funds, in an amount certified to be enough
to pay at maturity, or upon redemption, the principal, premium and interest, if any, on all outstanding debt securities of
the series;
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we
deliver to the trustee an opinion of counsel from a nationally recognized law firm to the effect that the holders of the series
of debt securities will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the defeasance
or covenant defeasance and that defeasance or covenant defeasance will not otherwise alter the holders’ U.S. federal
income tax treatment of principal, premium and interest, if any, payments on the series of debt securities; and
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in
the case of subordinated debt securities, no event or condition shall exist that, based on the subordination provisions applicable
to the series, would prevent us from making payments of principal of, premium and interest, if any, on any of the applicable
subordinated debt securities at the date of the irrevocable deposit referred to above or at any time during the period ending
on the 91st day after the deposit date.
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In
the case of a defeasance by us, the opinion we deliver must be based on a ruling of the Internal Revenue Service issued, or a
change in U.S. federal income tax law occurring, after the date of the indenture, since such a result would not occur under the
U.S. federal income tax laws in effect on such date.
Although
we may discharge or decrease our obligations under the indenture as described in the two preceding paragraphs, we may not avoid,
among other things, our duty to register the transfer or exchange of any series of debt securities, to replace any temporary,
mutilated, destroyed, lost or stolen series of debt securities or to maintain an office or agency in respect of any series of
debt securities.
Modification
of the Indenture
The
indenture provides that we and the trustee may enter into supplemental indentures without the consent of the holders of debt securities
to:
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secure any debt securities
and provide the terms and conditions for the release or substitution of the security;
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evidence the assumption by a successor corporation
of our obligations;
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add covenants for the protection of the holders
of debt securities;
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add any additional events of default;
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cure any ambiguity or correct any inconsistency
or defect in the indenture;
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add to, change or eliminate any of the provisions
of the indenture in a manner that will become effective only when there is no outstanding debt security which is entitled
to the benefit of the provision as to which the modification would apply;
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establish the forms or terms of debt securities
of any series;
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eliminate any conflict between the terms of
the indenture and the Trust Indenture Act of 1939;
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evidence and provide for the acceptance of appointment
by a successor trustee and add to or change any of the provisions of the indenture as is necessary for the administration
of the trusts by more than one trustee; and
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make any other provisions with respect to matters
or questions arising under the indenture that will not be inconsistent with any provision of the indenture as long as the
new provisions do not adversely affect the interests of the holders of any outstanding debt securities of any series created
prior to the modification.
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The
indenture also provides that we and the trustee may, with the consent of the holders of not less than a majority in aggregate
principal amount of debt securities of all series of senior debt securities or of Subordinated Securities of equal ranking, as
the case may be, then outstanding and affected, voting as one class, add any provisions to, or change in any manner, eliminate
or modify in any way the provisions of, the indenture or modify in any manner the rights of the holders of the debt securities.
We and the trustee may not, however, without the consent of the holder of each outstanding debt security affected thereby:
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extend
the final maturity of any debt security;
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reduce
the principal amount or premium, if any;
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reduce
the rate or extend the time of payment of interest;
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reduce
any amount payable on redemption or impair or affect any right of redemption at the option of the holder of the debt security;
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change
the currency in which the principal, premium or interest, if any, is payable;
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reduce
the amount of the principal of any debt security issued with an original issue discount that is payable upon acceleration
or provable in bankruptcy;
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alter
provisions of the relevant indenture relating to the debt securities not denominated in U.S. dollars;
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impair
the right to institute suit for the enforcement of any payment on any debt security when due;
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if
applicable, adversely affect the right of a holder to convert or exchange a debt security; or
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reduce
the percentage of holders of debt securities of any series whose consent is required for any modification of the indenture.
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The
indenture provides that the holders of not less than a majority in aggregate principal amount of the then outstanding debt securities
of any and all affected series of equal ranking, by notice to the relevant trustee, may on behalf of the holders of the debt securities
of any and all such series of equal ranking waive any default and its consequences under the indenture except:
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a
continuing default in the payment of interest on, premium, if any, or principal of, any such debt security held by a non-consenting
holder; or
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a
default in respect of a covenant or provision of the indenture that cannot be modified or amended without the consent of the
holder of each outstanding debt security of each series affected.
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Concerning
the Trustee
The
indenture provides that there may be more than one trustee under the indenture, each for one or more series of debt securities.
If there are different trustees for different series of debt securities, each trustee will be a trustee of a trust under the indenture
separate and apart from the trust administered by any other trustee under that indenture.
