UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 20212022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number: 001-36530
Touchpoint Group Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 46-3561419 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer | |
4300 Biscayne Blvd, Suite 203 | 33137 | |
(Address of principal executive offices) | (Zip Code) |
(305) 420-6640
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which | ||
N/A | N/A | N/A |
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 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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of August 02, 2021,10, 2022, there were outstanding shares of the registrant’s common stock, par value $0.0001 per share, were outstanding.share.
TABLE OF CONTENTS
1 | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| ||
| |||
| |||
| |||
| |||
| |||
| |||
| |||
| |||
| |||
| |||
i
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
The statements made in this Report, and in other materials that the Company has filed or may file with the Securities and Exchange Commission, 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 and Section 21E of the Securities Exchange Act of 1934, both as amended, 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.
In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this report 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 report or the date of the document incorporated by reference in this report. 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 Report, or in the documents it incorporates by reference into this Report, 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.
ii
PARTPART I – FINANCIAL INFORMATION
ITEMITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
TOUCHPOINT GROUP HOLDINGS, INC.
Condensed Consolidated Balance Sheets
June 30, 20212022 and December 31, 20202021
(in thousands, except share data)
| June 30, 2022 (unaudited) | December 31, 2021 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 16 | $ | 147 | ||||
| Accounts receivable, net | 15 | 31 | ||||||
| Prepaid compensation | 92 | 367 | ||||||
| Prepaid Air Race expenditure | 966 | 490 | ||||||
| Other current assets | 46 | 41 | ||||||
| Total | 1,135 | 1,076 | ||||||
| Current assets of discontinued operations | 1 | 1 | ||||||
| Total current assets | 1,136 | 1,077 | ||||||
| Fixed assets, net | 555 | 354 | ||||||
| Intangible assets, net | 154 | 91 | ||||||
| Goodwill | 419 | 419 | ||||||
| Non current assets of discontinued operations | 5 | 5 | ||||||
| Total assets | $ | 2,269 | $ | 1,946 | ||||
| Liabilities, Temporary Equity and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 413 | $ | 339 | ||||
| Accrued expenses | 702 | 534 | ||||||
| Accrued compensation | 196 | 277 | ||||||
| Deferred revenue | 750 | 20 | ||||||
| Loans payable | 1,909 | 1,510 | ||||||
| Amount due to related parties | 131 | 81 | ||||||
| Share prepayment | 60 | 60 | ||||||
| Promissory notes, related parties | 1,000 | 1,000 | ||||||
| Current liabilities of continued operations | 5,161 | 3,821 | ||||||
| Current liabilities of discontinued operations | 11 | 11 | ||||||
| Total current liabilities | 5,172 | 3,832 | ||||||
| Total liabilities | 5,172 | 3,832 | ||||||
| Temporary Equity – redeemable common stock outstanding shares | 605 | 605 | ||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock: $ par value, authorized ; shares issued and outstanding (2021 – ) | | | 41 | | | | — | |
| Common stock: $ par value, authorized ; and shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | | | 40 | | | | 32 | |
| Additional paid-in capital | 68,086 | 66,633 | ||||||
| Accumulated deficit | (72,621 | ) | (70,102 | ) | ||||
| Accumulated other comprehensive loss | (24 | ) | (24 | ) | ||||
| Total Touchpoint Group Holdings, Inc. stockholders’ deficit | (4,478 | ) | (3,461 | ) | ||||
| Equity attributable to non-controlling interest | 970 | 970 | ||||||
| Total stockholders’ deficit | (3,508 | ) | (2,491 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 2,269 | $ | 1,946 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
1
TOUCHPOINT GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Operations
For the three and six months ended June 30, 2022 and 2021
(in thousands, except per share data)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | 1 | $ | 34 | $ | 31 | $ | 66 | ||||||||
| Cost of revenue: | ||||||||||||||||
| Amortization of intangible assets | 31 | 139 | 62 | 279 | ||||||||||||
| Total cost of revenue | 31 | 139 | 62 | 279 | ||||||||||||
| Gross deficit | (30 | ) | (105 | ) | (31 | ) | (213 | ) | ||||||||
| Expenses: | ||||||||||||||||
| General and administrative | 891 | 745 | 1,497 | 1,733 | ||||||||||||
| Loss from operations | (921 | ) | (850 | ) | (1,528 | ) | (1,946 | ) | ||||||||
| Other income and expense: | ||||||||||||||||
| Interest expense | (512 | ) | (100 | ) | (941 | ) | (186 | ) | ||||||||
| Foreign exchange | (53 | ) | — | (54 | ) | (1 | ) | |||||||||
| Other (expense) income | — | (290 | ) | 4 | (290 | ) | ||||||||||
| Total other income and expenses | (565 | ) | (390 | ) | (991 | ) | (477 | ) | ||||||||
| Loss for the period | (1,486 | ) | (1,240 | ) | (2,519 | ) | (2,422 | ) | ||||||||
| Loss from discontinued operations | — | (50 | ) | — | (50 | ) | ||||||||||
| Net loss attributable to Touchpoint Group Holdings Inc. common stockholders | $ | (1,486 | ) | $ | (1,290 | ) | $ | (2,519 | ) | $ | (2,472 | ) | ||||
| Earnings per share | ||||||||||||||||
| Basic and diluted net loss per share | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
| Weighted average number of shares outstanding | ||||||||||||||||
| Basic and diluted | 368,397 | 17,186 | 348,684 | 166,613 | ||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
2
TOUCHPOINT GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Comprehensive Loss
For the three and six months ended June 30, 2022 and 2021
(in thousands)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net loss | $ | (1,486 | ) | $ | (1,290 | ) | $ | (2,519 | ) | $ | (2,472 | ) | ||||
| Foreign currency translation adjustment | — | — | — | — | ||||||||||||
| Total comprehensive loss | $ | (1,486 | ) | $ | (1,290 | ) | $ | (2,519 | ) | $ | 2,472 | ) | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
TOUCHPOINT GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Equity
For the six months ended June 30, 2022 and 2021
(in thousands)
(unaudited)
|
| June 30, |
|
| December 31, |
| ||
Assets |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash |
| $ | 114 |
|
| $ | 118 |
|
Accounts receivable, net |
|
| 148 |
|
|
| 124 |
|
Prepaid compensation |
|
| 550 |
|
|
| 550 |
|
Other receivable |
|
| - |
|
|
| 66 |
|
Other current assets |
|
| 187 |
|
|
| 160 |
|
Current assets of continued operations |
|
| 999 |
|
|
| 1,018 |
|
Current assets of discontinued operations |
|
| 1 |
|
|
| 1 |
|
Total current assets |
|
| 1,000 |
|
|
| 1,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net |
|
| 3 |
|
|
| 3 |
|
Intangible assets, net |
|
| 660 |
|
|
| 930 |
|
Goodwill |
|
| 419 |
|
|
| 419 |
|
Prepaid compensation, net of current portion |
|
| 92 |
|
|
| 367 |
|
Non current assets of discontinued operations |
|
| 5 |
|
|
| 5 |
|
Total assets |
| $ | 2,179 |
|
| $ | 2,743 |
|
|
|
|
|
|
|
|
|
|
Liabilities, Temporary Equity and Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 262 |
|
| $ | 314 |
|
Accrued expenses |
|
| 421 |
|
|
| 327 |
|
Accrued compensation |
|
| 89 |
|
|
| 55 |
|
Deferred revenue |
|
| 70 |
|
|
| 60 |
|
Loans payable |
|
| 1,180 |
|
|
| 734 |
|
Amount due to related parties |
|
| 19 |
|
|
| 34 |
|
Settlement liability |
|
| 290 |
|
|
| - |
|
Promissory notes, related parties |
|
| 1,000 |
|
|
| 1,000 |
|
Current liabilities of continued operations |
|
| 3,331 |
|
|
| 2,524 |
|
Current liabilities of discontinued operations |
|
| 61 |
|
|
| 11 |
|
Total current liabilities |
|
| 3,392 |
|
|
| 2,535 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 3,392 |
|
|
| 2,535 |
|
|
|
|
|
|
|
|
|
|
Temporary Equity – redeemable common stock outstanding shares |
|
| 605 |
|
|
| 605 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Preferred stock: |
|
|
|
|
|
|
|
|
$ par value, authorized ; shares issued and outstanding |
|
| — |
|
|
| — |
|
Common stock: |
|
|
|
|
|
|
|
|
$ par value, authorized ; and shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively |
|
| 18 |
|
|
| 13 |
|
Additional paid-in capital |
|
| 64,597 |
|
|
| 63,551 |
|
|
|
|
|
|
|
|
|
|
Accumulated deficit |
|
| (67,379 | ) |
|
| (64,907 | ) |
Accumulated other comprehensive loss |
|
| (24 | ) |
|
| (24 | ) |
Total Touchpoint Group Holdings, Inc. stockholders’ deficit |
|
