UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20162019.

OR

¨

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-10822001-36530

One HorizonTouchpoint Group Holdings, Inc.

(Exact name of registrant as specified in its charter)

+353-61-5184771 (305) 420-6640

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $0.0001

(Title of Class) None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ¨☐  No þ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes ¨☐  No þ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ☒  No ¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ☒ No ¨

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No þ☒

The aggregate market value of the 35,347,283 shares ofregistrant’s voting and non-voting common equity stock held by non-affiliates of the registrant was approximately $ 26.86$2.7 million as of June 30, 2016,28, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, based on the last sale price of the registrant’s common stock on such date of $0.76$0.7525 per share, as reported on Nasdaq. the OTCQB Market as adjusted for the 1-for-25 reverse split which took effect on September 26, 2019.

As of April 3, 2017, 37,316,71424, 2020, 25,688,386 shares of the registrant’s common stock, par value $0.0001, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

Introductory Note

Unless otherwise noted, references to the “Company” in this Annual Report on Form 10-K include One HorizonTouchpoint Group Holdings, Inc. and all of its subsidiaries.

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

The statements made in this Annual Report on Form 10-K, and in other materials that the Company has filed or may file with the Securities and Exchange Commission (the “SEC”), in each case that are not historical facts, contain “forward-looking information” within the meaning of the Private Securities Litigation Reform Act of 1995, and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, both as amended (the “Exchange Act”), which can be identified by the use of forward-looking terminology such as “may,” “will,” “anticipates,” “expects,” “projects,” “estimates,” “believes,” “seeks,” “could,” “should,” or “continue,” the negative thereof, and other variations or comparable terminology as well as any statements regarding the evaluation of strategic alternatives.  These forward-looking statements are based on the current plans and expectations of management and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements.  Among theseThese risks include, but are not limited to, risks and uncertainties are the competition we face;relating to our abilitycurrent cash position and our need to adaptraise additional capital in order to rapid changes  in the market for voice and messaging services;be able to continue to fund our operations; our ability to retain customersour managerial personnel and to attract new customers;additional personnel; competition; our ability to establish and expand strategic alliances; governmental regulation and related actions and taxes in our international operations; increased market and competitive risks, including currency restrictions, in our international operations; risks related to the acquisition or integration of future businesses or joint ventures; our ability to obtain or maintain relevantprotect intellectual property rights; intellectual propertyrights, and any and other litigation that may be brought against us; failure to protect our trademarks and internally developed software; security breaches and other compromises of information security; our dependence on third party facilities, equipment, systems and services; system disruptions or flaws in our technology and systems; uncertainties relating to regulation of VoIP services; liability under anti-corruption laws; results of regulatory inquiries into our business practices; fraudulent use of our name or services; our ability to maintain data security; our dependence upon key personnel; our dependence on our customers' existing broadband connections; differences between our service and traditional phone services; our ability to obtain additional financing if required; our early history of net losses and our ability to maintain consistent profitabilityfactors, including the risk factors identified in the future. documents we have filed, or will file, with the SEC.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Annual Report on Form 10-K or in any document incorporated herein by reference might not occur. Investors are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the respective dates of this Annual Report on Form 10-K or the date of the document incorporated by reference in this Annual Report on Form 10-K. We expressly disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by federal securities laws.

These and other matters the Company discusses in this Annual Report on Form 10-K, or in the documents it incorporates by reference into this Annual Report on Form 10-K, may cause actual results to differ from those the Company describes. The Company assumes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Reverse Stock Split and Company Name Change

Following the approval of our stockholders at the Annual Meeting of Stockholders held on December 27, 2018, the Company amended its Certificate of Incorporation, as amended, to reflect a 1-for-25 reverse stock split. This reverse stock split took effect on September 26, 2019. The share amounts presented in this Annual Report on Form 10-K have been adjusted to reflect the reverse stock split.

Also on September 26, 2019, the Company changed its name from One Horizon Group, Inc. to Touchpoint Group Holdings Inc. The Company’s ticker symbol was also changed to “TGHI”.

PART I

ITEM 1. BUSINESS

One Horizon Group, Inc.We are a holding company which, through our operating subsidiaries, is engaged in media and its Subsidiaries (the “Company”) is the inventor of the patented SmartPacket^TM Voice over Internet Protocol (“VoIP”) platform. Our software is designeddigital technology, primarily in sports entertainment and related technologies that bring fans closer to capitalize on numerous industry trends, including the rapid adoption of smartphones, the adoption of cloud based Internet services, the migration towards all IP voice networksathletes and the expansion of enterprise bring-your-own-device to work programs.celebrities.

The Company designs, develops and sells white label SmartPacket^tm software and services to large Tier-1 telecommunications operators. Our licensees deliver an operator-branded mobile Internet communication solution to smartphones including VoIP, multi-media messaging, video, and mobile advertising; and the Business to Business (“B2B”) business. Current licensees include some of the world’s largest operators such as Singapore Telecommunications and Philippines Smart Communication.

The SmartPacket™ platform, significantly improves the efficiency by which voice signals are transmitted from smartphones over the Internet resulting in a 10X reduction in mobile bandwidth and reduced battery usage while transmitting a VoIP call on a smartphone. This is of commercial interest to operators that wish to have a high quality VoIP call on congested metropolitan networks and on legacy 2G and 3G cellular networks.

By leveraging its SmartPacket^TM solution, the Company is also a VoIP as a Service (“VaaS”) cloud communications leader for hosted smartphone VoIP that run globally on the Microsoft Azure cloud. The Company sells its software, branding, hosting and operator services to smaller telecommunications operators, enterprises, operators in fixed line telephony, cable TV operators and to the satellite communications sector; and the “VaaS” business. Our existing licensees come from around the world including Zimbabwe, Ghana, China, United Kingdom, Singapore, Canada and Hong Kong.

Based on the SmartPacket^TM solution, the Company is the sole owner and operator of its own branded retail smartphone VoIP, messaging and advertising service in the People’s Republic of China called Aishuo^TM; the “Aishuo” business. Since its inception in the second quarter of 2015 Aishuo has been downloaded over 40 million times since 2015 and has produced revenues throughout 2016. Aishuo offers subscribers very competitive telephone call rates and a virtual number rental service plus additional innovative smartphone social media features. Aishuo has been made available to users across 25 Chinese Android app stores and through iTunes. Aishuo subscribers pay for VoIP or can have a free VoIP call sponsored by advertisers. Aishuo supports top-up payment services inside the smartphone app including China UnionPay, Apple In-App Purchases, Alibaba’s Alipay and Tencent’s Wechat Wallet.

Our business model is focused on winning new B2B Tier-1 telecommunications operators, winning new VaaS subscribers and driving Aishuo retail revenues. We are also commercially focused on expanding sales of new and existing licensed products and services to existing customers, and renewing subscriptions and software support agreements. We target customers of all sizes and across a broad range of industries.

