UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

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

 

For the fiscal year ended December 31, 20182019.

 

OR

 

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

 

Commission File Number 001-36530

 

One HorizonTouchpoint Group Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware 46-3561419
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

 

649 NE 81st Street 4300 Biscayne Blvd, Suite 203,

Miami,

FL

 
FL 3313833137
(Address of principal executive offices) (Zip Code)

 

+1 (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: 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 

 

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 

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes No ☐

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

 

Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filer Smaller reporting company 
Emerging growth company ☐ 

 

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 

 

The aggregate market value of the registrant’s voting and non-voting common equity stock held by non-affiliates of the registrant was approximately $ 13.5$2.7 million as of June 29, 2018,28, 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 $0.535$0.7525 per share, as reported on The Nasdaq Stock Market.the OTCQB Market as adjusted for the 1-for-25 reverse split which took effect on September 26, 2019.

 

As of April 10, 2019, 88,401,43124, 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

 

Item Description Page
  Cautionary Note Regarding Concerning-LookingConcerning Forward-Looking Statements 3ii
     
  Part I  
Item 1 Business 41
Item 1A Risk Factors 135
Item 21B PropertiesUnresolved Staff Comments 1612
Item 32 Properties12
Item 3Legal Proceedings 1612
Item 4 Mine Safety Disclosures 1612
     
  Part II  
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 1713
Item 6 Selected Financial Data 1814
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 1914
Item 7A Quantitative and Qualitative Disclosures about Market Risk 2319
Item 8 Financial Statements and Supplementary Data 2319
Item 9A9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
Item 9AControls and Procedures 2319
Item 9B Other Information 2420
     
  Part III  
Item 10 Directors, Executive Officers and Corporate Governance 2522
Item 11 Executive Compensation 3027
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 3134
Item 13 Certain Relationships and Related Transactions, and Director Independence 3335
Item 14 Principal Accounting Fees and Services 3436
     
  Part IV  
Item 15 Exhibits, Financial Statement Schedules 3637
Item 16 Form 10-K Summary 4042
  Signatures 4143


i

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.  These risks include, but are not limited to, risks and uncertainties relating to our current cash position and our need to raise additional capital in order to be able to continue to fund our operations; our ability to retain our managerial personnel and to attract additional personnel; competition; our ability to protect intellectual property rights, and any and other factors, including the risk factors identified in the documents we have filed, or will file, with the Securities and Exchange Commission.SEC.

 

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this reportAnnual 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 reportAnnual Report on Form 10-K or the date of the document incorporated by reference in this report.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”.


ii

PART I

 

ITEM 1. BUSINESS

 

We are a holding company which, through our operating subsidiaries, is engaged in themedia and digital media,technology, primarily in sports entertainment and secure messaging businesses, described below.related technologies that bring fans closer to athletes and celebrities.

 

Current Structure of the Company

 

The Company has the following subsidiaries:

 

  Subsidiary name% Owned
 123Wish, Inc. (acquired February 2018)(considered dormant)51%
 One Horizon Hong Kong Ltd100%
 Horizon Network Technology Co. Ltd100%
 Love Media House, Inc. (acquired March 2018)(Discontinued Operations)100%
Touchpoint Connect Limited (formed in September 2019)100%
 Browning Productions & Entertainment, Inc. (acquired October 2018)(Disposed in February 2020)51%

 

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 purposes in accordance with generally accepted accounting principles in the United States (“GAAP”).

 

Summary Description of BusinessesCore Business

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.

 

We haveTCL brings users closer to the following three core businesses: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.

 

123Wish, Inc. formerly Once In A Lifetime, LLC (“123Wish”) – an experience based platform where subscribers have a chance to play and win experiences from celebrities, athletes and artists.

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.

Love Media House, Inc. formerly known as C-Rod, Inc. (“Love Media House”) -a full-service music production, artist representation and digital media business that providesa broad range of entertainment services including branding and advertising, video and photo production, recording (including music production, arranging, mixing and mastering), songwriting (arranging writing sessions with experienced and multi-platinum writers), artist development, digital distribution, billboard chart promotion, and consulting and life coaching. The entertainment marketplace is highly competitive. The team at Love Media House, headed by Chis Rodriguez, has worked with many famous artists and achieved many Billboard numbers and giving Love Media House an important edge in promoting new talent.

Browning Productions & Entertainment, Inc. (“Browning Productions”) - a full service video production company and executive producer for all entertainment projects. Browning Productions has been selected to produce and distribute numerous television programs spanning dozens of episodes in 2019 for acclaimed television networks including A&E, FYI and History Channel.

 

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


Our Growth Strategy

 

Entertainment Production Services (Love House and Browning Productions)

The primary business of Love House and Browning Productions are entertainment production services. Video projects are divided into four parts: (i) pre-production, (ii) production, (iii) post-production and (iv) distribution. During pre-production, the client describes the need and the purpose of the production. Production is the part of the process where raw materials that will be formed into the final product are created. Post-production is where the first rough cut of the final product is created. Client input is then used to create the final version of the production.


Video production services through Browning Productions include production of television shows, commercials, corporate videos, music videos, film, motion pictures (full length features), make-up and hair, casting, writing, producing, directing, stunts, post production services, graphic design (animation and special effects), audio production, and audio mastering and integration. Music production services through Love House include recording (including music production, arranging, mixing and mastering), songwriting (arranging writing sessions with experienced and multi-platinum writers), artist development, digital distribution, billboard chart promotion, branding and advertising, video and photo production, and consulting and life coaching.

Browning Productions has produced and has ownership rights to dozens of national and international television programs currently airing on a number of the most recognized television networks including A&E, FYI and History Channel. Browning Productions distributes content on a proprietary Internet/Over-The-Top (“OTT”) content platform that operates in conjunction with Verizon Digital Media Services (“VDMS”). Current productions of Browning Productions include “Wine Warriors”; the spin-off “Whisky Warriors, for which Browning Productions recently secured the Big Sky Film Grant from the State of Montana’s Film Office, “Training Grounds”; a new docuseries called “The Cryptos,” unveiling the inner workings of the cryptocurrency industry, soon to be distributed on one of the world’s most widely recognized global business news networks; and “America’s Crowdfunding,” an equity crowd-funding television series (the concept is “Shark Tank” meets “America’s Got Talent,” where the viewers vote with their wallets for equity stakes in the featured companies) in conjunction with Equity Bender, among others.

We also provide through Browning Productions marketing services and branded entertainment. Branding and name recognition is generally achieved through exposure in repetition. Through branded entertainment, a product or service stands out throughout a television series in precise placement from segment to segment for each viewer to see or hear, where the product or service is referred or mentioned by the celebrity cast. The pinnacle of all product or service inclusion into television is to allow for a full integration into the storyline and scripting of the segments centering the brand in the show content, which we believe is one of the best forms of marketing for any product or service.

The recording studio of Love House is a facility for sound recording and mixing. Ideally both the recording and monitoring spaces are specially designed by an acoustician to achieve optimum acoustic properties (acoustic isolation or diffusion or absorption of reflected sound that could otherwise interfere with the sound heard by the listener). The typical recording studio consists of a room called the "studio" or "live room", where instrumentalists and vocalists perform; and the "control room", where sound engineers sometimes with producer(s) as well operate either professional audio mixing consoles or computers with specialized software suites to manipulate and route the sound for analogue or digital recording. Often, there will be smaller rooms called "isolation booths" present to accommodate loud instruments such as drums or electric guitar, to keep these sounds from being audible to the microphones that are capturing the sounds from other instruments, or to provide "drier" rooms for recording vocals or quieter acoustic instruments.

Our recording studios through Love House may be used to record musicians, voice-over artists for advertisements or dialogue replacement in film, television or animation, foley, or to record their accompanying musical soundtracks.

Competitive Strengths

We believe our competitive strengths through Browning Productions include:

Excellent reputation:    We believe we have earned an excellent reputation for our creative ability, innovation, execution and on-time delivery of complex and challenging media content.

Our creative storytelling capabilities:    We believe our creative content turns ideas into visual, relatable stories that resonate with consumers and influences their behavior. We believe that our years of experience and access to creative talent allow us to tell compelling stories whether in seconds or minutes.


Diverse, creative talent base:    We employ or represent directors and designers, technical directors and other artists who we believe deliver a unique combination of creative direction (character, world and story development) and execution (unique and high quality imagery and related production content).

Strong relationships with advertising agencies and brands:    We have produced highly successful and creative advertising campaigns for our customers, many of which are global brands which we believe have allowed us to develop long-standing, strong relationships with leading advertising agencies and brands. We are often commissioned to create multiple campaigns for brands over many years, acting as the go-to production company for these clients. In addition despite that some of our competitors are larger than us, we have been able to compete effectively with them and win projects from new and existing clients.

End-to end solution:    We have developed in-house production processes that enable us to serve as a one-stop-shop, providing a full suite of solutions togrowing the advertising industry and brands. We are able to conduct a project from concept through design and all stages of production using in-house and contracted creative talent when necessary.

We believe our competitive strengths through Love House include:

High quality services: We provide high quality sound recording and audio production services. We have a high end recording and production studio for use for customers.  Use of the studio is billed on an hourly basis plus fees relating to the rental of the studio. Reproduction of recorded materials will also be sold to customers. The benefits that are afforded to clients in our studio include:

a convenient, reasonably priced recording studio.

a comfortable studio experience that allows artists to record their music while being in an inviting atmosphere.

high end audio equipment that will make high quality sound recordings for our clients.

professional and expert staff members that will help artists mix and produce their albums with minimal hassle.

Supplemental Services to Music Production: We also provide songwriting (arranging writing sessions with experienced and multi-platinum writers), artist development, digital distribution, billboard chart promotion, branding and advertising, video and photo production.

Competition

The team at Love Media House, headed by Chis Rodriguez, has worked with many famous artists and achieved many Billboard numbers giving Love House an important edge in promoting new talent. The team at Browning Productions, headed by William Browning, has produced and has ownership rights to dozens of national and international television programs currently airing on a number of the most recognized television networks including A&E, FYI and History Channel. Notwithstanding, the entertainment marketplace is highly competitive. There are few barriers of entry in the business and level of competition is extremely high. There are many video production companies and recording studios in United States. Many of these companies may have a greater, more established customer base than us.  of TCL, the Company will look at growth through the following methods:

Our Industry

We create branded advertising and entertainment content primarily for television, digital and other platforms.


The global advertising market is large and growing.    Global advertising spending was a $591 billion global market in 2017, projected to grow to $724 billion in 2020, according to eMarketer. The U.S. is currently Browning Productions’ customers’ primary target market. eMarketer forecasts that the U.S. will have the largest share of global advertising spending in 2020, which it estimates will be $243 billion. As Browning Productions’ business grows, we expect to capitalize on the large and expanding demand for services such as Browning Productions.

Television spending continues to be strong.    Television has historically been the single largest advertising medium worldwide. Zenith forecasts that television advertising in the U.S. peaked in 2017 at $69 billion and will decline slightly to $66 billion in 2020. Television and online video together are becoming more important to advertisers seeking to build brands than either form alone.

Digital advertising spending is increasing.    Digital technologies have transformed media consumption, viewing habits and social interaction. Content is being viewed at ever-increasing rates on wired and wireless smart devices across the globe. In 2017, global digital advertising spending surpassed global television advertising spending for the first time, according to MAGNA. MAGNA projects that, in 2018, U.S. digital advertising spending will exceed $100 billion and will account for half of total U.S. advertising sales for the first time. MAGNA projects that U.S. digital advertising sales will be $163 billion by 2023.

Creative short-form video content attracts audiences.    Given the proliferation of entertainment channels, capturing the attention of audiences is becoming increasingly challenging. We believe that brands are seeking creative content in short-form video that includes animation and mixed media to evoke emotions that resonate with viewers. According to AOL Advertising, while online video consumption is increasing across all video lengths, short-form video is growing the fastest. According to AOL Advertising, 59% of consumers watch videos that are under one minute long every day.

Our Growth Strategy

We intend to build upon our proven ability to aggregate large audiences for brands by continuing to make compelling content that is viewable on both traditional and new platforms. We have begun to implement the growth strategies described below, and expect to continue to do so over the several years following this offering. Although the net proceeds of this offering will be available to assist us to implement our growth strategies, we cannot estimate the ultimate amount of capital needed to achieve our expected growth. We may need additional capital to implement these strategies, particularly in the event we pursue acquisitions of complementary businesses or technologies.

We intend to grow our business by:

Capitalizing on market trends in advertising and digital media:    We believe our long history of creating award-winning content for television provides us with the expertise to continue to capture television advertising spending. We also believe our expertise in delivering entertaining, narrative-based short-form video content positions us well for the expected growth in digital advertising. We intend to build our core business by leveraging the increased use of animation and visual effects to differentiate marketing messages and capture audiences in the growing digital media market.

Implementing client service teams:    We believe we can increase recurring work from our existing clients with a more client-focused approach to delivering our services. We are hiring account directors with knowledge of the needs of brands in key industries so that we can collaborate more closely with brands and the advertising agencies. By doing so, we believe we can get involved earlier and more intimately in a particular pitch.

Expanding direct-to-brand sales:    Brands are increasingly working directly with content creators, bypassing advertising agencies. We believe this industry disruption is being caused by the desire of brands to obtain greater cost-effectiveness, transparency and control over customer data. We believe that we can increase our direct-to-brand sales by increasing business development efforts with brands. We recently reorganized our sales organization to include a specific focus on brand management.

 7

 

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.

  

Further developing intellectual property:    We intend to build upon our success in developing original series that we own and license to brands, networks and major and new digital media studios. When we develop an original series, we retain the copyright of that content. By licensing to other platforms portions of the content from original series that we develop, we can create additional revenue streams from development fees, brand license fees, distribution license fees and ancillary sources (such as from foreign viewership).

Expanding our geographic presence:    We believe that by expanding our physical presence into select international regions, we will be better able to attract and retain internationally-basedinternationally based brands as clients. With a physical presence outside of the U.S., we believe we can provide better customer service and offer local talent who can work more intimately with internationally-basedinternationally based brands than we can from our offices in the U.S.

 

Expanding our talent roster:    We intend to continue to seek to attract and retain world-class creative and technical talent, thereby increasing our ability to win jobs and build brand equity through additional high quality creative content. We believe that our reputation and our client base will allow us to continue to attract top creative talent.

  

Celebrity Experience Marketplace (123Wish)CORPORATE HISTORY

 

123Wish, available in the Apple App Store, Google Play and www.123wish.com, is a subscription-based, experience marketplace that focuses on providing users with exclusive opportunities to enjoy personalized, dream experiences with some of the world’s most renowned social media influencers including Super Influencer Jake Paul and Team 10 as well as celebrities, professional athletes, fashion designers, and artists while supporting a diverse range of charities.

123Wish provides experiences to fans of high profile celebrities but with the ability to ensure charities can benefit from proceeds of subscriptions paid. 123Wish is a super fan platform bringing fans closer to their favorite influencers, celebrities, musicians and more. 123Wish offers its users unique experiences, face time sessions, weekly giveaways, limited edition merchandise, VIP events, video shouts and exclusive video content.

The influencer or celebrity for each 123Wish experience selects a philanthropic cause to benefit or is randomly matched to a non-profit organization. Once the charitable contribution goal for an experience has been met and the designated timeframe for entry has expired, 123Wish randomly selects the winner who receives exclusive access to interact with the influencer or celebrity. Yet, everyone who enters wins a specialized gift for participation, which may include limited edition merchandise, gift cards or personalized video or voice messages from experience contributors.

Each 123Wish subscriber will soon have a digital wallet and will receive four digital coins each month that his or her subscription remains active, which the subscriber may contribute to charity. 123Wish are committed to making at least $1,000,000 in digital coin value available for charitable contribution premised on the number of subscribers. Development for inclusion of the coin technology is underway and we will be providing blockchain integration.


Competitive Strengths

We believe our competitive strengths through 123Wish include:

Excellent reputation:    We believe we have earned an excellent reputation for providing users with exclusive opportunities to enjoy personalized, dream experiences with celebrities.

Contacts with Celebrities: We have successfully established relationships with a number of social media influences, music artists and other celebrities to ensure the success of our experience marketplace.

Regulatory Status

Certain jurisdictions, including California where 123 Wish maintains it principal offices, have regulations that require 123 Wish to register as a commercial fundraiser and notify governmental authorities of events that it is sponsoring. The failure to comply with applicable regulations could subject 123 Wish to fines and other penalties, including being enjoined from conducting solicitation activities for charitable purposes within the jurisdiction and other civil remedies provided by law.

CORPORATE HISTORY

We were initially incorporated in Pennsylvania in 1972 as Coratomic, Inc. We changed our name fivesix times thereafter, with the last name change in 20122019 to One HorizonTouchpoint Group Holdings, Inc.In addition, we changed our domicile from Pennsylvania to Delaware in 2013.

 

Our authorized capital is 200,000,000 shares of Common Stock,common stock, par value $0.0001 per share, (the “Common Stock”), and 50,0000,000 shares of preferred stock, par value $0.0001 per share (the “Preferred Stock”).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 the date hereof, 88,401,431April 24, 2020, 25,688,386 shares of our Common Stockcommon stock are issued and outstanding and no preferred stock is issued and outstanding.

Acquisition of a Controlling Interest in Once In A Lifetime LLC

On February 22, 2018, we acquired 51% of the membership interests in Once In A Lifetime LLC, a Florida limited liability company d/b/a/ 123 Wish (“123 Wish”), pursuant to an Exchange Agreement dated January 18, 2018, with 123 Wish and its members in consideration for 1,333,334 shares of our common stock, plus an additional number of shares of our common stock based upon the net after tax earnings of 123 Wish during the six month periods ending six and twelve months after the completion of the acquisition. Once In A Lifetime LLC has been merged into our newly formed majority-owned Delaware subsidiary, 123 Wish, Inc.

123 Wish is a subscription-based, experience marketplace that focuses on providing users with exclusive opportunities to enjoy personalized, dream experiences with social media influencers, including Jake Paul and Team 10, as well as celebrities, professional athletes, fashion designers and artists, while supporting a diverse range of charities.

Acquisition of C-Rod, Inc.

On March 20, 2018, we acquired C–Rod, Inc., including its record label, Velveteen Entertainment, and media division, Mues Media (collectively, the “C-Rod Companies”) pursuant to an Exchange Agreement dated February 27, 2018 with C-Rod, Inc., Christopher Rodriguez and Patricia Rodriguez, in consideration for $150,000, 1,376,147 shares of our common stock issued to Cap United LLC, plus an additional number of shares of our common stock based upon the net after tax earnings of C-Rod during the two years ending after the completion of the acquisition. On May 2, 2018, we amended the articles of incorporation of C-Rod, Inc. to change its corporate name to Love Media House, Inc.

C-Rod, Inc., a music production company founded in 2002 by Grammy-nominated, multi-platinum producer and composer Christopher Rodriguez, regularly works with artists, which have included many celebrity acts.


AcquisitionDisposal of a Controlling Interest in Banana Whale Studios Pte. Ltd.

 

On May 18, 2018,we entered into and consummated an Exchange Agreement (the “Exchange Agreement”) with Banana Whale Studios Pte. Ltd., a Singapore corporation (“Banana Whale”), and the founding shareholders of Banana Whale (the “Banana Whale Stockholders”), pursuant to whichwe acquired 51% of the outstanding shares (“Controlling Interest in Banana Whale”) ofBanana Whale in exchange for a number of our shares of common stock to be based upon the earnings of Banana Whale. Banana Whale is a B2B software provider in the $100+ billion-dollar gaming industry focusing on innovation and next generation games and entertainment. As a condition to closing the acquisition, Banana Whale Stockholders demanded and we deposited in escrow for their benefit 7,383,000295,320 shares of our common stock (“OHGI Shares”) with a fair value of $4,983,000 as security for our obligation to issue such shares to which they may become entitled. If the number of shares to which the Banana Whale Stockholders become entitled is less than 7,383,000,295,320, the excess shares will be returned to us for cancellation. We also granted Banana Whale the right to use our secure messaging software.

Acquisition of 123Wish Software

Pursuant to the terms of that certain Agreement on Sale of 123Wish Software dated September 27, 2018 (“Software Sale Agreement”), among us, Once in a Lifetime Platform LLC (“OIALP”), and One Horizon Hong Kong Limited (“OHHK”), OIALP sold and assigned to OHHK eighty percent (80%) of the intellectual property rights to OIALP’s software platform and App that underlies 123Wish’s business in exchange for our making an additional investment of $100,000 into 123Wish without requiring the minority shareholders in 123Wish (some of whom are members of OIALP) to put up matching funds and our issuing 3,000,000 shares of its common stock to members of OIALP.

Acquisition of a Controlling Interest in Browning Productions& Entertainment, Inc.

On October 22, 2018, we entered into an Exchange Agreement (“Browning Exchange Agreement”) pursuant to which we acquired a majority of the outstanding shares (the “Controlling Interest in Browning”) of Browning Productions& Entertainment, Inc., a Florida corporation (“Browning Productions”), from William J. Browning, the sole stockholder of Browning. Browning Productions produces television programs which have aired internationally as well as nationally.

In exchange for the controlling interest in Browning Productions, we paid Mr. Browning $10,000 and issued to him 150,000 shares of common stock, and agreed to issue to him an additional 150,000 shares of common stock following completion of the audit of Browning Productions’ financial statements, plus an additional number of shares of common stock which can be up to a maximum of 17,000,000 shares, determined by dividing two and a half times the net after tax earnings of Browning Productions during the twelve month period ending December 31, 2019 by the average of the closing price of our common stock during the ten consecutive trading days immediately preceding the end of 2019. To the extent the number of shares which we are obligated to issue to Mr. Browning exceeds 13,553,506 shares, representing 19.99% of our outstanding shares of common stock immediately prior to the acquisition (the “Excess Shares”), instead of issuing the Excess Shares to Mr. Browning we will pay him an amount in cash for the Excess Shares. We had previously paid Mr. Browning $10,000 and issued 35,000 shares of common stock to him upon execution of a non-binding letter of intent for the acquisition of Browning Productions on May 10, 2018.

Though the terms of this transaction only required a $20,000 cash payment ($10,000 in cash under the non-binding letter of intent and $10,000 in cash under the Browning Exchange Agreement) to Mr. Browning, we were required to provide Browning Productions with a working capital loan in an initial amount of $150,000, which is to be repaid out of the post-closing net profit of Browning Productions as well as earmark an additional $150,000 in cash for future investment in Browning Productions (to assist in funding the future operations of Browning Productions).

We have agreed to register for resale the initial 150,000 shares issued to Mr. Browning.

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


Proposed Acquisition of a Controlling Interest in Maham

Pursuant to the terms of a definitive Exchange Agreement, dated February 20, 2019, among us, Maham LLC (“Maham”), the members of Maham, and Mr. Hauswirth (the “Maham Exchange Agreement”), we agreed to (i) issue to the members of Maham unregistered shares of Common Stock equal to (a) 25% of the dollar value the Members have invested in Maham to date, with all non-cash investment based equity owned by members will be exchanged at the same valuation as the valuation of Maham at the time that such non-cash investment based equity was issued, divided by (b) the market value of OHGI Common Stock, determined in accordance with the terms of the Exchange Agreement, as of the closing date (the “Initial Shares”), and (ii) upon completion of the second 12-month period following the closing, issue up to a maximum of 17,000,000 unregistered shares to the members of Maham on a pro-rata basis based on their holdings, which number of additional shares will be equal to two-and-a-half times (2.5x) the net after-tax earnings of Maham for the First Adjustment Period (as defined in the Maham Exchange Agreement), divided by the market value of our Common Stock. Upon the closing of the Maham transaction, we will own 51% of the issued and outstanding interests in Maham.

Adoption of One Horizon Group, Inc. Amended and Restated 2018 Equity Incentive Plan

Our board of directors and shareholders adopted and approved on November 2, 2018 and December 27, 2018, respectively, the One Horizon Group, Inc. Amended and Restated 2018 Equity Incentive Plan, effective December 27, 2018, under which stock options and restricted stock may be granted to officers, directors, employees and consultants. Under the Plan, 15,000,000 of Common Stock, par value $0.0001 per share, are reserved for issuance, subject to increase pursuant to the terms and conditions as set forth in the Plan.

Recent Developments

Disposition of a Controlling Interest in Banana Whale Studios Pte. Ltd.  

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 $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 Banana 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 the BWS Note.

 

The Agreement also terminated certain of the remaining obligations under the Exchange Agreement, which was previously entered into by us and the Banana Whale Stockholders, releasing us, Banana Whale and the Banana Whale Stockholders from their remaining obligations thereunder. PursuantIn 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 Exchange Agreement, we had agreedCompany 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 acquire25% of reported earnings before income tax, depreciation and amortization (“EBITDA”) each quarter up to a maximum amount of $250,000 in aggregate.

