United States securities and exchange commission logo
September 22, 2022
Liqiong (Iris) Yan
Chief Financial Officer
Taoping Inc.
Unit 3102, 31/F, Citicorp Centre
18 Whitefield Road, Hong Kong
Re: Taoping Inc.
Form 20-F for the
Fiscal Year Ended December 31, 2021
File No. 001-35722
Dear Ms. Yan:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 20-F for the Fiscal Year Ended December 31, 2021
Item 3. Key Information, page 2
1. We note your corporate
structure diagram on page 41. Please identify clearly the entity in
which public investors
own ordinary shares and the entity(ies) in which the company s
operations are
conducted. Describe the relevant contractual agreements between the
entities and how this
type of corporate structure may affect investors and the value of their
investment, including
how and why the contractual arrangements may be less effective
than direct ownership
and that the company may incur substantial costs to enforce the
terms of the
arrangements.
2. In your summary of risk
factors, provide a specific cross-reference to the more detailed
risk factor.
3. We note your disclosure
on page 4 related to the permissions and approvals to offer
securities. Please
revise to discuss any permissions and approvals required to be obtained
from Chinese
authorities to operate your business. Also, if you determine no permissions
Liqiong (Iris) Yan
FirstName LastNameLiqiong (Iris) Yan
Taoping Inc.
Comapany 22,
September NameTaoping
2022 Inc.
September
Page 2 22, 2022 Page 2
FirstName LastName
are required, provide an explanation as to whether you consulted
counsel and, if not, why
you did not consult counsel and why you believe you do not need any
permissions or
approvals.
Cash is transferred through our organization in the following manner, page 3
4. Please revise to quantify the extent to which transfers, dividends or
distributions have
been made to date between your subsidiaries.
5. Please revise to disclose, as you do on pages 28 and 73-74, any
restrictions on foreign
exchange and your ability to transfer cash across borders and to U.S.
investors.
Consolidated Financial Statements
Consolidated Statements of Cash Flows, page F-11
6. Revise your disclosure to clarify that there are no cash flows from
cryptocurrencies
included in net cash used in operating activities since the revenue
recognized from mining
is a noncash activity. In this regard, please revise your statement on
page F-22 and
elsewhere that cryptocurrencies awarded to the Company through its
mining activities
are included within operating activities on the accompanying
consolidated statements of
cash flows .
Notes to the Consolidated Financial Statements
2. Summary of Significant Accounting Policies
(f) Accounts Receivable, Accounts Receivable-related parties, and Concentration
of Risk, page
F-20
7. We note that your allowance for credit losses is approximately 63% of
third party
accounts receivable and 98% of accounts receivable - related parties.
We also note that
your accounts receivable balance before allowance for credit losses is
138% of your
revenue for the year ended December 31, 2021. Please provide a
detailed, company
specific analysis of how you determined your allowance for credit loss
balance. Your
analysis should discuss specific accounts receivable balances, their
aging, and when you
determined they were uncollectable. Your analysis should also note if
certain balances
related to one or more significant customers. In addition, disclose
how you considered
ASC 606-10-25-1(e) and ASC 606-10-55-3A through 606-10-55-3C when
determining
revenue recognition was appropriate.
(n) Cryptocurrencies, page F-22
8. So that we may better understand your accounting policies for
cryptocurrencies, please
address the following:
Revise to describe your accounting policies for disposal and
de-recognition of
cryptocurrencies, including how you determine if you have
transferred control of
your cryptocurrencies and how you determine gains or losses on
disposal or de-
recognition. Refer to ASC 610-20.
Liqiong (Iris) Yan
FirstName LastNameLiqiong (Iris) Yan
Taoping Inc.
Comapany 22,
September NameTaoping
2022 Inc.
September
Page 3 22, 2022 Page 3
FirstName LastName
Revise to clarify where you classify cryptocurrency impairment
losses on your
statements of operations and tell us the accounting literature
you relied upon to
support this presentation.
Describe to us in detail your reasons for classifying gains and
losses from the sale of
cryptocurrency outside of loss from operations and cite the
authoritative accounting
literature that supports your presentation.
9. Please provide us with an accounting analysis to explain why you
believe it is appropriate
to classify cash flows from selling cryptocurrencies within investing
activities. Also tell us
how you present the cash outflows for purchases of cryptocurrencies
and explain the basis
for such classification. Please refer to ASC 230-10.
Revenue - Cryptocurrency mining, page F-25
10. We note your disclosure on page 66 regarding Ethereum mining. Please
revise to
disclose, if true, that you mine both the Bitcoin and Ethereum
blockchain. To the extent
that your accounting policies differ depending on the type of
cryptocurrency mined, please
also revise your accounting policies to address those differences
accordingly.