| (2,788 | ) |
|
| (1,367 | ) |
Equity attributable to non-controlling interest |
|
| 970 |
|
|
| 970 |
|
Total stockholders’ deficit |
|
| (1,818 | ) |
|
| (397 | ) |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit |
| $ | 2,179 |
|
| $ | 2,743 |
|
| Temporary Equity | Preferred Stock | Common Stock | Additional Paid-in Capital | Retained Earnings (Deficit) | Accumulated Other Comprehensive Income (Loss) | Non-controlling interst | Total Equity | |||||||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | |||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2020 | 34 | $ | 605 | — | $ | — | 129,290 | $ | 13 | $ | 63,551 | $ | (64,907 | ) | $ | (24 | ) | $ | 970 | $ | (397 | ) | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (1,182 | ) | — | — | (1,182 | ) | |||||||||||||||||||||||||||||||
| Issuance of shares on partial conversion of note payable | — | — | — | — | 29,702 | 3 | 315 | — | — | — | 318 | |||||||||||||||||||||||||||||||||
| Issuance of shares for loan commitment | — | — | — | — | 3,750 | — | 173 | — | — | — | 173 | |||||||||||||||||||||||||||||||||
| Issuance of shares for services | — | — | — | — | 7,925 | 1 | 163 | — | — | — | 164 | |||||||||||||||||||||||||||||||||
| Issuance of shares for services to be provided | — | — | — | — | 1,500 | — | 20 | — | — | — | 20 | |||||||||||||||||||||||||||||||||
| Balance March 31, 2021 | 34 | 605 | — | — | 172,167 | 17 | 64,222 | (66,089 | ) | (24 | ) | 970 | (904 | ) | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (1,182 | ) | — | — | (1,182 | ) | |||||||||||||||||||||||||||||||
| Issuance of shares for conversion of loans payable | — | — | — | — | 29,702 | 3 | 315 | — | — | — | 318 | |||||||||||||||||||||||||||||||||
| Issuance of shares for loan commitment fees | — | — | — | — | 3,750 | — | 173 | — | — | — | 173 | |||||||||||||||||||||||||||||||||
| Issuance of shares for financing commitment | — | — | — | — | 1,500 | — | 26 | — | — | — | 26 | |||||||||||||||||||||||||||||||||
| Issuance of shares for services | — | — | — | — | 7,925 | 1 | 163 | — | — | — | 164 | |||||||||||||||||||||||||||||||||
| Balance June 30, 2021 | 34 | $ | 605 | — | $ | — | 215,044 | $ | 21 | $ | 64,899 | $ | (67,271 | ) | $ | (24 | ) | $ | 970 | $ | (1,405 | ) | ||||||||||||||||||||||
| Balance January 01, 2022 | 34 | $ | 605 | 20 | $ | — | 316,086 | $ | 32 | $ | 66,633 | $ | (70,102 | ) | $ | (24 | ) | $ | 970 | $ | (2,491 | ) | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (1,033 | ) | — | — | (1,033 | ) | |||||||||||||||||||||||||||||||
| Issue of Class B preferred shares | — | — | 321 | 32 | — | — | 289 | — | — | — | 321 | |||||||||||||||||||||||||||||||||
| Proceeds from issuance of Class A preferred shares and conversion to common shares | — | — | (10 | ) | — | 10,000 | 1 | 124 | — | — | — | 125 | ||||||||||||||||||||||||||||||||
| Conversion of Class A preferred shares to common shares | — | — | (10 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Warrants issued for financing commitments | — | — | — | — | — | — | 409 | — | — | — | 409 | |||||||||||||||||||||||||||||||||
| Issuance of common shares for license agreement | 10,000 | 1 | 124 | — | — | — | 125 | |||||||||||||||||||||||||||||||||||||
| Balance March 31, 2022 | 34 | $ | 605 | 321 | $ | 32 | 336,086 | $ | 34 | $ | 67,579 | $ | (71,135 | ) | $ | (24 | ) | $ | 970 | $ | (2,544 | ) | ||||||||||||||||||||||
| Net loss | (1,486 | ) | (1,486 | ) | ||||||||||||||||||||||||||||||||||||||||
| Issue of Class B preferred shares | 88 | 9 | 79 | 88 | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares on cashless exercise of warrants | — | — | — | 43,875 | 4 | (4 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||
Issuance of common shares for partial settlement of amounts owed | 16,000 | 2 | 18 | 20 | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for services provided | 4,000 | 20 | 20 | |||||||||||||||||||||||||||||||||||||||||
| Warrants issued for financing commitments | 394 | 394 | ||||||||||||||||||||||||||||||||||||||||||
| Balance June 30, 2022 | 34 | $ | 605 | 409 | $ | 41 | 399,961 | $ | 40 | $ | 68,086 | $ | (72,621 | ) | $ | (24 | ) | $ | 970 | $ | (3,508 | ) | ||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
TOUCHPOINT GROUP HOLDINGS, INC.
Condensed Consolidated Statements of OperationsCash Flows
For the three and six months ended June 30, 20212022 and 20202021
(in thousands, except per share data)thousands)
(unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | 34 |
|
| $ | 150 |
|
| $ | 66 |
|
| $ | 190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software and production costs |
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
Amortization of intangible assets |
|
| 139 |
|
|
| 139 |
|
|
| 278 |
|
|
| 278 |
|
|
|
| 139 |
|
|
| 139 |
|
|
| 279 |
|
|
| 278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (deficit) |
|
| (105 | ) |
|
| 11 |
|
|
| (213 | ) |
|
| (88 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| 745 |
|
|
| 742 |
|
|
| 1,732 |
|
|
| 1,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (850 | ) |
|
| (731 | ) |
|
| (1,945 | ) |
|
| (1,329 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (100 | ) |
|
| (74 | ) |
|
| (186 | ) |
|
| (122 | ) |
Interest income |
|
| - |
|
|
| - |
|
|
|
|
|
|
| 3 |
|
Foreign exchange |
|
| - |
|
|
| (1 | ) |
|
| (1 | ) |
|
| (2 | ) |
Legal settlement expense |
|
| (290) |
|
|
| - |
|
|
| (290 | ) |
|
| - |
|
Other (expense) income |
|
| - |
|
|
| (2 | ) |
|
| - |
|
|
| 604 |
|
Other income and expense |
|
| (390 | ) |
|
| (77 | ) |
|
| (477 | ) |
|
| 483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before discontinued operations for the period |
|
| (1,240 | ) |
|
| (808 | ) |
|
| (2,422 | ) |
|
| (846 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations |
|
| (50 | ) |
|
| - |
|
|
| (50 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Touchpoint Group Holdings Inc. common stockholders |
| $ | (1,290 | ) |
| $ | (808 | ) |
| $ | (2,472 | ) |
| $ | (846 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share |
| $ | (0.01 | ) |
| $ | (0.03 | ) |
| $ | (0.01 | ) |
| $ | (0.05 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
| 178,160 |
|
|
| 27,354 |
|
|
| 166,613 |
|
|
| 18,034 |
|
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss for the period | $ | (2,519 | ) | $ | (2,472 | ) | ||
| Adjustment to reconcile net loss for the period to net cash flows from operating activities: | ||||||||
| Shares issued for financing commitment | — | 196 | ||||||
| Fair value of warrants issued for financing commitment | — | 117 | ||||||
| Amortization of intangible assets | 62 | 278 | ||||||
| Shares issued for services to be provided | 20 | 344 | ||||||
| Non-cash interest | 647 | 18 | ||||||
| Amortization of shares issued for services | 275 | 277 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 16 | (24 | ) | |||||
| Deferred revenue | 750 | 10 | ||||||
| Other assets | (482 | ) | 59 | |||||
| Settlement liability | — | 290 | ||||||
| Accounts payable and accrued expenses | 161 | 76 | ||||||
| Net cash flows from operating activities – continuing operations | (1,070 | ) | (831 | ) | ||||
| Net cash flows from operating activities – discontinued operations | — | 50 | ||||||
| Net cash flows from operating activities | (1,070 | ) | (781 | ) | ||||
| Cash used in investing activities: | ||||||||
| Purchase of intangible assets | — | (8 | ) | |||||
| Purchase of fixed assets | (201 | ) | — | |||||
| Net cash flows from investing activities | (201 | ) | (8 | ) | ||||
| Cash flows from financing activities: | ||||||||
Proceeds from issuance of preferred shares | 534 | — | ||||||
| Repayment of loans | (584 | ) | (100 | ) | ||||
| Advances from related parties, net | 50 | (15 | ) | |||||
| Proceeds from loans | 1,140 | 900 | ||||||
| Net cash flows from financing activities | 1,140 | 785 | ||||||
| Decrease in cash during the period | (131 | ) | (4 | ) | ||||
| Cash at beginning of the period | 147 | 118 | ||||||
| Cash at end of the period | $ | 16 | $ | 114 | ||||
| Supplementary Information: | ||||||||
| Non-cash financing transactions: | ||||||||
| Interest paid | 194 | — | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
TOUCHPOINT GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Comprehensive Loss
For the three and six months ended June 30, 2021 and 2020
(in thousands)
(unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | (1,290 | ) |
| $ | (808 | ) |
| $ | (2,472 | ) |
| $ | (846 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total comprehensive loss |
| $ | (1,290 | ) |
| $ | (808 | ) |
| $ | (2,472 | ) |
| $ | (846 | ) |
See accompanying notes to unaudited condensed consolidated financial statements.