We are an ISO 9001 and ISO 20000-1 certified company with assets and operations in Switzerland, Ireland, the United Kingdom, China, India, Russia, Hong Kong and Latin America.

Current Structure of the Company

The Company has the following wholly owned subsidiaries:

In addition to the subsidiaries listed above, Suzhou Aishuo Network Information Co., Ltd (“Suzhou Aishuo”) is a limited liability company, organized in China and controlled by us via various contractual arrangements. Suzhou Aishuo is treated as one of our subsidiaries for financial reporting purposepurposes in accordance with generally accepted accounting principles in the United States (“GAAP”).

Touchpoint Connect Limited (“TCL”) is a software developer which supplies a robust fan engagement platform designed to enhance the fan experience and drive commercial aspects of the sport and entertainment business.

Current Business OperationsTCL brings users closer to the action by enabling them to engage with clubs, favourite players, peers and relevant brands through features that include live streaming, access to limited edition merchandise, gamification (chance to win unique one-off life experiences), user rewards, third party branded offers, credit cards and associated benefits.

TCL is available to a broad audience as a white label product. The platform provides in-depth analytics that enable marketing teams to ensure that they deliver aligned, strategic messages and campaigns to the right audience at the right time.

The Company is based in the United States of America, Hong Kong, China and the United Kingdom. 

Our Growth Strategy

In 2015,addition to growing the customer base of TCL, the Company will look at growth through the following methods:

Growing through acquisitions:We believe that the highly fragmented content creation media industry, which is comprised primarily of small-to-medium-sized private companies, provides us with significant opportunities to grow our business through acquisitions. We intend to pursue acquisitions that provide services within our current core product offerings, extend our geographic reach and expand our product offerings.

Cross-selling services:    Our ability to produce diverse, engaging content across various media platforms allows us to offer clients a one-stop-shop for all of their content needs. We intend to cross-sell our various capabilities to drive additional revenue from existing clients and to seek to win new clients.

Expanding our geographic presence:    We believe that by expanding our physical presence into select international regions, we announcedwill be better able to attract and retain internationally based brands as clients. With a physical presence outside of the rollout ofU.S., we believe we can provide better customer service and offer local talent who can work more intimately with internationally based brands than we can from our platform in China, brand namedAishuo(http://www.ai-shuo.cn/). This rollout entailed multiple strategies including advertisements, search engine optimization, press releases, event marketing, business-traveler direct marketing, as well as on and off-line promotions and leveraging the brand new One Horizon Sponsored-Call platform.  Based on the SmartPacket^TM solution, we are the owner and operator of this retail smartphone VoIP, messaging and advertising serviceoffices in the People’s Republic of China.U.S.

Since its commercial availability in the second quarter of 2015, Aishuo hasExpanding our talent roster:    We intend to date, been downloaded over 43 million times. Aishuo offers subscribers very competitive telephone call ratescontinue to seek to attract and a virtual number rental service plus lots of innovative smartphone social media features. Aishuo has been made availableretain world-class creative and technical talent, thereby increasing our ability to users across 25 Chinese Android app storeswin jobs and build brand equity through iTunes. Aishuo subscribers pay for VoIP or can have a VoIP call sponsored by advertisers. Aishuo supports top-up payment services inside the smartphone app including China UnionPay, Apple In-App Purchases, Alibaba’s Alipayadditional high quality creative content. We believe that our reputation and Tencent’s Wechat Wallet.our client base will allow us to continue to attract top creative talent.

Aishuo is operated by, Suzhou Aishuo Network Information Co., Ltd. a Chinese company controlled by us and headquartered in Nanjing, China.

 CORPORATE HISTORY

Figure 1. Aishuo Retail

AtWe were initially incorporated in Pennsylvania in 1972 as Coratomic, Inc. We changed our name six times thereafter, with the end of Q1 2017,last name change in 2019 to Touchpoint Group Holdings, Inc.In addition, we announced the rollout ofchanged our VoIP as a Service “VaaS” platform on the Microsoft Azure cloud. We sell our software, branding, hosting and operator servicesdomicile from Pennsylvania to smaller telecommunications operators, enterprises, operatorsDelaware in fixed line telephony, cable TV operators and to the satellite communications sector. The Company was showcased by Microsoft Corp. for its Azure technology (https://customers.microsoft.com/en-us/story/onehorizon).

Figure 2. VaaS Hosted Offering

Figure 3. Cloud-based Secure, Fault Tolerant and Low Latency Architecture

Figure 4. Microsoft Showcases One Horizon Group Inc.2013.

OurB2B platform authorized capital is being used200,000,000 shares of common stock, par value $0.0001 per share, and 50,0000,000 shares of preferred stock, par value $0.0001 per share. The designation of rights including voting powers, preferences, and restrictions shall be determined by the Board of Directors before the issuance of any shares. As of April 24, 2020, 25,688,386 shares of our common stock are issued and outstanding and no preferred stock is issued and outstanding.

Disposal of a pre-paid VoIP Smartphone application launched by different carriers respectively, some of which are listed as follows:

 Controlling Interest in Banana Whale Studios Pte. Ltd.

Figure 1. Horizon B2B Operator Core Network

OfferingOn May 18, 2018, we entered into and Market Related

In September 2016,consummated an Exchange Agreement (the “Exchange Agreement”) with Banana Whale Studios Pte. Ltd. and the founding shareholders of Banana Whale (the “Banana Whale Stockholders”), pursuant to which we sold 198,413acquired 51% of the outstanding shares (“Controlling Interest in Banana Whale”) of Banana Whale in exchange for a number of our shares of common stock to certain institutional investors atbe based upon the earnings of Banana Whale. As a purchase pricecondition to closing the acquisition, Banana Whale Stockholders demanded and we deposited in escrow for their benefit 295,320 shares of $0.63our common stock (“OHGI Shares”) with a fair value of $4,983,000 as security for aggregate gross proceedsour obligation to issue such shares to which they may become entitled. If the number of $125,000shares to which the Banana Whale Stockholders become entitled is less than 295,320, the excess shares will be returned to us for cancellation. We also granted Banana Whale the right to use our secure messaging software. On February 4, 2019, we entered into and consummated an agreement (the “Agreement”) with Banana Whale and the Banana Whale Stockholders, pursuant to which we sold the Controlling Interest in Banana Whale in exchange for $2,000,000, consisting of $1,500,000 in cash and a securities purchase agreement. In connection$500,000 promissory note bearing interest at 5% per annum payable on December 31, 2019 (the “BWS Note”). Under the BWS Note, Banana Whale can prepay the BWS Note in whole or in part without premium or penalty. Pursuant to the BWS Note, the Banana Whale Stockholders agreed to guarantee the payments of all amounts due thereunder on a limited-recourse basis. On February 4, 2019, we also entered into a Pledge and Escrow Agreement with the purchaseBanana Whale Stockholders pursuant to which the Banana Whale Stockholders agreed to place the Controlling Interest in Banana Whale in escrow as security for payment of common stock the purchasersBWS Note.