11. You disclose on page F-25 that contracts are terminable under certain
circumstances.
Please supplementally address the following:
Describe the circumstances under which contracts are terminable.
Tell us if the contracts are terminable without compensating the
other party.
Tell us for what period each party to your contract has
enforceable rights and
obligations and the basis for your conclusion.
Clarify if your right or the pool operator s right to terminate
the contract governing
your participation in the pool is conditional.
Summarize the material rights and obligations of each party to
your pool participation
contracts.
12. We note your disclosure that your performance obligation in your
contracts with mining
pool operators is the provision of computing power. Please revise to
clarify whether you
satisfy your performance obligation over time or at a point in time.
Please provide us with
your analysis demonstrating how you considered ASC 606-10-25-24.
13. You disclose that, "The transaction consideration the Company
receives, if any, is
noncash consideration, which the Company measures at fair value using
the quoted price
of the related cryptocurrency on the date received, which is not
materially different than
the fair value at the contract inception or at the time the Company
has earned the award
from the pools." In this regard, please tell us how you determined
that the fair value of
the noncash consideration on the date received is not materially
different than the fair
value at contract inception. Also, explain why your disclosure
addresses the difference
between the fair value of the noncash consideration on the date
received and its fair value
when you earn the award from the pools. Refer to ASC 606-10-32-21 to
32-24.
Liqiong (Iris) Yan
Taoping Inc.
September 22, 2022
Page 4
14. Please revise to clarify when you recognize revenue. We note that
revenue is recognized
when you receive confirmation of the consideration you will receive.
However, you also
disclose that noncash consideration is measured on the date received.
Since it appears that
the confirmation is received prior to the receipt of the noncash
consideration, it is
unclear how you are able to measure the amount of revenue to recognize
upon receipt of
the confirmation. Please supplementally clarify the time periods
between successful
placement of a block on the blockchain by the pool operator, receipt
of confirmation, and
receipt of consideration.
15. Please clearly disclose your reward sharing mechanism as a pool
participant. In this
regard, clarify the extent to which you are entitled to any
compensation for computing
power provided for a block that the pool operator is not successful in
placing. In addition,
tell us and disclose the amount of block rewards earned separately
from the amount of any
fees for transaction verification.
16. We note your reference to digital asset transaction fees. Please
describe to us, in detail,
the types of fees you are charged by the mining pool operators and how
you account for
those fees. Please also tell us whether you receive consideration net
of these fees or if you
make a separate payment to the mining pool operator for digital asset
transaction fees.
Finally, describe in detail how you considered ASC 606-10-32 in
determining the
transaction price in your contracts with mining pool operators.
6. Related Party Transactions, page F-33
17. We note based on your disclosure on page F-20 that accounts receivable
from related
parties increased from $12,017,651 to $16,032,134 from December 31,
2020 to December
31, 2021. However, you only discuss $0.1 million and $27,000 of
related party revenue
for the year ended December 31, 2021. Please clarify and revise to
disclose all of your
related party revenue.
18. Please disclose total gross accounts receivable from related parties
as well as total
allowance for credit losses from related parties for each period
presented. Disclose when
the original revenue and accounts receivable were recorded and when
you determined the
majority of this revenue would not be collected. Confirm, if true,
that this uncollectable
accounts receivable was from Taoping New Media Co., Ltd. (TNM) and its
affiliates, an
entity controlled by Mr. Lin, your Chairman and Chief Executive
Officer.
10. Cryptocurrencies,
FirstName page F-34
LastNameLiqiong (Iris) Yan
Comapany
19. NameTaoping
Please Inc.
revise your rollforward to include a separate column for each
type of
cryptocurrency
September held,
22, 2022 Page 4 acquired or sold during the periods presented.
FirstName LastName
Liqiong (Iris) Yan
FirstName LastNameLiqiong (Iris) Yan
Taoping Inc.
Comapany 22,
September NameTaoping
2022 Inc.
September
Page 5 22, 2022 Page 5
FirstName LastName
General
20. We note your risk factor on page 37. Please revise to also include a
separate
Enforceability section to address the difficulty of bringing actions
against your officers
and directors who are located in Hong Kong and enforcing judgments
against them.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Lisa Etheredge, Senior Staff Accountant, at (202)
551-3424 or Inessa
Kessman, Senior Staff Accountant, at (202) 551-3371 if you have questions
regarding comments
on the financial statements and related matters. Please contact Alexandra
Barone, Staff
Attorney, at (202) 551-8816 or Jan Woo, Legal Branch Chief, at (202) 551-3453
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Jianghuai Lin