The Company realized a gain of $553,000 on the Controlling Interestsale 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 which 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 athe controlling interest in Browning, we paid Mr. Browning $10,000 and issued to him 12,000 shares of common stock, plus an additional number of shares of common stock which can be up to a maximum of 680,000 shares, determined by dividing two and a half times the net after tax earnings of Browning during the twelve month period ended December 31, 2019 by the average of the closing price of our sharescommon stock during the 10 consecutive trading days immediately preceding the end of 2019.

Though the terms of this transaction only required a $20,000 cash payment ($10,000 in cash under the non-binding letter of intent and $10,000 in cash under the Browning Exchange Agreement) to Mr. Browning, we were required to provide Browning with a working capital loan in an initial amount of $150,000, which is to be based uponrepaid out of the earningspost-closing net profit of Banana Whale. UnderBrowning, as well as earmark an additional $150,000 in cash for future investment in Browning (to assist in funding the Agreement,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 agreeddecided to leave the OHGI Sharessell its interests in escrowits subsidiaries, Love Media House Inc. (“Love Media”) and togetherBrowning. In connection with the Banana Whale Stockholders, to instruct the escrow agent that the OHGI Shares will remain in escrow for a period of at least 90 days pending an absence of asserted claims under the Agreements indemnification provisions.

Recent Voluntary Termination By OHGI of Listing of Common Stock on the Nasdaq Capital Market

Our common stock commenced trading on the Nasdaq Capital Market (“Nasdaq”) on July 9, 2014 under the ticker symbol “OHGI”. On May 10, 2018,this determination, the Company received notice (the “Notice”)concluded the intangible assets related to these subsidiaries were impaired. Accordingly, the Company recorded an impairment charge of $2,440,000 which is included in the loss from Nasdaq indicating that the Company’s common stock did not meet the continued listing requirement as set forth in Nasdaq Listing Rule 5550(a)(2) based on the closing bid price of the common stock for the preceding 30 business days.discontinued operations.

 


Under Nasdaq Listing Rule 5810(c)(3)(A),In February 2020, the Company receivedconcluded the sale of its majority interest in Browning for the following consideration;

The return of 89,334 shares in the Company held by William J. Browning for cancellation; and

The repayment to the Company of the advances made to Browning totaling $210,000 over a 24-month period ending January 31, 2022. To encourage early repayment by Browning, the Company has agreed to give additional debt reduction on the basis of $1.00 credit for every $1.00 paid during the first six months of the repayment term.

Currently, the Company is looking to negotiate a 180-calendar day grace period fromsale of its ownership interest in Love Media.  

Recent Developments

The Company continues to seek cost-effective acquisitions in the datesports and entertainment sectors that would be synergistic with the Touchpoint app and platform, enabling the livestreaming of content to fans. On February 12, 2020, the Notice to regain compliance by meetingCompany announced the continued listing standardsigning of a minimum closing bid price of at least $1.00 per share for 10 consecutive business days during the 180-calendar day grace period ended on NovemberTouchpoint licensing agreement with TV celebrity Joey Essex.

On April 6, 2018. During the grace period,2020 the Company was unable to regain complianceannounced the signing of a Touchpoint licensing agreement with the minimum bid price standard.Russell Simmons company GDAS LLC.

 

In accordanceThe Company is in discussions with NASDAQ Listing Rule 5810(c)(3)(A), in additionother athletes and other celebrities to such initial grace period, the Company could be afforded an additional 180-calendar day compliance period, provided that on the 180th calendar day of the initial grace period, the Company (i) met the applicable market value of publicly held shares requirement for continued listing and all other applicable requirements for initial listing on the Nasdaq (except for the bid price requirement) and (ii) notified Nasdaq of its intententer into a Touchpoint license to cure the minimum bid price deficiency. Priorenable them to expiration of the initial grace period, the Company requested an additional 180-calendar day compliance period and notified Nasdaq of the Company’s complianceengage with the stated listing standards and its intent to cure the minimum bid price deficiency through a reverse stock split, if necessary. On November 7, 2018, the Company received written notification from Nasdaq granting an additional 180-calendar day period, which expires on May 6, 2019, to regain compliancetheir fanbase with the minimum bid price requirement described above. This second 180-calendar day period relates exclusively to the bid price deficiency and we could be delisted during the 180-calendar day period for failure to maintain compliance with any other listing requirements that occurs during the 180-calendar day period.content.

 

During subsequent interactions between the Company and the Nasdaq it became apparent that the Nasdaq may make a finding of noncompliance with the stockholder approval requirements of Nasdaq Listing Rule 5635 and may initiate delisting proceedings against the Company.

As a result of the foregoing, on February 26, 2019, Martin Ward, Chief Financial Officer of the Company, approved the voluntary termination of the listing of OHGI’s common stock on the Nasdaq. On March 8, 2019, the Company filed an application on Form 25 with the SEC to voluntarily terminate its Nasdaq listing. The delisting from the Nasdaq became effective on March 8, 2019. As of March 8, 2019, the Company’s common stock is quoted on the OTCQB tier of the OTC Markets under the ticker symbol “OHGI.” The transition from the Nasdaq to the OTCQB did not materially affect the Company’s business operations.

Reverse Stock Split

 

A reverse stock split (“Reverse Stock Split”)Following approval of the outstanding shares of the Common Stock in the range from one-for-two (1-for-2) to one-for-fifty (1-for-50), which ratio will be selected by the Board of Directors was approved by our Board of Directors and by our shareholdersCompany’s stockholders at the annual meetingAnnual Meeting of the shareholdersStockholders held on December 27, 2018, the Company amended its Certificate of Incorporation, as describedamended, to reflect a 1-for-25 reverse stock split. This reverse stock split took effect on September 26, 2019. The share amounts presented in that proxy statementthis Annual Report on that certain Definitive Schedule 14A filed withForm 10-K have been adjusted to reflect the SEC on November 28, 2018. We will announce publicly our plans to effect the Reverse Stock Split once the Board of Directors makes its determination.reverse stock split.

 

Corporate Information

 

Our principal executive offices are located at 649 NE 81st Street,4300 Biscayne Blvd., Miami, Florida 33138,33137, and our telephone number at that location is (305) 420-6640. The URL for ourOur website is www.onehorizongroup.com.www.touchpointgh.com. The information contained on or connected to our website is not incorporated by reference into, and you must not consider the information to be a part of, this Annual Report on Form 10-K.

  

During the year ended December 31, 2017, we restructured our operations and simplified and strengthened our capital structure by:

Selling certain of our operating subsidiaries (the “Discontinued Entities”) to our former Chief Executive Officer pursuant to a Stock Purchase Agreement entered into August 10, 2017, in consideration for the forgiveness of $1,968,243 payable to our former CEO.

Issuing: (A) (i) 13,000,000 shares of our common stock in exchange for $3,000,000 principal amount of an outstanding subordinated debenture in the principal amount of $3,500,000 and the forgiveness of accrued and unpaid interest thereon, and (ii) our 7% promissory note in the principal amount of $500,000 for the surrender of the remaining principal amount of the debenture; (B) 4,000,000 shares of our common stock and our 7% promissory note in the principal amount of $500,000 for all of the outstanding shares of our Series A-1 Convertible Preferred Stock; and (C) 859,802 shares of our common stock to our Chief Financial Officer in exchange for $662,048 of indebtedness payable to him.


The restructuring and simplification and strengthening of our capital structure has allowed us to concentrate on developing our secure messaging business, which has focused on gaming, educational and security applications in China and Hong Kong, while seeking acquisition opportunities. In September 2017, Mark White who had previously served as our Chief Executive Officer, was appointed Chief Executive Officer to develop and implement our acquisition strategy.

Our Strategy

 

The Company’s strategy is to grow the TCL business and to make further acquisitions in the digital media, sports and entertainment space, while continuing to trade in the secure messaging business in gaming, educational and security segments.space.

 

Employees

 

As of December 31, 2018,2019, we had 13six employees, all of whom were full-time employees. 


ITEM 1A. RISK FACTORS

 

RISKS RELATED TO OUR BUSINESS

We incurred a net loss in 2018 and 2017 with negative cash flows and we cannot assure you as to when, or if, we will become profitable and generate positive cash flows.

 

We incurredhave a net losshistory of $13.8 million foroperating losses and our auditors have indicated that there is a substantial doubt about our ability to continue as a going concern.

For the yearfiscal years ended December 31, 2019 and 2018, we reported losses from continuing operations of $3.3 million and a net loss of $7.5$13.4 million, for the year ended December 31, 2017respectively, and negative cash flowsflow from operating activities from continuing operations of $1.4 million and $3.0 million, for the year endedrespectively. As of December 31, 2018 and $0.4 million for the year ended December 31, 2017.2019, 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 termlong-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.

We 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 effectively manageachieve these goals and actual results could differ from our planned expansion.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 planned expansion may strain ourconsolidated financial resources. In addition,statements do not include any significant growth into new markets may require an expansionadjustments that might result from the outcome of this uncertainty. These adjustments would likely include substantial impairment of the carrying amount of our employee base for managerial, operational, financial,assets and other purposes. During any growth, wepotential contingent liabilities that may face problems related to our operational and financial systems and controls. We would also need to continue to expand, train and manage our employee base. Continued future growth will impose significant added responsibilities upon the members of management to identify, recruit, maintain, integrate, and motivate new employees.

Ifarise if we are unable to successfully managefulfill various operational commitments. In addition, the value of our expansion,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 encounter operationalbe 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 difficulties which would in turn adversely affectcondition.

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

straining our financial resources to acquire a company;

anticipated benefits may not materialize as rapidly as we expect, or at all;

diversion of management time and focus from operating our business to address acquisition integration challenges;

retention of employees from the acquired company;

cultural challenges associated with integrating employees from the acquired company into our organization;

integration of the acquired company’s accounting, management information, human resources and other administrative systems;

the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies; and

litigation or other claims in connection with the acquired company, including claims from terminated employees, former stockholders or other third parties.

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.

 

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

In December 2019, a novel strain of 123 Wish are subjectcoronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to regulation in certain jurisdictions,its economy, it has now spread to several other countries and the failure to comply with those regulations could result in fines and other penalties.infections have been reported globally.

 

Certain jurisdictions, including California where 123 Wish maintains it principal offices,Because COVID-19 infections have regulations that require 123 Wish to register as a commercial fundraiser and notify governmental authorities of events that it is sponsoring. The failure to comply with applicable regulations could subject 123 Wish to fines and other penalties, including being enjoined from conducting solicitation activities for charitable purposes within the jurisdiction and other civil remedies provided by law.

Our operations and managements are partially located outside of the United States; U.S. investors may experience difficulties in attempting to effect service of process and to enforce judgments based upon U.S. federal securities laws against the company and its non U.S. resident officers and directors.

While we are organized under the laws of State of Delaware, our management, our officers and directors are non-U.S. residents, and our headquarters are located outside of the United States. Consequently, it may be difficult for investors to effect service of process on such officers and directors inbeen reported throughout the United States and to enforcethe 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 United States judgments obtainedfuture. As a result, the Company has seen delays in United States courts against such persons basedcertain 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 civil liability provisionsCompany’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 United States securities laws. Since all our assets are located outsideCOVID-19 outbreak, new information which may emerge concerning the severity of the U.S. itCOVID-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 difficult or impossible for U.S. investorsreasonably estimated at this time but is anticipated to collect a judgment against us. As well, any judgment obtained in the United States against us may not be enforceable.

We are dependent on our management team and the loss of any key member of that team could have a material adverse effectimpact on our operationsbusiness, financial condition and financial condition.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.

 

We attributeOur executive officers do not reside in the United States.

Our U.S. stockholders would face difficulty in:

Effecting service of process within the United States on our executive officers, if considered necessary.

Enforcing judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against the executive officers.

Enforcing judgments of U.S. courts based on civil liability provisions of U.S. federal securities laws in foreign courts against the executive officers.

Bringing an original action in foreign courts to enforce liabilities based on the U.S. federal securities laws against the executive officers.

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

Our future success todepends on the leadership and contributionscontinuing efforts of our managing team comprisingkey 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 directorsofficers, our founders and other key executives,employees, and in particular, to Mark White, our Chief Executive Officer, and Martin Ward, our Chief Financial Officer.


Our continued success is therefore dependent 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 a large extent on 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 servicesbenefit of these keyour investment in recruiting and training them.

Employee turnover, including changes in our management personnel.team, could disrupt our business. The loss of their services without timelyone or more of our executive officers, founders or other key employees, or our inability to attract and qualified replacement, would adversely affectretain highly skilled and creative employees, could have a material adverse effect on our business, results of operations and hence, our revenue and profits.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.


RISKSRELATED 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.


Our shares

Trading on the OTC Markets is volatile and sporadic, which could depress the market price of our common stock are from timeand make it difficult for our security holders to time thinly-traded, so stockholders may be unable to sell at or near ask prices or at all if they need to sell shares to raise money or otherwise desire to liquidateresell their shares.common stock.

 

Our common stock has from timeis 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 time been “thinly traded,” meaning thatmany factors, some of which may have little to do with our operations or business prospects. This volatility could depress the numbermarket price of persons interested in purchasing our common stock atfor 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 near ask prices ata stock exchange like the NYSE American. These factors may result in investors having difficulty reselling any given time mayshares of our common stock.

Our stock price is likely to be relatively small or non-existent. This situation is attributable to a numberhighly volatile because of several factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attentionlimited public float.

The market price of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give stockholders any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.

There is only a limited publichas been volatile in the past and the market forprice 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:

actual or anticipated fluctuations in our operating results;

the absence of securities analysts covering us and distributing research and recommendations about us;

we may have a low trading volume for a number of reasons, including that a large portion of our stock is closely held;

overall stock market fluctuations;

announcements concerning our business or those of our competitors;

actual or perceived limitations on our ability to raise capital when we require it, and to raise such capital on favorable terms;

conditions or trends in the industry;

litigation;

changes in market valuations of other similar companies;

future sales of common stock;

departure of key personnel or failure to hire key personnel; and

general market conditions.

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 outstandingshares 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 may be sold in(“Put Shares”) at an aggregate price of up to $10,000,000 over the market.

A substantial numbercourse of ourits 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 are freely tradeable without restriction or further registration under the Securities Act any mayEquity Purchase Agreement, we will be sold in the publicissuing common stock at below market prices, which maycould cause the market price of our common stock to decline. Becausedecline, and if such issuances are significant in number, the Company believes Mr. Zhanming Wu is not an affiliate, as that term is definedamount of the decline in Rule 144 under the Securities Act, and has beneficially owned his shares for more than one year, theour market price could also be significant. In general, we are unlikely to sell shares of common stock available for saleunder 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 market include 15,484,039value of their shares currently ownedof common stock. Additionally, we do not have the right to control the timing and amount of any sales by him.Crown Bridge of the shares issued under the Equity Line.

 

We doOur 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 expect to pay dividendsotherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the foreseeable future.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.

 

We do not intendLegal remedies available to declare dividends foran investor in “penny stocks” may include the foreseeable future, as we anticipate that we will reinvestfollowing:

If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment.

If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages.

These requirements may have the effect of reducing the level of trading activity, if any, future earnings in the developmentsecondary 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 growthliquidity of our business. Therefore, investors will not receive any funds unless theysecurities. These requirements may restrict the ability of broker-dealers to sell theirour common stock and stockholders may be unableaffect your ability 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 inresell 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. We leaseAs at December 31, 2019 we leased the following offices:

 

Location Approximate size Approximate monthly rent  Approximate size Approximate monthly rent 
          
Hong Kong 150 sqft $1,900  150 sq.ft. $1,900 
USA 1,000 sqft $1,400  1000 sq.ft. $1,400 
UK 120 sqft $1,250  150 sq.ft. $1,250 

 

ITEM 3. LEGAL PROCEEDINGS

 

We are not partyThe Company has received a claim from the landlord of a property leased by Maham LLC, a possible acquisition target, under which the Company is a guarantor. The Company’s legal counsel has responded to any material legal proceedingsthe claim, denying the claim and no material legal proceedings haverequesting additional information.

The Company has also been threatened by us.served a claim from the former management of Love Media regarding a claim for unpaid wages. The Company disputes the validity of their claim in its entirety.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.


PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

 

Our common stock is currently quoted on the OTCQB Venture Markettier of the OTC Markets under the symbol, OHGI.“TGHI.” Prior to October 23, 2019, our common stock was quoted on the OTCQB under the symbol, “OHGI.” Prior to March 8, 2019, our Company’s common stock was listed on the NASDAQNasdaq Capital Market.Market (the “Nasdaq”). Our common stock commenced trading on the Nasdaq on July 9, 2014 under the ticker symbol, “OHGI.” On February 26, 2019, Martin Ward, Chief Financial Officer of the Company, approved the voluntary termination of the listing of our common stock on the Nasdaq. On March 8, 2019, the Company filed an application on Form 25 with the SEC to voluntarily terminate its Nasdaq listing. The delisting from the Nasdaq became effective on March 8, 2019.

 

Trading in OTCQB stocks can be volatile, sporadic and risky, as thinly traded stocks tend to move more rapidly in price than more liquid securities. Such trading may also depress the market price of our common stock and make it difficult for our stockholders to resell their common stock.

The following table reflects the high and low closing price for our common stock for the period indicated. For periods after March 8, 2019, the bid information was obtained from the OTC Markets Group, Inc. and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions. 

Quarter Ended High  Low 
June 30, 2020 (1) $0.0245  $0.013 
March 31, 2020 $0.148  $0.01 
         
December 31, 2019 $0.2502  $0.0551 
September 30, 2019 $0.7549  $0.0211 
June 30, 2019 (2) $1.80  $0.7025 
March 31, 2019 $0.18  $0.03 
         
December 31, 2018 $0.43  $0.07 
September 30, 2018 $0.54  $0.17 
June 30, 2018 $1.26  $0.49 
March 31, 2018 $3.03  $0.84 

(1)Through April 23, 2020.
(2)On March 8, 2019, following our application to terminate or Nasdaq listing, Nasdaq suspended our common stock from trading on the Nasdaq and the OTCQB commenced the quotation of our common stock.

On April 23, 2020, the closing price of our common stock on the OTCQB was $0.012.

Record Holders

 

As of April 10, 2019,23, 2020, we had approximately 269271 record holders of our common stock. The number of record holders does not include persons who held our common stock in nominee or “street name” accounts through brokers.


Dividend Policy

 

The payment of cash dividends by us is within the discretion of our board of directors and depends in part upon our earnings levels, capital requirements, financial condition, any restrictive loan covenants, and other factors our board considers relevant. We have not declared or paid any dividends on our common stock, during the periods included in this report,Annual Report on Form 10-K, and we do not anticipate paying such dividends in the foreseeable future. We intend to retain earnings, if any, to finance our operations and expansion.

 

Stock compensationSecurities Authorized for Issuance under Equity Compensation Plans

 

The shareholdersOn December 27, 2018, the Company’s stockholders approved a stock option plan on August 6, 2013, the 20132018 Equity Incentive Plan (“20132018 Plan”). The 20132018 Plan isprovides for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, cash bonuses and other stock-based awards to employees, directors and consultants of the Company.

There have been no No options were issued induring the yearyears ended December 31, 2019 or 2018, and there arewere no options outstanding as at December 31, 2019 or 2018.

 

Sales of Unregistered Equity Securities

 

On December 6, 2017, weMay 16, 2019, the Company entered into an agreement amendment with Maxim Group LLC (“Maxim”) for investment bankingBrowning regarding the original acquisition pricing and advisory services. Underissued 150,000 shares to Browning.


On July 11, 2019, the agreement we agreed to issue 225,000Company issued 200,000 shares of common stock to Maxim. The certificates evidencing the shares were issued in 2018 and were endorsed with, the customary Securities Act legend. Except as previously reported in the reports we have filed under the Exchange Act, we have not issued or sold any other unregistered equity securities during the period by this report. One Percent Investments Inc. for consultancy services.

 

On AprilJuly 31, 2019 and December 5, 20182019, the Company entered into a “Buy-Side” agreement with Maxim for 12 months ending April 4, 2019 whereby Maxim would act for the Company in introducing an acquisition target. The Company agreed the annual fee of 225,000issued 566,000 shares of common stock together withto Crown Bridge Partners as a cashcommitment fee equivalent to 3% offor the agreed price of any such acquisition.equity purchase agreement.

 

On SeptemberAugust 2, 20182019, the investment bank advisory agreement signed in December 2017 was extended to a minimum period of 24 months with it terminating thereafter by either party giving a minimum of 15 days written notice of cancellation. The Company issued 500,000179,104 shares of common stock to Labrys Fund LP as security for the cash advance. These shares were returned in compensationFebruary 2020 for this contract extension.cancellation following repayment of the advance by the Company.

 

On August 20, 2019, the Company issued 100,000 shares of common stock to Scott Mahoney for consultancy services.

The above issuances were made pursuant to an exemption from registration as set forth in 506 of Regulation D and Section 4(2) of the Securities Act.

Repurchases of Equity Securities

 

We havedid not repurchasedrepurchase any equity securities during the period covered by this report.fourth quarter of 2019.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable.


ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our audited consolidated financial statements and notes for the fiscal years ended December 31, 20182019 and 2017.2018. The following discussion and analysis containscontain forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. See “Cautionary Note Concerning Forward-Looking Statements.” You also should specifically consider the various risk factors identified in this reportAnnual Report on Form 10-K that could cause actual results to differ materially from those anticipated in these forward-looking statements.

 

Overview

 

During the year ended December 31, 2018, the Company continuedWe are a holding company which, through our operating subsidiaries, is engaged in media and digital technology, primarily in sports entertainment and related technologies that bring fans closer to generate cash losses related to the legacy operations (Horizon Globex/VoIP Business). For the year ended December 31, 2018 the Company’s net loss totaled $13.8 million. The losses were primarily made up of non-cash items totaling $11.2 million including, impairment charges, amortization of intangible assets, issuance of common stock warrants for services received, amortization of debt issue costsathletes and debt discounts, and non cash other income.celebrities.

 

During 2018,Current Structure of the Company

The Company has pursued investments in the digital media business and on February 22, 2018, acquired a controlling interest in Once In A Lifetime, LLC d/b/a 123Wish (www.123wish.com), anexperience based platform that offers participants an opportunity to play and win unique experiences from renowned celebrities, influencers, athletes, designers, artists, luxury items and more while supporting a diverse range of charities.following subsidiaries:

Subsidiary name% Owned
123Wish, Inc. (considered dormant)51%
One Horizon Hong Kong Ltd100%
Horizon Network Technology Co. Ltd100%
Love Media House, Inc. (Discontinued Operations)100%
Touchpoint Connect Limited (formed in September 2019)100%
Browning Productions & Entertainment, Inc. (Discontinued Operations and sold in February 2020)51%

 

In addition on March 20,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 purposes in accordance with generally accepted accounting principles in the United States (“GAAP”).

Summary Description of Core Business

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.

TCL 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. 

Disposal of Discontinued Operations

On October 22, 2018, we entered into an Exchange Agreement (“Browning Exchange Agreement”) pursuant to which we acquired alla majority of the outstanding shares (the “Controlling Interest in Browning”) of C-Rod,Browning Productions &Entertainment, Inc., a Florida corporation, including its record label, Velveteen Entertainment, and media division, Mues Media (collectively, the “C-Rod Companies” (“Browning”), pursuant to an Exchange Agreement with C-Rod, Inc., Christopher Rodriguez and Patricia Rodriguez, infrom William J. Browning, the sole stockholder of Browning.

In exchange for $150,000the controlling interest in cashBrowning, we paid Mr. Browning $10,000 and 3,376,000issued to him 12,000 shares of our common stock, plus an additional number of shares of our common stock based uponwhich can be up to a maximum of 680,000 shares, determined by dividing two and a half times the net after tax earnings of C-RodBrowning during the two years ending aftertwelve month period ended December 31, 2019 by the completionaverage of the acquisition.closing price of our common stock during the 10 consecutive trading days immediately preceding the end of 2019.

Though the terms of this transaction only required a $20,000 cash payment ($10,000 in cash under the non-binding letter of intent and $10,000 in cash under the Browning Exchange Agreement) to Mr. Browning, we were required to provide Browning with a working capital loan in an initial amount of $150,000, which is to be repaid out of the post-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 is 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;

The return of 89,334 shares in the Company held by William J. Browning for cancellation; and

The repayment to the Company of the advances made to Browning totaling $210,000 over a 24-month period ending January 31, 2022. To encourage early repayment by Browning, the Company has agreed to give additional debt reduction on the basis of $1.00 credit for every $1.00 paid during the first six months of the repayment term.