TOUCHPOINT GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Equity
For the six months ended June 30, 2021 and 2020
(in thousands)
(unaudited)
|
| Temporary Equity |
|
| Common Stock |
|
| Additional |
|
|
|
|
| Accumulated |
|
| Accumulated |
|
| Non- |
|
| Total |
| |||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-In |
|
|
|
|
| Deficit |
|
| Loss |
|
| Interest |
|
| Equity(Deficit) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balances, January 1, 2020 |
|
|
|
| $ | 605 |
|
|
|
|
| $ | 2 |
|
| $ | 61,749 |
|
|
|
|
| $ | (61,362 | ) |
| $ | (24 | ) |
| $ | 1,002 |
|
| $ | 1,367 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
| (38 | ) |
|
| - |
|
|
|
|
|
|
| (38 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of shares on recission of contracts |
|
| - |
|
|
| 0 |
|
|
| ) |
|
| 0 |
|
|
| (2 | ) |
|
|
|
|
| 0 |
|
|
|
|
|
|
| (32 | ) |
|
| (34 | ) | |
Correction of shares not subject to reverse split |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| |
Issuance of shares on partial conversion of note payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 71 |
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 71 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for financing commitment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8 |
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 8 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2020 |
|
|
|
|
| 605 |
|
|
|
|
|
| 2 |
|
|
| 61,826 |
|
|
|
|
|
| (61,400 | ) |
|
| (24 | ) |
|
| 970 |
|
|
| 1,374 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
| (808 | ) |
|
| - |
|
|
|
|
|
|
| (808 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for cash |
|
| - |
|
|
| - |
|
|
|
|
|
| - |
|
|
| 20 |
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 20 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares on partial conversion of note payable |
|
|
|
|
|
|
|
|
|
|
|
|
| 1 |
|
|
| 28 |
|
| - |
|
|
|
| - |
|
|
| - |
|
| - |
|
|
| 29 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for financing commitment |
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| 26 |
|
| - |
|
|
| - |
|
|
|
| - |
|
|
| - |
|
| 26 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for services |
|
| - |
|
|
| - |
|
|
|
|
|
| 1 |
|
|
| 324 |
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 325 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2020 |
|
|
|
| $ | 605 |
|
|
|
|
| $ | 4 |
|
| $ | 62,224 |
|
|
| ) |
| $ | (62,208 | ) |
| $ | (24 | ) |
| $ | 970 |
|
| $ | 966 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, January 1, 2021 |
|
|
|
| $ | 605 |
|
|
|
|
| $ | 13 |
|
| $ | 63,551 |
|
|
|
|
| $ | (64,907 | ) |
| $ | (24 | ) |
| $ | 970 |
|
| $ | (397 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
| (1,182 | ) |
|
| - |
|
|
| - |
|
|
| (1,182 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for services provided |
|
|
|
|
|
|
|
|
|
|
|
|
| 1 |
|
|
| 163 |
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 164 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares on conversion of loans payable |
|
|
|
|
|
|
|
|
|
|
|
|
| 3 |
|
|
| 315 |
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 318 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services to be provided |
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| 20 |
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 20 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for loan commitment fees |
|
| - |
|
|
| - |
|
|
|
|
|
| - |
|
|
| 173 |
|
|
|
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| 173 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2021 |
|
|
|
|
| 605 |
|
|
|
|
|
| 17 |
|
|
| 64,222 |
|
|
|
|
|
| (66,089 | ) |
|
| (24 | ) |
|
| 970 |
|
|
| (904 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,290 | ) |
|
| - |
|
|
| - |
|
|
| (1,290 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants issued for financing commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares on conversion of note payable |
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| 56 |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
| 56 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for financing commitment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 23 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services to be provided |
|
|
|
|
|
|
|
|
|
|
|
|
| 1 |
|
|
| 179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 180 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2021 |
|
|
|
|
| 605 |
|
|
|
|
|
| 18 |
|
|
| 64,597 |
|
|
|
|
|
| (67,379 | ) |
|
| (24 | ) |
|
| 970 |
|
|
| (1,818 | ) | ||
See accompanying notes to unaudited condensed consolidated financial statements.
TOUCHPOINT GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2021 and 2020
(in thousands)
(unaudited)
|
| 2021 |
|
| 2020 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
| $ | (2,472 | ) |
| $ | (846 | ) |
|
|
|
|
|
|
|
|
|
Adjustment to reconcile net loss for the period to net cash flows from operating activities: |
|
|
|
|
|
|
|
|
Shares issued for financing commitment |
|
| 196 |
|
|
| 34 |
|
Fair value of warrants issued for financing commitment |
|
| 117 |
|
|
| - |
|
Amortization of intangible assets |
|
| 278 |
|
|
| 278 |
|
Gain on sale of interest in subsidiary |
|
| - |
|
|
| (604 | ) |
Shares issued for services to be provided |
|
| 344 |
|
|
| 256 |
|
Shares issued for settlement of accrued interest |
|
| 18 |
|
|
| - |
|
Loan discount |
|
| - |
|
|
| 57 |
|
Forgiveness of note receivable |
|
| - |
|
|
| 3 |
|
Amortization of shares issued for services |
|
| 277 |
|
|
| 329 |
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (24 | ) |
|
| (173 | ) |
Deferred revenue |
|
| 10 |
|
|
| - |
|
Other assets |
|
| 59 |
|
|
| (30 | ) |
Settlement liability |
|
| 290 |
|
|
|
|
|
Accounts payable and accrued expenses |
|
| 76 |
|
|
| 354 |
|
Net cash flows from operating activities – continuing operations |
|
| (831 | ) |
|
| (342 | ) |
Net cash flows from operating activities – discontinued operations |
|
| 50 |
|
|
| - |
|
Net cash flows from operating activities |
|
| (781 | ) |
|
| (342 | ) |
|
|
|
|
|
|
|
|
|
Cash used in investing activities: |
|
|
|
|
|
|
|
|
Purchase of intangible assets |
|
| (8 | ) |
|
| (10 | ) |
Purchase of fixed assets |
|
| - |
|
|
| (3 | ) |
Net cash flows from investing activities |
|
| (8 | ) |
|
| (13 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of shares |
|
| - |
|
|
| 20 |
|
Repayment of loans |
|
| (100 | ) |
|
| (190 | ) |
Advances from related parties, net |
|
| (15 | ) |
|
| - |
|
Proceeds from note receivable |
|
|
|
|
|
| 3 |
|
Proceeds from loans |
|
| 900 |
|
|
| 455 |
|
Net cash flows from financing activities |
|
| 785 |
|
|
| 288 |
|
|
|
| - |
|
|
| - |
|
Net cash flows from financing activities |
|
| 785 |
|
|
| 288 |
|
|
|
|
|
|
|
|
|
|
Decrease in cash during the period |
|
| (4 | ) |
|
| (67 | ) |
Foreign exchange effect on cash |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Cash at beginning of the period |
|
| 118 |
|
|
| 258 |
|
|
|
|
|
|
|
|
|
|
Cash at end of the period |
| $ | 114 |
|
| $ | 191 |
|
|
|
|
|
|
|
|
|
|
| Supplementary Information: | ||||||||
| Non-cash financing transactions: | ||||||||
Issuance of shares on conversion of loan payable |
|
| 18 |
|
|
| - |
|
See accompanying notes to unaudited condensed consolidated financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 20212022
Note 1. Description of Business, Organization and Principles of Consolidation
Description of Business
The Company has the following businesses:
(i) | Touchpoint Group Holdings, Inc. (“TGHI”) 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. | |
|
TGHI brings users closer to the action by enabling them to engage with clubs, favorite 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. |
|
|
TGHI signed a worldwide IP license and Royalty Agreement on February 22, 2022 with GBT Technologies Inc. “GBT” which enables TGHI to license GBT software and technology and to split any royalties earned with GBT on a 50/50 basis.