Except
as otherwise indicated in this prospectus or any prospectus supplement, any action permitted to be taken by a trustee may be taken
by such trustee only on the one or more series of debt securities for which it is the trustee under the indenture. Any trustee
under the indenture may resign or be removed from one or more series of debt securities. All payments of principal of, premium
and interest, if any, on, and all registration, transfer, exchange, authentication and delivery of, the debt securities of a series
will be effected by the trustee for that series at an office designated by the trustee.
If
the trustee becomes a creditor of ours, the indenture places limitations on the right of the trustee to obtain payment of claims
or to realize on property received in respect of any such claim as security or otherwise. The trustee may engage in other transactions.
If it acquires any conflicting interest relating to any duties concerning the debt securities, however, it must eliminate the
conflict or resign as trustee.
The
holders of a majority in aggregate principal amount of any and all affected series of debt securities of equal ranking then outstanding
will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the
trustee concerning the applicable series of debt securities, provided that the direction:
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would not conflict with any
rule of law or with the relevant indenture;
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would not be unduly prejudicial to the rights
of another holder of the debt securities; and
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would not involve any trustee in personal liability.
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The
indenture provides that in case an Event of Default shall occur, not be cured and be known to any trustee, the trustee must use
the same degree of care as a prudent person would use in the conduct of his or her own affairs in the exercise of the trustee’s
power. The trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any
of the holders of the debt securities, unless they shall have offered to the trustee security and indemnity satisfactory to the
trustee.
No
Individual Liability of Incorporators, Stockholders, Officers or Directors
The
indenture provides that in case an Event of Default shall occur, not be cured and be known to any trustee, the trustee must use
the same degree of care as a prudent person would use in the conduct of his or her own affairs in the exercise of the trustee’s
power. The trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any
of the holders of the debt securities, unless they shall have offered to the trustee security and indemnity satisfactory to the
trustee.
Governing
Law
The
indenture and the debt securities will be governed by, and construed in accordance with, the laws of the State of New York.
DESCRIPTION
OF WARRANTS
We
may issue warrants for the purchase of Ordinary Shares and/or debt securities in one or more series. We may issue warrants independently
or together with Ordinary Shares and/or debt securities, and the warrants may be attached to or traded separate and apart from
these securities. Each series of warrants will be issued under a warrant agreement all as set forth in the prospectus supplement.
A copy of the form of warrant agreement, including any form of warrant certificates representing the warrants, reflecting the
provisions to be included in the warrant agreements and/or warrant certificates that will be entered into with respect to particular
offerings of warrants, will be furnished to the SEC as an exhibit to a Form 6-K to be incorporated into the registration statement
of which this prospectus constitutes a part prior to the issuance of any warrants.
The
applicable prospectus supplement or term sheet will describe the terms of the warrants offered thereby, any warrant agreement
relating to such warrants and the warrant certificates, including but not limited to the following:
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the title of the warrants;
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the offering price or prices of the warrants,
if any;
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the minimum or maximum amount of the warrants
which may be exercised at any one time;
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the currency or currency units in which the
offering price, if any, and the exercise price are payable;
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the number of securities, if any, with which
such warrants are being offered and the number of such warrants being offered with each security;
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the date, if any, on and after which such warrants
and the related securities, if any, will be transferable separately;
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the amount of securities purchasable upon exercise
of each warrant and the price at which the securities may be purchased upon such exercise, and events or conditions under
which the amount of securities may be subject to adjustment;
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the date on which the right to exercise such
warrants shall commence and the date on which such right shall expire;
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the circumstances, if any, which will cause
the warrants to be deemed to be automatically exercised;
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any material risk factors, if any, relating
to such warrants;
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the identity of any warrant agent; and
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any other material terms of the warrants.
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Prior
to the exercise of any warrants, holders of such warrants will not have any rights of holders of the securities purchasable upon
such exercise, including the right to receive payments of dividends or the right to vote such underlying securities. Prospective
purchasers of warrants should be aware that material U.S. federal income tax, accounting and other considerations may be applicable
to instruments such as warrants.
DESCRIPTION
OF UNITS
We
may issue units comprised of one or more of the other securities described in this prospectus in any combination. Each unit will
be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit
will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may
provide that the securities included in the unit may not be held or transferred separately, at any time or at any time before
a specified date.
The
applicable prospectus supplement may describe:
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the
designation and terms of the units and of the securities comprising the units, including whether and under what circumstances
those securities may be held or transferred separately;
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any
provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units;
and
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any
additional terms of the governing unit agreement.
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The
applicable prospectus supplement will describe the terms of any units. The preceding description and any description of units
in the applicable prospectus supplement does not purport to be complete and is subject to and is qualified in its entirety by
reference to the unit agreement and, if applicable, collateral arrangements and depositary arrangements relating to such units.