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

COVID-19 Effects

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 C-Rod Companiesultimate 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

For the fiscal years ended December 31, 2019 and 2018, we our continuing operations generated revenues of $170,000 and $306,000, respectively; and reported net losses of $3,298,000 and $13,413,000, respectively, and negative cash flow from continuing operating activities of $1,431 and $2,973,000, respectively. As noted in our consolidated financial statements, we had an accumulated deficit of approximately $61.3 million and recurring losses from operations as of December 31, 2019. We anticipate that we will continue business operationsto report losses and negative cash flow. Our auditors have raised substantial doubt regarding our ability to continue as ‘Love Media House,’ a wholly owned subsidiarygoing concern as a result of our company.historical recurring losses and negative cash flows from operations. See “Risk Factors—We have a history of operating losses and our auditors have indicated that unless there is additional equity or debt funding in 2020, there is a substantial doubt about our ability to continue as a going concern.”

 

Love Media House, a premier music production company founded in 2002 by Grammy-nominated, multi-platinum producer and composer Christopher Rodriguez, regularlyworks with superstar artists, which have included many celebrity acts such as Rihanna, Jennifer Lopez, Lady Gaga, Enrique Iglesias and Pet Shop Boys.

In May 2018 the Company acquired a 51% interest of a Singaporean Gaming Software developer called Banana Whale Studios PTE Ltd.(“BWS”). BWS required funding of the development of the software games and the Company provided the necessary funding. In February 2019 the Company sold its interest in BWS for $2.0 million and the results for BWS are reflected in discontinued operations in the Company’s financial statements.

On October 23, 2018 the Company acquired a 51% stake in Browning Production & Entertainment, Inc., a Television production company with productions on Over The Top platforms like “Wine Warriors” and “Training Grounds”.

On February 21, 2019 the Company entered into an exchange agreement to acquire a 51% share of the Maham LLC, an innovative, technology- driven yoga studio concept. The purchase price is ultimately based on 2.5 times the aggregate net profit earned during the 24 month period from closing.


Results of Operations

 

The following table sets forth information from our statements of operations for the years ended December 31, 20182019 and 2017.2018. 

 

Comparison of yearyears ended December 31, 20182019 and 20172018 (in thousands) excluding discontinued items.

 

 For the Year Ended Year to Year Comparison  For the Years Ended Year to Year Comparison 
 December 31, Increase/ Percentage  December 31,  Increase/  Percentage 
 2018  2017 (decrease) Change  2019  2018  (decrease)  Change 
                  
Revenue $787 $714 $73 10.2% $170  $306  $(136)  (44.4)%
                         
Cost of revenue                         
Software and production costs 91  91 N/A   4      4   N/A 
Amortization of intangible assets  2,148  855 1,293 151.2%  553   1,982   (1,429)  (72.1)%
  2,239  855       557   1,982         
                         
Gross deficit  (1,452)  (141) (1,311) (929.8)%  (387)  (1,676)  (1,289)  (76.9)%
                         
Operating Expenses                         
                         
General and administrative 7,139 4,236 2,903 68.5%  3,321   6,642   (3,321)  (50.0)%
Acquisition services 1,874  1,874  N/A   -   1,874   (1,874)  N/A 
Depreciation 1 17 (16) (94.1)%  1   1   -    %
Impairment charge  3,761   3,761 N/A   -   3,761   (3,761)  N/A 
Total Operating Expenses  12,775  4,253 8,522 200.4%  3,322   12,278   (8,956)  (72.9)%
                         
Loss from Operations  (14,227)  (4,394) 9,833 223.8%  (3,709)  (13,954)  (10,245)  (73.4)%
                         
Other Income(expense)                         
Interest expense (428) (666) 238 35.7%  (87)  (428)  (341)  (79.7)%
Other Income 989  989 N/A   553   968   (415)  (42.9)%
Loss on disposal of investment  (50)  -   (50)  N/A 
Foreign currency exchange (losses) gains (5) 1 (6 (600.0)%  (5)  1   (6)  (600.0)%
             411   541         
                         
Loss from continuing operations (13,671) (5,059) (8,612) (170.2)% $(3,298) $(13,413)  (10,115)  (75.4)%

 


Revenue: Our revenue for continuing operations for the year ended December 31, 20182019 was approximately $787,000$170,000 as compared to approximately $714,000$306,000 for the year ended December 31, 2017, an increase2018, a decrease of approximately $73,000$136,000 or 10.2%. The increase was primarily44.4% due to a reduction in revenue generated from companies acquired in the year.generating contracts.


Cost of Revenue: Cost of revenue wasis primarily the amortization of intangible assets relating to subsidiaries acquired together with intellectual property associated with the secure messaging.

 

Gross Deficit:  Gross deficit for the year ended December 31, 20182019 was approximately $1.45 million$387,000 as compared to $0.15 million$1,676,000 for the year ended December 31, 2017.2018. The increaseddecreased deficit is primarily due to the increasedecrease in amortization.

 

Operating Expenses: Operating expenses including general and administrative expenses, consultancy expenses, depreciation and impairment charges were approximately $12.8$3.3 million for the year ended December 31, 2018,2019, as compared to approximately $4.3$12.3 million, for the same period in 2017, an increase2018, a decrease of approximately $8.5$9.0 million or 200%73%. The increasedecrease in expenses primarily arose due to an increasedecreases in non-cash consulting expenses paid in sharescosts, acquisition costs and an impairment charge related to our secure messaging software.charges.

 

Other Income (Expense): Net other income totaled $0.56approximately $0.4 million for the year ended December 31, 2018, and increase of $1.222019 as compared to approximately $0.5 million overin the year ended December 31, 2017.2018, a decrease of approximately $124,000. The increasedecrease in net other income is due primarily to a decrease in interest expense charges and other income recognized from the planned disposition of Banana Whale.

 

Net Loss: Net loss from continuing operations for the year ended December 31, 20182019 was approximately $13.7$3.3 million as compared to a net loss from continuing operations of $5.1$13.4 million for the same period in 2017.2018.  Going forward, management believes the Company will continue to grow the business and increase profitability through acquisitions.

 

Foreign Currency Translation Adjustment:     Our reporting currency is the U.S. dollar. Our local currencies, Hong Kong Dollars, British pounds and Chinese Renminbi, are our functional currencies. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate at the end of the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.


Years Ended December 31, 2018 and December 31, 20172018

 

The following table sets forth a summary of our approximate cash flows for the periods indicated:

 

 For the Years Ended
December 31
(in thousands)
  For the Years Ended
December 31
(in thousands)
 
 2018 2017  2019  2018 
Net cash used in operating activities from continuing operations (3,012) (382)  (1,431)  (2,973)
Net cash used in operating activities from discontinued operations (39) (321  (633)  (1,058)
Net cash used in investing activities from continuing operations (170) (2)
Net cash provided (used) in investing activities from continuing operations  1,660   (205)
Net cash used in investing activities from discontinued operations (980) (261)  (77)  (5)
Net cash provided by financing activities from continuing operations 3,516 1,477   291   3,516 
Net cash provided by financing activities from discontinued operations 301    69   301 

 

Net cash used by operating activities from continuing operations was approximately $3.0$1.4 million for the year ended December 31, 20182019 as compared to approximately $0.4$3.0 million for the same period in 2017.2018. The increasedecrease in cash used in operating activities from continuing operations is largely due to the increasedecrease in cash expenditures in 20182019 as compared to 20172018 related to the newly acquired entities.fundraising and management activities.

 

Net cash used inprovided by investing activities from continuing operations was approximately $0.17$1.7 million for the year ended December 31, 2018.2019 as compared to net cash used of approximately $0.2 million. Net cash used inprovided by investing activities was primarily focused on acquisition and investmentthe disposal of the interest in acquired subsidiaries.Banana Whale Studios PTE LTD. 

 

Net cash provided by financing activities from continuing operations amounted to approximately $0.3 million for 2019 and $3.5 million for 2018 and $1.5 million for 2017.2018. Cash provided by financing activities in 20182019 and 20172018 was primarily from the sale of Common Stockcommon stock and conversionexercise of warrants, net of related costs.

 

Our working capital surplus as of December 31, 2018, was approximately $1.6 million, as compared to a working capital surplus of approximately $0.9 million for the same date in 2017.

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Critical Accounting Policies and Estimates

 

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. Our significant accounting policies are described in notes accompanying the consolidated financial statements. The preparation of the consolidated financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. Estimates are based on information available as of the date of the financial statements, and accordingly, actual results in future periods could differ from these estimates. Significant judgments and estimates used in the preparation of the consolidated financial statements apply critical accounting policies described in the notes to our consolidated financial statements.

 

We consider our recognition of revenues, accounting for the consolidation of operations, accounting for stock-based compensation, accounting for intangible assets and related impairment analyses, the allowance for doubtful accounts and accounting for equity transactions, to be most critical in understanding the judgments that are involved in the preparation of our consolidated financial statements.

 

Together with our critical accounting policies set out above,forth below, our significant accounting policies are summarized in Note 2 of our audited financial statements as of and for the year ended December 31, 2018.2019.

 


Revenue Recognition

 

 1.Digital secure messaging revenue involves the sale of user licenses, at a fixed price per license, to the customers, which is our sole performance obligation under the existing licensing agreements. The Company recognizes the revenue fromRevenue for the sale of the user licenses when the valid licenses have been delivered to the customer’s server in useable form.

2.123Wish derives income from user subscriptions, sale of merchandise, sale of tickets for experiences with social media influencers and artists, and the sale of corporate sponsorships, each of whichsoftware license is a separate performance obligation. User subscriptions cover a defined period of time (typically one month) and the revenue is recognized as the Company satisfies the requisite performance obligation (over the defined subscription period). Sale of merchandise and tickets are recognized when the customer has paid foruse of the itemservices and whenhas access to use the merchandise and/or ticket has been delivered to the customer. Corporate sponsorship packages are non-refundable and relate to brand association. The Company has no further service deliverable to the sponsor and the revenue is recognized when the agreement is entered into by both parties and the required marketing materials have been delivered to the corporate sponsor for their use.

3.Love Media House derives incomesoftware. Revenue from recording and video services. Income is recognized when the recording and videomaintenance services are performed andrecognized as the final customer product is delivered and the point at which the performance obligation is satisfied. These revenues are non-refundable.

4.Banana Whale derives income primarily through licensing arrangements with gaming customers. Under these arrangements, Banana Whale provides the customers with a license (functional IP), implementation services and ad-hoc support, which may include unspecified upgrades and enhancements. The Company has determined that these promised goods and services represent one combined performance obligation since the individual promised goods or services are not distinct in the context of the contract. The revenues earned from the arrangements are primarily based on usage-based royalties. As the Company has determined that the license is the predominant item to which the royalty relates, revenues are recognized when the related sale or usage by the customer occurs.

5.Browning Production & Entertainment, Inc derives income from the advertising associated with the airing of television series produced by BP&Eprovided and also license income from the show of series on certain channels based on the number of viewers attracted.charged.

 

Recent Accounting Pronouncements

 

In May 2014,February 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers,2016-02, “Leases,” which supersedes the revenue recognition requirements ofcreated a new Topic, Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition”842 and most industry-specific guidanceestablished the core principle that a lessee should recognize the assets, representing rights-of-use, and liabilities to make lease payments, that arise from leases. For leases with a term of 12 months or less, a lessee is permitted to make an election under which such assets and liabilities would not be recognized, and lease expense would be recognized generally on revenue recognition throughouta straight-line basis over the ASC. The newlease term. This standard is principles-based and provides a five step model to determine when and how revenue is recognized. The core principle of the new standard is that revenue should be recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also requires disclosure of qualitative and quantitative information surrounding the amount, nature, timing and uncertainty of revenues and cash flows arising from contracts with customers. The new standard, as updated in 2015, was effective for usthe Company beginning in 2019 and was adopted by the first quarter ofCompany for the year ending December 31, 2018 and can be applied either retrospectively to all periods presented or as a cumulative-effect adjustment as of the date of adoption. We havebeginning January 1, 2019. The Company has evaluated the impact of the new accounting standard on our revenue recognition policies and it did not have an impact on our financial statements.

        In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” ASU 2016-10 clarifies the implementationthis revised guidance on identifying performance obligations. This ASU applies to all companies that enter into contractsits financial statements and determined it had no material impact, as the Company has no leasing arrangements with customers to transfer goods or services. This ASU is effective for public entities for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, but not before interim and annual reporting periods beginning after December 15, 2016. Entities have the choice to apply the ASU either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying these standards at the date of initial application and not adjusting comparative information. We have evaluated the impact of the new accounting standard on our revenue recognition policies and it did not have an impact on our financial statements.terms greater than one year.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by Item 304 of Regulation S-K.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Our financial statements, including the independent registered public accounting firm’s report on our financial statements, are included beginning at page F-1 immediately following the signature page of this report.Annual Report on Form 10-K.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Limitations on the Effectiveness of Disclosure Controls. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures for the period ended December 31, 2018.2019. Our Chief Executive Officer and Chief Financial Officer concluded that due to the deficiency in the internal control over financial reporting discussed below, our disclosure controls and procedures (as defined in Rules 13a-15(e)13a-15(f) and 15d-15(e) under the Exchange Act) were not effective as of December 31, 2018.2019.


Management’s Report on Internal Control over Financial Reporting

 

Our management is also responsible for establishing and maintaining adequate internal controls over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors (notably, the Audit Committee thereof), management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principlesGAAP and includes those policies and procedures that:

 

●           Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

 

●           Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

 

●           Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, our internal control over financial reporting may not prevent or detect all misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Our management, including our Chief Executive Officer and our Chief Financial Officer, has assessed the effectiveness of our internal control over financial reporting as of December 31, 2018.2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Due to a lack of accounting personnel, the Company'sCompany’s inability to segregate various accounting functions, lack of a control function over original documentation of agreements, and a lack of a documented control environment with respect to our operating entities, management has concluded that there was a material weakness in our internal control environment based on these matters and has concluded that as of December 31, 2018,2019, our internal control over financial reporting was not effective.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. The rules of the Securities and Exchange CommissionSEC do not require an attestation of the Management’smanagement’s report by our registered public accounting firm in this annual report.

 

Changes in Internal Control over Financial Reporting

 

During the year ended December 31, 2018,2019, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None.

Entry into a Material Definitive Agreements & Unregistered Sales of Equity Securities

Catalyst Corporate Solutions, LLC Consulting Agreement

On August 5, 2019, the Company entered into a Consulting Agreement (the “Catalyst Agreement”) between the Company and Catalyst Corporate Solutions, LLC (“Catalyst”). Pursuant to the terms of the Catalyst Agreement, the Company retained Catalyst to (i) assist the Company with its plans to expand its business; and (ii) furnish additional ongoing management and business consulting services aimed at enhancing Company’s business (collectively, the “Catalyst Consulting Services”).

The Catalyst Agreement had a term of six months, but the Company had the right to cancel the Catalyst Agreement by providing 30 days’ written notice to Catalyst. Notwithstanding, in the event of a termination notice, all of the compensation mentioned in the Catalyst Agreement and issued to Catalyst up to and including 15 days following the termination notice will be deemed earned (or immediately due and payable). The Catalyst Agreement provides that Catalyst will not be issued, at any time during the term of the Catalyst Agreement or any extension thereof, such number of shares of Company common stock that would result in beneficial ownership by Catalyst and its affiliates of more than 9.99% of the outstanding shares of Company common stock.

In order to incentivize Catalyst to enter into the Catalyst Agreement and to provide the Catalyst Consulting Services and for other good and valuable consideration, the Company agreed to issue and immediately and irrevocably deliver to Catalyst 2,500,000 restricted shares of Company common stock.


Catalyst Corporate Solutions, LLC Accord and First Amended Consulting Agreement

On April 21, 2020, the Company entered into the Accord and First Amended Consulting Agreement (the “Amended Catalyst Agreement”), dated as of April 16, 2020, by and between the Company and Catalyst. The Amended Catalyst Agreement amends the Catalyst Agreement. Pursuant to the terms of the Amended Catalyst Agreement, Catalyst agreed to provide the Consulting Services until October 15, 2020 in exchange for issuance by the Company of 5,000,000 shares of Company common stock.

In addition, pursuant to the terms of the Catalyst Agreement, the parties agreed that the 2,500,000 shares that were issued would not be subject to a reverse split. As previously disclosed, on September 26, 2019, the Company effected a 1-for-25 reverse stock split of the Company’s common stock (the “Reverse Split”). Pursuant to the terms of the Amended Catalyst Agreement, the Company agreed to issue to Catalyst an additional 2,400,000 shares of Company common stock as a corrective share issuance that the parties agreed was fully earned by Catalyst as of August 20, 2019.

Convertible Note

On November 21, 2019, the Company issued a convertible note (the “Convertible Note”) to Bespoke Growth Partners, Inc. (“Bespoke”) in the principal amount of $300,000. The Convertible Note is payable in full on May 21, 2020 and bears interest at the rate of 20% per annum. Accrued interest on the Convertible Note is payable each month on the 30-day anniversary of the issue date. The Convertible Note carries an original issue discount of $100,000; Accordingly, the purchase price of the Convertible Note is $200,000. The Convertible Note may not be prepaid in whole or in part except as set forth in the Convertible Note. Any amount of principal or interest on the Convertible Note which is not paid when due shall bear interest at the rate of the lesser of 28% per annum or the maximum amount permitted under applicable law from the due date until paid. The Convertible Note may be convertible into shares of the Company’s common stock at any time only following an event of default at a price per share of 50% (representing a 50% discount) of the lowest one trading price for the Company’s common stock during the 20-trading day period ending on the last complete trading day prior to the date of conversion.

Quantum Lexicon Consulting Agreement

On April 20, 2020, the Company entered into a Consulting Agreement (“Quantum Agreement”), dated as of April 16, 2020, by and between the Company and Quantum Lexicon (“Quantum”). Pursuant to the terms of the Quantum Agreement, the Company retained Quantum to (i) assist the Company with its plans to grow its business; and (ii) furnish additional ongoing management and business consulting services aimed at enhancing the Company’s business (collectively, the “Quantum Consulting Services”).

The Quantum Agreement had a term of six months, but the Company had the right to cancel the Quantum Agreement by providing 30 days’ written notice to Quantum. Notwithstanding, in the event of a termination notice, all of the compensation mentioned in the Quantum Agreement and issued to Quantum up to and including 15 days following the termination notice will be deemed earned (or immediately due and payable). The Quantum Agreement provides that Quantum will not be issued, at any time during the term of the Quantum Agreement or any extension thereof, such number of shares of Company common stock that would result in beneficial ownership by Quantum and its affiliates of more than 9.99% of the outstanding shares of Company common stock.

In order to incentivize Quantum to enter into the Quantum Agreement and to provide the Quantum Consulting Services and for other good and valuable consideration, the Company agreed to issue and immediately and irrevocably deliver to Quantum 2,000,000 restricted shares of Company common stock.

With regard to any acquisition of a company introduced by Quantum that results in ownership by the Company of not less than 20% of such company, the Company agreed to compensate Quantum within three business days of closing of such transaction by that amount of cash that equates to 5% of the anticipated total purchase price or deal value or that amount of Company stock that equates to 7.5% of the anticipated purchase price or deal value.

The foregoing descriptions of the Catalyst Agreement, the Amended Catalyst Agreement and the Quantum Agreement are qualified in their entirety by reference to such Catalyst Agreement, Amended Catalyst Agreement, Convertible Note and Quantum Agreement, copies of which are filed as Exhibits 10.45, 10.46, 10.47 and 10.48, respectively, to this Annual Report on Form 10-K.

On April 24, 2020, the Company issued an aggregate of 5,000,000 shares to an employee in advance of stock awards due to him. The Company claims an exemption from the registration requirements of the Securities Act for the private placement of the securities issued to this employee and to Catalyst and Quantum pursuant to Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder because, among other things, the transaction did not involve a public offering, the recipients are accredited investors, the recipients acquired the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.


PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Board of Directors and Executive Officers

The following table sets forth the names, positions and ages of our directors and executive officers as of the date of this Annual Report on Form 10-K. Our directors are elected by our stockholders at annual meeting of the stockholders and serve until the next annual meeting of the stockholders or, in absence of such annual meeting, until their successors are elected and qualified. Officers are elected by our board of directors and their terms of office are at the discretion of our board.

Directors and Executive Officers

 

Name Age Position
     
Mark White  5859 President, Chief Executive Officer and Director
     
Martin Ward  6162 Chief Financial Officer and Director
     
Nicholas Carpinello  6970 Director
     
Richard VosNalin Jay  7343 Director
     
Robert Law  6869 Director
     
Aling Zhang 6162 Director
     
Pengfei Li 3132 Director

 

Biographical information concerning the directors and executive officers listed above is set forth below.  

Mark White.  Mr. White was appointed as President, Chief Executive Officer and a director of the Company on September 8, 2017. Mr. White previously served as the Company’s Chief Executive Officer from November 30, 2012 to July 24, 2014founded and as a director from December 2012 to July 2014. From July 2014 to August 2017, he was engaged as a private investor seeking business and investment opportunities. Mr. White served as thebecame Chief Executive Officer of a predecessor of the Company, One Horizon Group PLC, in 2004 and served as Chief Executive Officer and a Director of One Horizon Group, Inc. from 20042012 to November 2012.2014. His entrepreneurial career in the distribution of electronic equipment and telecommunications spans over 2025 years.

He founded Next Destination Limited in 1993, the European distributor for Magellan GPS and satellite products, and sold the business in 1997. Prior to that, Mr. White was Chief Executive Officer for Garmin Europe, where he built up the company’s European distribution network. He previously sold Garmin’s GPS products through Euro Marine Group Ltd, a company he formed in 1990, which established distribution in Europe for U.S. manufacturers of marine electronic equipment. Earlier in

Apart from his career,product and technical knowledge, Mr. White washas a wealth of experience in corporate finance. He has led in excess of 25 merger and acquisition transactions and associated funding and financing rounds and has successfully transformed numerous company’s fortunes on both the Sales Director for Cetrek Limited, a maritime autopilot manufacturer.private and public markets.

 

Martin Ward.Mr. Ward has served as Chief Financial Officer since November 30, 2012 and a director of the Company since December 10, 2012. Mr. Ward served2012, and as the Chief Financial Officer and Company Secretary of One Horizon Group PLC from 2004 to November 2012. Prior to joining One Horizon Group, Mr. Wardand its predecessor since 2004.  During that time, he has overseen the Company’s United Kingdom arm float on the London AIM market and in 2012 merge with an OTC market company that was a partner at Langdowns DFK, a United Kingdom-based chartered accountancy practice. Earlieruplisted the NASDAQ Capital Market in his career, between 1983 and 1987, he worked for PricewaterhouseCoopers as an Audit Manager.2014. Mr. Ward is a fellowFellow of the Institute of Chartered Accountants ofin England and Wales.Wales (“ICAEW”) and qualified as a Chartered Accountant in 1983.


22

Nicholas Carpinello.Mr. Carpinello has served asasa member of the Board of Directors since 2013.  He is an Independent Director of the Company and is the Chairman of the Audit Committee and a director since March 7, 2013.member of the Compensation and the Nomination & Governance Committees. He has been the owner of Carpinello Enterprises LLC d/b/a Cottman Transmission Center, a nationalU.S. nationwide auto service franchise since 2004 and also has worked as a consultant to SatCom Distribution Inc. (“SDI”), assisting in various business, tax and financial matters of US operations of UK-based distributors of satellite communication hardware and airtime, since 2005. Prior to November 2012, SDI was a subsidiary of One Horizon Group PLC.2004.  Mr. Carpinello’s years of professional experience are extensive and include experience as CFO and Treasurer with multinational public and private manufacturers of armored vehicles and, later in his career, CFO of privately-held companies in the computer science field. He is a Certified Public Accountant, an alumnus of Arthur Andersen & Co., and holds a BA degree in Accounting from the University of Cincinnati.

 

Richard Vos.Nalin Jay.Mr. VosJay was appointed as a director in 2019 and has many years’ experience in corporate finance and management consultancy.  Currently, he heads up Carnegie Stewart, a strategic, financial and management consultancy business that he founded in 2011. Clients include several major law firms, such as Allen & Overy, Linklaters, White & Case and Freshfields as well as major corporations such as Bank of America Merrill Lynch, Starwood Hotels, Grosvenor, Gammon Construction and Brown Brothers Harriman.

In addition, Mr. Jay has a long and successful track record in sports, where he has advised a number of Premier League and Championship teams on August 28, 2013. Mr. Vos has beenissues ranging from player acquisition, global sponsorship (with a non-executive director of NSSC Operations Ltd.particular focus on Asia), which operates the National Space Centre in the United Kingdom, until February 2018player and was chairman of its audit committee. From August 2014 to March 2017. Mr. Vos was a non-executive director of Tawsat Limitedteam performance and Tawsat Holdings Limited, both Irish registered companies which hold intellectual property in certain satellite operations.corporate strategy. Carnegie Stewart’s sporting clients have included Lee Grant, Gianfranco Zola, Aaron Ramsey, Ole Solskjaer, and Roberto Martinez.