TGHI acquired certain rights to the World Championship Air Race (“WCAR”) on September 20, 2021, through an asset purchase agreement for approximately $70,000. Management and all key operational staff for the WCAR joined Touchpoint’s wholly owned subsidiary, Air Race Limited (“ARL”), under long-term agreements. In addition, all key supplier, participating host city and participating team contracts were assumed by ARL. WCAR is a race format developed by Red Bull as the Red Bull Air Race. |
|
|
The Company is primarily based in the United States of America and the United Kingdom
Interim Period Financial Statements
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. The results of operations reflect interim adjustments, all of which are of a normal recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for such interim period. The results reported in these interim condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Certain information and note disclosure normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the SEC’s rules and regulations. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020,2021, as filed with the SEC on April 9, 2021 and as amended.
Current Structure of the Company
The Company has the following subsidiaries:
|
| |||
|
|
| ||
|
|
| ||
|
|
| ||
|
|
| ||
|
|
| ||
In addition to the subsidiaries listed above, Suzhou Aishuo Network Information Co., Ltd (“Suzhou Aishuo”) is a limited liability company organized in China and controlled by the Company via various contractual arrangements. Suzhou Aishuo is treated as one of our subsidiaries, with limited operations, for financial reporting purposes in accordance with GAAP. During 2021, there have been limited operations at Suzhou Aishou.
During the six months ended June 30, 2021 the main trading of the Group is conducted through the Company and no significant activities are undertaken in the subsidiary companies.
All significant intercompany balances and transactions have been eliminated in consolidation. 15, 2022.
Note 2. Summary of Significant Accounting Policies
Liquidity and Capital Resources
The Company has incurred net losses and negative cash flows from 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 and the issuance of convertible debt instruments.
The Company will 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 June 30, 2021, the Company had cash of approximately $114,000. Together with the Company’s Equity Line with MacRab LLC, and current operational plan and budget, the Company believes that it has the potential to generate positive cash flows in 2022. However, actual results could differ materially from the Company’s projections.
Covid-19
The outbreak of the novel strain of coronavirus, specifically identified as “COVID- 19”, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operations in future periods.
Basis of Accounting and Presentation
These condensed consolidated financial statements have been prepared in conformity with GAAP.
Foreign Currency Translation
The reporting currency of the Company isgenerally accepted accounting principles in the United States dollar. Assets(“GAAP”) for interim financial information and liabilities other than those denominated in U.S. dollars, primarily inwith the United Kingdom, are translated into United States 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 partinstructions of the investment in the subsidiaries is sold or liquidated. The translation adjustmentsSecurities and Exchange Commission (the “SEC”). Accordingly, they do not recognizeinclude all the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations.
Transaction gainsinformation 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-term investments with maturities of three months or less when purchased. Cash consists of checking accounts held atfootnotes required by GAAP for complete financial institutions in the U.S. and the United Kingdom which balances may exceed insured limits at times. The Company has not experienced any losses related to these balances, and management believes the credit risk to be minimal. statements.
Accounts Receivable, Revenue Recognition and Concentrations
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:
— Continued operations
1 | Touchpoint – Revenue for the sale of |
— Discontinued operations
|
|
The Company does not have off-balance sheet credit exposure related to its customers. As of June 30, 2021 and December 31, 2020, seven customers and five customers respectively, accounted for 100% of the accounts receivable balance. One customer accounted for 100% of the revenue for the three and six months ended June 30, 2021, and 2020.
Intangible Assets
Intangible assets include software development costs and acquired technology 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.
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.
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.
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 three and six month periodsmonths ended June 30, 20212022 and 2020,2021, outstanding warrants and shares underlying convertible debt are antidilutive because of net losses, and as such, their effect was 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)Property, Plant and Equipment
Other comprehensive income (loss), as defined, includes net income (loss), foreign currency translation adjustment,Property and all changesequipment are stated at cost. Depreciation and amortization are provided for using straight-line methods, in equity (net assets) during a period from nonowner sources. To date,amounts sufficient to charge the Companycost of depreciable assets to operations over their estimated service lives. In October 2021, ARL began purchasing racing equipment to utilize in future racing events that has not had any significant transactions that are required to be reportedyet been placed in other comprehensive income (loss), except for foreign currency translation adjustments. service.
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 period. 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, determining fair values of assets acquired and liabilities assumed in business combinations, 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.
Recently adopted Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update permits the use of either the modified retrospective or fully retrospective method of transition. Effective January 1, 2021, the Company elected to early adopt ASU 2020-06, which did not have a material impact on the consolidated financial statements and related disclosures.
Note 3. Intangible Assets
Intangible assets consist of the following (in thousands):
|
| June 30 |
|
| December 31 |
| June 30 | December 31 | ||||||||
|
| 2021 |
|
| 2020 |
| 2022 | 2021 | ||||||||
|
| (unaudited) |
|
|
|
|
| (unaudited) | ||||||||
Touchpoint software |
| $ | 2,451 |
|
| $ | 2,443 |
| $ | 2,084 | $ | 2,084 | ||||
| Air Race Limited (intellectual property) | 79 | 79 | ||||||||||||||
| GBT License | 125 | — | ||||||||||||||
Less accumulated amortization |
|
| (1,791 | ) |
|
| (1,513 | ) | (2,134 | ) | (2,072 | ) | ||||
|
| 660 |
|
|
| 930 |
| 154 | 91 | |||||||
|
|
|
|
|
|
|
| |||||||||
Goodwill |
|
| 419 |
|
|
| 419 |
| 419 | 419 | ||||||
|
|
|
|
|
|
|
| |||||||||
Intangible assets, net |
| $ | 1,079 |
|
| $ | 1,349 |
| $ | 573 | $ | 510 | ||||
Note 4. Notes payable
a) Promissory notes, related parties
The promissory notes due to Zhanming Wu ($500,000)500,000) and the Company’s CEO, Mark White ($500,000)500,000), both considered related parties, including accrued interest of 7% per annum from issuance, were due for repayment on August 31, 2019. Such payments were not made and the parties are in negotiations to extend the maturity dates of the promissory notes. There can be no guarantee that commercially reasonable terms will agreed upon. As of June 30, 2021,2022, the counterparties had not demanded repayment of the promissory notes.
Convertible Loans Payable
| Lenders | General terms | Amount due at June 30, 2021 | Lender | General terms | Amount due at June 30, 2022 | Amount due at December 31, 2021 |
1 | Bespoke Growth Partners Convertible Note #1 | The loan was due on January 26, 2020 and bore interest of 20% per annum. During the year ended December 31, 2020, the Company repaid $84,210 of principal and $16,061 of interest on the note by issuing an aggregate of shares of Company common stock to Bespoke Growth Partners. | $15,790 | Bespoke Growth Partners Convertible Note #2 | In November 2019, the Company issued a convertible promissory note in the original principal amount of $300,000 to Bespoke Growth Partners. The note was due on May 21, 2020, with an interest rate of 20% per annum. During the year ended December 31, 2020 the Company received proceeds under the note of $175,000. In October 2021 the Company issued shares of common stock, with a fair value of $54,275, as partial payment. | $208,225 | $208,225 |
2 | Bespoke Growth Partners Convertible Note #2 | In November 2019, the Company issued a convertible promissory note in the original principal amount of $300,000 to Bespoke Growth Partners. The note was due on May 21, 2020, with an interest rate of 20% per annum. During the year ended December 31, 2020 the Company received proceeds under the note of $175,000. | $262,500 | Geneva Roth Remark Holdings, Inc. Note #8 | On June 24, 2021, the Company issued a convertible promissory note in the principal amount of $85,000 to Geneva Roth Remark Holdings, Inc. The note is due June 24, 2022 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 trading days. The balance owing was repaid in full by cash on January 3, 2022. | $— | $85,000 |
3 | Geneva Roth Remark Holdings, Inc. Note #2 | In July 2020, the Company issued a convertible promissory note in the principal amount of $63,000 to Geneva Roth Remark Holdings, Inc. The note was due July 27, 2021, and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. The final balance was repaid in February 2021 by the issue of shares of common stock.