PLAN
OF DISTRIBUTION
We,
or the Selling Shareholder, as applicable, may sell the securities offered by this prospectus in any one or more of the following
ways (or in any combination) from time to time:
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directly
to investors, including through privately negotiated transactions, a specific bidding, auction or other process;
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to
investors through agents;
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directly
to agents;
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to
or through underwriters or dealers;
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in
“at the market” offerings, within the meaning of the Rule 415(a)(4) of the Securities Act, to or through a market
maker or into an existing trading market on an exchange or otherwise;
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through
a combination of any such methods of sale; or
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through
any other method permitted by applicable law and described in the applicable prospectus supplement.
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The
accompanying prospectus supplement will set forth the terms of the offering and the method of distribution and will identify any
firms acting as underwriters, dealers or agents in connection with the offering, including:
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names and addresses of any underwriters, dealers or agents;
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the
purchase price of the securities and the proceeds to us from the sale, if any;
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any
over-allotment options under which underwriters may purchase additional securities from us;
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any
underwriting discounts and other items constituting compensation to underwriters, dealers or agents;
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any
public offering price, any discounts or concessions allowed or reallowed or paid to dealers; and
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any
securities exchange or market on which the securities offered in the prospectus supplement may be listed.
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If
underwriters are used in the sale, the underwriters will acquire the offered securities for their own account and may resell them
from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying
prices determined at the time of sale. The offered securities may be offered either to the public through underwriting syndicates
represented by one or more managing underwriters or by one or more underwriters without a syndicate. Unless otherwise set forth
in a prospectus supplement, the obligations of the underwriters to purchase any series of securities will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all of such series of securities if any are purchased.
Only those underwriters identified in such prospectus supplement are deemed to be underwriters in connection with the securities
offered in the prospectus supplement. Any underwritten offering may be on a best efforts or a firm commitment basis.
In
connection with the sale of our securities, underwriters or agents may receive compensation (in the form of discounts, concessions
or commissions) from us, the Selling Shareholder, or from purchasers of securities for whom they may act as agents. Underwriters
may sell securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters, dealers
and agents that participate in the distribution of our securities may be deemed to be “underwriters” as that term
is defined in the Securities Act, and any discounts allowed or commissions paid, and any profit on the resale of the securities
they realize may be deemed to be underwriting discounts and commissions under the Securities Act. Any person who may be deemed
to be an underwriter will be identified, and the compensation received from us or the selling stockholder will be described, in
the prospectus supplement. Maximum compensation to any underwriters, dealers or agents will not exceed any applicable Financial
Industry Regulatory Authority limitations.
Underwriters
and agents may be entitled to indemnification by us or the Selling Shareholder against some civil liabilities, including liabilities
under the Securities Act, or to contributions with respect to payments which the underwriters or agents may be required to make
relating to these liabilities. Underwriters and agents may be customers of, engage in transactions with, or perform services for
us or the Selling Shareholder in the ordinary course of business.
Unless
otherwise specified in the related prospectus supplement, each series of securities will be a new issue with no established trading
market, other than Ordinary Shares, which are listed on the NASDAQ Stock Market. Any Ordinary Shares sold pursuant to a prospectus
supplement will be listed on the NASDAQ Stock Market, subject to official notice of issuance. We may elect to list any series
of debt securities on an exchange, but we are not obligated to do so. It is possible that one or more underwriters may make a
market in the securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time
without notice. No assurance can be given as to the liquidity of, or the trading market for, any offered securities.
The
aggregate proceeds to us or the Selling Shareholder from the sale of our Ordinary Shares, as applicable, will be the purchase
price of our Ordinary Shares less discounts or commissions, if any. We and the Selling Shareholder reserve the right to accept
and, together with our or its agents from time to time, as applicable, to reject, in whole or in part, any proposed purchase of
our Ordinary Shares to be made directly or through agents. We will not receive any of the proceeds from any offering by the Selling
Shareholder.
To
facilitate the offering of the Ordinary Shares offered by us or the Selling Shareholder, certain persons participating in the
offering may engage in transactions that stabilize, maintain or otherwise affect the price of our Ordinary Shares. This may include
over-allotments or short sales, which involve the sale by persons participating in the offering of more shares than were sold
to them. In these circumstances, these persons would cover such over-allotments or short positions by making purchases in the
open market or by exercising their over-allotment option, if any. In addition, these persons may stabilize or maintain the price
of our Ordinary Shares by bidding for or purchasing shares in the open market or by imposing penalty bids, whereby selling concessions
allowed to dealers participating in the offering may be reclaimed if shares sold by them are repurchased in connection with stabilization
transactions. The effect of these transactions may be to stabilize or maintain the market price of our Ordinary Shares at a level
above that which might otherwise prevail in the open market. These transactions may be discontinued at any time.