 

Mr. Vos was an Independent Director from 2007 to January 2017 of Avanti Communication Group plc,Nalin is a public company listed on the London Stock Exchange (LSE:AVN), where he was chairman of its remuneration committee and audit committee. From June 2005 to June 2010, Mr. Vos was a director of our United Kingdom subsidiary. One Horizon Group plc (formerly SatCom Group Holdings plc) (“One Horizon UK”), and from October 2006 to June 2010 was also Chairman. From July 2005 to March 2010, One Horizon UK was listed on the Alternative Investment Marketgraduate of the London Stock Exchange (AIM: SGH). From October 2008 to October 2010, Mr. Vos served asSchool of Economics and a directornon-practising Barrister and Member of TerreStar Europe Ltd., a former start-up business seeking to provide mobile satellite services in Europe. From April 2003 to 2009, Mr. Vos was chairman of the Telecommunications and Navigation Advisory Board of the British National Space Centre (subsequently reconstituted as the United Kingdom Space Agency). From September 2006 to June 2009, Mr. Vos was a director of Avanti Screenmedia Group plc, formerly listed on the London Stock Exchange (LSE:ASG), which provided satellite and other services. Mr. Vos obtained his Bachelor of Arts with Honors in Modern Languages from University of London in 1968, and his Diploma in Management Studies from Kingdom Polytechnic in 1973. Lincoln’s Inn.

Robert Law. Mr. Law has served as a directormember of the Board of Directors since August 28, 2013.  He is an Independent Director of the Company and is the Chairman of the Compensation Committee and a member of the Nomination & Governance and the Audit Committees. From 1990 tountil 2016, Mr. Law has served as chief executive officer of Langdowns DFK Limited (“Langdowns”), a United Kingdom-based accounting, tax and business advisory firm, and from 1979 to 2018 served as a director of Langdowns. Also, from 1990 to 2016, Mr. Law served ashas been the chief executive officer of Southern Business Advisers LLP (“Southern Business Advisers”), a United Kingdom-based business associated with Langdowns that also offers accounting, tax and business advisory services, was a member of Southern Business Advisers since 1979.services. Mr. Law is a Fellow of the Institute of Chartered Accountants in England and Wales (“ICAEW”), having and is a member of the Valuation and Information Technology Faculties of the ICAEW. Mr. Law qualified as an ICAEWa Chartered Accountant in 1976.

 

Ajing Zhang. Mr. Zhang was appointed as a director in January 2019. Hewas managing director of Shanghai Suonengderui Energy Science and Technology Development Co., Ltd. from March 2011 to April 2018. From March 2010 to February 2011, he was Executive Deputy General Manager of China Energy Conservation and Environmental Protection Shanghai Company. From June 2006 to March 2010, he was Deputy General Manager of Shanghai Citelum Kighting Design Co. LTd.Ltd. From March 2003 to June 2006, he was Assistant General Manager of Oriental Pearl Group Co., Ltd. From May 1992 to March 2003, he was Assistant General Manager and Financial Manager of Oriental Pearl Taxi Co., Ltd. From April 1989 to May 1992, he was Finance Supervisor of Shanghai Qichongtian Hotel. Mr. Zhang received a Bachelor’s degree from Shanghai Lixin College of Accounting in 1987 (where he majored in Accounting), a postgraduate degree from East China Normal University in 1999 )(where(where he majored in Economic Information Management) and a Master’s degree from Macau University of Science and Technology in 2004 (where he majored in Business Administration Management).

 

Pengfei Li. Mr. Li was appointed as a director in January 2019. He has been Investment Director of Dachao Asset Management (Shanghai) Co., Ltd., of which Mr. Wu is Chairman, since January 2018. From June 2015 to December 2017, he was Assistant resident of Shanghai Lighter Capital Management Co., Ltd. From June 2013 to June 2015, he was Investment Manager of Shanghai Fosun Hiogh Technology (Group) Co., Ltd/Shanghai Yuyuan Gold and Jewelry Group Ltd. Mr. Li received a Bachelor’s degree from Shanghai University of Engineering Science in 2011 (where he majored in International Economics and Trade) and a Master of Science degree from the University of Brighton (United Kingdom) in 2013 (where he majored in MSc Finance and Investment).

 

There are no family relationships among our directors and executive officers. Each director is elected at our annual meeting of shareholders and holds office until the next annual meeting of shareholders, or until his successor is elected and qualified, or his earlier death, resignation or removal. Officers are elected by and serve at the discretion of the Board of Directors.


Information Concerning the Board of Directors

Board Leadership Structure and the Board’s Role in Risk Oversight.

 

The Board of Directors currently does not have a Chairman. Our Chief Executive Officer acts as the Chairman of the Board. The Board determined that in the best interest of the Company the most effective leadership structure at this time is not to separate the roles of Chairman and Chief Executive Officer. A combined structure provides the Company with a single leader who represents the Company to our stockholders, regulators, business partners and other stakeholders, among other reasons set forth below. Should the Board conclude otherwise, the Board will separate the roles and appoint an independent Chairman.

 

This structure creates efficiency in the preparation of the meeting agendas and related Board materials as the Company’s Chief Executive Officer works directly with those individuals preparing the necessary Board materials and is more connected to the overall daily operations of the Company. Agendas are also prepared with the permitted input of the full Board of Directors allowing for any concerns or risks of any individual director to be discussed as deemed appropriate. The Board believes that the Company has benefited from this structure, and Mr. White’s continuation in the combined role of the Acting Chairman and Chief Executive Officer is in the best interest of the stockholders.

 

The Company believes that the combined structure is necessary and allows for efficient and effective oversight, given the Company’s relatively small size, its corporate strategy and focus.

 

The Board of Directors does not have a specific role in risk oversight of the Company. The Chairman, President and Chief Executive Officer and other executive officers and employees of the Company provide the Board of Directors with information regarding the Company’s risks.

 

Compensation of Directors

 

Non-employee directors are entitled to receive compensation for serving as directors and may receive option grants from our company. Employee directors do not receive any compensation for their services as directors. All of our directors are reimbursed for expenses incurred by them in connection with attending Board of Directors’ meetings. The following table sets forth all cash compensation paid or where unpaid, accrued by us as well as certain other compensation paid or accrued, in 2018,2019 to each of our non-employee directors.

 

Name Fees
Earned
or
Paid in
Cash
($)
 Stock
Awards
($)
 Option
Awards
($)
 Non-Equity
Incentive
Plan
Compensation
($)
 Nonqualified
Deferred
Compensation
Earnings
($)
 All Other
Compensation
($)
 Total ($)  

Fees
Earned,

Accrued
or
Paid in
Cash
($)

  Stock
Awards
($)
  Option
Awards
($)
  Non-Equity
Incentive
Plan
Compensation
($)
  Nonqualified
Deferred
Compensation
Earnings
($)
  All Other
Compensation
($)
  Total ($) 
Nicholas Carpinello  18,000 0 0 0 0 0 18,000   18,000         0         0         0         0         0   18,000 
Robert Law 16,000 0 0 0 0 0 16,000   16,000   0   0   0   0   0   16,000 
Richard Vos(1) 16,000 0 0 0 0 0 16,000   14,666   0   0   0   0   0   14,666 
Nalin Jay (2)  1,000   0   0   0   0   0   1,000 

(1)Mr. Vos resigned his position as a member of the Board of Directors on December 12, 2019.
(2)Mr. Jay was appointed as a member of the Board of Directors on December 12, 2019.

 

Independent Directors

 

Our Board of Directors has determined that Nicholas Carpinello, Robert Law and Richard VosNalin Jay are “independent directors” within the meaning of NASDAQ Marketplace Rule 5605(a)(2).As of March 8, 2019, our common stock is quoted on the OTCQB tier of the OTC Markets and ceased trading on Nasdaq.


Board Meetings; Committees and Membership

 

The Board of Directors held 7seven meetings during the fiscal year ended December 31, 2018 (“fiscal 2018”).2019. During fiscal 2018, each of the directors then in office attended2019, more than 75% of the directors attended aggregate of (i) the total number of meetings of the Board of Directors and (ii) the total number of meetings of all committees of the Board on which such director served.

 

We maintain the following committees of the Board of Directors: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each committee is comprised entirely of directors who are “independent” within the meaning of NASDAQ Marketplace Rule 5605(a)(2). Each committee acts pursuant to a separate written charter, and each such charter has been adopted and approved by the Board of Directors. Copies of the committee charters are available on our website at airindustriesgroup.comtouchpointgh.com under the heading “Investor Relations.” As of March 8, 2019, our common stock is quoted on the OTCQB tier of the OTC Markets and ceased trading on Nasdaq.

 

Audit Committee

 

Our Audit Committee consists of NicholasMessrs. Carpinello, Robert Law and Richard Vos,Jay, each of whom is independent. The Audit Committee held 4 meetings during 2019 and acted by written consent X times. The Audit Committee assists the Board of Directors oversight of (i) the integrity of financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, and (iv) the performance of our internal audit function and independent auditor, and prepares the report that the Securities and Exchange CommissionSEC requires to be included in our annual proxy statement. The audit committee operates under a written charter. Mr. Carpinello is the Chairman of our audit committee.

 

The Board of Directors determined that Mr. Carpinello possesses accounting or related financial management experience that qualifies him as financially sophisticated within the meaning of Rule 4350(d)(2)(A) of the Nasdaq Marketplace Rules and that he is an “audit committee financial expert” as defined by the rules and regulations of the SEC.As of March 8, 2019, our common stock is quoted on the OTCQB tier of the OTC Markets and ceased trading on Nasdaq.

 

A copy of current charter of Audit Committee is available on the Company’s website at http://content.stockpr.com/content.stockpr.com/onehorizongroup/media/6f6926ac07f2526da1eaa0d94f84c6d7.pdf6f6926ac07f2526da1eaa0d94f84c6d7.pdf.

 

Nominating and Corporate Governance Committee

 

The purpose of the Nominating and Corporate Governance Committee is to assist the Board of Directors in identifying qualified individuals to become members of our Board of Directors, in determining the composition of the Board of Directors and in monitoring the process to assess Board effectiveness. Each of NicholasMessrs. Carpinello, Robert Law and Richard VosJay are members of the Nominating and Corporate Governance Committee. Mr. Jay serves as Chairman of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held 4 meetings during 2019 and acted by written consent X times. The Nominating and Corporate Governance Committee operates under a written charter. Mr. Richard Vos is the Chairman of the Nominating and Corporate Governance Committee.

 

Our Nominating and Corporate Governance Committee has, among the others, the following authority and responsibilities:

To determine and recommend to the Board, the criteria to be considered in selecting nominees for the director;

 

To identify and screen candidate consistent with such criteria and consider any candidates recommended by our stockholders pursuant to the procedures described in our proxy statement or in accordance with applicable laws, rules and regulations and provisions of our charter documents.

To select and approve the nominees for director to be submitted to a stockholder vote at the annual meeting of stockholders.

 

A copy of current charter of Nominating and Corporate Governance Committee is available on the Company’s website at http://content.stockpr.com/content.stockpr.com/onehorizongroup/media/8eccadeceb1ccc10b249cc5ab2456058.pdf8eccadeceb1ccc10b249cc5ab2456058.pdf.


Compensation Committee

 

The Compensation Committee is responsible for overseeing and, as appropriate, making recommendations to the Board of Directors regarding the annual salaries and other compensation of our executive officers and general employees and other policies, and for providing assistance and recommendations with respect to our compensation policies and practices. Each of NicholasMessrs. Carpinello, Robert Law and Richard VosJay are members of the Compensation Committee. The Compensation Committee operates under a written charter. Mr. Robert Law is the Chairman of Compensation Committee. The Compensation Committee held 4 meetings during 2019 and acted by written consent X times.

 

As required by Rule 10C-1(b)(2), (3) and (4)(i)(vi) under the Securities Exchange Act, of 1934 (the “Act”), our Compensation Committee has, among the others, the following responsibilities and authority.

 

The compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser.

 

The compensation committee shall be directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and other adviser retained by the compensation committee or said group.

 

The Company must provide for appropriate funding, as determined by the compensation committee, for payment of reasonable compensation to a compensation consultant, legal counsel or any other adviser retained by the compensation committee or said group.

 

The compensation committee select, or receive advice from, a compensation consultant, legal counsel or other adviser to the compensation committee or said group, other than in-house legal counsel, only after conducting an independence assessment with respect to the adviser as provided for in the Exchange Act.

 

A copy of current Charter of Compensation Committee is available on the Company’s website at http://content.stockpr.com/content.stockpr.com/onehorizongroup/media/abf14232f92dbd65d5ee4c83d7b1fa3b.pdfabf14232f92dbd65d5ee4c83d7b1fa3b.pdf.

 

Code of Ethics

 

Our board of directors has adopted a Policy Statement on Business Ethics and Conflicts of Interest (“Code of Ethics”) applicable to all employees, including the Company’s chief executive officer and chief financial officer. A copy of the Code of Ethics and Business Conduct is available on the Company’s website at  http://content.stockpr.com/content.stockpr.com/onehorizongroup/media/250c1db923f658aca6cc69dfc35c7f89.pdf250c1db923f658aca6cc69dfc35c7f89.pdf.

 

Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports

 

Section 16(a) of the Exchange Act and the rules thereunder require our officers and directors, and persons that own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and to furnish us with copies. Based solely on our review of the copies of the Section 16(a) forms received by us, or written representations from certain reporting persons, we believe that during the fiscal year ended December 31, 20182019 all of our officers, directors, and beneficial owners of more than 10% of our outstanding shares of common stock filed on a timely basis all reports required by Section 16(a) of the Exchange Act.Act, except as follows: Mr. Jay failed to file a Form 3 in connection with his appointment in December 2019.


Stockholder Communications

 

Stockholder Communications

OHGITGHI stockholders who want to communicate with our Board or any individual director can write to:

 

One HorizonTouchpoint Group Holdings, Inc.  

649 NE 81st Street 

4300 Biscayne Blvd, Suite 203

Miami FL 33138 

33137

Attn: Board Administration

 

Your letter should indicate that you are an OHGIa Touchpoint stockholder.  Depending on the subject matter, management will:

 

 Forward the communication to the Director or Directors to whom it is addressed;
   
 Attempt to handle the inquiry directly, for example where it is a request for information about OHGITGHI or it is a stock-related matter; or 
   
 Not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic.

 

At each Board meeting, a member of management presents a summary of all communications received since the last meeting that were not forwarded and makes those communications available to the Directors on request.


ITEM 11. EXECUTIVE COMPENSATION

 

The following tables set forth, for the periods indicated, the total compensation awarded to, earned by or paid to each person who served as the principal executive officer during the fiscal year ended December 31, 2018 (“Fiscal 2018”)2019 and each other executive officer whose total compensation awarded to, earned by or paid to such other executive officer for Fiscal 20182019 was in excess of $100,000 for services rendered in all capacities to the Company and its subsidiaries (together, the “Named Executive Officers”).

 

20182019 Summary Compensation Table: ExecutivesTable

 

Name and
Principal
Position
 Period Salary
($)
 Bonus
($)
 Stock
Award(s)
($)
 Option
Awards
($)
 Non-
Equity
Incentive
Plan
Compensation
 Non-
Qualified
Deferred
Compensation
Earnings 
($)
 All Other
Compensation 
($)
 Total ($)  Period Salary
($)
  Bonus
($)
  Stock
Award(s)
($)
  Option
Awards
($)
  Non-
Equity
Incentive
Plan
Compensation
  Non-
Qualified
Deferred
Compensation
Earnings 
($)
  All Other
Compensation 
($)
  Total ($) 
                   
                                     
Mark White CEO (1) Year ended 12/31/18 480,000 0 0 0 0 0 0 480,000  2019  480,000        0        0        0        0        0        0   480,000 
 Year ended 12/31/17  160,000  0 1,504,000  0  0  0  0  1,664,000  2018  480,000   0   0   0   0   0   0   480,000 
Martin Ward, CFO(2) Year ended 12/31/18 240,000 0 0 0 0 0 0 240,000 
Martin Ward, CFO (2) 2019  240,000   0   0   0   0   0   0   240,000 
 Year ended 12/31/17 240,000 0 0 0 0 0 0 240,000  2018  240,000   0   0   0   0   0   0   240,000 

  

For the two years ended December 31, 2019 and 2018, Mr. White’s and Mr. Ward’s salaries were either paid or accrued in U.S. Dollars. 

 (1)For the year ended December 31, 2018, Mr. White was paid in US Dollars. For the year ended December 31, 2017, Mr. White’s remuneration was accrued in US Dollars, that remuneration remains unpaid. Mr. White was awarded a stock award of 1.6 million shares with a value of approximately $1.5 million for the signing of the 5 year employment contract. The value was based on the closing stock price at the date of execution of the contract.

(2)For the years ended December 31, 2017 and 2018, Mr. Ward was paid predominately in US Dollars.

 

We have entered into an Amended and Restated Employment Agreementemployment agreement with Mark White which continues for an initial term through July 31, 2022, and which automatically renews for one yearone-year terms thereafter, subject to the rights of both parties to terminate the Agreement.agreement. Mr. White’s Employment Agreementemployment agreement provided for a signing grant of 1,600,000 shares of the Company’s common stock, an annual salary of $480,000 per annum, an annual bonus to be determined by the Board and an acquisition bonus whereby Mr. White will receive additional shares each time the Company completes an acquisition of a new business. Mr. White’s Agreementagreement contains customary non-disclosure and non-compete provisions which are operative during the term of his agreement and for one year thereafter. Mr. White’s agreement provides for severance of one year’s salary if his agreement is terminated by the Company without cause or in the event of a change in control of the Company. In addition, we have agreed that upon termination of Mr. White’s Employment Agreementemployment agreement, upon request we would register our shares of common stock then held by him for sale under the Securities Act of 1933, as amended.Act.

 

We have entered into an Employment Agreementemployment agreement with Martin Ward which continues for an initial term through July 31, 2022, and which automatically renews for one yearone-year terms thereafter, subject to the rights of both parties to terminate the Agreement.agreement. Mr. Ward’s Employment Agreementemployment agreement provides for an annual salary of $240,000 per annum and an annual bonus to be determined in accordance with a program to be developed by the Board of Directors. Mr. Ward’s Agreementagreement contains customary non-disclosure and non-compete provisions which are operative during the term of his agreement and for one year thereafter. Mr. Ward’s agreement provides for severance of one year’s salary if his agreement is terminated by the Company without cause or in the event of a change in control of the Company. In addition, we have agreed that upon termination of Mr. Ward’s Employment Agreementemployment agreement, upon request we would register our shares of common stock then held by him for sale under the Securities ActAct.


Elements of 1933, as amended.Compensation

 

Mark White and Martin Ward were provided with the following primary elements of compensation in 2019 and 2018:

Base Salary

Mark White and Martin Ward received a fixed base salary in an amount determined by the Compensation Committee based on a number of factors, including:

The nature, responsibilities and duties of the officer’s position;

The officer’s expertise, demonstrated leadership ability and prior performance;

The officer’s salary history and total compensation, including annual cash bonuses and long-term incentive compensation; and

The competitiveness of the market for the officer’s services.

Mark White’s and Martin Ward’s base salary for 2019 and 2018 is listed in “—2019 Summary Compensation Table.”

Equity Awards – Years Ended 2019 and 2018

We did not grant any equity awards to Mark White and Martin Ward during 2019 and 2018.

Outstanding Equity Awards at 2019 Year-End

As of December 31, 2019, there were no unexercised options, stock that has not vested or equity incentive plan awards held by any of the Company’s named executive officers.

Other Benefits

We did not pay any other benefits or perquisites to Mark White and Martin Ward during years ended 2019 and 2018.

Pension Benefit

 

None during the periods covered in this Report.years ended 2019 and 2018.

 

Nonqualified Deferred Compensation

 

None during the periods covered in this Report.years ended 2019 and 2018.

 

Retirement/Resignation Plans

 

None during the periods covered in this Report.years ended 2019 and 2018.

 

Outstanding Equity Awards at 2018 Year-EndIncentive Plan

 

None.Introduction

On February 1, 2018, our Board of Directors adopted the 2018 Plan, which authorizes the issuance of shares of common stock for grants of stock options, stock appreciation rights, restricted stock, stock units, bonus stock, dividend equivalents, other stock related awards and performance awards that may be settled in cash, stock, or other property. The 2018 Plan initially authorized the issuance of up to 5,000,000 shares.

On November 2, 2018 and December 27, 2018, our Board of Directors and our shareholders, respectively, amended the 2018 Plan to increase the number of shares authorized to be issued to up to 15,000,000 shares; provided that as of February 1 of each fiscal year commencing February 1, 2020 and ending on February 1, 2027, the number of shares available for all awards under the Plan shall automatically be increased by an amount equal to the lesser of (i) 5,000,000 shares of common stock or the equivalent of such number of shares after the plan administrator, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization or similar transaction in accordance with the terms of the 2018 Plan; (ii) 5% of the number of outstanding shares of common stock on such date; and (iii) an amount determined by the Board. Any reverse stock split, if approved and effected, will not reduce the number of shares available under the 2018 Plan.


We adopted the 2018 Plan to provide a means by which employees, directors, and consultants of our Company and those of our subsidiaries and other designated affiliates, which we refer to together as our affiliates, may be given an opportunity to purchase our common stock, to assist in retaining the services of such persons, to secure and retain the services of persons capable of filling such positions, and to provide incentives for such persons to exert maximum efforts for our success and the success of our affiliates. The material features of the 2018 Plan are outlined below. This summary is qualified in its entirety by reference to the complete text of the 2018 Plan. Stockholders are urged to read the actual text of the 2018 Plan in its entirety, which has been filed with the SEC.

Summary of the 2018 Plan

Shares Available for Awards 

The total number of shares of our common stock that may be subject to awards under the 2018 Plan is 15,000,000 shares; provided that as of February 1 of each fiscal year commencing February 1, 2020 and ending on February 1, 2027, the number of shares available for all awards under the 2018 Plan shall automatically be increased by an amount equal to the lesser of (i) 5,000,000 shares of common stock or the equivalent of such number of shares after the plan administrator, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization or similar transaction in accordance with the terms of the 2018 Plan; (ii) 5% of the number of outstanding shares of common stock on such date; and (iii) an amount determined by the Board. Under the 2018 Plan, the terms and number of options or other awards to be granted in the future are to be determined in the discretion of the plan administrator. No determination has been made regarding awards or grants under the 2018 Plan, or as to the benefits or amounts that will be received by or allocated to our non-employee directors, executive officers and other eligible employees under the 2018 Plan. Our only other equity incentive plan is the 2013 Equity Incentive Plan (the “2013 Plan”). As of December 31, 2019, under the 2013 Plan, 20,000 shares remain available for grant. However, the Company does not intend to grant any additional awards under the 2013 Plan.      

Limitations on Awards

The plan administrator may, in its discretion, proportionately adjust the number of shares covered by each outstanding Award, and the number of shares which have been authorized for issuance under the 2018 Plan but as to which no Awards have yet been granted or which have been returned to the 2018 Plan, the exercise or purchase price of each such outstanding Award, as well as any other terms that the plan administrator determines require adjustment for (1) any increase or decrease in the number of issued shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the shares, (2) any other increase or decrease in the number of issued shares effected without receipt of consideration by the Company, or (3) as the 2018 Plan administrator may determine in its discretion, any other transaction with respect to common stock to which Section 424(a) of the Internal Revenue Code of 1986, as amended (the “Code”), applies. Such adjustment shall be made by the plan administrator and its determination shall be final, binding and conclusive.

Eligibility

The persons eligible to receive awards under the 2018 Plan consist of officers, directors, employees, and consultants of our company and those of our affiliates. An employee on leave of absence may be considered as still in our employ or in the employ of an affiliate for purposes of eligibility under the 2018 Plan.

Administration

The 2018 Plan is administered by our Compensation Committee or other committee appointed by our Board of Directors, or in the absence of any such committee, the Board of Directors (together, our Board of Directors and any committee(s) delegated to administer the 2018 Plan, including the Compensation Committee, are referred to as the “plan administrator”).  The Compensation Committee, or such other committee appointed from time to time by the Board of Directors to administer the 2018 Plan, is intended to consist of three or more Non-Employee Directors, each of whom will be, to the extent required by Rule 16b-3 under the Exchange Act and the rules of the Financial Industry Regulatory Authority, a non-employee director as defined in Rule 16b-3, an “outside director” as defined under Section 162(m) of the Code and an “independent” director within the meaning of NYSE American Rule 303A.02. If for any reason the plan administrator does not meet the requirements of Rule 16b-3 of the Exchange Act or Section 162(m) of the Code, the validity of the awards, grants, interpretation or other actions of the plan administrator will not be affected. The plan administrator has the full authority to select those individuals eligible to receive awards and the amount and type of awards. Subject to the terms of the 2018 Plan, the plan administrator is authorized to select eligible persons to receive awards, determine the type and number of awards to be granted and the number of shares of our common stock to which awards will relate, specify times at which awards will be exercisable or may be settled (including performance conditions that may be required as a condition thereof), set other terms and conditions of awards, prescribe forms of award agreements, interpret and specify rules and regulations relating to the 2018 Plan, and make all other determinations that may be necessary or advisable for the administration of the 2018 Plan. The plan administrator may amend the terms of outstanding awards, in its discretion; provided that any amendment that adversely affects the rights of the award recipient must receive the approval of such recipient.