| $- | Geneva Roth Remark Holdings, Inc. Note #9 | On August 3, 2021, the Company issued a convertible promissory note in the principal amount of $68,500 to Geneva Roth Remark Holdings, Inc. The note is due August 3, 2022 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 trading days. The balance owing was repaid in full by cash on February 3, 2022. | $— | $68,500 |
4 | Geneva Roth Remark Holdings, Inc, Note #3 | In October 2020, the Company issued a convertible promissory note in the principal amount of $55,000 to Geneva Roth Remark Holdings, Inc. The note is due October 21, 2021, and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. The loan was repaid in full by cash on April 1, 2021. | $- | Geneva Roth Remark Holdings, Inc. Note #10 | On August 11, 2021, the Company issued a convertible promissory note in the principal amount of $103,000 to Geneva Roth Remark Holdings, Inc. The note is due August 11, 2022 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 trading days. The balance owing was repaid in full by cash on February 8, 2022. | $— | $103,000 |
| 5 | Geneva Roth Remark Holdings, Inc. Note #11 | On September 10, 2021, the Company issued a convertible promissory note in the principal amount of $55,000 to Geneva Roth Remark Holdings, Inc. The note is due September 10, 2022 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 trading days. The balance owing was repaid in full by cash on March 15, 2022. | $— | $55,000 | |||
| 6 | Geneva Roth Remark Holdings, Inc. Note #12 | On October 1, 2021, the Company issued a convertible promissory note in the principal amount of $88,000 to Geneva Roth Remark Holdings, Inc. The note is due October 1, 2022 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 trading days. The balance owing was repaid in full on April 1, 2022. | $— | $88,000 | |||
| 7 | Quick Capital, LLC Loan #2 | On December 10, 2021, the Company issued a convertible promissory note in the principal amount of $200,000 to Quick Capital, LLC. The note is due December 10, 2022, and carries an OID of 10% and has an interest rate of 12% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a fixed price of $0.0125 per share of common stock. On December 10, 2021 the Company issued 3,111,111 shares of common stock and 6,500,000 warrants, convertible into 6,500,000 shares of common stock at $0.02 per share, as loan commitment fees. The balance outstanding as of June 30, 2022 is $200,000. | $200,000 | $200,000 | |||
| 8 | SBA – PPP loan | The Company has received an SBA PPP loan of $22,425 of which $10,417 has been forgiven. The balance of $12,008 is repayable, together with interest of 1% per annum, at $295 per month until paid in full. The balance outstanding as of June 30, 2022 is $10,827. | $9,940 | $11,713 | |||
5 | Geneva Roth Remark Holdings, Inc. Note #4 | In December 2020, the Company issued a convertible promissory note in the principal amount of $53,500 to Geneva Roth Remark Holdings, Inc. The note was due December 14, 2021, and bore an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. The loan was repaid in full in June 2021 by the issuance of shares of common stock. | $- |
6 | Geneva Roth Remark Holdings, Inc. Note #5 | In December 2020, the Company issued a convertible promissory note in the principal amount of $45,500 to Geneva Roth Remark Holdings, Inc. The note is due December 30, 2021, and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. The loan was repaid in full by cash on June 29, 2021.
| $- |
7 | Geneva Roth Remark Holdings, Inc. Note #6 | On January 13, 2021, the Company issued a convertible promissory note in the principal amount of $55,000 to Geneva Roth Remark Holdings, Inc. The note is due July 12, 2021, and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35%. The balance owing as of June 30, 2021, is $55,000. The loan was repaid in full in July 2021 by the issuance of shares of common stock.
| $55,000 |
8 | Geneva Roth Remark Holdings, Inc. Note #7 | On February 8, 2021, the Company issued a convertible promissory note in the principal amount of $55,000 to Geneva Roth Remark Holdings, Inc. The note is due August 4, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35%. The loan was repaid in full by cash on August 10, 2021.
| $55,000 |
9 | Geneva Roth Remark Holdings, Inc. Note #8 | On June 24, 2021, the Company issued a convertible promissory note in the principal amount of $85,000 to Geneva Roth Remark Holdings, Inc. The note is due June 24, 2022 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35%. The balance owing as of June 30, 2021, is $85,000. | $85,000 |
| 9 | Glen Eagles Acquisition LP | On August 10, 2021, the Company issued a convertible promissory note in the principal amount of $126,500 to Glen Eagles LP. The note is due August 10, 2022 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a fixed price of $0.0125 per share of common stock. During the year ended December 31, 2021 the Company issued 11,500,000 shares of common stock, with a fair value of $57,000 as a reduction of the promissory note. In addition, payments totaling $67,750 were made. The balance owing as of June 30, 2022 is $1,750. | $1,750 | $16,750 |
| 10 | Glen Eagles Acquisition LP | On February 7, 2022 the Company borrowed $75,000 from Glen Eagles Acquisition LP and repaid the same, in cash, on February 9, 2022. On March 9, 2022 the Company borrowed $52,500 from Glen Eagles Acquisition LP and repaid $32,500 , in cash, on March 15, 2022. The loans are unsecured and non-interest bearing. The balance owing was repaid in full on April 11, 2022. | $0 | $0 |
| 11 | Mast Hill Fund LLP | On October 29, 2021, the Company issued a convertible promissory note in the principal amount of $810,000 to Mast Hill Fund LLP The note is due October 29, 2022, and carries an OID of 10% and has an interest rate of 12% per annum. The promissory note is convertible, at the option of the holder, into common shares of the Company at a fixed price of $0.0125 per share of common stock. On October 29, 2021 the Company issued 10,855.047 shares of common stock and 28,065,000 warrants, convertible into 28,065,000 shares of common stock at $0.02 per share, as loan commitment fees. The balance outstanding as of June 30, 2022 is $810,000. | $810,000 | $810,000 |
| 12 | Mast Hill Fund LLP | On March 29, 2022, the Company issued a convertible promissory note in the principal amount of $625,000 to Mast Hill Fund LLP The note is due March 28, 2023, and carries an OID of 10% and has an interest rate of 12% per annum. The promissory note is convertible, at the option of the holder, into common shares of the Company at a fixed price of $0.002 per share of common stock. On March 29, 2022 the Company issued 175,000,000 warrants, convertible into 175,000,000 shares of common stock at $0.002 per share until March 28, 2027, as loan commitment fees. The Company also issued 245,000,000 special warrants, convertible into 245,000,000 shares of common stock at $0.002 per share. These special warrants are only exercisable upon the event of a default of the note. | $625,000 | $— |
| 13 | Mast Hill Fund LLP | On April 11, 2022, the Company issued a convertible promissory note in the principal amount of $275,000 to Mast Hill Fund LLP The note is due April 11, 2023, and carries an OID of 10% and has an interest rate of 12% per annum. The promissory note is convertible, at the option of the holder, into common shares of the Company at a fixed price of $0.002 per share of common stock. On April 11, 2022 the Company issued 75,000,000 warrants, convertible into 75,000,000 shares of common stock at $0.004 per share until April 11, 2027, as loan commitment fees. The Company also issued 105,000,000 special warrants, convertible into 105,000,000 shares of common stock at $0.002 per share. These special warrants are only exercisable upon the event of a default of the note . | 275,000 | — |
| 14 | Mast Hill Fund LLP | On June 7, 2022, the Company issued a convertible promissory note in the principal amount of $225,000 to Mast Hill Fund LLP The note is due June 7, 2023, and carries an OID of 10% and has an interest rate of 12% per annum. The promissory note is convertible, at the option of the holder, into common shares of the Company at a fixed price of $0.002 per share of common stock. On June 7, 2022 the Company issued 168,750,000 warrants, convertible into 168,750,000 shares of common stock at $0.0012 per share until March 28, 2027, as loan commitment fees. The Company also issued 262,500,000 special warrants, convertible into 262,500,000 shares of common stock at $0.0012 per share. These special warrants are only exercisable upon the event of a default of the note. | 225,000 | — |
| 15 | Talos Victory Fund, LLC | On November 3, 2021, the Company issued a convertible promissory note in the principal amount of $540,000 to Talos Victory Fund, LLC. The note is due November 3, 2022, and carries an OID of 10% and has an interest rate of 12% per annum. The promissory note is convertible, at the option of the holder, into common shares of the Company at a fixed price of $0.0125 per share of common stock. On November 3, 2021 the Company issued 10,144,953 shares of common stock and 15,810,000 warrants, convertible into 15,810,000 shares of common stock at $0.02 per share, as loan commitment fees. Repayments totaling $40,000 have been made. | $500,000 | $540,000 |
TOTAL Unamortized debt discount Notes payable, net of discounts | $2,854,915 946,237 $1,908,678 | $2,186,188 676,644 $1,509,544 |
10 | Firstfire Global Opportunities Fund, LLC. Loan #2 | On February 5, 2021, the Company issued a convertible promissory note in the principal amount of $100,000 to FirstFire Global Opportunities Fund, LLC. The note was due August 1, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35%. The balance owing as of June 30, 2021, is $100,000.