The
Selling Shareholder may, from time to time, pledge or grant a security interest in some of the Ordinary Shares owned by it and,
if the Selling Shareholder defaults in the performance of its secured obligations, the pledgees or secured parties may offer and
sell the Ordinary Shares, from time to time, under this prospectus, or under an amendment or supplement to this prospectus amending
the list of the Selling Shareholders to include the pledgee, transferee or other successors in interest as the Selling Shareholder
under this prospectus. The Selling Shareholder also may transfer the Ordinary Shares in other circumstances, in which case the
transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
The
Selling Shareholder may use this prospectus in connection with resales of the Ordinary Shares. The Selling Shareholder may be
deemed to be an underwriter under the Securities Act in connection with the Ordinary Shares they resell and any profits on the
sales may be deemed to be underwriting discounts and commissions under the Securities Act. Unless otherwise set forth in a prospectus
supplement, the Selling Shareholder will receive all the net proceeds from the resale of the Ordinary Shares sold by it.
The
Selling Shareholder also may in the future resell a portion of the Ordinary Shares in open market transactions in reliance upon
Rule 144 under the Securities Act, provided that they meet the criteria and conform to the requirements of that rule, or pursuant
to other available exemptions from the registration requirements of the Securities Act.
EXPENSES
OF ISSUANCE AND DISTRIBUTION
The
following table sets forth the various expenses in connection with the sale and distribution of the securities being registered.
We will bear all of the expenses shown below.
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Securities and Exchange Commission registration fee
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$
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9,766.30
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|
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FINRA filing fee
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|
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*
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|
|
Printing and engraving expenses
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|
|
*
|
|
|
Legal fees and expenses
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|
|
*
|
|
|
Accounting fees and expenses
|
|
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15,000
|
|
|
Transfer agent fees and expenses
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|
|
*
|
|
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Miscellaneous
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|
|
*
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|
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Total
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|
$
|
*
|
|
*The
amount of securities and number of offerings are indeterminable, and the expenses cannot be estimated at this time.
LEGAL
MATTERS
Except
as otherwise set forth in the applicable prospectus supplement, certain legal matters in connection with the securities offered
pursuant to this prospectus will be passed upon for us by Maples and Calder to the
extent governed by the laws of British Virgin Islands, and by Bevilacqua PLLC to the extent governed by the laws of the State
of New York. Legal matters as to PRC law will be passed upon for us by Guangdong Jindi (Chengdu)
Law Firm. Bevilacqua PLLC may rely upon Maples and Calder with respect to
matters governed by British Virgin Islands law and Guangdong Jindi (Chengdu) Law Firm with respect to matters governed by PRC
law. If legal matters in connection with offerings made pursuant to this prospectus are passed upon by counsel to underwriters,
dealers or agents, such counsel will be named in the applicable prospectus supplement relating to any such offering.
ENFORCEMENT
OF CIVIL LIABILITIES
We
are a BVI company and our principal executive offices are located in China. A majority of our directors and officers reside outside
the United States. In addition, almost all of our assets and the assets of our directors and officers are located outside the
United States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons.
You may also have difficulty enforcing, both in and outside the United States, judgments you may obtain in the United States courts
against us or these persons in any action, including actions based upon the civil liability provisions of United States federal
or state securities laws.
We
have appointed Cogency Global Inc., 10 East 40th Street, 10th Floor, New York, N.Y. 10016, as our agent upon whom process may
be served in any action brought against us under the securities laws of the United States.
Guangdong
Jindi (Chengdu) Law Firm, our counsel as to PRC law, has advised us that the recognition and enforcement of foreign judgments
are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments, which do not otherwise
violate basic legal principles, state sovereignty, safety or social public interest of the PRC, in accordance with the requirements
of the PRC Civil Procedures Law based either on treaties between the PRC and the country where the judgment is made or on reciprocity
between jurisdictions. As there currently exists no treaty or other form of reciprocity between the PRC and the United States
governing the recognition of judgments, including those predicated upon the liability provisions of the U.S. federal securities
laws, there is uncertainty whether and on what basis a PRC court would recognize and enforce judgments rendered by U.S. courts.
Maples
and Calder, our counsel as to British Virgin
Islands law, has further advised us that, it is uncertain whether the courts of the BVI would enter judgments in original actions
brought in those courts predicated on United States federal or state securities laws.