The Agreement also terminated certain of the remaining obligations under the Exchange Agreement, releasing us, Banana Whale and the Banana Whale Stockholders from their remaining obligations thereunder. In February 2020, the shares held in escrow were cancelled.

In December 2019, an agreement regarding the remaining amount due on the BWS Note was reached, pursuant to which the Company received $250,000 in December 2019 and the balance payable over the 2 years ending December 2021 whereby the Company will receive an amount equal to 25% of reported earnings before income tax, depreciation and amortization (“EBITDA”) each quarter up to a warrantmaximum amount of $250,000 in aggregate.

The Company realized a gain of $553,000 on the sale of its 51% interest in Banana Whale during the year ended December 31, 2019.

Disposal of Discontinued Operations

On October 22, 2018, we entered into an Exchange Agreement (“Browning Exchange Agreement”) pursuant to acquire 148,810which we acquired a majority of the outstanding shares (the “Controlling Interest in Browning”) of Browning Productions &Entertainment, Inc. (“Browning”), from William J. Browning, the sole stockholder of Browning.

In exchange for the controlling interest in Browning, we paid Mr. Browning $10,000 and issued to him 12,000 shares of common stock, atplus an exercise priceadditional number of $0.819 per share. The warrants became exercisable on the date of issuance for a three-year term.

In October 2016, we sold 320,512 shares of common stock to certain institutional investors at a purchase price of $0.39 for aggregate gross proceeds of $125,000 pursuantwhich can be up to a securities purchase agreement.. In connection withmaximum of 680,000 shares, determined by dividing two and a half times the purchasenet after tax earnings of common stockBrowning during the purchasers received a warrant to acquire 240,385 shares of common stock at an exercise price of $0.5616 per share. The warrants became exercisable ontwelve month period ended December 31, 2019 by the date of issuance for a three-year term.

In December 2016, we sold 500,000 shares of common stock to certain institutional investors at a purchase price of $0.30 for aggregate gross proceeds of $150,000 pursuant to a securities purchase agreement. . In connection with the purchase of common stock the purchasers received a warrant to acquire 375,000 shares of common stock at an exercise price of $0.35 per share. The warrants became exercisable on the date of issuance for a three-year term.

The above financings are conducted as at-the-market shelf-take down under our registration statement on Form S-3 (File No. 333-205049).

On August 10, 2015, in connection with an Underwriting Agreement dated August 4, 2015 (the “Underwriting Agreement”) with Aegis Capital Corp. (“Aegis”), as representativeaverage of the several underwriters named therein (the “Underwriters”), we closed a firm commitment underwritten public offering of 1,714,286 shares of Common Stock, and warrants to purchase up to an aggregate of 857,143 shares of Common Stock at a combined offering price of $1.75 per share and accompanying Warrant. Pursuant to the Underwriting Agreement, the Underwriters exercised an option to purchase 151,928 additional shares of Common Stock and 75,964 additional warrants. The net proceeds from the offering were approximately $2.89 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The warrants offered have a per share exercise price of $2.50 (subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock and also upon any distributions of assets, including cash, stock or other property to our stockholders), are exercisable immediately and will expire three years from the date of issuance. Subject to applicable laws, the warrants may be offered for sale, sold, transferred or assigned without our consent.

Recent Developments

Notice of Delisting or Failure to Satisfy a Continued Listing Rule

On August 30, 2016, the Company received a written alert from Nasdaq Listing Qualifications that our listed security has not regained compliance with the minimum $1 bid price per share requirement, within the 180 calendar days. However, the Staff has determined that the Company is eligible for an additional 180 calendar day period, pursuant to Listing Rule 5810(c)(3)(a). If at any time during this 180 day period the closing bid price of our common stock is at least $1 forduring the 10 consecutive trading days immediately preceding the end of 2019.

Though the terms of this transaction only required a minimum$20,000 cash payment ($10,000 in cash under the non-binding letter of ten consecutive business days,intent and $10,000 in cash under the Browning Exchange Agreement) to Mr. Browning, we will regain compliance. In order to regain compliance, we may have to affect a reverse stock-split. If we arewere required to effectprovide Browning with a reverse stock-split, it would haveworking capital loan in an initial amount of $150,000, which is to be completed at least 10 days prior to the expirationrepaid out of the date bypost-closing net profit of Browning, as well as earmark an additional $150,000 in cash for future investment in Browning (to assist in funding the future operations of Browning).

We had a right of first refusal to purchase the remaining shares of Browning.

During the year ended December 31, 2019, the Company decided to sell its interests in its subsidiaries, Love Media House Inc. (“Love Media”) and Browning. In connection with this determination, the Company concluded the intangible assets related to these subsidiaries were impaired. Accordingly, the Company recorded an impairment charge of $2,440,000 which we must regain complianceis included in the loss from discontinued operations.

In February 2020, the Company concluded the sale of its majority interest in Browning for the following consideration;

Currently, the Company is looking to negotiate a sale of its ownership interest in Love Media.  

Recent Developments

The Company continues to seek cost-effective acquisitions in the sports and entertainment sectors that would be synergistic with Rule 5550(a)(2).the Touchpoint app and platform, enabling the livestreaming of content to fans. On February 12, 2020, the Company announced the signing of a Touchpoint licensing agreement with TV celebrity Joey Essex.

On February 28, 2017,April 6, 2020 the Company receivedannounced the signing of a notice from Touchpoint licensing agreement with Russell Simmons company GDAS LLC.

The NasdaqCompany is in discussions with other athletes and other celebrities to enter into a Touchpoint license to enable them to engage with their fanbase with content.

Reverse Stock Market LLC (“Nasdaq”) Listing Qualifications Staff (the “Staff”) stating thatSplit

Following approval of the Staff has determined, unlessCompany’s stockholders at the Annual Meeting of Stockholders held on December 27, 2018, the Company timely requests an appealamended its Certificate of the Staff’s determination, before Nasdaq’s Hearing Panel (the “Panel”), by March 7, 2017,Incorporation, as amended, to delist the Company’s common stock from the Nasdaq Capital Market because the Company is not in compliance with the $1.00 minimum bid price requirement (the “Minimum Bid Price”) for continued listing set forth in the Nasdaq Listing Rule 5550(a)(2).The Company filedreflect a request for a hearing before the Panel, on March 2, 2017, which request will stay any delisting or suspension action by the Staff pending the issuance of the Panel’s decision and the expiration of any extension granted by the Panel.

On March 3, 2017, the Staff informed the Company that they were granted a hearing to be held on April 20, 2017 (the “Hearing”). As such, the delisting action, referenced above, has been stayed, pending a final written decision by the Panel at the Hearing.