Stock Options and Stock Appreciation Rights

The plan administrator is authorized to grant stock options, including both incentive stock options, which we refer to as ISOs, and non-qualified stock options. In addition, the plan administrator is authorized to grant stock appreciation rights, which entitle the participant to receive the appreciation in our common stock between the grant date and the exercise date of the stock appreciation right. The plan administrator determines the exercise or purchase price per share subject to an option and the grant price of a stock appreciation right. However, the per share exercise price of an ISO and a non-qualified stock option must not be less than 100% of the fair market value of a share of our common stock on the grant date; provided, however, that in the case of an ISO granted to an employee who owns more than 10% of the voting power of all classes of stock of the Company or affiliates, the exercise or purchase price must not be less than 110% of the fair market value of a share of our common stock on the grant date. The plan administrator generally will fix the maximum term of each option or stock appreciation right, the times at which each stock option or stock appreciation right will be exercisable, and provisions requiring forfeiture of unexercised stock options or stock appreciation rights at or following termination of employment or service, except that no ISO may have a term exceeding ten years. Stock options may be exercised by payment of the exercise price in any form of legal consideration specified by the plan administrator, including cash, shares and outstanding awards or other property having a fair market value equal to the exercise price. The plan administrator determines methods of exercise and settlement and other terms of the stock appreciation rights.

Restricted Stock 

The plan administrator is authorized to grant restricted stock. Restricted stock is a grant of shares of our common stock, subject to restrictions on transfers, rights of first refusal, repurchase provisions, forfeiture provisions and other terms and conditions as may be established by the plan administrator. A grantee granted restricted stock generally has all of the rights of one of our shareholders, unless otherwise determined by the plan administrator.

Stock Based Awards 

The plan administrator is authorized to grant awards under the 2018 Plan that are denominated or payable in, valued by reference to, or otherwise based on or related to shares of our common stock. Such awards might include convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of our common stock, purchase rights for shares of our common stock, awards with value and payment contingent upon our performance or any other factors designated by the plan administrator, and awards valued by reference to the book value of shares of our common stock or the value of securities of or the performance of specified subsidiaries or business units. The plan administrator determines the terms and conditions of such awards.

Performance Awards 

The plan administrator is authorized to grant awards which may be earned in whole or in part upon attainment of performance criteria and which may be settled for cash, shares of our common stock, other securities or a combination of cash, shares of our common stock or other securities. The right of a grantee to exercise or receive a grant or settlement of an award, and the timing thereof, may be subject to satisfaction of performance criteria, which may be based on any one, or combination of, the following factors: increase in share price, earnings per share, total shareholder return, return on equity, return on assets, return on investment, net operating income, cash flow, revenue, economic value added, or personal management objectives. Partial achievement of the specified criteria may result in a partial payment or vesting as specified in the award agreement.

Other Terms of Awards 

The plan administrator shall have the authority to determine the provisions, terms, and conditions of each award including, but not limited to, the award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, shares of our common stock, or other consideration) upon settlement of the award, payment contingencies, and satisfaction of any performance criteria. The plan administrator may establish one or more programs under the 2018 Plan to permit selected grantees the opportunity to elect to defer receipt of consideration upon exercise of an award, satisfaction of performance criteria, or other event that absent the election would entitle the grantee to payment or receipt of shares of our common stock or other consideration under an award. The plan administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, shares of our common stock or other consideration so deferred, and such other terms, conditions, rules and procedures that the plan administrator deems advisable for the administration of any such deferral program.

The plan administrator may establish one or more programs under the 2018 Plan to permit selected grantees to exchange an award under the Plan for one or more other types of awards under the 2018 Plan on such terms and conditions as determined by the plan administrator from time to time. The plan administrator may establish one or more separate programs under the 2018 Plan for the purpose of issuing particular forms of awards to one or more classes of grantees on such terms and conditions as determined by the plan administrator from time to time.


Awards granted under the 2018 Plan generally may not be pledged or otherwise encumbered and are not transferable except by will or by the laws of descent and distribution, or to a designated beneficiary upon the participant’s death, except that the plan administrator may, in its discretion, permit transfers of nonqualified stock options for estate planning or other purposes subject to any applicable legal restrictions. The plan administrator may also provide that, in the event that a grantee terminates employment with the Company to assume a position with a governmental, charitable, educational or similar non-profit institution, a third party, including but not limited to a “blind” trust, may be authorized by the plan administrator to act on behalf of and for the benefit of the respective grantee with respect to any outstanding awards.

Acceleration of Vesting; Change in Control

The plan administrator shall have the authority, exercisable either in advance of any actual or anticipated corporate transaction (as defined in the 2018 Plan) or at the time of an actual corporate transaction and exercisable at the time of the grant of an award under the 2018 Plan or any time while an Award remains outstanding, to provide for the full automatic vesting and exercisability of one or more outstanding unvested awards under the 2018 Plan and the release from restrictions on transfer and repurchase or forfeiture rights of such Awards in connection with a corporate transaction, on such terms and conditions as the plan administrator may specify. The plan administrator also shall have the authority to condition any such award vesting and exercisability or release from such limitations upon the subsequent termination of the continuous service of the grantee within a specified period following the effective date of the corporate transaction. Effective upon the consummation of a corporate transaction, all outstanding awards under the 2018 Plan shall remain fully exercisable until the expiration or sooner termination of the award.

Amendment and Termination

Our Board of Directors may amend, alter, suspend, discontinue, or terminate the 2018 Plan, except stockholder approval shall be obtained for any amendment or alteration if such approval is required by law or regulation or under the rules of any stock exchange or quotation system on which shares of our common stock are then listed or quoted. No award may be granted during any suspension of the 2018 Plan or after termination of the 2018 Plan. Any amendment, suspension or termination of the 2018 Plan shall not affect Awards already granted, and such awards shall remain in full force and effect as if the 2018 Plan had not been amended, suspended or terminated, unless mutually agreed otherwise between the grantee and the plan administrator, which agreement must be in writing and signed by the grantee and the Company. 

Unless earlier terminated by our Board of Directors, the 2018 Plan will terminate ten years after its adoption by our Board of Directors. 

Federal Income Tax Consequences of Awards 

The information set forth herein is a summary only and does not purport to be complete. In addition, the information is based upon current federal income tax rules and therefore is subject to change when those rules change. Moreover, because the tax consequences to any recipient may depend on his or her particular situation, each recipient should consult the recipient’s tax adviser regarding the federal, state, local, and other tax consequences of the grant or exercise of an award or the disposition of stock acquired as a result of an award. The 2018 Plan is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974.

Nonqualified Stock Options

Generally, there is no taxation upon the grant of a nonqualified stock option where the option is granted with an exercise price equal to the fair market value of the underlying stock on the grant date. On exercise, an optionee will recognize ordinary income equal to the excess, if any, of the fair market value on the date of exercise of the stock over the exercise price. If the optionee is our employee or an employee of an affiliate, that income will be subject to withholding tax. The optionee’s tax basis in those shares will be equal to their fair market value on the date of exercise of the option, and the optionee’s capital gain holding period for those shares will begin on that date.

Incentive Stock Options

The 2018 Plan provides for the grant of stock options that qualify as “incentive stock options,” which we refer to as ISOs, as defined in Section 422 of the Code. Under the Code, an optionee generally is not subject to ordinary income tax upon the grant or exercise of an ISO. In addition, if the optionee holds a share received on exercise of an ISO for at least two years from the date the option was granted and at least one year from the date the option was exercised, which we refer to as the Required Holding Period, the difference, if any, between the amount realized on a sale or other taxable disposition of that share and the holder’s tax basis in that share will be long-term capital gain or loss.


If, however, an optionee disposes of a share acquired on exercise of an ISO before the end of the Required Holding Period, which we refer to as a Disqualifying Disposition, the optionee generally will recognize ordinary income in the year of the Disqualifying Disposition equal to the excess, if any, of the fair market value of the share on the date the ISO was exercised over the exercise price. However, if the sales proceeds are less than the fair market value of the share on the date of exercise of the option, the amount of ordinary income recognized by the optionee will not exceed the gain, if any, realized on the sale. If the amount realized on a Disqualifying Disposition exceeds the fair market value of the share on the date of exercise of the option, that excess will be short-term or long-term capital gain, depending on whether the holding period for the share exceeds one year.

For purposes of the alternative minimum tax, the amount by which the fair market value of a share of stock acquired on exercise of an ISO exceeds the exercise price of that option generally will be an adjustment included in the optionee’s alternative minimum taxable income for the year in which the option is exercised. If, however, there is a Disqualifying Disposition of the share in the year in which the option is exercised, there will be no adjustment for alternative minimum tax purposes with respect to that share. If there is a Disqualifying Disposition in a later year, no income with respect to the Disqualifying Disposition is included in the optionee’s alternative minimum taxable income for that year. In computing alternative minimum taxable income, the tax basis of a share acquired on exercise of an ISO is increased by the amount of the adjustment taken into account with respect to that share for alternative minimum tax purposes in the year the option is exercised. 

We are not allowed an income tax deduction with respect to the grant or exercise of an incentive stock option or the disposition of a share acquired on exercise of an incentive stock option after the Required Holding Period. However, if there is a Disqualifying Disposition of a share, we are allowed a deduction in an amount equal to the ordinary income includible in income by the optionee, provided that amount constitutes an ordinary and necessary business expense for us and is reasonable in amount, and either the employee includes that amount in income or we timely satisfy our reporting requirements with respect to that amount. 

Stock Awards

Generally, the recipient of a stock award will recognize ordinary compensation income at the time the stock is received equal to the excess, if any, of the fair market value of the stock received over any amount paid by the recipient in exchange for the stock. If, however, the stock is not vested when it is received (for example, if the employee is required to work for a period of time in order to have the right to sell the stock), the recipient generally will not recognize income until the stock becomes vested, at which time the recipient will recognize ordinary compensation income equal to the excess, if any, of the  fair market value of the stock on the date it becomes vested over any amount paid by the recipient in exchange for the stock. A recipient may, however, file an election with the Internal Revenue Service, within 30 days of his or her receipt of the stock award, to recognize ordinary compensation income, as of the date the recipient receives the award, equal to the excess, if any, of the fair market value of the stock on the date the award is granted over any amount paid by the recipient in exchange for the stock.

The recipient’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired from stock awards will be the amount paid for such shares plus any ordinary income recognized either when the stock is received or when the stock becomes vested. 

Stock Appreciation Rights 

We may grant stock appreciation rights separate from any other award, which we refer to as stand-alone stock appreciation rights, or in tandem with options.

With respect to stand-alone stock appreciation rights, where the rights are granted with a strike price equal to the fair market value of the underlying stock on the grant date and the recipient receives the appreciation inherent in the stock appreciation rights in shares of stock, the recipient will recognize ordinary compensation income equal to the excess of the fair market value of the stock on the day it is received over any amounts paid by the recipient for the stock.

With respect to stand-alone stock appreciation rights, if the recipient receives the appreciation inherent in the stock appreciation rights in cash or the strike price of the rights is less than the fair market value of the underlying stock on the grant date (whether the appreciation is paid in cash or stock), the cash or stock will be taxable as ordinary compensation income to the recipient at the time that the payment is received, so long as the payment may only be received upon one of the following events: a fixed calendar date, separation from service, death, disability or a change of control. If delivery occurs on another date, the taxable event will be on the date the stock appreciation right is vested and there will be an additional twenty percent excise tax and interest on any taxes owed.

At this time, due to the complex and unfavorable tax consequences, we do not plan on granting any tandem stock appreciation rights.


Dividend Equivalent Rights 

Generally, the recipient of an award consisting of dividend equivalent rights will recognize ordinary compensation income each time a dividend is paid pursuant to the dividend equivalent rights award equal to the fair market value of the dividend received. If the dividends are deferred, additional requirements must be met to ensure that the dividend is taxable upon actual delivery of the shares, instead of the grant of the dividend.

Equity Compensation Plan Information

The table below sets forth information as of December 31, 2019.

Plan CategoryNumber of securities to be issued upon exercise of outstanding options, warrants and rightsWeighted-average exercise price of outstanding options, warrants and rightsNumber of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(a)(b)(c)
Equity compensation plans approved by security holders (1)-$15,020,000
Equity compensation plans not approved by security holders---
Total-$15,020,000

(1)Represents 15,000,000 shares available for issuance under the 2018 Plan, plus 20,000 shares available for issuance under the 2013 Plan. The Company does not intend to grant any additional awards under the 2013 Plan, however.

The Company has two equity incentive plans, each of which has been approved by the Company’s stockholders: the 2013 Plan and the 2018 Plan. However, the Company does not intend to grant any additional awards under the 2013 Plan.

As of December 31, 2019, under the 2013 Plan, 20,000 shares remain available for grant. However, the Company does not intend to grant any additional awards under the 2013 Plan.

As of December 31, 2019, under the 2018 Plan, no equity grants have been made, and 15,000,000 shares of our common stock remain available for issuance. Pursuant to the terms of the 2018 Plan, the total number of shares of our common stock that may be subject to awards under the 2018 Plan is 15,000,000 shares; provided that as of February 1 of each fiscal year commencing February 1, 2020 and ending on February 1, 2027, the number of shares available for all awards under the 2018 Plan shall automatically be increased by an amount equal to the lesser of (i) 5,000,000 shares of common stock or the equivalent of such number of shares after the plan administrator, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization or similar transaction in accordance with the terms of the 2018 Plan; (ii) 5% of the number of outstanding shares of common stock on such date; and (iii) an amount determined by the Board. Accordingly, as of April 23, 2020, an aggregate of 15,000,000 shares of common stock are authorized for issuance under the 2018 Plan.

Executive Compensation Philosophy

Our Compensation Committee determines the compensation given to our executive officers in their sole determination. Our Compensation Committee reserves the right to pay our executives or any future executives a salary, and/or issue them shares of common stock issued in consideration for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also include long-term stock-based compensation to certain executives, which is intended to align the performance of our executives with our long-term business strategies. Additionally, while our Compensation Committee has not granted any performance-based stock options to date, the Compensation Committee reserves the right to grant such options in the future, if the Board in its sole determination believes such grants would be in the best interests of the Company.


Incentive Bonus

The Compensation Committee may grant incentive bonuses to our executive officers and/or future executive officers in its sole discretion, if the Compensation Committee believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives.

Long-Term, Stock-Based Compensation

In order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy, we may award our executives and any future executives with long-term, stock-based compensation in the future, at the sole discretion of our Compensation Committee.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information regarding beneficial ownership of our Common Stockcommon stock as of April 10, 201924, 2020 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent (5%)5% of the outstanding shares of our Common Stock,common stock, (ii) each director, executive officer and director nominee, and (iii) all of our directors, executive officers and director nominees as a group. As of April 10, 2019,24, 2020, we had 88,401,43125,688,386 shares of Common Stockcommon stock issued and outstanding.


Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of April 10, 2019.24, 2020. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named below, any shares that such person or persons has the right to acquire within 60 days of April 10, 201924, 2020  is deemed to be outstanding for such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

 

Name  Amount And
Nature of
Beneficial
Ownership(1)
 Percent  Amount And
Nature of
Beneficial
Ownership (1)
  Percent 
          
Owners of More than 5% of Outstanding Shares:          
          
Zhanmang Wu  15,354,409 17.4%
     
BK Consulting Group, LLC 4,750,000 5.4%
Zhanming Wu  614,177   2.4%
             
Directors and Named Executive Officers:             
             
Mark White 4,140,603 4.7%  165,624   * 
             
Martin Ward 1,369,738 1.5%  54,790   * 
             
Richard Vos 3,402 * 
Nalin Jay        
             
Nicholas Carpinello 1,781 *   71   * 
             
Robert Law 1,781 *   71   * 
 *         
All Executive Officers and Directors as a Group (5 persons): 5,517,305 6.2%  220,556   * 

 

*Less than 1%.
(1)Based on 25,688,386 shares of common stock outstanding on April 24, 2020. Except as otherwise indicated, each of the stockholders listed above has sole voting and investment power over the shares beneficially owned.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Our Policy Concerning Transactions with Related Persons

 

Under Item 404 of SEC Regulation S-K, a related person transaction is any actual or proposed transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, including those involving indebtedness not in the ordinary course of business, to which we or our subsidiaries were or are a party, or in which we or our subsidiaries were or are a participant, in which the amount involved exceeded or exceeds the lesser of $120,000 or one percent1% of the average of our total assets at year-end for the last two completed fiscal years and in which any of our directors, nominees for director, executive officers, beneficial owners of more than 5% of any class of our voting securities (a “significant shareholder”), or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.

 

We recognize that transactions between us and any of our Directors or Executives or with a third party in which one of our officers, directors or significant shareholders has an interest can present potential or actual conflicts of interest and create the appearance that our decisions are based on considerations other than the best interests of our Company and stockholders.

 

The Audit Committee of the Board of Directors is charged with responsibility for reviewing, approving and overseeing any transaction between the Company and any related person (as defined in Item 404 of Regulation S-K), including the propriety and ethical implications of any such transactions, as reported or disclosed to the Committee by the independent auditors, employees, officers, members of the Board of Directors or otherwise, and to determine whether the terms of the transaction are not less favorable to us than could be obtained from an unaffiliated party.

 

The following includes a summary of transactions since January 1, 2018, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest.

Amounts due to related parties include the following: (in thousands)

 

 December 31,  December 31, 
 2018  2019 
Loans due to stockholders and related parties      
Due within one year $1,205  $1,010 
Long-term  0   0 
 $1,205  $1,010 

As of December 31, 2019, amounts totaling $205,000 (December 31, 2018 – $205,000) were owed to certain members of the management of Browning. The amounts are unsecured, interest free and have no specified repayment dates. The loans were transferred out of the group following the sale of Browning in February 2020.

The promissory notes due to Zhanming Wu ($500,000) and the Company’s CEO, Mark White ($500,000), both considered related parties, including accrued interest of 7% per annum from issuance, were due for repayment on August 31, 2019 and the Company is currently in negotiations with the counterparties to extend the maturity dates of the promissory notes, but there can be no guarantee that commercially reasonable terms will agreed upon.

The $500,000 loan payable with a remaining principal balance of $10,000 at December 31, 2019 is due to Century River Limited, a company controlled by the Company’s CEO, Mark White. This loan is due on demand and bears interest of 3% per annum. 

Indemnification

We have entered into indemnification agreements with each of our directors and entered into such agreements with certain of our executive officers. These agreements require us, among other things, to indemnify these individuals for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts reasonably incurred by such person in any action or proceeding, including any action by or in our right, on account of any services undertaken by such person on behalf of our company or that person’s status as a member of our Board of Directors to the maximum extent allowed under Delaware law.

 

The foregoing transactions were reviewed and approved by the Audit Committee or our Board of Directors. We believe that the terms of each transaction were not less favorable to us than those terms that could be obtained from an unaffiliated third party.


Director Independence 

 

Our Board of Directors has determined that Nicholas Carpinello, Robert Law and Richard VosNalin Jay are “independent directors” within the meaning of NASDAQ Marketplace Rule 5605(a)(2).As of March 8, 2019, our common stock is quoted on the OTCQB tier of the OTC Markets and ceased trading on Nasdaq.Markets.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

 

The Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services.

 

Principal Accountant Fees and Services

 

As required by our Audit Committee charter, our Audit Committee pre-approved the engagement of Cherry Bekaert LLP (“Cherry”) for all audit and permissible non-audit services. The Audit Committee annually reviews the audit and permissible non-audit services performed by our principal accounting firm and reviews and approves the fees charged by our principal accounting firm. The Audit Committee has considered the role of Cherry Bekaert LLP in providing tax and audit services and other permissible non-audit services to us and has concluded that the provision of such services, if any, was compatible with the maintenance of such firm’s independence in the conduct of its auditing functions.  

 

Aggregate fees for professional services rendered to the Company by Cherry Bekaert LLP (“Cherry”) for the years ended December 31, 20182019 and 20172018 were as follows:

 

Services Provided 2018 2017  2019  2018 
Audit Fees $101,684 $88,700  $119,000  $101,684 
Audit Related Fees 16,100 0   4,500   16,100 
Tax Fees 20,000 0   -   20,000 
All Other Fees 0 0   -   - 
Total $137,784 $ 88,700  $123,500  $137,784 

 

Audit Fees

 

Audit fees billed by Cherry, the Company’s current independent registered public accounting firm, were for the audit of our annual consolidated financial statements, including any fees related to other filings with the SEC.


Audit-Related Fees

Audit-related fees related to work performed with regard to registration statements on Form S-1. 

Tax Fees

 

There were $16,100 of audit related fees incurred in 2018 in relation to work on Form S-3 registration statements issued. 

Tax Fees

There were $20,000 ofno tax fees billed or accrued during the Reported Periods.2019 or 2018. 

 

All Other Fees

 

There were no other fees billed or accrued during the Reported Periods.2019 or 2018.


PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a)(1) Financial Statements

 

The consolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the Index to Financial Statements on page F-1 and included beginning on page F-2.

 

(2) Financial Statement Schedules

 

All schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein.

 

(3) Exhibits.

   

Exhibit
Number
 Title of Document Location
     
2.1 Agreement and Plan of Merger effective as of August 26, 2013 

Incorporated by reference from Definitive Information Statement on Form 14C Appendix C

filed May 26, 2013

     
2.2 Stock Purchase Agreement with Brian Collins dated August 11, 2017 Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 filed August 14, 2017
     
3.1 Amendment to Articles of Incorporation as filed December 27, 2012, with the Pennsylvania Department of State Corporate Bureau Incorporated by reference from the Current Report on Form 10-K filed May 13, 2013
     
3.2 Amendment to Articles of Incorporation as filed, with the Pennsylvania Department of State Corporate Bureau 

Incorporated by reference from Definitive Information Statement on Form 14C Appendix B

filed May 26, 2013

     
3.3 Amended and restated articles of incorporation of BICO, Inc as filed, with the Pennsylvania Department of State Corporate Bureau 

Incorporated by reference from Definitive Information Statement on Form 14C Appendix F

filed May 26, 2013

     
3.4 Bylaws of BICO, Inc. as filed, with the Pennsylvania Department of State Corporate Bureau Incorporated by reference from Definitive Information Statement on Form 14C Appendix G filed May 26, 2013
     
3.5 Certificate of incorporation, of  One Horizon Group, Inc., as filed with Delaware Secretary of State Incorporated by reference from Definitive Information Statement on Form 14C Appendix D filed May 26, 2013
     
3.6 Certificate of Amendment to Certificate of Incorporation effecting a 1-for-6 reverse stock split Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed May 1, 2017.
     
3.7 Certificate of Designation for Series A-1 Convertible Preferred Stock Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed July 14, 2017.
     