| $100,000 |
11 | LGH Investments, LLC | On March 4, 2021, the Company issued a convertible promissory note in the principal amount of $165,000 to LGH Investments, LLC. The note carries an Original Issue Discount (“OID”) of 10% and has an interest rate of 8% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a fixed price of $0.03 per share of common stock. The balance owing as of June 30, 2021, is $165,000.
| 165,000 |
12 | Jefferson Street Capital, LLC | On March 17, 2021, the Company issued a convertible promissory note in the principal amount of $165,000 to Jefferson Street Capital, LLC. The note carries an OID of 10% and has an interest rate of 8% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a fixed price of $0.03 per share of common stock. The balance owing as of June 30, 2021, is $165,000. | $165,000 |
13 | BHP Capital NY, LLC | On March 24, 2021, the Company issued a convertible promissory note in the principal amount of $165,000 to BHP Capital NY, LLC. The note carries an OID of 10% and has an interest rate of 8% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a fixed price of $0.03 per share of common stock. The balance owing as of June 30, 2021 is $165,000. | $165,000 |
14 | Quick Capital, LLC | On April 2, 2021, the Company issued a convertible promissory note in the principal amount of $110,000 to Quick Capital, LLC. The note is due January 2, 2022, and carries an OID of 10% and has an interest rate of 8% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a fixed price of $0.03 per share of common stock. The balance owing as of June 30, 2021, is $110,000. The Company also issued to Quick Capital, LLC warrants to purchase 3,666,667 shares of the Company’s common shares at $0.10 per share until April 2, 2024.
| $110,000 |
15 | SBA | The Company has received an SBA loan of $2,000 which is repayable together with interest of 3.75% per annum | $2,000 |
| TOTAL |
| $1,180,290 |
b) Bespoke Growth Partners Convertible Note #1
In July 2019, the Company issued a convertible promissory note in the original principal amount of $100,000 to Bespoke Growth Partners. The loan was due on January 26, 2020, and bore interest of 20% per annum. During the year ended December 31, 2020, the Company repaid $84,210 of principal and $16,061 of interest on the note by issuing an aggregate of shares of Company common stock to Bespoke Growth Partners. The balance owing as of June 30, 2021, was $15,790.
c) Bespoke Growth Partners Convertible Note #2
In November 2019, the Company issued a convertible promissory note in the original principal amount of $300,000 to Bespoke Growth Partners. The note was due on May 21, 2020 with an interest rate of 20% per annum. During the year ended December 31, 2020, the Company received proceeds under the note of $175,000. The balance outstanding as of June 30, 2021, including pro-rata loan discount, was $262,500.
The Company is in negotiation with Bespoke to revise the repayment terms and date on both loans with Bespoke Growth Partners.
d) Geneva Roth Remark Holdings, Inc. Note #2
In July 2020, the Company issued a convertible promissory note in the principal amount of $63,000 to Geneva Roth Remark Holdings, Inc. The note was due July 27, 2021, and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. The final balance was repaid in February 2021, by the issue of shares of common stock.
e) Geneva Roth Remark Holdings, Inc, Note #3
In October 2020, the Company issued a convertible promissory note in the principal amount of $55,000 to Geneva Roth Remark Holdings, Inc. The note is due October 21, 2021, and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. The loan was repaid in full by cash on April 1, 2021.
f) Geneva Roth Remark Holdings, Inc. Note #4
In December 2020, the Company issued a convertible promissory note in the principal amount of $53,500 to Geneva Roth Remark Holdings, Inc. The note was due December 14, 2021 and bore an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. The loan was repaid in full in June 2021, by the issuance of shares of common stock.
g) Geneva Roth Remark Holdings, Inc. Note #5
In December 2020, the Company issued a convertible promissory note in the principal amount of $45,500 to Geneva Roth Remark Holdings, Inc. The note is due December 30, 2021, and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. The loan was repaid in full by cash on June 29, 2021.
h) Geneva Roth Remark Holdings, Inc. Note #6
On January 13, 2021, the Company issued a convertible promissory note in the principal amount of $55,000 to Geneva Roth Remark Holdings, Inc. The note is due July 12, 2021, and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35%. The balance owing as of June 30, 2021, is $55,000. The loan was repaid in full in July 2021 by the issuance of shares of common stock.
i) Geneva Roth Remark Holdings, Inc. Note #7
On February 8, 2021, the Company issued a convertible promissory note in the principal amount of $55,000 to Geneva Roth Remark Holdings, Inc. The note is due August 4, 2021, and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35%. The balance owing as of June 30, 2021, is $55,000.
j) Geneva Roth Remark Holdings, Inc. Note #8
On June 24, 2021, the Company issued a convertible promissory note in the principal amount of $85,000 to Geneva Roth Remark Holdings, Inc. The note is due June 24, 2022 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35%. The balance owing as of June 30, 2021 is $85,000.
k) Firstfire Global Opportunities Fund, LLC. Loan #1
In June 2020, the Company issued a convertible promissory note in the principal amount of $145,000 to Firstfire Global Opportunities Fund, LLC. The note was due June 15, 2021, and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. During the year ended December 31, 2020 the amount of $33,004 was converted to 4,000,000 common shares of the Company. The final balance was repaid during the three months ended March 31, 2021, by the issue of shares of common stock.
l) Firstfire Global Opportunities Fund, LLC. Loan #2
On February 5, 2021, the Company issued a convertible promissory note in the principal amount of $100,000 to FirstFire Global Opportunities Fund, LLC. The note was due August 1, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35%. The balance owing as of June 30, 2021, is $100,000.
m) EMA Financial, LLC
In August 2020, the Company issued a convertible promissory note in the principal amount of $125,000 to EMA Financial, LLC. The note was due October 30, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at the lower of $0.05 per share and a discount of 35% to the average trading price. The loan was paid in full in February 2021, by the issuance shares of common stock.
n) LGH Investments, LLC
On March 4, 2021, the Company issued a convertible promissory note in the principal amount of $165,000 to LGH Investments, LLC. The note carries an Original Issue Discount (“OID”) of 10% and has an interest rate of 8% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a fixed price of $0.03 per share of common stock. The balance owing as of June 30, 2021 is $165,000.
o) Jefferson Street Capital, LLC
On March 17, 2021, the Company issued a convertible promissory note in the principal amount of $165,000 to Jefferson Street Capital, LLC. The note carries an OID of 10% and has an interest rate of 8% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a fixed price of $0.03 per share of common stock. The balance owing as of June 30, 2021, is $165,000.
p) BHP Capital NY, LLC
On March 24, 2021, the Company issued a convertible promissory note in the principal amount of $165,000 to BHP Capital NY, LLC. The note carries an OID of 10% and has an interest rate of 8% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a fixed price of $0.03 per share of common stock. The balance owing as of June 30, 2021, is $165,000.
q) Quick Capital, LLC
On April 2, 2021, the Company issued a convertible promissory note in the principal amount of $110,000 to Quick Capital, LLC. The note is due January 2, 2022, and carries an OID of 10% and has an interest rate of 8% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a fixed price of $0.03 per share of common stock. The balance owing as of June 30, 2021, is $110,000. The Company also issued to Quick Capital, LLC warrants to purchase 3,666,667 shares of the Company’s common shares at $0.10 per share until April 2, 2024.
Note 5. Share Capital
Common StockPreferred Shares
The Company is authorized to issue millionshares of preferred stock. The Board of Directors determines the number, terms and rights of the various classes of preferred stock.
Class A
The Company has designated preferred shares as Class A Preferred Shares. Each Class A Preferred Share has a stated value of $ per share and is convertible into 1,000 shares of common stock any time after July 1, 2022.
Class B
The Company has designated preferred shares as Class B Preferred Shares. Each Class B Preferred Share has a stated value of $ per share and is convertible into one shares of common stock any time after July 1, 2022.
Common Stock
Effective February 2, 2022, the Company amended its Articles of Incorporation increasing the number of authorized shares of common stock from to with a par value of $.