At the Hearing, we will present its plan to regain compliance with the Minimum Bid Price by effecting a1-for-25 reverse stock split. On March 20, 2017, the Company filed a definitive proxy statement with the Securities and Exchange Commission in connection with special meeting of stockholders (the “Stockholders’ Meeting”) to be held on April 14, 2017.  The proposal being submitted is for a vote of the stockholders at the Stockholders’ Meeting is the approval of a 6 to 1This reverse stock split of all of the issued and outstanding shares of the Company’s common stock. Management believes that effectingtook effect on September 26, 2019. The share amounts presented in this Annual Report on Form 10-K have been adjusted to reflect the reverse stock split will allow our common stock to regain compliance with Nasdaq Listing Rule 5550(a)(2), which should allow the Company’s common stock to continue to trade on the Nasdaq Capital Market. Assuming the reverse stock split proposal is approved by the Company’s stockholders, the Company’s board of directors currently intends to effect the reverse stock split immediately after the Stockholders’ Meeting, unless it determines that doing so would not have the desired effect of satisfying the Minimum Bid Price requirement.

Industrysplit.

Rapid Growth in Global Mobile Voice over IP Service MarketCorporate Information

We aimOur principal executive offices are located at 4300 Biscayne Blvd., Miami, Florida 33137, and our telephone number at that location is (305) 420-6640. Our website is www.touchpointgh.com. The information contained on or connected to deliver our patented smartphone software towebsite is not incorporated by reference into, and you must not consider the ever expanding mobile Voice over IP (“mVoIP”) user. By 2019 there are expected to be over 2.7 billion smartphones consumers, or more than one-third of all people worldwide (Source: https://www.statista.com/statistics/330695/number-of-smartphone-users-worldwide. Each new smartphone represents an opportunity for us to deliver our innovative mobile VoIP, Messaging over IP and Advertising over IP solution in whatever mobile app brand is attractive to the end user throughout the globe.

By partnering with national carriers and delivering our solution as a licensed service to regional mobile operators, we leverage the power of their brand and join them to fight back against already lost revenues, or potential revenue loss, to network bandwidth-intensive Over The Top (“OTT”) VoIP apps; such as Skype^TM in the USA or Line^TM in Japan and the like.

In the past mobile operators relied upon blocking VoIP on their networks but they have realized that this is no longer a viable option. They must embrace innovations in VoIP software, especially on the smartphone, from businesses like ours. Not only can we offer a multi-media, multi-faceted software solution to smartphones, but we are the only company that offers a package that aids the operators in the rollout, expansion, maintenance and upgrade of their mobile network in metro and rural areas to cater for smartphones.

From the beginning of the first smartphones in 2008, our software was specifically targetedinformation to be a disruptive technology, which was and has been explicitly designed, and patented, to workpart of, this Annual Report on congested wireless Internet connections; the absolute fundamental basis of mobile phones in 2016 and beyond.Form 10-K.

As more and more smartphones come online, each one places a significantly higher load on the existing cellular infrastructure; as smartphone users now use smartphone to check for emails, surf the Internet, check the weather, read the news, etc. while in the past, all a mobile phone did was calling and Short Messaging (SMS). In order for carriers to keep up with the explosive growth of smartphones and their increased network consumption they are in need of any possible tool to assist them in managing their network and maintaining relevance on the users’ device.

We offer operators a mobile VoIP call that has ten (10) times less bandwidth than a standard telephone call over GSM or legacy mobile VoIP solutions such as Session Initiation Protocol (“SIP”). This gives operators a higher quality call on busy and legacy networks such as 2G, 3G and congested metro-based 4G using less bandwidth; meaning more bang for their “spectrum buck”. We will not replace traditional calls nor prevent the delivery of newer call types such as Voice over LTE (“VoLTE”) etc., but we give operators yet another tool in their arsenal to deliver the best quality voice, for the best value, for their diversified customer bases.

Our Technology

Our Technology

We have a very detailed knowledge of these wireless data network issues and have invented a totally new solution to successfully deliver a high quality voice call over a wireless Internet connection. Our solution is designed specifically to address such issues as call latency (i.e. delay) and network jitter (i.e. lost data) in a way that achieves a much higher likelihood of a voice packet (i.e. tiny piece of recorded voice) arriving in time and not being lost or delayed. Our awareness of these problems led us to develop a completely new algorithm for sending and receiving (and ordering) voice packets so as to reduce the likelihood of packet loss due to congestion, which we call SmartPacket™; and to the end user this just means near HD audio at a fraction of the cellular consumption.

SmartPacket™ Technology

The core of the Horizon solution is our truly innovative, and patented, SmartPacket™ technology. This enables VoIP from only 2 kilobytes/second (kbps) compared to around 8kbps and upwards from other VoIP platforms available today.  This industry-leading solution has been developed in-house and is fully compatible with digital telecommunications standards.  This technology is capable of interconnecting any phone system over IP - on mobile, fixed and satellite networks.  Our SmartPacket™ technology is not based on legacy SIP (Session Initiation Protocol) or RTP (Real-time Transport Protocol).  Rather, the Horizon signaling protocol is much simpler and benchmark testing has shown that it consumes significantly less bandwidth for the same audio quality score.  Our SmartPacket™ technology is the world’s most bandwidth efficient IP communication platform designed for mobile communications. The technology optimizes voice flow, delivery and playback and delivers excellent call quality, reduced delays and drops.   As a further illustration, the technology is considerably more efficient in the way it handles silence.  Traditional VoIP calls send the same amount of data in both directions, regardless of whether or not someone is speaking.  SmartPacket™ technology is designed to detect silence and send tiny “indications of silence”, rather than the silence itself. This massively reduces the amount of data transmitted, lowers the load on the cellular infrastructure which, in turn, means that more data can get through.  This results in higher audio quality and a better user experience.

Our Benchmark Testing: Horizon vs the biggest smartphone VoIP technologies in the world

University published testing has shown that Horizon is up to 8.8 times more efficient, depending on which one of our voice compression settings is selected by the user. 

Proprietary Technology

The Horizon Platform has been developed entirely in-house, patented, and is fully compatible with digital telecommunications standards. It is capable of interconnecting any phone system over IP – on mobile, fixed and satellite networks.

The Horizon Platform was initially developed for the burgeoning smartphone market and the challenging mobile VoIP over satellite market by Abbey Technology to make the best use of the limited wireless bandwidth available and to minimize the amount of data consumed.

We further developed the Horizon Platform for the broader telecommunications market on Apple’s iOS, Google’s Android and a Windows PC client focusing on the mobile Internet sector. This sector also benefits from our optimized mobile VoIP as it allows voice calls over new and legacy cellular telecom data networks. With the explosive growth in smartphone sales and increased usage of mobile data services, mobile operators face the challenge of dealing with increasingly congested networks, more dropped calls and rising levels of churn. Since the wireless spectrum is a finite resource, it is not always possible, or can be cost prohibitive, to increase network capacity. For these reasons, we believe that the demand for solutions to optimize the use of IP bandwidth will inevitably increase.