3.8 Bylaws of One Horizon Group, Inc., as filed, with Delaware Secretary of State Incorporated by reference from Definitive Information Statement on Form 14C Appendix E filed May 26, 2013


Exhibit
Number
 Title of Document Location
4.1 Common Stock Purchase Warrant dated May 1, 2013 Incorporated by reference to Exhibit 4.1 of Quarterly Report on Form 10-Q/A filed May 30, 2013
     
4.2 Form of Class A Warrant Incorporated by reference from Current Report on Form 8-K filed July 25, 2014.
     
4.3 Form of Class B Warrant Incorporated by reference from Current Report on Form 8-K filed July 25, 2014
     
4.54.4 Form of Convertible Debenture Incorporated by reference from Current Report on Form 8-K filed December 29, 2014
     
4.64.5 Form of Amended and Restated Class C Warrant Incorporated by reference from Current Report on Form 8-K filed January 23, 2015
     
4.74.6 Form of Amended and Restated Class D Warrant Incorporated by reference from Current Report on Form 8-K filed January 23, 2015
     
4.84.7 Form of Amended and Restated Performance Warrant Incorporated by reference from Current Report on Form 8-K filed January 23, 2015
     
4.94.8 Form of Amended and Restated Placement Agent Warrant Incorporated by reference from Current Report on Form 8-K filed January 23, 2015
     
4.104.9 Form of Warrant Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed July 18, 2017
     
4.114.10 Form of Warrant issued to Bespoke Growth Partners, Inc. Incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-3 (File No. 333-221300) filed October 17, 2017
     
4.124.11 Form of warrants issued to First Choice International Company, Inc. Incorporated by reference to the exhibits to Exhibit 10.1 to Current Report on Form 8-K Filed December 19, 2017
     
4.13

Warrant issued to BK Consulting Group, LLC, as amended

Incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-3 filed on September 10, 2018 and declared effective on September 14, 2018

4.14

Form of Warrant issued to First Choice International Company, IncIncorporated by reference to Exhibit A to Exhibit 10.1 to Current Report on Form 8-K filed on October 9, 2018

Exhibit
Number
Title of DocumentLocation
10.1 Loan Agreement dated January 22, 2013 between the Company and Mark White Incorporated by reference to the Quarterly Report on Form 10-Q/A filed on May 30, 2013
     
10.2Loan Agreement dated January 22, 2013 between the Company and Brian CollinsIncorporated by reference to the Quarterly Report on Form 10-Q/A filed on May 30, 2013
10.3Subscription Agreement, as amended, dated as of February 18, 2013, between the Company and Patrick SchildknechtIncorporated by reference to the Quarterly Report on Form 10-Q/A filed on May 30, 2013
10.4Warrant Agreement, dated as of February 18, 2013, between the Company and Patrick SchildknechtIncorporated by reference from the Current Report  on Form 10-8K filed September 5, 2013
10.5Advisory Agreement dated as of April 15, 2013 between the Company and TriPoint Global Equities, LLCIncorporated by reference to the Quarterly Report on Form 10-Q/A filed on May 30, 2013
10.6Amended and Restated Subscription Agreement, dated as of August 30, 2013, between the Company and Patrick SchildknechtIncorporated by reference from the Current Report on Form 8-K filed September 5, 2013
10.7Amended and Restated Warrant Agreement, dated as of August 30, 2013, between the Company and Patrick SchildknechtIncorporated by reference from the Current Report on Form 8-K filed September 5, 2013 
10.8 Form of Independent Director Agreement between the Company and Richard Vos/Nicholas Carpinello/Robert Law Incorporated by reference from the Current Report on Form 8-K filed August 22, 2013
     
10.910.3 From of Indemnification Agreement between the Company and Richard Vos/Nicholas Carpinello/Robert Law Incorporated by reference from the Current Report on Form 8-K filed August 22, 2013
     
10.1010.4 Agreement, dated November 29, 2013, between One Horizon Group, Inc. and Newport Coast Securities, Inc. Incorporated by reference from the Current Report on Form 8-K filed December 3, 2013
     
10.1110.5 Director Agreement between the Company and Robert Vogler dated January 8, 2014 Incorporated by reference from the Current Report on Form 8-K filed January 13, 2014
     
10.1210.6 Securities Purchase Agreement dated July 21, 2014 Incorporated by reference from the Current Report on Form 8-K filed on July 25, 2014


Exhibit
Number
 Title of Document Location
10.13
10.7 

Form of Securities Purchase Agreement dated July 14, 2017

 

 Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed July 18, 2017
     
10.14Form of Stock Purchase Agreement dated August 10, 2017 with Brian Collins, former CEOIncorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed August 14, 2017  
10.1510.8 Amendment to Certain Transaction Documents dated August 15, 2014 Incorporated by reference from the Current Report on Form 8-K filed on August 8, 2014
     
10.1610.9 Securities Purchase Agreement dated December 22, 2014 Incorporated by reference from the Current Report on Form 8-K filed on December 29, 2014
     
10.1710.10 Agreement with Zhanming Wu for conversion of Convertible Debenture Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed September 8, 2017
     
10.1810.11 Registration Rights Agreement dated December 22, 2014 Incorporated by reference from the Current Report on Form 8-K filed on December 29, 2014
     
10.1910.12 Agreement with Mark White dated August 4, 2017 for Exchange of Series A-1 Preferred Stock Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed September 8, 2017
     
10.2010.13 Consulting Agreement dated October 17, 2017 with Bespoke Growth Partners, Inc. Incorporated by reference to Exhibit 10.1 to Registration Statement on Form S-3(File No. 333-221300) filed October 17, 2017
     
10.2110.14 Agreement dated December 6, 2017 with Maxim Group LLC Incorporated by reference to Exhibit 10.21 to Annual Report on Form 10-K filed April 2, 2018
     
10.2210.15 Agreement dated December 13, 2017 with First Choice International Company, Inc. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed December 19, 2017
     
10.23Indemnification Agreement between the Company and Brian CollinsIncorporated by reference from the Annual Report on Form 10-K filed on April 1, 2015
10.2410.16 Indemnification Agreement between the Company and Martin Ward dated Incorporated by reference from the Annual Report on Form 10-K filed on April 1, 2015
     
10.2510.17 Form of Securities Purchase Agreement dated July 14, 2017. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed July 18, 2017.
     
10.2610.18 Exchange Agreement dated January 18, 2018 with Once In A Lifetime, LLC Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed January 24, 2018
     
1 0.2710.19 Exchange Agreement dated February 26, 2018 with C-Rod, Inc. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed February 28, 2018
     
10.28†10.20† Employment Agreement with Mark White Incorporated by reference to Exhibit 10.28 to Annual Report on Form 10-K filed April 2, 2018
     
10.29†10.21† Employment Agreement with Martin Ward Incorporated by reference to Exhibit 10.29 to Annual Report on Form 10-K filed April 2, 2018
     
10.30†10.22† 2018 Equity Incentive Plan Incorporated by reference to Exhibit 10.30 to Annual Report on Form 10-K filed April 2, 2018
10.23Subscription Agreement with BK Consulting Group, LLCIncorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-3 (Registration No. 333-225945) filed on June 28, 2018 and declared effective on August 7, 2018
10.24Verified Complaint in the Wu LitigationIncorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 7, 2018

 


Exhibit
Number
Title of DocumentLocation
10.2510.31Escrow Agreement between the Company and the stockholders of Banana Whale Studios Pte. Ltd.Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 10, 2018
10.26Subscription Agreement with First Choice International Company, Inc.Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-3 (Registration No. 333-227247) filed on September 10, 2018 and declared effective on September 14, 2018
10.27 Exchange Agreement dated as of May 18, 2018 by and among One Horizon Group, Inc., Banana Whale Studios, Sargon Petros, Mark Hogbin, Rita Liu and Jeremy Chung Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on May 24, 2018
     
10.3210.28 Subscription Agreement dated as of August 29, 2018 Incorporated by reference to Exhibit 10.1 to Registration Statement on Form S-3 filed on September 10, 2018 and declared effective on September 14, 2018
     
10.3310.29 Consulting Agreement dated as of March 30, 2018 with BK Consulting Group, LLC Incorporated by reference to Exhibit 10.2 to Registration Statement on Form S-3 filed on September 10, 2018 and declared effective on September 14, 2018
     
10.3410.30 Subscription Agreement dated as of September 21, 2018. Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on September 21, 2018
     
10.3510.31 Securities Purchase Agreement dated as of October 4, 2018 with First Choice International Company, Inc. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on October 9, 2018
     
10.3610.32 Exchange Agreement dated as of October 22, 2018 for the acquisition of a majority of the outstanding shares of Browning Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on October 24, 2018
     
10.3710.33 

Settlement Agreement relating to the Wu Litigation

 Incorporated by reference to Registration Statement on Form S-3 (Registration No. 333-227971) filed October 24, 2018 and declared effective November 2, 2018
     
10.3810.34 Consulting Agreement with One Percent Investments, Inc. Incorporated by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q filed November 16, 2018
     
10.3910.35 Securities Purchase Agreement with Bespoke Growth Partners, Inc. Incorporated by reference to Exhibit 10.7 to Quarterly Report on Form 10-Q filed November 16, 2018
     
10.4010.36 Securities Purchase Agreement with BK Consulting Group, LLC. Incorporated by reference to Exhibit 10.8 to Quarterly Report on Form 10-Q filed November 16, 2018
     
10.37Agreement dated as of February 4, 2019 relating to Disposition of Banana Whale Studios Pte. Ltd.Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 5, 2019
10.38Promissory Note of Banana Whale Studios Pte Ltd dated February 4, 2019.Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 5, 2019


Exhibit
Number
 Title of Document Location
10.39Pledge and Escrow Agreement dated as of February 4, 2019.Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 5, 2019
10.40Exchange Agreement dated as of February 20, 2019 with Maham LLC.Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 21, 2019
10.41Consulting Agreement with One Percent Investments, Inc.Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 11, 2019
10.42Equity Purchase Agreement entered into on August 5, 2019 and dated as of July 18, 2019 with Crown Bridge Partners, LLC.Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 9, 2019
10.43Registration Rights Agreement entered into on August 5, 2019 and dated as of July 18, 2019, with Crown Bridge Partners, LLCIncorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 9, 2019
10.44Convertible promissory note issued to Bespoke Growth Partners, Inc. on July 11, 2019Incorporated by reference to Exhibit 10.50 to Registration Statement on Form S-1 (Registration No. 333-233825) filed September 18, 2019 and declared effective September 23, 2019
10.45Consulting Agreement dated August 5, 2019 by and between the registrant and Catalyst Corporate Solutions, LLCFiled herewith
10.46Accord and First Amended Consulting Agreement dated April 16, 2020 by and between the registrant and Catalyst Corporate Solutions, LLCFiled herewith
10.47Consulting Agreement dated April 16, 2020 by and between the registrant and Quantum LexiconFiled herewith
10.48Convertible Promissory Note dated November 21, 2019 issued by the registrant to Bespoke Growth Partners, Inc.Filed herewith
14.1 Policy Statement on Business Ethics and Conflicts of Interest Incorporated by reference from the Annual Report on Form 10-KSB for the year ended December 31, 2004, filed May 23, 2005
     
21.1 Subsidiaries Filed as part of this reportherewith
     
23.1 Consent of Cherry Bekaert, LLP Filed as part of this reportherewith
     
31.1 Certification of Principal Executive Officer Pursuant to Rule 13a-14 Filed as part of this reportherewith
     
31.2 Certification of Principal Financial Officer Pursuant to Rule 13a-14 Filed as part of this reportherewith
     
32.1 Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Filed as partherewith

Exhibit
Number
Title of this reportDocumentLocation
     
101.INS XBRL Instance Filed as part of this reportherewith
     
101.SCH XBRL Taxonomy Extension Schema Filed as part of this reportherewith
     
101.CAL XBRL Taxonomy Extension Calculation Filed as part of this reportherewith
     
101.DEF XBRL Taxonomy Extension Definition Filed as part of this reportherewith
     
101.LAB XBRL Taxonomy Extension Labels Filed as part of this reportherewith
     
101.PRE XBRL Taxonomy Extension Presentation Filed as part of this reportherewith

 

† Management contract, compensation plan or arrangement.

 

Item 16. Form 10-K Summary

 

None. 


SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 ONE HORIZONTOUCHPOINT GROUP HOLDINGS, INC.
   
Date: April 15, 201924, 2020By: /s/ Mark White
  Mark White
  President and Chief Executive Officer (principal executive officer)
 
Date: April 24, 2020By:/s/ Martin Ward
Martin Ward
Chief Financial Officer (principal financial officer and principal accounting officer)

 

POWER OF ATTORNEY

 

Each person whose signature appears below hereby appoints Mark White and Martin Ward, and each of them, as attorneys-in-fact with full power of substitution, severally, to execute in the name and on behalf of the registrant and each such person, individually and in each capacity stated below, one or more amendments to the annual report on Form 10-K, which amendments may make such changes in the report as the attorney-in-fact acting deems appropriate and to file any such amendment to the annual report on Form 10-K with the Securities and Exchange Commission.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature Title Date
     
/s/ Mark White President, Chief Executive Officer and Director (principal executive officer) April 15, 201924, 2020
Mark White    
     
/s/ Martin Ward Chief Financial Officer and Director (principal financial officer and principal accounting officer) April 15, 201924, 2020
Martin Ward    
     
/s/ Nicholas Carpinello Director April 15, 201924, 2020
Nicholas Carpinello    
     
/s/ Robert Law Director April 15, 201924, 2020
Robert Law    
     
/s/ Richard VosNalin Jay Director April 15, 201924, 2020
Richard VosNalin Jay
DirectorApril 24, 2020
Ajing Zhang
DirectorApril 24, 2020
Pengfei Li    

ONE HORIZONTOUCHPOINT GROUP HOLDINGS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 20182019 AND 20172018

 

 Page
ReportsReport of Independent Registered Public Accounting FirmF-1F-2
Consolidated Financial Statements: 
Consolidated Balance Sheets as of December 31, 20182019 and 20172018F-2F-3
Consolidated Statements of Operations for the Years Ended December 31, 20182019 and 20172018F-3F-4
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 20182019 and 20172018F-4F-5
Consolidated Statements of Temporary and Stockholders’ Equity for the Years Ended December 31, 20182019 and 20172018F-5F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 20182019 and 20172018F-6F-7
Notes to Consolidated Financial StatementsF-8F-9


Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders of
One HorizonTouchpoint Group Holdings, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of One HorizonTouchpoint Group Holdings, Inc. (the “Company”) as of December 31, 20182019 and 2017,2018, and the related consolidated statements of operations, comprehensive loss, temporary and stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182019 and 2017,2018, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern Matters

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has recurring losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s evaluations of the events and conditions and management’s plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board of the United States of America (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Cherry Bekaert LLP

Tampa, Florida

April 15, 2019

24, 2020  

We have served as the Company’s auditors since 2016.


ONE HORIZONTOUCHPOINT GROUP HOLDINGS, INC.

Consolidated Balance Sheets

December 31, 20182019 and 20172018

(in thousands, except share data)

 

 December 31,  December 31, 
 2018  2017  2019  2018 
          
Assets             
Current assets:             
Cash $353  $763  $258  $313 
Accounts receivable, net  325   102   80   - 
Prepaid compensation  550   550   550   550 
Investment  100      -   100 
Other receivable  2,022      -   2,022 
Advances to acquisition target  70      210   70 
Deferred production costs  87    
        
Other current assets  386   28   88   381 
  3,893   1,443   1,186   3,436 
Current assets of discontinued operations  129      29   586 
Total current assets  4,022   1,443   1,215   4,022 
                
Property and equipment, net  3   2 
Other receivable  250   - 
Goodwill  2,213      419   419 
Intangible assets, net  3,184   5,340   1,992   2,489 
Prepaid compensation (non-current)  1,467   2,017   917   1,467 
Non current assets of discontinued operations  36      34   2,528 
                
Total assets $10,925  $8,802  $4,827  $10,925 
                
Liabilities, Temporary Equity and Stockholders’ Equity                
                
Current liabilities:                
Accounts payable $334  $167  $387  $311 
Accrued expenses  156   55   219   121 
Accrued compensation  181   251   531   181 
Deferred income  177    
Notes payable  101   32 
Notes payable, related parties  205    
Convertible notes, net of debt discount of $155     45 
Loans payable  290    
Promissory notes, related parties  1,000      1,000   1,000 
  2,154   550   2,427   1,613 
Current liabilities of discontinued operations  301      428   842 
Total current liabilities  2,455   550   2,855   2,455 
        
Long-term liabilities        
        
Promissory notes, related parties     1,000 
                
Total liabilities  2,455   1,550   2,855   2,455 
                
Temporary Equity - redeemable common stock outstanding 848,611  605      605   605 
                
Stockholders’ Equity                
One Horizon Group, Inc. stockholders’ equity        
Touchpoint Group Holdings, Inc. stockholders’ equity        
Preferred stock: $0.0001 par value, authorized 50,000,000; nil shares issued or outstanding            
Common stock: $0.0001 par value, authorized 200,000,000 shares, issued and outstanding 87,559,672 (2018) and 30,255,123 (2017)  8   3 
Common stock: $0.0001 par value, authorized 200,000,000 shares, issued and outstanding 4,132,600 (2019) and 3,502,387 (2018)  2   2 
Additional paid-in capital  62,600   48,356   61,749   62,606 
Share subscription receivable  (1,425)     -   (1,425)
Accumulated (Deficit)  (54,854)  (41,085)
Accumulated Deficit  (61,362)  (54,854)
Accumulated other comprehensive loss  (35)  (22)  (24)  (35)
Total One Horizon Group, Inc stockholders’ equity  6,294   7,252 
Total Touchpoint Group Holdings, Inc. stockholders’ equity  365   6,294 
Non-controlling interest  1,571      1,002   1,571 
Total stockholders’ equity  7,865   7,252   1,367   7,865 
Total liabilities, temporary equity and stockholders’ equity $10,925  $8,802  $4,827  $10,925 

See accompanying notes to consolidated financial statements.


TOUCHPOINT GROUP HOLDINGS, INC.

Consolidated Statements of Operations

For the years ended December 31, 2019 and 2018

(in thousands, except per share data)

  Years Ended December 31, 
  2019  2018 
       
Revenue $170  $306 
Cost of revenue        
Software and production costs  4    
Amortization of intangible assets  553   1,982 
   557   1,982 
Gross deficit  (387)  (1,676)
         
Expenses:        
General and administrative  3,321   6,642 
Acquisition related costs  -   1,874 
Depreciation  1   1 
Intangible asset impairment charge  -   3,761 
   3,322   12,278 
         
Loss from operations  (3,709)  (13,954)
         
Other income and expense:        
Interest expense  (87)  (428)
Other income (Note 3)  553   968 
Foreign currency exchange (losses)/gains  (5)  1 
Loss on disposal of investment  (50)  - 
   411   541 
         
Loss from continuing operations  (3,298)  (13,413)
         
Loss from discontinued operations  (3,330)  (1,166)
Net loss for the year  (6,628)  (14,579)
Net loss attributable to non controlling interest  120   810 
Net loss attributable to Touchpoint Group Holdings, Inc. common stockholders $(6,508) $(13,769)
         
Earnings per share        
Basic and diluted net loss per share        
- Continuing operations $(0.85) $(6.59)
- Discontinued operations $(0.88) $(0.57)
Weighted average number of shares outstanding        
Basic and diluted  3,768   2,034 

See accompanying notes to consolidated financial statements.


TOUCHPOINT GROUP HOLDINGS, INC.

Consolidated Statements of Comprehensive Loss

For the years ended December 31, 2019 and 2018

(in thousands)

  Years Ended December 31, 
  2019  2018 
       
Net loss $(6,508) $(13,769)
Other comprehensive loss:        
Foreign currency translation adjustment gain (loss)  11   (13)
         
Total comprehensive loss $(6,497) $(13,782)

See accompanying notes to consolidated financial statements.


TOUCHPOINT GROUP HOLDINGS, INC.

Consolidated Statements of Temporary and Stockholders’ Equity

For the years ended December 31, 2019 and 2018

(in thousands)

  Temporary Equity  Common Stock  Additional
Paid-In
  Stock
Subscription
  Accumulated  Accumulated
Other
Comprehensive
  Non-
Controlling
  Total
Stockholders’
 
  Shares  Amount  Shares  Amount  Capital  Receivable  Deficit  Income  Interest  Equity 
Balance January 1, 2018    $   1,210  $1  $48,358     $(41,085) $22  $  $7,252 
                                         
Net loss                    (13,769)     (810)  (14,579)
                                         
Foreign currency translation                       (13)     (13)
                                         
Warrant modification expense                  544                   544 
                                         
Shares issued for services provided  7   199   459   1   4,749               4,750 
                                         
Shares issued for exercise of warrants        347      2,096               2,096 
                                         
Shares issued for business combinations        491      3,341            2,381   5,722 
                                         
Shares issued for IP agreement        120      548               548 
                                         
Shares issued for settlement agreement        14      96               96 
                                         
Shares issued in conversion of debt  27   406   -      -               - 
                                         
Beneficial conversion feature              200               200 
                                         
Shares issued for sale of stock        861      2,674   (1,425)           1,249 
                                         
Balances, December 31, 2018  34  $605   3,502  $2  $62,606  $(1,425) $(54,854) $(35) $1,571  $7,865 
                                         
Net loss                    (6,508)     (120)  (6,628)
                                         
Foreign currency translation                       11      11 
                                         
Additional shares for contract revision        82       127            -   127 
                                         
Rounding shares issued        6      -               - 
                                         
Shares issued for services provided  -   -   300   -   189               189 
                                         
Shares issued as security for loan        179   -   -   -            - 
                                         
Disposal of equity in subsidiary  -   -                     (449)  (449)
                                         
Shares issued for commitment fees        370      102               102 
                                         
Share subscription settled through services provided              -   150            150 
                                         
Shares subscription cancelled        (340)     (1,275)  1,275            - 
                                         
Balances, December 31, 2019  34  $605   4,099  $2  $61,749  $-  $(61,362) $(24) $1,002  $1,367 

See accompanying notes to consolidated financial statements.


TOUCHPOINT GROUP HOLDINGS, INC.

Consolidated Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(in thousands)

  Years Ended December 31, 
  2019  2018 
       
Cash used in operating activities:      
Operating activities:      
Net loss for the year $(3,298) $(13,413)
         
Adjustment to reconcile net loss for the year to net cash used in operating activities:        
Depreciation of property and equipment  1   1 
Amortization of intangible assets  553   1,982 
Shares issued for financing commitment  102   - 
Amortization of beneficial conversion feature  -   355 
Shares issued for contract revision  127   - 
Impairment charge  -   3,761 
Amortization of shares issued for services  955   550 
Warrants issued for services received  -   544 
Non-cash interest expense  18   - 
Loss on disposal of investment  50   - 
Common shares issued for services received  189   4,729 
Other income (non-cash) (Note 3)  (553)  (930)
Changes in operating assets and liabilities:        
Accounts receivable  (102)  (102)
Other assets  21   (353)
Accounts payable and accrued expenses  506   (97)
         
Net cash flows from continuing operating activities  (1,431)  (2,973)
         
Net cash flows from discontinued operating activities  (633)  (1,058)
         
Net cash flows from operating activities  (2,064)  (4,031)
         
Cash used in investing activities:        
Cash advances to acquisition target  (140)  - 
Cash consideration of acquisitions (net of cash acquired)  -   (204)
Proceeds from sale of investments  50   - 
Proceeds from sale of interest in subsidiary  1,750    
Acquisition of fixed assets  -   (1)
Net cash flows from investing activities – continuing operations  1,660   (205)
         
Cash flows from investing activities – discontinued operations  (77)  (5)
         
Net cash flows from investing activities  1,583   (210)
         
Cash flows from financing activities:        
Proceeds from loans  762   - 
Repayments on loans  (490)  - 
Cash proceeds from exercise of warrants  -   2,096 
Cash proceeds from issuance of common stock  --   1,450 
Advances from/(repayments to) related parties  19   (30)
Net cash flows from financing activities – continuing operations  291   3,516 
Cash flows from financing activities – discontinued operations  69   301 
Net cash flows from financing activities  360   3,817 
         
Decrease in cash during the year  (121)  (424)
Foreign exchange effect on cash  10   (26)
         
Cash at the beginning of the year - continuing operations  313   763 
Cash at the beginning of the year – discontinued operations  58   - 
Cash at end of the year – total $260  $313 

 

See accompanying notes to consolidated financial statements.


ONE HORIZONTOUCHPOINT GROUP INC.

Consolidated Statements of Operations

For the years ended December 31, 2018 and 2017

(in thousands, except per share data)

  Years ended December 31, 
  2018  2017 
       
Revenue $787  $714 
Cost of revenue        
Software and production costs  91    
Amortization of intangible assets  2,148   855 
   2,239   855 
Gross deficit  (1,452)  (141)
         
Expenses:        
General and administrative  7,139   4,236 
Acquisition related costs  1,874    
Depreciation  1   17 
Intangible asset impairment charge  3,761    
   12,775   4,253 
         
Loss from operations  (14,227)  (4,394)
         
Other income and expense:        
Interest expense  (428)  (666)
Other income (Note 3)  989    
Foreign currency exchange (losses)/gains  (5)  1 
         
   556   (665)
         
Loss from continuing operations  (13,671)  (5,059)
         
         
Loss from discontinued operations  (908)  (2,375)
Net loss for the year  (14,579)  (7,434)
Net loss attributable to non controlling interest  810    
Net loss attributable to One Horizon Group, Inc. Common stockholders $(13,769) $(7,434)
         
Earnings per share        
Basic and diluted net loss per share        
-     Continuing operations $(0.27) $(0.40)
-     Discontinued operations $(0.02) $(0.19)
Weighted average number of shares outstanding        
Basic and diluted  50,857   12,534 

See accompanying notes to consolidated financial statements.


ONE HORIZON GROUP, INC.

Consolidated Statements of Comprehensive Loss

For the years ended December 31, 2018 and 2017

(in thousands)

  Years ended December 31, 
  2018  2017 
       
Net loss $(13,769) $(7,434)
Other comprehensive loss:        
Foreign currency translation adjustment loss  (13)  (51)
         
         
Total comprehensive loss $(13,782) $(7,485)

See accompanying notes to consolidated financial statements.


ONE HORIZON GROUP, INC.