During the six months ended June 30, 2021,2022 the Company issued shares of common stock as follows:the following shares:
Class B Preferred Shares
| ● | shares of Class B Preferred Shares for cash consideration of $409,000 |
Class A Preferred Shares
● |
|
Common Stock
| ● | shares of common stock on conversion of shares of Class A Preferred Shares |
| ● | shares of common stock on cashless conversion of 43,875,000 warrants |
| ● | shares of common stock, with a fair value of $ |
● |
|
|
|
|
|
Standby Equity AgreementStock Purchase Warrants
At June 30, 2022, the Company had reserved 441,522,727 shares of its common stock for the following outstanding warrants:
Schedule of warrants
| Outstanding as of January 1, 2021 | — |
| Granted | 72,814,394 |
| Exchanged for common shares | (20,166,667) |
| Outstanding as of December 31, 2021 | 52,647,727 |
| Granted | 432,750,000 |
| Exchanged for common shares | (43,875,000) |
| Outstanding as of June 30, 2022 | 441,522,727 |
During the six months ended June 30, 2022, warrants were issued as part of debt financings, warrants were exercised and warrants were forfeited. The relative fair value of the warrants were recorded as a debt discountat issuance and is amortized over the life of the related debt.
During the six months ended June 30, 2022, the Company also issued warrants, and reserved the same number of shares of its common stock, to purchase shares of its common stock at prices of $0.002 to $0.0012 per share solely as security in the event the Company defaults on certain borrowings which are due to be settled in full, either by repaying in cash or converting to shares of common stock, on or before June 7, 2023.
| Strike price | $ |
| Term (years) | 5.0 |
| Volatility | % |
| Risk free rate | % |
| Dividend yield | — |
On August 6, 2013, the Company’s shareholders approved the 2013 Equity Incentive Plan (“2013 Plan”). The 2013 Plan provides 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 were no options issued during the six months ended June 30, 2022 and there were options outstanding as at June 30, 2022.
In March 16, 2021,2018, the Company completed on a Standbyadopted the 2018 Equity Commitment Agreement (“SECA”Incentive Plan (the “2018 Plan”) with MacRab LLC whereby duringto provide additional incentives to the 24 months commencing on the date on which a registration statement covering the saleemployees, directors and consultants of the sharesCompany to be purchased by MacRab is declared effective,promote the Company has the option to sell up to $5.0 millionsuccess of the Company’s business. During the six months ended June 30, 2022, no common stock to MacRab at a price equal to 90% of the average of the two lowest volume weighted average prices during the eight trading day days following the clearing date associated with the respective putCompany was issued under the SECA. Under the SECA MacRab are entitled to 2,272,727 stock purchase warrants with an exercise price of $0.044 upon the signing of the agreement. MacRab retains the rights to the warrants if the agreement is ever terminated. The Company hasn’t yet exercised any option to sell any stock under this agreement. 2018 Plan.
Note 6.7. Legal settlement expensesSubsequent events
In 2019Subsequent to June 30, 2022 the Company received a claim from the landlordissued shares of a property leased by Maham LLC,common stock for conversion $159,848 of debt principal and interest and issuance of 200,996,053 shares of common stock under which the Company is a guarantor.exercise of cashless warrants.
In July 2021, the company settled the claim with the Landlords of a property leased to Maham LLC (then a possible acquisition target) which the Company had guaranteed. The settled claim amounted to $290,000 and is payable over a 12-month period ending in Judly 2022.14
In 2020 the Company had been served a claim from the former management of Love Media regarding a claim for unpaid wages. Whilst the Company disputes the validity of this claim in its entirety. It agreed to settle the claim from employees in a full and final settlement with a single payment of $50,000.
ITEMITEM 2. 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 unaudited condensed consolidated financial statements for the three and six months ended June 30, 20212022 and 20202021 and notes thereto contained elsewhere in this Report, and our annual report on Form 10-K for the twelve months ended December 31, 20202021 including the consolidated financial statements and notes thereto. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. See “Cautionary Note Concerning Forward-Looking Statements.”
Overview
We 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 athletes and celebrities.
Current Structure of the Company
The Company has the following subsidiaries:
Subsidiary Name | % Owned | |||||
● | 123Wish, Inc. (considered dormant) | 51 | % | |||
● One Horizon Hong Kong Ltd (Limited operations) | 100 | % | ||||
| ● Horizon Network Technology Co. Ltd | 100 | % | ||||
● | Love Media House, | 100 | % | |||
● Air Race Limited |
| 100 |
| % | ||
● AR Management GmbH |
| 100 |
| % | ||
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 Core Business
We are 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 bring users closer to the action by enabling them to engage with clubs, favorite players, peers and relevant brands through features, available through the Touchpoint APP and program, 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.
We are based in the United States of America and the United Kingdom.
15
Business update
The Company CEO, Mr. White stated, “We continue to make significant progress advancing our next generation fan engagement platform. Specifically, we are now working with numerous fitness brands, celebrities and influencers. The customer response has been overwhelmingly positive, as our platform is specifically designed to bring fans closer to celebrities by providing access to proprietary content, livestream events, as well as exclusive merchandise. To further enhance the platform and add new revenue streams, we are working towards integrating new blockchain machine learning capabilities designed for intuitive analytic feedback, thereby allowing for the creation of highly optimized content strategies both inside the Touchpoint platform and on social media.”
“Building on our core expertise in fan engagement, we announced last year our acquisition of Air Race World Championship (Air Race), a race format developed by Red Bull as the Red Bull Air Race. Since that time, we have been successful in signing multiple host-city agreements. However, given the prolonged impact and travel restrictions associated with the pandemic in addition to global financial market conditions, we made the strategic decision to postpone these events into early 2023, when we believe we can maximize the success and financial impact of these events.”
“Overall, we could not be more excited about the outlook for the business. For this reason, and based on feedback from investors, the Board of Directors made the strategic decision to forgo plans for a reverse split. While our goal remains to list on a senior U.S. stock exchange, we are also exploring a variety of strategic alternatives to maximize value for shareholders. Meanwhile, we remain focused on both advancing plans to launch Air Race in the new year, as well as accelerating the growth of our core Touchpoint fan engagement platform.”
For more information, see http://touchpointgh.com/
16
Results of Operations
Comparison of three months ended June 30, 20212022 and 20202021
The following table sets forth key components of our results of operations for the periods.
(All amounts, other than percentages, in thousands of U.S. dollars)
Three Months Ended June 30, | Change | |||||||||||||||
| 2022 | 2021 | Increase/ (decrease) | Percentage Change | |||||||||||||
| (unaudited) | ||||||||||||||||
| Revenue | $ | 1 | $ | 34 | $ | (33 | ) | (99.0 | ) | |||||||
| Cost of revenue | 31 | 139 | (108 | ) | (77.7 | ) | ||||||||||
| Gross deficit | (30 | ) | (105 | ) | (75 | ) | (71.4 | ) | ||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 891 | 745 | 146 | 20.0 | ||||||||||||
| Total operating expenses | 891 | 745 | 146 | 20.0 | ||||||||||||
| Loss from operations | (921 | ) | (850 | ) | (71 | ) | (8.4 | ) | ||||||||
| Other expense | (565 | ) | (390 | ) | (313 | ) | (406.5 | ) | ||||||||
| Loss before income taxes | (1,486 | ) | (1,240 | ) | (246 | ) | (19.8 | ) | ||||||||
| Total net loss | $ | (1,486 | ) | $ | (1,240 | ) | $ | (246 | ) | (19.8 | ) | |||||
17
|
| Three Months Ended June 30, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| Increase/ |
|
| Percentage |
| ||||
|
| (unaudited) |
|
|
|
|
|
|
| |||||||
Revenue |
| $ | 34 |
|
| $ | 150 |
|
| $ | (116 | ) |
|
| (77.3 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
| 139 |
|
|
| 139 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (deficit) |
|
| (105 | ) |
|
| 11 |
|
|
| (116 | ) |
|
| (105.4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| 745 |
|
|
| 742 |
|
|
| 3 |
|
|
| 0.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
| 745 |
|
|
| 742 |
|
|
| 3 |
|
|
| 0.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (850 | ) |
|
| (731 | ) |
|
| (119 | ) |
|
| (15.9 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense |
|
| (390 | ) |
|
| (77 | ) |
|
| (313 | ) |
|
| (406 | .5) |
Loss before discontinued operations |
|
| (1,240 | ) |
|
| (808 | ) |
|
| (432 | ) |
|
| (53.5 | ) |
Loss from discontinued operations |
|
| (50 ) |
|
|
| - |
|
|
| (50 | ) |
|
| N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net loss |
| $ | (1,290 | ) |
| $ | (808 | ) |
| $ | (482 | ) |
|
| 59.6 |
|
Revenue: Our revenue for the three months ended June 30, 2021,2022, decreased by approximately $116,000$33,000 over the same period in 2020.2021. The increasedecrease was a result of the reduction in salesales of software licenses during the three months ended June 30, 2021.2022.