Our Strategy

We have developed a mobile application template called “Horizon Call,” that enables highly bandwidth-efficient VoIP calls over a smartphone using a 2G/EDGE, 3G, 4G/LTE, WiFi or Satellite connection. Our Horizon Call applicationThe Company’s strategy is currently available forto grow the iPhoneTCL business and for Android handsets and we use it to showcase all of our functions, features, our call quality and the level of software innovation that we can brand for our potential clients.

Unlike the majority of mobile VoIP applications, Horizon Call creates a white-label business-to-business solution for mobile operators. Telecommunications operators are able to license from us, brand with us and deploy with us a completely new “white-labeled” solution so that they can optimize their highly pressurized mobile internet bandwidth and deliver innovation that in turn brings them new smartphone users. The operators decide how to integrate our application within their portfolio, how to offer it commercially and can customize it according to their own branding.  Our solution helps them to manage increased traffic volumes while combating the competitive threat to their voice telephony revenues from other mobile VoIP applications by giving its mobile data customers a more efficient mobile VoIP solution that adds value to their mobile data network.

We are positioning ourselves as an operator-enabler by licensing our technology to mobile operators in a manner that can be fully customized to the needs of their subscribers. As shown below, operators are able to offer our platform to deliver branded smartphone applications to their existing customers to reduce lost Voice/Text revenue and minimize customer churn.

By offering Horizon Call to their existing customer base, our customers can offer innovative data-based voice and data services that are different from the existing Over The Top (“OTT”) data applications running on their networks. OTT refers to voice and messaging services that are delivered by a third party to an end user’s smartphone, leaving the mobile network provider responsible only for transporting internet data packets and not the value-added content. The Horizon Call voice services allow mobile operators’ customers to make VoIP calls under mobile operators’ call plans, thereby allowing mobile operators to capture value-added content, including voice calls, text messaging, voice messaging, group messaging, multimedia messaging, and advertising, that would have otherwise gone to the providers of other OTT services.

Horizon Call runs on both smartphone and tablet devices and, as networks become more congested, software services such as Horizon Call become ever more relevant. We believe that although more network capacity will eventually come on stream with 4G/LTE, it, like all other highways, will quickly become congested and this is why we believe that Horizon Call is ideally placed to add value to mobile data networks.

Incumbent mobile operators are suffering a reduction in revenue per user due to the OTT software services on mobile devices. OTT applications, such as Skype and Line, can negatively impact mobile operators’ traditional revenue streams of voice and SMS (short message service). As shown below, the Horizon Platform positions the Company to enable mobile operators to operate their own OTT solution branded in their image allowing use on all mobile data networks.

In addition to delivering new data services to their existing customers, mobile operators can offer their brand of Horizon Call on anyother operators’ handsets. Because the Horizon Call application can be installed on the smartphone from the Internet, the potential customer base for the operators’ data application surpasses the customer base that they can reach through traditional mobile phone SIM card distribution. We believe that this service innovation, coupled with the fact that the Horizon Call application can also use existing mobile operator pre-paid credit redemption and distribution services, presents a very compelling service against OTT services.

We believe that emerging markets represent a key opportunity for Horizon Call because these are significant markets with high population densities, high penetration of mobile phones, congested mobile cellular networks and high growthacquisitions in the adoption of smartphones.  It is forecast that over 2.7 billion people will use smartphones in 2019.  Asia-Pacific will account for over half of all smartphone users in 2016, estimated at 1.1 billion users. Globally, China is the largest smartphone market with an estimated 563.1 million handsets. These factors will put increased pressure on mobile operators to manage their network availability.digital media, sports and entertainment space.

In this context, where necessary, we have created our own brand in China, called Aishuo, formed a number of strategic ventures with local partners in regions of various emerging markets to seize upon this opportunity.

Marketing

Our marketing objective is to become a broadly adopted solution in the regions of the world with large concentrations of smartphone users and high network congestion. We aim at becoming the preferred solution for carriers who wish to deploy branded VoIP solutions that enable them to minimize revenue erosion, reduce churn, increase the effective capacity of their network infrastructure and improve user experience. We employ an integrated multi-channel approach to marketing, whereby we evaluate and focus our efforts on selling through telecommunications companies to enable them to provide the Horizon Platform to their customers. We routinely evaluate our marketing efforts and try to reallocate budgets to identify more effective media mixes.

We conduct marketing research to gain consumer insights into brand, product, and service performance, and utilize those findings to improve our messaging and media plans. Market research is also leveraged in the areas of testing, retention marketing, and product marketing to ensure that we bring compelling products and services to market.

Sales

Direct Sales. Our primary sales channel for the products and services of Horizon Platform is the sale of Horizon Platforms to Tier 1 and Tier 2 telecommunications companies to enable them to provide the product and services to their customers. We continue our efforts to develop new customers globally but particularly in Asia, Africa and Latin America.

Strategic Ventures.In addition to our direct sales channel, we also offer increased sales through our strategic venture channel. In this context, as mentioned above, we are working towards forming a number of strategic ventures in areas where regulatory issues require local representation.

Target Markets. The markets for our primary and joint venture channels will have high population density, high penetration of mobile phones, congested mobile cellular networks and high growth in the adoption of smartphones.

Competition

Our direct competitors for its technology primarily consist of systems integrators that combine various elements of SIP (Session Initiation Protocol) dialers and media gateways. Other dial-back solutions exist but they are not IP-based. Because SIP dialers and media gateways currently are unable to provide a low bandwidth solution, they do not currently compete with the Company’s technology in those markets in which their high bandwidth needs are unsupported by the existing cellular networks. They do, however, compete in those markets where the cellular networks are accessible by those SIP dialers and gateways.

We license the Horizon Platform to mobile operators, who in turn may offer the application to their end-user subscribers. The Company’s principal competitors for the mobile operators’ end-users are Skype, Viber, WeChat, and WhatsApp. Having a mobile operator’s subscriber opt to use the operator’s (branded) Horizon Call service instead of existing OTT services means that the mobile operator will gain market share of some of the OTT voice and messaging traffic. We are currently unaware of any other companies that seek to license VoIP technology directly to mobile operators.

One of our key competitive advantages is that we are not a threat to mobile operators. Rather, the Company’s Horizon Platform is a tool that can be used by mobile operators to compete against the OTT provider’s applications that are running on their networks. Through the Horizon Platform, mobile operators are able to compete directly with OTT services that, by their design, divert voice and messaging services away from mobile operators. The solution is delivered completely and is easy to install and operate. This means that a mobile operator has a turnkey mobile voice and messaging solution to deploy to its customer (i.e., the end-user).

The turnkey Horizon software platform and the Horizon SmartPacket™ technology give us a competitive advantage by managing credit, routing, rating, security, performance, billing and monitoring. Horizon SmartPacket™ is the world’s lowest bandwidth voice compression and transmission protocol and is 100% developed and owned by the Company. Though other software companies can offer part of this solution space, we believe none offers it in such a complete and integrated fashion as we do. We believe it will take a substantial number of years to copy/replicate the Horizon Platform in its entirety, by which time we believe the Horizon Platform will have improved and further distanced itself from potential competition.