EXPERTS
The
consolidated financial statements of Taoping Inc. as of December 31, 2017 and 2016 and for the years ended December 31, 2017 and
2016 included in our Annual Report on Form 20-F for the year ended December 31, 2017 and incorporated by reference herein and
in the registration statement, have been audited by UHY LLP, an independent registered public accounting firm, as set forth in
their report thereon, and incorporated by reference elsewhere herein. Such financial statements are incorporated herein by reference
in reliance upon such report given on the authority of said firm as expert in auditing and accounting.
The
consolidated financial statements of Taoping Inc. for the year ended December 31, 2015 included in our Annual Report on Form 20-F
for the year ended December 31, 2017 and incorporated by reference herein and in the registration statement, have been audited
by GHP Horwath, P.C. (“GHP”), an independent registered public accounting firm, as set forth in their report thereon,
and incorporated by reference elsewhere herein. However, we have been unable to obtain the written consent of GHP with respect
to the incorporation by reference of such financial statements due to the fact that GHP has ceased operations and no longer has
the ability to give its consent. Therefore, we have obtained from the Securities and Exchange Commission a waiver of the requirements
to file as an exhibit to the registration statement of which this prospectus forms a part the written consent of GHP in reliance
upon Rule 437 of the Securities Act. As a result, you may not be able to recover damages from GHP under Section 11 of the Securities
Act for any untrue statements of material fact or any omissions to state a material fact, if any, contained in our aforementioned
financial statements.
INDEMNIFICATION
Insofar
as indemnification by us for liabilities arising under the Securities Act may be permitted to our directors, officers or persons
controlling the company pursuant to provisions of our amended
and restated memorandum and articles of association, or otherwise, 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. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful
defense of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities
being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed with the SEC a registration statement on Form F-3 under the Securities Act with respect to the securities offered hereby.
This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in
the registration statement, the exhibits filed therewith or the documents incorporated by reference therein. For further information
about us and the securities offered hereby, reference is made to the registration statement, the exhibits filed therewith and
the documents incorporated by reference therein. Statements contained in this prospectus regarding the contents of any contract
or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance
we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. We are subject
to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly,
we will be required to file reports, including annual reports on Form 20-F, and other information with the SEC. As a foreign private
issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content of proxy statements to shareholders,
and Section 16 short swing profit reporting for our officers and directors and for holders of more than 10% of our ordinary shares.
The
SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that
file electronically with the SEC. The address of the website is www.sec.gov.
Additionally,
we make these filings available, free of charge, on our website at www.taop.com as soon as reasonably practicable after
we electronically file such materials with, or furnish them to, the SEC. The information on our website, other than these filings,
is not, and should not be, considered part of this prospectus and is not incorporated by reference into this document.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The
SEC allows us to “incorporate by reference” into this prospectus the information that we have filed with the SEC,
which means that we can disclose important information to you by referring you to those documents. Any information that we file
subsequently with the SEC will automatically update this prospectus. We incorporate by reference into this prospectus the information
contained in the documents listed below, which is considered to be a part of this prospectus:
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●
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The
Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2017, filed with the Commission on March
30, 2018;
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●
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Our
Current Reports on Form 6-K dated November 14, 2018 and November 21, 2018;
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●
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The
description of the Company’s Ordinary Shares contained in the Form 8-K12B, filed with the Commission on October 31,
2012, and any further amendment or report filed hereafter for the purpose of updating such description; and
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●
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With
respect to each offering of the securities under this prospectus, all subsequent reports on Form 20-F and any report on Form
6-K that so indicates it (or any applicable portions thereof) is being incorporated by reference that we file with or furnish
to the SEC on or after the date hereof and until the termination or completion of the offering by means of this prospectus.
|
Any
reports filed by us with the SEC after the date of this prospectus and before the date that the offering of securities by means
of this prospectus is terminated will automatically update and, where applicable, supersede any information contained in this
prospectus or incorporated by reference in this prospectus. This means that you must look at all of the SEC filings that we incorporate
by reference to determine if any of the statements in this prospectus or in any documents incorporated by reference have been
modified or superseded. Unless expressly incorporated by reference, nothing in this prospectus shall be deemed to incorporate
by reference information furnished to, but not filed with, the SEC.
We
will provide without charge to any person (including any beneficial owner) to whom this prospectus is delivered, upon oral or
written request, a copy of any document incorporated by reference in this prospectus but not delivered with the prospectus (except
for exhibits to those documents unless a documents states that one of its exhibits is incorporated into the document itself).
Such request should be directed to: Taoping Inc.., 21st Floor, Everbright Bank Building, Zhuzilin, Futian District, Shenzhen,
Guangdong 518040, People’s Republic of China, telephone number (+86)755-8370-8333.
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