Consolidated Statements of Temporary and Stockholders’ Equity

For the years ended December 31, 2018 and 2017

(in thousands)

  Temporary Equity  Common Stock  Additional
Paid-In
  Stock Subscription  Accumulated  Accumulated  Non-Controlling  Total
Stockholders’
 
  Shares  Amount  Shares  Amount  Capital  Receivable  Deficit  OCI  Interest  Equity 
Balance January 1, 2017    $   6,145  $1  $37,504   —   $(33,590) $29  $  $3,944 
                                         
Net loss        —        —      (7,434)        (7,434)
                                         
Foreign currency translation         —       —         (51)     (51)
                                         
Deemed distribution         —      61      (61)         
                                         
Shares issued for services provided        4,275      4,170             —   4,170 
                                         
Shares issued for exercise of warrants        1,521      980    —       —   —    980 
                                         
Options issued for services         —      132          —      132 
                                         
Warrants issued for services         —      1,486          —      1,486 
                                         
Reclassification of redeemable preference shares        —       62          —    —   62 
                                        
Shares issued in settlement of debt        897      692          —    —   692 
                                        
Conversion of preferred shares and note payable to common stock        4,000   1   (500)         —    —   (499)
                                         
Conversion of debenture to common stock        13,000   1   3,349       —    —    —   3,350 
                                         
Beneficial conversion feature        —       155    —    —   —       155 
                                         
Shares issued for sale of stock        417      265       —    —      265 
                                         
Balances, December 31, 2017    $   30,255  $3  $48,356  $  $(41,085) $(22) $  $7,252 
                                         
Net loss                    (13,769)     (810)  (14,579)
                                         
Foreign currency translation                       (13)     (13)
                                         
Shares issued for business combinations        12,277   1   3,340            2,381   5,722 
                                         
Shares issued for exercise of warrants        8,675      2,096               2,096 
                                         
Shares issued for services provided  171   199   11,474   2   4,748               4,750 
                                         
Shares issued for sale of stock        21,525   2   2,672   (1,425)           1,249 
                                         
Shares issued for IP agreement        3,000      548               548 
                                         
Shares issued for conversion of debt  677   406                         
                                         
Shares issued for settlement agreement        354      96               96 
                                         
Beneficial conversion feature              200               200 
                                         
Warrant modification expense              544               544 
                                         
Balances, December 31, 2018  848  $605   87,560  $8  $62,600  $(1,425) $(54,854) $(35) $1,571  $7,865 

See accompanying notes to consolidated financial statements.


ONE HORIZON GROUP, INC.

Consolidated Statements of Cash Flows

For the years ended December 31, 2018 and 2017

(in thousands)

  Years ended December 31, 
  2018  2017 
       
Cash used in operating activities:        
Operating activities:        
Net loss for the year $(13,671) $(5,059)
         
Adjustment to reconcile net loss for the year to net cash used in operating activities:        
Depreciation of property and equipment  2   17 
Amortization of intangible assets  2,148   855 
Amortization of debt issue costs     132 
Amortization of beneficial conversion feature  355   101 
Amortization of debt discount     199 
Impairment charge  3,761    
Amortization of shares issued for services  550   270 
Warrants issued for services received  544   1,530 
Options issued for services received     132 
Common shares issued for services received  4,949   1,244 
Other income  (930)   
Changes in operating assets and liabilities:        
Accounts receivable  (180)  (100)
Other assets  (465)  17 
Accounts payable and accrued expenses  (179)  280 
Deferred revenue  105    
Net cash flows from continuing operating activities  (3,012)  (382)
         
Net cash flows from discontinued operating activities  (39)  (321)
         
         
Net cash flows from operating activities  (3,051)  (703)
         
Cash used in investing activities:        
         
Cash consideration of acquisitions (net of cash acquired)  (168)   
       
Acquisition of property and equipment  (2)  (2)
Net cash flows from investing activities – continuing operations  (170)  (2)
         
Cash flows from investing activities – discontinued operations  (980)  (261)
         
Net cash flows from investing activities  (1,150)  (263)
         
Cash flows from financing activities:        
         
Cash proceeds from exercise of warrants  2,096   980 
Cash proceeds from issuance of common stock  1,449   465 
Advances from/(repayments to) related parties  (29)  32 
Net cash flows from financing activities – continuing operations  3,516   1,477 
Cash flows from financing activities – discontinued operations  301    
Net cash flows from financing activities  3,817   1,477 
         
Increase/(decrease) in cash during the year  (384)  511 
Foreign exchange effect on cash  (26)  (8)
         
Cash at the beginning of the year - continuing operations  763   106 
Cash at the beginning of the year – discontinued operations     154 
Cash at end of the year – total $353  $763 

See accompanying notes to consolidated financial statements.


ONE HORIZON GROUP,HOLDINGS, INC.

Consolidated Statements of Cash Flows (continued)

For the years ended December 31, 20182019 and 20172018

(in thousands)

 

 Year ended December 31,  Year Ended December 31, 
 2018  2017  2019  2018 
          
Cash paid for interest $  $  $  $ 
Non-cash transactions:                
Common stock issued in acquisitions $5,722  $  $   $5,722 
Common stock issued for software $548  $  $   $548 
Common stock issued for settlement of accrued compensation $  $662 
Reclassification of preferred shares $  $62 
Forgiveness of related party debt for sale of discontinued operations $  $1,968 
Disposal of interest in subsidiary $(449) $- 
Share subscription settled through securities provided $150  $- 

 

See accompanying notes to consolidated financial statements.


 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

December 31, 20182019 and 20172018

 

Note 1. Description of Business, Organization and Principles of Consolidation

 

Description of Business

 

On September 26, 2019, the Company changed its name from One Horizon Group, Inc (“the Company”Inc. to Touchpoint Group Holdings, Inc. (the “Company”). The Company has the following core businesses following the acquisition of 123Wish Inc., Love Media House, Inc (formerly called C-Rod, Inc.), Banana Whale Studios PTE Ltd and Browning Productions & Entertainment, Inc. in the year ended December 31, 2018 (See Note 3). The core trading businesses are:businesses:

 

 (i)Secure MessagingTouchpoint Connect Limited (“Touchpoint”)a newly formed wholly owned subsidiary that offers digitally secure messaging softwarea white label product which is a fan engagement platform designed to enhance the fan experience and sells licenses primarily intodrive commercial aspects of the gaming, securitysport and educational markets.entertainment business.

 (ii)123Wish – an experience based platform where subscribers have a chanceThe Company is in negotiations to playsell its interests in Love Media House, Inc. (“Love Media House”) and win experiences from celebrities, athletes and artists.as such, it is considered to be discontinued operations. See Note 3 for more information.
 (iii)Love Media House (formerly called C-Rod) -a full-service music production, artist representationThe Company signed agreements in February 2020 completing the sale of its interest in Browning Productions & Entertainment, Inc. (“Browning”) and digital media business.its results for 2019 are treated as discontinued operations. See Note 3 for more information.
 (iv)Banana Whale Studios (“BWS”) – a B2B software provider in the online gaming industry that develops and supplies online games123 Wish, Inc. is considered dormant. All operations have been moved to Asian gaming platforms.The interest in BWS was disposed on in February 2019 (see note 4)
(v)Browning Productions & Entertainment - a television filming and production company was acquired on October 23, 2018.Touchpoint.

  

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

 

Current Structure of the Company

 

The Company has the following subsidiaries:

Subsidiary name% Owned
  Subsidiary name% Owned
123Wish, Inc. (considered dormant)51%51%
One Horizon Hong Kong Ltd100%100%
Horizon Network Technology Co. Ltd100%100%
Love Media House, IncInc. (discontinued operations)100%100%
● Touchpoint Connect Limited (formed in September 2019)Global Phone Credit Limited100%100%
Browning ProductionProductions & Entertainment, Inc. (discontinued operations and disposed of in February 2020)51%51%

 

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 usthe Company via various contractual arrangements. Suzhou Aishuo is treated as one of our subsidiaries for financial reporting purposes in accordance with GAAP.

 

In February 2019 the Company entered into to an agreement to acquire a majority interest in Maham LLC.

All significant intercompany balances and transactions have been eliminated in consolidation.


Note 2. Summary of Significant Accounting Policies

 

Liquidity and Capital Resources 

 

Historically, the Company has incurred net losses and negative cash flows from operations.operations which raise substantial doubt about the Company’s ability to continue as a going concern. The Company has principally financed these losses from the sale of equity securities.securities and the issuance of debt instruments.

 

On February 4, 2019 the Company sold its equity stake in BWS for $2.0 million of which $1.5 million was received in cash immediately and the balance is payable by December 31, 2019. The impact on the Company’s liquidity is twofold, (i) the immediate increase in cash balances of $1.5 million, and (ii) the ceasing of the investment funding to cover the Banana Whale software development.

In addition, and as more fully described in Note 3, the Company acquired three additional operating entities during 2018. Coupled with the reduction of expenses due to the disposal of the interest in BWS described above, the Company projects the results of these acquisitions will provide positive cash contributions to the Company’s corporate and central costs by the fourth quarter of 2019.

At December 31, 2018, the Company had cash of $353,000. In addition, in February 2019, the Company received cash proceeds of $1,500,000 together with a promissory note for $500,000 for the disposal of the Company’s interest in BWS. Together with the cash on hand as a result of these transactions and based on the Company’s current operational plan and budget, the Company believes that it is probable that it has will have sufficient cash to fund its operations into at least the second quarter of 2020.

However, actual results could materially differ from the Company’s projections. Accordingly, the Company may be required to raise additional funds through various sources, such as equity and debt financings. While the Company believes it is probable that such financings could be secured, there can be no assurance the Company will be able to secure additional sources of funds to support its operations or, if such funds are available, that such additional financing will be sufficient to meet the Company’s needs or on terms acceptable to us.

 

At December 31, 2019, the Company had cash of $258,000. Together with the Company’s current operational plan and budget, the Company believes that it is probable that it will have sufficient cash to fund its operations into at least the first quarter of 2021. However, actual results could differ materially from the Company’s projections.

On August 5, 2019, the Company entered into an equity purchase agreement (the “Equity Purchase Agreement”) with Crown Bridge Partners, LLC (“Crown”), whereby Crown are committed to purchase up to $10.0 million of new common stock from the Company at the Company’s option during the next three years. The amount is determined by the market value of trades and is priced at an 18% discount to average market price. As of December 31, 2019, no shares have been sold under the Equity Purchase Agreement. In connection with the Equity Purchase Agreement, the Company entered into a six month loan with Labrys Fund, LP in the original principal amount of $180,000. The loan was issued with a 10% original issue discount, and accordingly, the Company received net proceeds of $162,000 and an annual coupon rate of 12%. The loan was repaid on the due date in January 2020.

Basis of Accounting and Presentation

 

These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States.States (“GAAP”).

 

Foreign Currency Translation

 

The reporting currency of the Company is the United StatesU.S. dollar. Assets and liabilities other than those denominated in U.S. dollars, primarily in Singapore, the United Kingdom and China, are translated into United StatesU.S. dollars at the rate of exchange at the balance sheet date. Revenues and expenses are translated at the average rate of exchange throughout the period. Gains or losses from these translations are reported as a separate component of other comprehensive income (loss) until all or a part of the investment in the subsidiaries is sold or liquidated. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations.

 

Transaction gains and losses that arise from exchange-rate fluctuations on transactions denominated in a currency other than the functional currency are included in general and administrative expenses.


Cash

 

Cash and cash equivalents include bank demand deposit accounts and highly liquid short termshort-term investments with maturities of three months or less when purchased. Cash consists of checking accounts held at financial institutions in Hong Kongthe U.S. and the United Kingdom which, at times, balances may exceed insured limits. The Company has not experienced any losses related to these balances, and management believes the credit risk to be minimal.

 

Accounts receivable, concentrationsReceivable, Concentrations and Revenue Recognition

Performance Obligations- A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under the revenue recognition standard. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s contracts do not typically have variable consideration that needs to be considered when the contract consideration is allocated to each performance obligation.

Revenue Recognition– We recognize revenues from each business segment as described below:

— Discontinued operations 

 

 1.Digital secure messaging revenue involves the sale of user licenses, at a fixed price per license, to the customers, which is our sole performance obligation under the existing licensing agreements. The Company recognizes the revenue from the sale of the user licenses when the valid licenses have been delivered to the customer’s server in useable form.

2.123Wish derives income from user subscriptions, sale of merchandise, sale of tickets for experiences with social media influencers and artists, and the sale of corporate sponsorships, each of which is a separate performance obligation. User subscriptions cover a defined period of time (typically one month) and the revenue is recognized as the Company satisfies the requisite performance obligation (over the defined subscription period). Sale of merchandise are recognized when the customer has paid for the item and when the merchandise has been delivered to the customer. Corporate sponsorship packages are non-refundable and relate to brand association. The Company has no further service deliverable to the sponsor and the revenue is recognized when the agreement is entered into by both parties and the required marketing materials have been delivered to the corporate sponsor for their use.

3.1Love Media House derives income from recording and video services. Income is recognized when the recording and video services are performed and the final customer product is delivered and the point at which the performance obligation is satisfied. These revenues are non-refundable.

 

 4.Banana Whale derives income primarily through licensing arrangements with gaming customers. Under these arrangements, Banana Whale provides the customers with a license (functional IP), implementation services and ad-hoc support, which may include unspecified upgrades and enhancements. The Company has determined that these promised goods and services represent one combined performance obligation since the individual promised goods or services are not distinct in the context of the contract. The revenues earned from the arrangements are primarily based on usage-based royalties. As the Company has determined that the license is the predominant item to which the royalty relates, revenues are recognized when the related sale or usage by the customer to which the royalty relates, occurs.

5.2Browning Production & Entertainment, Inc derives income from the advertising associated with the airing of television series produced by BP&EBrowning and also licenselicenses income from the showshowing of series on certain channels based on the number of viewers attracted advertising. The advertisingattracted. Advertising revenue is recognized when the series to which the advertising relates is aired. Customer payments received prior to

— Continued operations 

3Touchpoint – Revenue for the satisfactionsale of the company’s performance obligationsoftware license is recognized when the customer has use of the services and has access to use the software. Revenue from maintenance services are recordedrecognized over time as deferred revenue in the Company’s consolidated balance sheet.services are provided and charged.

 

The Company does not have off-balance sheet credit exposure related to its customers. As of December 31, 2018 three2019, two customers accounted for 68%100% of the accounts receivable balance and as of December 31, 2017, one customer2018, there was no accounts receivable balance. Five customers accounted for 100% of the accounts receivable balance. Two customers accounted for 31% of the revenue for the year ended December 31, 20182019 and one customer accounted for 76%74% of the revenue for the year ended December 31, 2017.


In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements of Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition” and most industry-specific guidance on revenue recognition throughout the ASC. The new standard is principles-based and provides a five step model to determine when and how revenue is recognized. The core principle of the new standard is that revenue should be recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also requires disclosure of qualitative and quantitative information surrounding the amount, nature, timing and uncertainty of revenues and cash flows arising from contracts with customers. Topic 606 was effective for us in the first quarter of2018. During the year ended December 31, 2018 and adoption did not have a material impact on our financial statements.2019, revenues totaling $40,000 were generated from an arrangement with an acquisition target.

  

In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” ASU 2016-10 clarifies the implementation guidance on identifying performance obligations. This ASU applies to all companies that enter into contracts with customers to transfer goods or services. Topic 606 was effective for us in the first quarter of the year ending December 31, 2018 and adoption did not have a material impact on our financial statements.


Intangible Assets

 

Intangible assets include software development costs and acquired technology and customer lists and are amortized on a straight-line basis over the estimated useful lives ranging from four to five years. The Company periodically evaluates whether changes have occurred that would require revision of the remaining estimated useful life. The Company performs periodic reviews of its capitalized intangible assets to determine if the assets have continuing value to the Company. As a result of this review, an impairment change relating to Horizon Software totaling $3.8 million was recognized in the year ended December 31, 2018 (2017: $nil).


Impairment of Other Long-Lived Assets

 

The Company evaluates the recoverability of its property and equipment and other long-lived assets whenever events or changes in circumstances indicate impairment may have occurred. An impairment loss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributed to the assets or the business to which the assets relate. Impairment losses, if any, are measured as the amount by which the carrying value exceeds the fair value of the assets. During the yearsyear ended December 31, 2018 and 2017the Company, as a result of this review, recognized an impairment charge relating to Horizon Software totaling $3.8 million. As set out in Note 3, during the year ended December 31, 2019, the Company recorded noan impairment lossescharge related to the Company’s long-lived assets other than the previously discussed intangible asset impairment charge. The impairment determination is subject to a high degree of estimation uncertainty and are ongoing as we continue to develop the acquired companies.discontinued operations totaling $2.4 million.

 

Income Taxes

 

Deferred income tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, operating loss, and tax credit carryforwards, and are measured using the enacted income tax rates and laws that will be in effect when the differences are expected to be recovered or settled. Realization of certain deferred income tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction. The Company records a valuation allowance to reduce deferred income tax assets to amounts that are more likely than not to be realized. The initial recording and any subsequent changes to valuation allowances are based on a number of factors (positive and negative evidence). The Company considers its actual historical results to have a stronger weight than other, more subjective, indicators when considering whether to establish or reduce a valuation allowance.


The Company continually evaluates its uncertain income tax positions and may record a liability for any unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense and other expense, respectively.

Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in: (1) calculating its income tax expense, deferred tax assets, and deferred tax liabilities; (2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized. Historically the Company has not filed income tax returns and the related required informational filings in the US. Certain informational filings if not filed contain penalties. The Company is currently addressing this issue with advisors to determine the amount of potential payments due. Given the complexity of the issue the Company is unable to quantify a range of potential loss. Accordingly no liability has been recorded in the accompanying consolidated balance sheets in respect of this matter. However, such potential penalties may be material to the Company’s financial statements.

  

Net Loss per Share

 

Basic net loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. Diluted loss per share takes into consideration common shares outstanding (computed under basic loss per share) and potentially dilutive securities. For the years ended December 31, 20182019 and 2017,2018, all outstanding warrants are antidilutive because of net losses, and as such, their effect has not been included in the calculation of diluted net loss per share. Common shares issuable are considered outstanding as of the original approval date for purposes of earnings per share computations.

 

Accumulated Other Comprehensive Income (Loss)

 

Other comprehensive income (loss), as defined, includes net income (loss), foreign currency translation adjustment, and all changes in equity (net assets) during a period from non-owner sources. To date, the Company has not had any significant transactions that are required to be reported in other comprehensive income (loss), except for foreign currency translation adjustments.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the fiscal year. The Company makes estimates for, among other items, useful lives for depreciation and amortization, determination of future cash flows associated with impairment testing for long-lived assets, determination of the fair value of stock options and warrants, valuation allowance for deferred tax assets, allowances for doubtful accounts, and potential income tax assessments and other contingencies. The Company bases its estimates on historical experience, current conditions, and other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and assumptions.


Stock-based paymentsRecently Adopted Accounting Pronouncements

 

The Company accounts for stock-based awards at fair value on dateIn February 2016, the FASB issued ASU 2016-02, “Leases,” which created a new Topic, ASC Topic 842 and established the core principle that a lessee should recognize the assets, representing rights-of-use, and liabilities to make lease payments, that arise from leases. For leases with a term of grant and recognition of compensation over the service period for awards expected12 months or less, a lessee is permitted to vest. The fair value of stock options is determined using the Black-Scholes option pricing model,make an election under which includes subjective judgements about the expected life of the awards, forfeiture rates and stock price volatility.

Fair Value Measurements

GAAP establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by GAAP are described below:

Level 1 - Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 - Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 - Pricing inputs that are generally observable inputs and not corroborated by market data.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financialsuch assets and liabilities fall within morewould not be recognized, and lease expense would be recognized generally on a straight-line basis over the lease term. This standard is effective for the Company beginning in 2019 and was adopted by the Company for the year beginning January 1, 2019. The Company has evaluated the impact of this revised guidance on its financial statements and determined it had no material impact, as the Company has no leasing arrangements with terms greater than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.year.

 

The Company’s Level 3 financial liabilities consist of contingent consideration relating to the acquisitions of 123Wish and LMH which requires significant judgment or estimation (see Note 3).


Note 3. Acquisitions

 

123Wish, Inc.

 

In February 2018, the Company completed the acquisition of a 51% controlling interest in 123 Wish, Inc. (formerly Once in a Lifetime LLC) a Delaware corporation(“123 Wish”) in exchange for the issuance of 1,333,334 fully paid and non-assessable shares of common stock with a fair value of $1.39 million. In addition, the Company shall issue fully paid and non-assessable shares of common stock equal to 2.5 times of the net, after tax, earnings of 123 Wish for the nine month period after the date of acquisition and fully paid and non-assessable shares of common stock equal to 4.5 times the net, after tax, earnings of 123 Wish for the second six month period after the date of acquisition. 123 Wish Inc. has proprietary applications which use the social media aspect of the internet.

 

The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed (In thousands):

 

Consideration Paid:

 

Common stock $1,387 
Non controlling interest  1,353 
  $2,740 
     
Fair values of identifiable assets acquired and liabilities assumed:    
     
Assets acquired:    
Cash $14 
Other intangible assets  2,307 
Goodwill  419 
     
Net Assets Acquired $2,740 

 

The consideration paid was 1,333,334 common shares valued at $1.04 per share. Separately identifiable intangible assets include technology which were valued by management using discounted cash flow and replacement cost approaches.

  

As of December 31, 2018, the Company has estimated that no additional share amounts will need to be issued as contingent consideration and therefore is not included in the Company’s allocation of the purchase price in the table above.

Love Media House, Inc. (formerly C-Rod, Inc.)

 

In March 2018, the Company completed the acquisition of 100% ownership of Love Media House Inc. (“LMH”) a Florida corporation in exchange for $150,000 cash and 3,376,147 fully paid and non-assessable shares of common stock with a fair value of $1.9 million. LMH is in the music and video content business. The financial statements of LMHLove Media House have been included in the consolidated financial statements from the date of acquisition.


The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed (In thousands):

 

Consideration Paid:

 

Cash $150 
Common stock  1,885 
  $2,035 
     
Fair values of identifiable assets acquired and liabilities assumed:    
     
Assets acquired:    
Cash $5 
Other intangible assets  900 
Goodwill  1,172 
Total assets acquired  2,077 
     
Liabilities assumed:    
Accounts payable  42 
Total Liabilities Assumed  42 
     
Net Assets Acquired $2,035 

 

Separately identifiable intangible assets were customer relationships and were valued by management using discounted cash flow and replacement cost approaches.

 

As of December 31, 2018, the Company has estimated that no additional share amounts will need to be issued as contingent consideration and therefore is not included in the Company’s allocation of the purchase price in the table above.

Banana Whale Studios PTE Ltd

 

In May 2018 the Company completed the acquisition of 51% ownership of Banana Whale Studios PTE Ltd (“BWS” or “Banana Whale”) a Singapore corporation. The acquisition of Banana Whale was based on an earnout formula solely and should Banana Whale fail to reach forecasted profit numbers during the first 24 months then some, or all of the shares allocated would be refundable to the Company.

 

At the time of acquisition 7,383,000295,300 shares of common stock were placed in escrow for payment of the confirmed earn out. However, based on the terms of the ultimate disposition (note 4) of BWS no shares were ultimately transferred or other consideration paid. The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed in May 2018 (In thousands):

 

Consideration Paid:

 

Common stock $ 
Non-controlling interest  894 
  $894 

Fair values of identifiable assets acquired and (liabilities) assumed:

 

Assets acquired:   
Cash $42 
Accounts receivable  11 
Equipment  37 
Other receivable  2,022 
Liabilities assumed:    
Accounts payable  (288)
  $1,824 
Bargain purchase gain $930 

  

On February 4, 2019, the Company sold it’s holdingits interest in Banana Whale for $2.0 million, of which $1.5 million was in cash on completion and the balance was in the form of a promissory note receivable for $500,000 payable by December 31, 2019.2019 (see below). The note is secured by a pledge of Banana Whale shares held in the name the four founding shareholders of Banana Whale. The pledged shares are held in escrow pending the payout of the Note.promissory note.

In December 2019, an agreement regarding the remaining amount due on the promissory note of $500,000 was reached whereby 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 maximum amount of $250,000 in aggregate.

  

Browning Production & Entertainment

 

In October 2018, the Company completed the acquisition of 51% ownership of Browning Productions & Entertainment, Inc. (“Browning Productions”) a Florida corporation in exchange for $10,000 cash and an allocation of 300,00012,000 fully paid shares of common stock with a fair value of $101,100. Of these shares, 150,0006,000 have been issued with the remaining balance of 150,0006,000 to be issued upon receipt of audited financial statements of Browning Productions.Browning. The Company had previously paid a deposit of $10,000 cash and 35,000 fully paid shares of common stock with a fair value of $18,200.