Intellectual Property

Our strategy with respect to our intellectual property is to patent our core software concepts wherever possible. The Company’s current software patent has been approved in the United States and is pending in other jurisdictions around the world. Our patent strategy serves to protects the Horizon Platform and the central processing service of the Horizon Platform.

The Company endeavors to protect its internally developed systems and technologies. All of our software is developed “in-house,” and then licensed to our customers. We take steps, including by contracts, to ensure that any changes, modifications or additions to the Horizon Platform requested by our customers remain the sole intellectual property of the Company.

Research and Development and Software Products

We have spent approximately $0.5 million on capitalizable research and development during 2016.

Throughout 2016 we continued with our focus on innovation and our research and development teams (“R&D”) brought us software that allows our customer to offer call and messaging Bundles. This is a common feature for SIM cards and popular with mobile subscribers whereby the user pre-purchases bulk minutes at a lower per minute rate that when they pay for a call minute by minute. The Company now offers such innovations to its subscribers right inside the operators’ smartphone app supplied to Company thereby driving up the operator’s revenue per user.

We also expanded our R&D effort into the cellular operators' core network with a feature set that allows our service to directly connect to an operators Unstructured Supplementary Service Data (USSD) service thereby allowing all mobile prepaid subscribers to add credit to their mobile account in a traditional way and then allowing this USSD top up to be applied to a mobile VoIP smartphone app, an industry first.

The Cyber-Security R&D team also delivered a cyber-secure VoIP service that leverages the low bandwidth benefits of Company’s patented technology to allow VoIP over the strongest security protocols on the Internet. By leveraging the power of Virtual Private Networks (VPN) native client on the smartphone the Company’s VoIP protocols work where other traditional VoIP solutions cannot due to call quality issues with high data consumption protocols. Management expect this platform to drive a new revenue stream for Cyber Secure VoIP.

Also in 2016 our Cyber-Security R&D team delivered a stand alone version of our optimized VoIP core network server software for vertical markets covering Government, Banks and Small to Medium Enterprises that ensures privacy of their internal voice and messaging services in a cryptographically secure way. Our stand alone service can be installed on-site at the customer and requires minimal operational support thereby delivering secure communications in a cost efficient manner.

R&D also delivered a standalone Lawful Intercept module for operators that are legally required to have call recording features. This service is capable of recording calls from VoIP application on the handset to another handset or to the traditional telephone network. Such features are required by regulators in certain jurisdictions around the world.  This feature also allows our mobile solution to internet connect with Microsoft's Skype for Business Unified Communication platform.

R&D also delivered a complete mobile app telephone conferencing service where a user of our VoIP service can bring in other parties to an on-going call, an ad-hoc conference. This feature is targeting the B2B user that may need multi-party calls on lower quality or congested mobile data networks.

R&D delivered a complete integration into one of Africa's largest micropayments platforms, Ecocash.  App users can now securely pay for their calls from inside the app using this widely used payment solution.

Cyber-Security team delivered a completely new security messaging solution with external key-broker for the ultimate in message security.  Using our solution, not even the service-host can decrypt the app-app messages as the keys are not available inside the core network.  Our distributed key broker can be located anywhere in the world, independent of the service-host passing messages thereby guaranteeing message security for the end to end communication.

R&D delivered a bespoke real-time network quality monitor that automatically adjusts the bandwidth consumed by a handset for a VoIP call depending out network strength.  This allow for a much smoother call with reduced jitter and enhanced user acceptance.

R&D commenced the development work on iOS for the latest Apple CallKit service.

Cyber-Security R&D team commenced development on an encrypted call solution that can avail of the independent key broker service for the ultimate in VoIP security.

Employees

As of December 31, 2016,2019, we had 23six employees, all of whom were full-time employees.

ITEM 1A. RISK FACTORS

RISKS RELATED TO OUR BUSINESS

We have a history of operating losses and our auditors have indicated that there is a substantial doubt about our ability to continue as a going concern.

For the fiscal years ended December 31, 2019 and 2018, we reported losses from continuing operations of $3.3 million and $13.4 million, respectively, and negative cash flow from operating activities from continuing operations of $1.4 million and $3.0 million, respectively. As of December 31, 2019, we had an aggregate accumulated deficit of approximately $61.3 million. Such losses have historically required us to seek additional funding through the issuance of debt or equity securities. Our long-term success is dependent upon among other things, achieving positive cash flows from operations and if necessary, augmenting such cash flows using external resources to satisfy our cash needs. As a result of Touchpoint licensing agreements signed and forecast to be signed in 2020 we project to have positive cash flows during the second half of 2020 to fund operations from late 2020 onwards. However, we may be unable to achieve these goals and actual results could differ from our estimates and assumptions; accordingly, we may have to supplement our cash flow, by debt financing or sales of equity securities. There can be no assurance that we will be able to obtain additional funding, if needed, on commercially reasonable terms, or of all.

As a result of these net losses and cash flow deficits and other factors, our independent auditors issued an audit opinion with respect to our consolidated financial statements for the two years ended December 31, 2019 that indicated that without obtaining sufficient additional equity or debt funding, there is a substantial doubt about our ability to continue as a going concern.

Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. These adjustments would likely include substantial impairment of the carrying amount of our assets and potential contingent liabilities that may arise if we are unable to fulfill various operational commitments. In addition, the value of our securities, including common stock issued in this offering, would be greatly impaired. Our ability to continue as a going concern is dependent upon generating sufficient cash flow from operations and obtaining additional capital and financing, including funds to be raised in this offering. If our ability to generate cash flow from operations is delayed or reduced and we are unable to raise additional funding from other sources, we may be unable to continue in business even if this offering is successful. For further discussion about our ability to continue as a going concern and our plan for future liquidity, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Ability to Continue as a Going Concern.”

We are a holding company and depend upon our subsidiaries for our cash flows.

We are a holding company. All of our operations are conducted, and almost all of our assets are owned, by our subsidiaries. Consequently, our cash flows and our ability to meet our obligations depend upon the cash flows of our subsidiaries and the payment of funds by these subsidiaries to us in the form of dividends, distributions or otherwise. The ability of our subsidiaries to make any payments to us depends on their earnings, the terms of their indebtedness, including the terms of any credit facilities and legal restrictions. Any failure to receive dividends or distributions from our subsidiaries when needed could have a material adverse effect on our business, results of operations or financial condition.

Future acquisitions or strategic investments could disrupt our business and harm our business, results of operations or financial condition.

We may in the future explore potential acquisitions of companies or strategic investments to strengthen our business. Even if we identify an appropriate acquisition candidate, we may not be successful in negotiating the terms or financing of the acquisition, and our due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business.

Acquisitions involve numerous risks, any of which could harm our business, including:

Failure to appropriately mitigate these risks or other issues related to such strategic investments and acquisitions could result in reducing or completely eliminating any anticipated benefits of transactions and harm our business generally. Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses or the impairment of goodwill, any of which could have a material adverse effect on business, results of operations or financial condition.