Gross Profit (Deficit)Deficit: Gross profit (deficit)deficit for the three months ended June 30, 2022, was approximately $30,000 as compared to a deficit of $105,000 for the three months ended June 30, 2021, was approximately $(105,000) as compared to $11,000 for the three months ended June 30, 2020, due primarily to the decrease in revenue.revenue and amortization of software.
Operating Expenses: Operating expenses incurred during the three months ended June 30, 2021,2022, were approximately $745,000,$891,000, an increase of approximately $3,000 (or less than 1%)$146,000 when compared to the approximate figure of $742,000$745,000 incurred in the three months ended June 30, 2020. 2021.
Net Loss: Net loss for the three months ended June 30, 20212022, was approximately $1,290,000$1,486,000 as compared to net loss of approximately $808,000$1,240,000 for the same period in 2020.2021.
Comparison of six months ended June 30, 2021,2022, and 20202021
The following table sets forth key components of our results of operations for the periods indicated.
(All amounts, other than percentages, in thousands of U.S. dollars)
|
| Six Months Ended June 30, |
|
| Change |
| Six Months Ended June 30, | Change | ||||||||||||||||||||||||
|
| 2021 |
| 2020 |
| Increase/ |
| Percentage |
| 2022 | 2021 | Increase/ (decrease) | Percentage Change | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Revenue |
| $ | 66 |
| $ | 190 |
| $ | (124 | ) |
| (65.8 | ) | $ | 31 | $ | 66 | $ | (35 | ) | (53.0 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Cost of revenue |
|
| 279 |
|
| 278 |
|
| (1 | ) |
|
| 0.0 |
| 62 | 279 | (217 | ) | (77.7 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Gross deficit |
| (213 | ) |
| (88 | ) |
| (125 | ) |
| (142.0 | ) | (31 | ) | (213 | ) | (182 | ) | (85.4 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
General and administrative |
| 1,732 |
| 1,241 |
| 491 |
|
| 39.6 |
| 1,497 | 1,733 | (236 | ) | (13.6 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total operating expenses |
| 1,732 |
| 1,241 |
| 491 |
| 39.6 |
| 1,497 | 1,733 | (236 | ) | (13.6 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Loss from operations |
| (1,945 | ) |
| (1,329 | ) |
| (616 | ) |
| (46.4 | ) | (1,528 | ) | (1,946 | ) | (418 | ) | (21.5 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Other expense |
|
| (477 | ) |
|
| 483 |
|
| (960 | ) |
|
| (198.6 | ) | (991 | ) | (477 | ) | (805 | ) | (81.2 | ) | |||||||||
Loss for before discontinued operations |
| (2,422 | ) |
| (846 | ) |
| (1,576 | ) |
| 186.3 |
| (2,519 | ) | (2,442 | ) | (387 | ) | (18.2 | ) | ||||||||||||
Loss from discontinued operations |
| (50) |
| - |
| (50) |
| N/A |
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Net loss |
| $ | (2,472 | ) |
| $ | (846 | ) |
| $ | (1,626 | ) |
|
| 192.2 |
| $ | (2,519 | ) | $ | (2,442 | ) | $ | (387 | ) | (18.2 | ) | |||||
Revenue:Our revenue for the six months ended June 30, 2021,2022, was approximately $66,000$31,000 as compared to approximately $190,000$66,000 for the six months ended June 30, 2020, an2021, a decrease of approximately $124,000.$35,000. The decrease was due to the decrease in license sales in the second quarter.
Cost of Revenue: Cost of revenue was approximately $279,000$31,000 for the six months ending June 30, 20212022, as compared to the same amount$279,000 for the six months ended June 30, 2020. 2021, a decrease of $217,000.
18
Gross Deficit: Gross deficit for the six months ended June 30, 2021,2022, was approximately $213,000$31,000 as compared to a gross deficit of $88,000$213,000 for the six months ended June 30, 2020, an increase2021, a decrease in the deficit of approximately $125,000.$182,000. The increasedecrease was mainly due to the reduction in revenue as set forth above.costs related to application revenue.
Operating Expenses: Operating expenses, including general and administrative expenses, depreciation and acquisition costs for the six months ended June 30, 2021,2022, were approximately $1,732,000$1,497,000 representing an increase of 39.6%13.6% over the charge for the same period in 2020.2021. The increase was mainly due to the charge for the issue of warrants, calculated using Blacks Scholes.
Net Loss: Net loss for the six months ended June 30, 20212022 was approximately $2,472,000$2,519,000 as compared to loss of approximately $846,000$2,472,000 for the same period in 2020. 2021.
19
Liquidity and Capital Resources
Six Months Ended June 30, 20212022 and June 30, 20202021
The following table sets forth a summary of our net cash flows for the periods indicated:
|
| For the Six Months Ended |
| For the Six Months Ended June 30 (in thousands) | ||||||||||||
|
| 2021 |
| 2020 |
| 2022 | 2021 | |||||||||
Net cash flows from operations |
| (781 | ) |
| (342 | ) | (1,070 | ) | (831 | ) | ||||||
Net cash flows from investing activities |
| (8 | ) |
| (13 | ) | (201 | ) | (8 | ) | ||||||
Net cash flows from financing activities |
| 785 |
| 288 |
| 1,140 | 785 | |||||||||
Net cash used by operating activities of continuing operations increased to $781,000$1,070,000 for the six months ended June 30, 20212022 from $342,000$831,000 for the same period in 2020.2021.
Net cash used from investing activities was approximately $8,000$201,000 in the six months ended June 30, 2021,2022, as compared to net cash used of $13,000$8,000 in the comparative period in 2020.2021.
Net cash generated in financing activities was approximately $1,140,000 for the six months ended June 30, 2022, as compared to $785,000 for the six months ended June 30, 2021, as compared to $288,000 for the six months ended June 30, 2020.2021. The cash generated from financing activities in the six months ended June 30, 2021,2022, was primarily from convertible loans raised from US funds, less repayment of a loan raised in 2020.2021.
At June 30, 2021,2022, the Company had cash of approximately $114,000.$16,000.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our unaudited consolidated financial statements, which have been prepared in accordance with GAAP. Our significant accounting policies are described in notes accompanying the unaudited consolidated financial statements. The preparation of the unaudited 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 unaudited financial statements, and accordingly, actual results in future periods could differ from these estimates. Significant judgments and estimates used in the preparation of the unaudited consolidated financial statements apply significant 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 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 unaudited consolidated financial statements.
Recent Accounting Pronouncements
See Note 2 to our unaudited condensed financial statements, included in Part I, Item 1., Financial Information of this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
As of June 30, 2021,2022, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEMITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of June 30, 2021,2022, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of June 30, 2021,2022, our disclosure controls and procedures were not effective. This was due to certain deficiencies in our controls over financial reporting. In particular a lack of accounting personnel has resulted in an inability to segregate various accounting functions.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
21
PARTPART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In 2019 the Company received a claim from the landlord of a property leased by Maham LLC, under which the Company is a guarantor.
In July 2021, the company settled the claim with the Landlords of a property leased to Maham LLC (then a possible acquisition target) which the Company had guaranteed. The settled claim amounted to $290,000 and is payable over a 12-month period ending in July 2022.
In 2020 the Company had been served a claim from the former management of Love Media regarding a claim for unpaid wages. Whilst the Company disputes the validity of this claim in its entirety. It agreed to settle the claim from employees in a full and final settlement with a single payment of $50,000.
ITEMITEM 1A. RISK FACTORS
Reference is made to the risks and uncertainties disclosed in Item 1A (“Risk Factors”) of our Annual Report on Form 10-K for the year ended December 31, 20202021 (the “2020“2021 Form 10-K”) filed April 9, 2021,15, 2022, which sections are incorporated by reference into this report, as the same may be updated from time to time. Prospective investors are encouraged to consider the risks described in our 20202021 Form 10-K, and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Report and other information publicly disclosed or contained in documents we file with the Securities and Exchange Commission before purchasing our securities. As a smaller reporting company, the Company is not required to disclose material changes to the risk factors that were contained in the 20202021 Form 10-K.
22
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended June 30, 2021,2022, the Company issued shares of common stock as follows:
● | 5,147,724 shares of common stock, with an aggregate fair value of $56,175, in settlement of principal and interest owing to Geneva Roth Remark Holdings, Inc, | |
Class B Preferred Shares
Class A Preferred Shares
Common Stock
The shares above were issued in reliance on the exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 of Regulation D promulgated under the Securities Act. Each of the investors represented that it was acquiring the shares for investment only and not with a view toward, or for resale in connection with, the public sale or distribution thereof. Accordingly, the shares have not been registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws. 23
ITEM
24
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.
25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||