 

The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed as of October 22, 2018 (In thousands):

 

Consideration Paid:

 

Common stock $119 
Cash  20 
Non-controlling interest  134 
  $273 

 

Fair values of identifiable assets acquired and (liabilities) assumed:

 

Assets acquired:   
Cash $ 
Accounts receivable  43 
Other assets  23 
Equipment  2 
Goodwill  622 
Liabilities assumed:    
Accounts payable  (42)
Deferred revenue  (72)
Loans and advances  (303)
     
Net Assets Acquired $273 


Note 4. Discontinued Operations

 

In November 2018, the management of the Company’s then 51% controlled subsidiary, Banana Whale, Studios PTE Ltd., entered into discussions whereby the Company would sell its shares of BWS to a third party. Under the agreement, datedwhich had an effective date of January 31,1, 2019, the Company received cash of $1,500,000 and a promissory note of $500,000 and the return of the 7,383,000295,320 Company shares issued on acquisition.

The Company shares are heldrealized a gain of $553,000 on the sale of its 51% interest in Escrow for three monthsBWS during the year ended December 31, 2019.

In December 2019, an agreement regarding the remaining amount due on the Promissory note of $500,000 was reached whereby 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 secure certain warranties given25% of reported EBITDA each quarter up to a maximum amount of $250,000 in aggregate.

During the year ended December 31, 2019, the Company decided to sell its interests in its subsidiaries, Love Media House 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 is included in the loss from discontinued operations.

On February 24, 2020, the Company completed the sale of its interest in Browning to William J. Browning, the holder of the remaining Browning shares. Under the agreement, Browning and Mr. Browning agreed to repay advances totaling $210,000 made to Browning by the Company on closure.over a 24-month period ending January 31, 2022 with an early repayment discount given during the six months ending August 31, 2020. Mr. Browning also agreed to return to the Company shares given to Mr. Browning under the original acquisition for cancellation by the Company.

    

The Company has accounted for the operations of BWS, Love Media House and Browning as discontinued operations. The statementStatements of operations includeOperations for year ended December 31, 2019 and 2018 for discontinued operations is as follows:(in thousands)

 

 Year ended
December 31,
  Years Ended
December 31,
 
 2018  2019  2018 
        
Revenue $156  $467  $637 
Cost of Revenue   
Cost of revenue        
Hardware  504   193   596 
Amortization  150   166 
 504   343   762 
Gross Deficit (348)
Gross Profit/(deficit)  124   (125)
Expenses           
General and administrative 551   987   1,054 
Depreciation  9   8   10 
Other expenses  19   (23)
Impairment  2,440   - 
  560   3,454   1,041 
Loss from Discontinued Operations $(908 $(3,330) $(1,166)

The balance sheet of discontinued operations as atof December 31, 2019 and 2018 is as follows: (in(in thousands)

 

  December 31, 
  2018 
    
Current assets    
Cash 18 
Accounts Receivable  111 
   129 
Property and equipment   36 
  $165 
Current liabilities    
Accounts payable 1 
Loans payable  300 
   $301 
Shareholder deficiency   (136)
  $165 

In the year ended December 31, 2017 the Company disposed of a Voice over I.P. software business together with the subsidiaries incorporated in Ireland, Switzerland and United Kingdom, which were involved in that business segment to Mr. Collins, the former Chief Executive Officer of the Company. In consideration Mr. Collins forgave the liability of $1.97 million then due to Mr. Collins. The Company accounted for the operations of this business segment as discontinued operations. The 2017 statement of operations include discontinued operations as follows (in thousands)

  Year ended
December 31,
 
  2017 
    
Revenue $496 
Cost of Revenue  1,012 
Gross Deficit  (516)
Expenses    
 General and administrative  998 
 Depreciation  5 
 Research and development  255 
   1,258 
Impairment Loss  (622)
Income Taxes  21 
Loss from Discontinued Operations $(2,375)

  December 31, 
  2019  2018 
Current Assets      
Cash $2  $58 
Accounts Receivable  -   436 
Other current assets  27   92 
   29   586 
Property and equipment  34   39 
Intangible assets  -   830 
Goodwill  -   1,659 
  $63  $3,114 
         
Current Liabilities        
Accounts payable and accrued expenses $36  $59 
Deferred revenue  15   177 
Loans payable  115   401 
Finance contracts, due within one year  51   - 
Notes payable – related parties  211   205 
         
  $428  $842 

Note 5. Intangible Assets

 

Intangible assets consist primarily of software development costs, intellectual property and customer and reseller relationships which are amortized over the estimated useful life, generally on a straight-line basis.(infollowing (in thousands):

 

  December 31  December 31 
  2018  2017 
       
Horizon software $  $6,527 
123Wish Platform intellectual property  548    
Social online application software  2,307    
Customer lists  900    
         
   3,755   6,527 
Less accumulated amortization  (571)  (1,187)
         
Intangible assets, net $3,184  $5,340 

Amortization of intangible assets for each of the next four years is estimated to be approximately $796,000 per year.

Note 6. Goodwill

The following is the detail of the Goodwill that arose on acquisitions described in Note 3:

  December 31  December 31 
  2018  2017 
       
123Wish, Inc. $419  $ 
Love Media House, Inc. (formerly C. Rod, Inc.)  1,172    
Browning Productions & Entertainment, Inc  622     
  $2,213  $ 

Note 7. Notes Payable, Related Parties

As of December 31, 2018 amounts totalling $205,000 were owed to certain members of the management at subsidiary companies. The amounts are unsecured, interest free and have no specified repayment dates.

  December 31, 
  2019  2018 
       
Touchpoint software $2,950  $2,894 
Goodwill  419   419 
         
   3,347   3,313 
Less accumulated amortization  (958)  (405)
         
Intangible assets, net $2,411  $2,908 

Note 8.6. Notes Payable

 

a) Promissory notes.notes, related parties

 

The promissory notes due to Zhanming Wu ($500,000) and the Company’s CEO, Mark White ($500,000), both considered related parties, including accrued interest of 7% per annum from issuance, arewere due for repayment on August 31, 2019. TheSuch payments were not made and the parties are in negotiations to extend the maturity dates of the promissory notes, were issued as a resultbut there can be no guarantee that commercially reasonable terms will agreed upon. As of December 31, 2019, the re-organizationcounterparties had not demanded repayment of the Company in August 2017 involving the removal of Redeemable Preference Shares and the Debenture totaling in exchange for new shares of common stock and the promissory notes.

 

b) Other notes payable.Century River Limited

 

NotesThe $500,000 loan payable by Browning Productions & Entertainment, Inc. totaling $101,000 arewith a remaining principal balance of $10,000 at December 31, 2019 is due to unrelated parties and are repayableCentury River Limited, a company controlled by the Company’s CEO, Mark White. This loan is due on demand and bears interest bearingof 3% per annum.

c) Bespoke Growth Partners

The loan payable in the amount of $100,000 is due to Bespoke Growth Partners. This loan was due on January 26, 2020 and bore interest of 20% per annum. During 2020 the loan is in the process of repayment by way of stock issuances to Bespoke Growth Partners. As at average ratesApril 21, 2020 the Company repaid $64,382 by issuing a total of 5.4%7,424,213 shares of common stock to Bespoke Growth Partners.

d) Labrys Fund

The loan payable in the amount of $180,000 is due to Labrys Fund LP. This loan was due on January 24, 2020 and bore interest of 12% per year.annum. The Loan was repaid in full on the due date.


Note 9.7. Share Capital

 

Common Stock

 

The Company is authorized to issue 200 million shares of common stock, par value of $0.0001.

 

During the year ended December 31, 2019, the Company issued shares of common stock as follows:

81,933 shares of common stock, with a fair value of $126,760, as additional compensation related to acquisition of Browning.
200,000 shares of common stock, with a fair value of $150,000, for consulting services to be provided.
100,000 shares of common stock with a fair value of $38,750 for consulting services to be provided
179,104 shares of common stock as security against the loan payable to Labrys Fund LP. The shares were received back by the Company for cancellation in February 2020.
370,000 shares of common stock for a commitment fee payable to Crownbridge Partners

During the year ended December 31, 2019, 340,000 shares of common stock, issued in December 2018 was returned to the company for cancellation and the related share subscription due was cancelled.

During the year ended December 31, 2018, the Company:

 

 Issued 225,0009,000 shares of common stock for services with a fair value of $357,750

 Issued 1,333,33453,334 shares of common stock, with a fair value of $1.4 million, for the acquisition of 51% of Once in a Lifetime

 Issued 100,0004,000 shares of common stock for services provided with a fair value of $204,000

 Issued 504,16720,167 shares of common stock for conversion of convertible note and accrued interest in the amount of $302,500

 Issued 172,2226,889 shares of common stock for conversion of convertible note and accrued interest in the amount of $103,000

 Issued 172,2226,889 shares of common stock for services provided with a fair value of $200,000

 Issued 750,00030,000 shares of common stock for exercise of warrants at a price of $0.75$18.75 per share.

 Issued 50,0002,000 shares of common stock for services provided with a fair value of $80,000.

 Issued 1,376,14755,046 shares of common stock, with a fair value of $1,541,285, as part consideration for the acquisition of Love Media House, Inc.

 Issued 100,0004,000 shares of common stock for services to be provided with a fair value of $85,000.
 
Issued 225,0009,000 shares of common stock for services to be provided with a fair value of $168,750
 
Issued 850,00034,000 shares of common stock for services provided with a fair value of $425,000

 Issued 7,383,000295,320 shares of common stock, for the acquisition of 51% of Banana Whale Studios Pte., Ltd see note 3.
 
Issued 1,575,00063,000 shares of common stock for services provided with a fair value of $787,500
 
Issued 850,00034,000 shares of common stock for exercise of warrants at a price of $0.50$12.50 per share
 Issued 600,00024,000 shares of common stock for services provided with a fair value of $306,000
 
Issued 300,00012,000 shares of common stock for services provided with a fair value of $150,000
 
Issued 1,750,00070,000 shares of common stock for cash of $0.20$5.00 per share

 Issued 1,850,00074,000 shares of common stock for exercise of warrants at a price of $0.10$2.50 per share
 Issued 35,0001,400 shares of common stock, with a fair value of $18,200, for an option to acquire an interest in Browning Productions.
 
Issued 1,525,00061,000 shares of common stock for cash of $114,375
 
Issued 975,00039,000 shares of common stock for exercise of warrants at a price of $0.075$1.88 per share
 Issued 4,500,000180,000 shares of common stock for cash of $360,000
 
Issued 1,000,00040,000 shares of common stock for services provided with a fair value of $175,000
 
Issued 3,000,000120,000 shares of common stock for acquisition of software with a fair value of $548,000
 
Issued 150,0006,000 shares of common stock, with a fair value of $51,000, for the acquisition of 51% of Browning Productions.
 
Issued 5,550,000222,000 shares of common stock for services provided with a fair value of $1,148,000
 
Issued 4,250,000170,000 shares of common stock for cash of $324,500
 
Issued 4,250,000170,000 shares of common stock for exercise of warrants at a price of $0.20$5.00 per share
 Issued 354,40914,176 shares of common stock, with a fair value of $96,000, pursuant to a settlement
 
Issued 2,000,00080,000 shares of common stock, with a fair value of $344,000, as an adjustment to the purchase price of Love Media House, Inc.
 
Issued 9,500,000380,000 shares of common stock for subscription receivable of $1,425,000

During the year ended December 31, 2017 the Company:

Issued 91,667 shares of common stock for services provided with a fair value of $176,055
Issued 127,366 shares of common stock for exercise of warrants at a price of $0.80 per share
Issued 417,461 shares of common stock for cash proceeds of $265,000
Issued 859,802 shares of common stock for settlement of related party loan in the amount of $662,048
Issued 3,000,000 shares of common stock in connection with five year employment contracts for executives with a fair value of $2,750,000
Issued 55,556 shares of common stock for exercise of warrants at a price of $0.80 per share
Issued 37,500 shares of common stock for settlement of amount owing of $30,000
Issued 13,000,000 shares of common stock as part of settlement of convertible debenture and accrued interest in the amount of $3,350,000
Issued 4,000,000 shares of common stock for redemption of 555,555 shares of Series A-1 Preferred Stock
Issued 108,333 shares of common stock for services provided with a fair value of $83,416
Issued 833,334 shares of common stock for the exercise of warrants at a price of $0.60 per share
Issued 1,075,000 shares of common stock for services provided with a fair value of $1,161,000
Issued 350,000 shares of common stock for the exercise of warrants at a price of $0.60 per share
Issued 155,000 shares of common stock for the exercise of warrants at a price of $0.80 per share

Stock Purchase Warrants

 

As at December 31, 2018,2019, the Company had reserved 185,1692,890 shares of its common stock for the outstanding warrants with weighted average exercise price of $0.80.$20.00. Such warrants expire at various times up tothrough July 2020.

 

During the year ended December 31, 2018, 5,225,0002019, no warrants were issued 301,219or exercised and 4,518 warrants were forfeited.

During the year ended December 31, 2018, 209,000 warrants were issued, 12,099 warrants were forfeited and 8,675,000347,000 warrants were exercised, for proceeds of $2,096,000.

 

During the year ended December 31, 2018, the Company agreed to reduce the exercise price on 6.50.26 million outstanding warrants, which resulted in additional compensation cost of $544,000, in order to obtain additional funding.

Under the engagement agreement with Maxim Group LLC, the Company has agreed for any financing arranged by Maxim for the Company, during the contractual period, the Company will in addition to paying a cash fee of up to 7% of funds raised to deliver a cash warrant to Maxim to purchase shares in the Company equal to 4% of the number of shares issued in the financing. The warrants will be exercisable at 120% of the pricing of the common stock issued in the raise. The exercisable period is 12 months from the date of the raise, thereafter if not exercised the warrants will lapse.

   

Note 10.8. Stock-Based Compensation

 

The shareholders approved a stock option plan onOn August 6, 2013, the Company’s shareholders approved the 2013 Equity Incentive Plan (“2013 Plan”). The 2013 Plan isprovides for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, cash bonuses and other stock-based awards to employees, directors and consultants of the Company. Following the reorganization in August 2017, all outstanding employee stock options were forfeited under the rules of the Plan.

 

There have beenwere no options issued in the years ended December 31, 20172019 and 2018.


A summary of the 2013 Plan2018 and there are no options for the twelve months endedoutstanding as at December 31, 2017, is as follows:

  Number of  Weighted
Average
 
  Options  Exercise Price 
       
Outstanding at January 1, 2017  141,250  $14.83 
Forfeited  (141,250)  22.61 
Outstanding at December 31, 2017     N/A 

During the year ended December 31, 2018 there was no stock option activity relating to the 2013 Plan. 

Prior to the 2013 Plan the Company issued stock options to employees under other stock plans.

A summary of the Company’s other stock options for the year ended December 31, 2017, is as follows:

  Number of  Weighted
Average
 
  Options  Exercise Price 
       
Outstanding at January 1, 2017  145,950  $3.18 
Forfeited  (145,950)  22.61 
Outstanding at December 31, 2017     N/A 

During the year ended December 31, 2018 there was no stock option activity relating to other stock plans. 2019.

 

In March 2018, the Company adopted anthe 2018 Equity Incentive Plan (“the 2018(the “2018 Plan”) to provide additional incentives to the employees, directors and consultants of the Company to promote the success of the Company’s business. During the year ended December 31, 2018,2019, no common stock of the Company was issued under the 2018 Plan.


Note 11.9. Income Taxes

 

The difference between the U.S.applicable statutory federal tax raterates and the provision for income tax recorded by the Company is primarily attributable to the change in the Company’s valuation allowance against its deferred tax assets and to a lesser extent to the tax the differential ontreatment of certain gains and losses in foreign countries.

Deferred Tax Assetsrecorded under GAAP.

  

The potential benefit of net operating loss carryforwards has not been recognized in the consolidated financial statements since the Company cannot determine that it is more likely than not that such benefit will be utilized in future years. The tax years 2006 through 20172019 remain open to examination by federal authorities in certain jurisdictions in which the Company operates, namely China and Hong Kong. The components of the net deferred tax assets and the amount of the valuation allowance are as follows:(in thousands)

 

 December 31  December 31, 
 2018 2017  2019  2018 
          
Deferred tax assets             
Net operating loss carryforwards 3,577 2,138   4,494   3,577 
Valuation allowance  (3,577)  (2,138)  (4,494)  (3,577)
Net deferred tax assets $ $  $  $ 

On December 22, 2017, the Tax CutsThe Company continually evaluates its uncertain income tax positions and Jobs Act of 2017 became law (the “Tax Act”). The Tax Act enactsmay record a broad range of changesliability for any unrecognized tax benefits resulting from uncertain income tax positions taken or expected to the Internal Revenue Code of 1986,be taken in an income tax return. Estimated interest and penalties are recorded as amended (the “IRC”). The Tax Act, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibilitya component of interest expense and net operating losses, allows forother expense, respectively.

Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the expensing of capital expendituresCompany makes certain estimates and puts into effect the migration from a “worldwide” system of taxation to a territorial system. Theassumptions in: (1) calculating its income tax reform did not have a material impact to our financial statements as our netexpense, deferred tax assets, and liabilities are fully reserved. We urge our stockholdersdeferred tax liabilities; (2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to consult with their legalsuch uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax advisors with respect to any such legislationbenefits ultimately realized. Historically, the Company has not filed income tax returns and the potential tax consequences of investingrelated required informational filings in our common stock.

Note 12. Segment Information

the U.S. Certain informational filings if not filed contain penalties. The Company is currently addressing this issue with advisors to determine the amount of potential payments due. Given the complexity of the issue the Company is unable to quantify a range of potential loss. Accordingly, no liability has the following business segments for the year ended December 31, 2018 and 2017.

The Company’s revenues for continuing operations were generatedbeen recorded in the following business segments (in thousands)

  December 31,  December 31, 
  2018  2017 
       
Sale of secure messaging licenses $228  $714 
123Wish (from January 2018)  109    
Love Media House (from March 2018)  446    
Browning Productions (from November 2018)  4     
Total $787  $714 

 The following is a detailaccompanying consolidated balance sheets in respect of this matter. However, such potential penalties may be material to the Company’s cost of sales by business segment:financial statements.

  December 31,  December 31, 
  2018  2017 
       
Sale of secure messaging licenses including amortization of software $1,577  $855 
123Wish (from January 2018)  404    
Love Media House (from March 2018)  258    
Browning Productions (from November 2018)      
Total $2,239  $855 

The following is a detail of the Company’s general and administrative and other expenses by business segment:

  December 31,  December 31, 
  2018  2017 
       
Sale of secure messaging licenses including impairment charge $4,021  $ 
123Wish (from January 2018)  869    
Love Media House (from March 2018)  490    
Browning Productions (from November 2018)  12    
Corporate  7,383   4,253 
Total $12,775  $4,253 

 The following is a detail of the Company’s other income and expenses by business segment:

  December 31,  December 31, 
  2018  2017 
       
Sale of secure messaging licenses $  $ 
123Wish (from January 2018)      
Love Media House (from March 2018)      
Browning Productions (from November 2018)  22    
Corporate  534   (665) 
Total $556  $(665) 


The following is a detail of the continuing net (loss) by business segment:

  December 31,  December 31, 
  2018  2017 
       
Sale of secure messaging licenses $(5,327) $(149) 
123Wish (from January 2018)  (760)   
Love Media House (from March 2018)  (135)    
Browning Productions (from November 2018)  14    
Corporate  (7,463)  (4,910)
Total $(13,671) $(5,059)

  

Note 13.10. Legal proceedingsProceedings

 

On May 30, 2018, Zhanming Wu (“Wu”),The Company has received a claim from the record ownerlandlord of 15,000,000 shares of common stock of One Horizon Group, Inc. (the “Company”), commenced an action in the Court of Chancery of the State of Delaware [Case No.2018-0387-JRS; the “Injunction Action”] againsta property leased by Maham LLC, under which the Company is a guarantor. The Company has taken legal advice and its directorscounsel is liaising with the landlord regarding the claim and officers (collectively, the “Director Defendants”) alleging multiple breaches of contract between theis also discussing a solution to Maham’s financial difficulty.

The Company and Wu, and seeking (i) damages; (ii) to enjoin the Companyhas also been served a claim from issuing, offering, selling or granting any shares of its common stock to any person or entity, or consummate any merger, acquisition or similar transaction without the prior approval of Wu, and to prevent the Individual Defendants from undermining that right by engaging in any further transactions designed to entrench themselves as directors and officers of the Company and to dilute Wu’s stock ownership below 30% of the outstanding shares of the Company, (iii) to enforce Wu’s right to appoint four directors to the Company’s Board of Directors, (iv) to rescind the issuance of 7,383,000 shares to the former stockholdersmanagement of Banana Whale Studios Pte. Ltd (“Banana Whale”)Love Media regarding a claim for unpaid wages. The Company disputes the validity of their claim in exchange for 51% of the outstanding shares of Banana Whale (the “Banana Whale Acquisition”), (iv) to obtain a declaration that the Individual Defendants have breached their fiduciary duty of loyalty by taking actions to entrench themselves on the Company’s Board of Directors; and (v) seeking an award of attorneys’ fees and costs in connection with the litigation and such other relief as the Court deems fair and equitable.its entirety. 

Note 11. Subsequent Events

 

On June 11, 2018, Wu commencedAugust 5, 2019, the Company entered into a second action inConsulting Agreement pursuant to which, the Court of Chancery of the State of Delaware [Case No.2018-0427-JRS; the “225 Action”] under Section 225 of the Delaware General Corporation Law seeking (i)Company agreed to appoint four directorsissue and immediately and irrevocably deliver to the Company’s Boardconsultant 2,500,000 restricted shares of Directors, (ii) to enjoinCompany common stock. On April 21, 2020, the Company entered into the Accord and its affiliates from issuing, offering, selling or granting anyFirst Amended Consulting Agreement, dated as of April 16, 2020, pursuant to which the Company agreed to issue 5,000,000 shares of the Company’s common stock to any person or entity, or consummate any merger, acquisition or similar transaction without the prior approval of Wu duringconsultant. In addition, pursuant to the pendencyterms of the action and (iii) seeking an award of attorneys’ fees and costs in connection with the litigation and such other relief as the Court deems fair and equitable.

On October 15, 2018,Consulting Agreement, the parties entered into an agreement (the “Settlement Agreement”) which provides foragreed that the immediate cessation of all activities in the two actions and which will result in the dismissal of the two actions upon the fulfillment by2,500,000 shares that were issued would not be subject to a reverse split. As previously disclosed, on September 26, 2019, the Company of certain conditions. Among the conditions to dismissal which the Company is required to meet to obtain the complete dismissal of the actions are the issuance of 354,409 shares to Wu to reimburseeffected a portion of the expenses incurred in connection with the actions, the nomination and election to the Company’s Board of Directors of up to two individuals designated by Wu, the redemption of up to approximately 850,000 shares of common1-for-25 reverse stock at $0.65 each, from certain investors whom Wu recommended to invest in the Company (the “Additional Investors”) should they request that the Company do so and the facilitation of the sale of sharessplit of the Company’s common stock by Wu, including the registration of such shares for sale under the Securities Act. Based on ASC 840, which requires that conditionally redeemable securities be classified outside of permanent stockholders’ equity, $605,000 was reclassified as mezzanine equity effective October 15, 2018. Pending the re-election of Wu’s nominees(the “Reverse Split”). Pursuant to the Board of Directors at the Company’s 2018 Annual Meeting of Stockholders, the Company will continue to comply with the terms of the Status Quo Order issued in July in connection with the 225 Action. The 225 Action will be dismissedAccord and First Amended Consulting Agreement, the Company will no longer be obligedagreed to comply with the Status Quo Order upon the re-election of Wu’s nomineesissue to the Boardconsultant an additional 2,400,000 shares of Directors atCompany common stock as a corrective share issuance that the Company’s 2018 Annual Meetingparties agreed was fully earned by the consultant as of Stockholders.August 20, 2019.

 

A StipulationOn April 20, 2020, the Company entered into an Agreement, dated as of DismissalApril 16, 2020, pursuant to which the Company agreed to issue and immediately and irrevocably deliver to a consultant 2,000,000 restricted shares of Company common stock. With regard to any acquisition of a company introduced by the consultant that results in respectownership by the Company of not less than 20% of such company, the Company agreed to compensate the consultant within three business days of closing of such transaction by that amount of cash that equates to 5% of the Injunction Action will be filed and the parties will exchange releases upon the fulfillmentanticipated total purchase price or deal value or that amount of certain conditions, including the registration of Wu’s shares and the removalCompany stock that equates to 7.5% of the restrictive legend from Wu’s shares and the shares held by the Additional Investors. Notwithstanding such dismissal, should the registration of Wu’s shares lapse for any reason prior to October 1, 2019, Wu shall be entitled to enforce his rights under the side letters which were the basis of many of his claims, which letters are deemed to be a part of the Settlement Agreement as if set forth therein. If the Dismissal Stipulation has been filed in the Injunction Action and Wu’s shares have remained continuously registered until October 1, 2019, the side letters shall be deemed of no force and effect.anticipated purchase price or deal value.

 

On April 24, 2020, the Company issued an aggregate of 5,000,000 shares to an employee in advance of stock awards due to him.

F-22

F-26