We may require additional funding for our growth plans, and such funding may result in a dilution of your investment.

We have estimated our funding requirements in order to implement our growth plans.

If the costs of implementing such plans should exceed these estimates significantly or if we come across opportunities to grow through expansion plans which cannot be predicted at this time, and our funds generated from our operations prove insufficient for such purposes, we may need to raise additional funds to meet these funding requirements.

These additional funds may be raised by issuing equity or debt securities or by borrowing from banks or other resources. We cannot assure you that we will be able to obtain any additional financing on terms that are acceptable to us, or at all. If we fail to obtain additional financing on terms that are acceptable to us, we will not be able to implement such plans fully if at all. Such financing even if obtained, may be accompanied by conditions that limit our ability to pay dividends or require us to seek lenders’ consent for payment of dividends, or restrict our freedom to operate our business by requiring lender’s consent for certain corporate actions.

Further, if we raise additional funds by way of a rights offering or through the issuance of new shares, any shareholders who are unable or unwilling to participate in such an additional round of fund raising may suffer dilution in their investment.

Public health epidemics or outbreaks, such as COVID-19, could materially and adversely impact our business.

In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to several other countries and infections have been reported globally.

Because COVID-19 infections have been reported throughout the United States and the United Kingdom, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future. As a result, the Company has seen delays in certain Touchpoint licensing agreements commencing operation which leads to subsequent delays in subscriptions being processed. All of the Company employees and management can operate from home whilst the stay-at-home orders remain in place.

The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but is anticipated to have a material adverse impact on our business, financial condition and results of operations.

The measures taken to date will impact the Company’s business for the fiscal first, second and third quarters and potentially beyond. Management expects that all of its business segments, across all of its geographies, will be impacted to some degree, but the significance of the impact of the COVID-19 outbreak on the Company’s business and the duration for which it may have an impact cannot be determined at this time.

Our executive officers do not reside in the United States.

Our U.S. stockholders would face difficulty in:

Accordingly, persons contemplating an investment in our common stock should seriously consider these factors before making an investment decision.

Our future success depends on the continuing efforts of our key employees and our ability to attract, hire, retain and motivate highly skilled and creative employees in the future.

Our future success depends on the continuing efforts of our executive officers, our founders and other key employees, and in particular, Mark White, our Chief Executive Officer, and Martin Ward, our Chief Financial Officer. We rely on the leadership, knowledge and experience that our executive officers, founders and key employees provide. They foster our corporate culture, which we believe has been instrumental to our ability to attract and retain new talent. Any failure to attract new or retain key creative talent could have a material adverse effect on our business, financial condition and results of operations.

The market for talent in our key areas of operations, including California and New York, is intensely competitive, which could increase our costs to attract and retain talented employees. As a result, we may incur significant costs to attract and retain employees, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards, and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in recruiting and training them.

Employee turnover, including changes in our management team, could disrupt our business. The loss of one or more of our executive officers, founders or other key employees, or our inability to attract and retain highly skilled and creative employees, could have a material adverse effect on our business, results of operations or financial condition.

We believe our corporate culture has contributed to our success and, if we are unable to maintain it as we grow, our business could be harmed.

We believe our corporate culture has been a key element of our success. However, as our organization grows, it may be difficult to maintain our culture, which could reduce our ability to attract and maintain new talent and operate effectively. The failure to maintain the key aspects of our culture as our organization grows could result in decreased employee satisfaction, increased difficulty in attracting top talent and increased turnover and could compromise the quality of our client service, all of which are important to our success and to the effective execution of our business strategy. Accordingly, if we are unable to maintain our corporate culture as we grow our business, this could have a material adverse effect on our business, results of operations or financial condition.

We may not have sufficient insurance coverage and an interruption of our business or loss of a significant amount of property could have a material adverse effect on our financial condition and operations.

We currently do not maintain any insurance policies against loss of key personnel and business interruption as well as product liability claims. If such events were to occur, our business, financial performance and financial position may be materially and adversely affected.

We could become involved in claims or litigations that may result in adverse outcomes.

From time-to-time we may be involved in a variety of claims or litigations. Such proceeding may initially be viewed as immaterial but could prove to be material. Litigations are inherently unpredictable and excessive verdicts do occur. Given the inherent uncertainties in litigation, even when we can reasonably estimate the amount of possible loss or range of loss and reasonably estimable loss contingencies, the actual outcome may change in the future due to new developments or changes in approach. In addition, such claims or litigations could involve significant expense and diversion of management’s attention and resources from other matters.

We may be unable to adequately safeguard our intellectual property, or we may face claims that may be costly to resolve or that limit our ability to use such intellectual property in the future.

Our business is reliant on our intellectual property. Our software is the result of our research and development efforts, which we believe to be proprietary and unique. However, we are unable to assure you that third parties will not assert infringement claims against us in respect of our intellectual property or that such claims will not be successful. It may be difficult for us to establish or protect our intellectual property against such third parties and we could incur substantial costs and diversion of management resources in defending any claims relating to proprietary rights. If any party succeeds in asserting a claim against us relating to the disputed intellectual property, we may need to obtain licenses to continue to use the same. We cannot assure you that we will be able to obtain these licenses on commercially reasonable terms, if at all. The failure to obtain the necessary licenses or other rights could cause our business results to suffer.

Where litigation is necessary to safeguard our intellectual property, or to determine the validity and scope of the proprietary rights of others, this could result in substantial costs and diversion of our resources and could have a material adverse effect on our business, financial condition, operating results or future prospects.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws with respect to our activities outside the United States.

We distribute our products to locations within and outside the United States as well as operate our business within and outside the United States. The U.S. Foreign Corrupt Practices Act, and other similar anti-bribery and anti-kickback laws and regulations, generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. We cannot assure you that we will be successful in preventing our agents from taking actions in violation of these laws or regulations. Such violations, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations and cash flows.

We rely on third parties to provide services in connection with our business, and any failure by these third parties to perform their obligations could have an adverse effect on our business, financial condition and results of operations.

We have entered into agreements with third parties that include, but are not limited to, information technology systems (including hosting our website, mobile application and our point of sale system), software development and support, select marketing services, employee benefits servicing and video production and distribution. Services provided by third-party suppliers could be interrupted as a result of many factors, such as acts of nature or contract disputes. Accordingly, we are subject to the risks associated with the third parties’ abilities to provide these services to meet our needs. Any failure by a third party to provide services for which we have contracted on a timely basis or within expected service level and performance standards could result in a disruption of our business and have an adverse effect on our business, financial condition and results of operations.

RISKS RELATED TO OUR COMMON STOCK AND OUR STATUS AS A PUBLIC COMPANY.

As a result of being a public company, we are subject to additional reporting and corporate governance requirements that will require additional management time, resources and expense.

As a public company we are obligated to file with the SEC annual and quarterly information and other reports that are specified in the Exchange Act. We are also subject to other reporting and corporate governance requirements under the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), and the rules and regulations promulgated thereunder, all of which impose significant compliance and reporting obligations upon us and require us to incur additional expense in order to fulfill such obligations.

Trading on the OTC Markets is volatile and sporadic, which could depress the market price of our common stock and make it difficult for our security holders to resell their common stock.

Our common stock is quoted on the OTCQB tier of the OTC Markets. Trading in securities quoted on the OTC Markets is often thin and characterized by wide fluctuations in trading prices, due to many factors, some of which may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Markets is not a stock exchange, and trading of securities on the OTC Markets is often more sporadic than the trading of securities listed on a quotation system like Nasdaq Capital Market or a stock exchange like the NYSE American. These factors may result in investors having difficulty reselling any shares of our common stock.

Our stock price is likely to be highly volatile because of several factors, including a limited public float.

The market price of our common stock has been volatile in the past and the market price of our common stock is likely to be highly volatile in the future. You may not be able to resell shares of our common stock following periods of volatility because of the market’s adverse reaction to volatility.

Other factors that could cause such volatility may include, among other things:

Any of these factors could have a significant and adverse impact on the market price of our common stock and/or warrants. In addition, the stock market in general has at times experienced extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock and/or warrants, regardless of our actual operating performance.

The issuance of a large number of shares of our common stock could significantly dilute existing stockholders and negatively impact the market price of our common stock.

On August 5, 2019 (“Closing Date”), the Company entered into an Equity Purchase Agreement (the “Equity Purchase Agreement”), dated as of July 18, 2019, with Crown Bridge Partners, LLC (“Crown Bridge”) providing that, upon the terms and subject to the conditions thereof, Crown Bridge is committed to purchase, on an unconditional basis, shares of common stock (“Put Shares”) at an aggregate price of up to $10,000,000 over the course of its term. Pursuant to the terms of the Equity Purchase Agreement, the purchase price for each of thePut Shares equals 82% of the lesser of the (i) “Market Price,” which is defined as the lowest traded price for any trading day during the 15 trading days immediately preceding the respective Put Date, or (ii) “Valuation Price,” which is defined as the lowest traded price during the seven trading days following the clearing date associated with the applicable put notice (“Put Notice”).As a result, if we sell shares of common stock under the Equity Purchase Agreement, we will be issuing common stock at below market prices, which could cause the market price of our common stock to decline, and if such issuances are significant in number, the amount of the decline in our market price could also be significant. In general, we are unlikely to sell shares of common stock under the Equity Purchase Agreement at a time when the additional dilution to stockholders would be substantial unless we are unable to obtain capital to meet our financial obligations from other sources on better terms at such time. However, if we do, the dilution that could result from such issuances could have a material adverse impact on existing stockholders and could cause the price of our common stock to fall rapidly based on the amount of such dilution.

Crown Bridge may sell a large number of shares, resulting in substantial diminution to the value of shares held by existing stockholders.

Pursuant to the Equity Purchase Agreement, we are prohibited from delivering a Put Notice to Crown Bridge to the extent that the issuance of shares would cause Crown Bridge to beneficially own more than 4.99% of our then-outstanding shares of common stock. These restrictions, however, do not prevent Crown Bridge from selling shares of common stock received in connection with the $10,000,000 Crown Bridge equity line (the “Equity Line”) and then receiving additional shares of common stock in connection with a subsequent issuance. In this way, Crown Bridge could sell more than 4.99% of the outstanding shares of common stock in a relatively short time frame while never holding more than 4.99% at any one time. As a result, existing stockholders and new investors could experience substantial diminution in the value of their shares of common stock. Additionally, we do not have the right to control the timing and amount of any sales by Crown Bridge of the shares issued under the Equity Line.

Our common stock is a “penny stock” under SEC rules. It may be more difficult to resell securities classified as “penny stock.”

Our common stock is a “penny stock” under applicable SEC rules (generally defined as non-exchange traded stock with a per-share price below $5.00). Unless we successfully list our common stock on a national securities exchange, or attain and maintain a per-share price above $5.00, these rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.

Legal remedies available to an investor in “penny stocks” may include the following:

These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.

Many brokerage firms will discourage or refrain from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated with these investments.

For these reasons, penny stocks may have a limited market and, consequently, limited liquidity. We can give no assurance at what time, if ever, our common stock will no longer be classified as a “penny stock” in the future.

As a result of our failure to maintain effective internal control over financial reporting, the price of our securities may be adversely affected.

Our internal control over financial reporting has weaknesses and conditions that require correction or remediation, the disclosure of which may have an adverse impact on the price of our common stock. We are required to establish and maintain appropriate internal control over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations. In addition, management’s assessment of internal control over financial reporting may identify weaknesses and conditions that need to be addressed in our internal control over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal control over financial reporting may have an adverse impact on the price of our common stock.  

We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act and if we fail to continue to comply, our business could be harmed, and the price of our securities could decline.

Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act require an annual assessment of internal control over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firm. The standards that must be met for management to assess the internal control over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards. We expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us to predict how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and remediation process on a timely basis. In the event that our Chief Executive Officer or Chief Financial Officer determines that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react or how the market prices of our securities will be affected; however, we believe that there is a risk that investor confidence and the market value of our securities may be negatively affected.

Shares eligible for future sale may adversely affect the market.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months, subject only to the current public information requirement. Affiliates may sell after six months, subject to the Rule 144 volume, manner of sale (for equity securities), current public information, and notice requirements. Of the 4,132,600 shares of our common stock outstanding as of December 31, 2019, approximately 2,803,942 shares are tradable without restriction. Given the limited trading of our common stock, resale of even a small number of shares of our common stock pursuant to Rule 144 or an effective registration statement may adversely affect the market price of our common stock.

Certain provisions of the General Corporation Law of the State of Delaware may have anti-takeover effects, which may make an acquisition of our company by another company more difficult.

We are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a Delaware corporation from engaging in any business combination, including mergers and asset sales, with an interested stockholder (generally, a 15% or greater stockholder) for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The operation of Section 203 may have anti-takeover effects, which could delay, defer or prevent a takeover attempt that a holder of our common stock might consider in its best interest.

Provisions of our certificate of incorporation, as amended, and bylaws may delay or prevent a takeover which may not be in the best interests of our stockholders.

Provisions of our certificate of incorporation, as amended, and our bylaws, as amended, may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt. Further, our certificate of incorporation, as amended, authorize the issuance of up to 50,000,000 shares of preferred stock with such rights and preferences as may be determined from time to time by our board of directors in their sole discretion. Our board of directors may, without stockholder approval, issue series of preferred stock with dividends, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock. 

We do not expect to pay dividends in the foreseeable future.

We do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business. Therefore, investors will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares on favorable terms. We cannot assure you of a positive return on investment or that you will not lose the entire amount of your investment in our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable to smaller reporting companies.

ITEM 2. PROPERTIES

We do not currently own any real property. In March 2017,As at December 31, 2019 we leased the following offices: