0001615774-18-012873.txt : 20181116 0001615774-18-012873.hdr.sgml : 20181116 20181116093352 ACCESSION NUMBER: 0001615774-18-012873 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 58 CONFORMED PERIOD OF REPORT: 20180930 FILED AS OF DATE: 20181116 DATE AS OF CHANGE: 20181116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: One Horizon Group, Inc. CENTRAL INDEX KEY: 0000225211 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 251229323 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36530 FILM NUMBER: 181188820 BUSINESS ADDRESS: STREET 1: 34 SOUTH MOLTON STREET CITY: LONDON STATE: X0 ZIP: W1K 5RG BUSINESS PHONE: 353-61-518477 MAIL ADDRESS: STREET 1: 34 SOUTH MOLTON STREET CITY: LONDON STATE: X0 ZIP: W1K 5RG FORMER COMPANY: FORMER CONFORMED NAME: INTELLIGENT COMMUNICATION ENTERPRISE CORP DATE OF NAME CHANGE: 20091230 FORMER COMPANY: FORMER CONFORMED NAME: MOBICLEAR INC. DATE OF NAME CHANGE: 20061206 FORMER COMPANY: FORMER CONFORMED NAME: BICO INC/PA DATE OF NAME CHANGE: 20000724 10-Q 1 s113922_10q.htm FORM 10-Q

 

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 September 30, 2018

 

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

 

One Horizon Group, 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 Identification No.)

 

34 South Molton Street, London
W1K 5RG, UK
   
(Address of principal executive offices)   (Zip Code)

 

+44(0)20 7409 5248

(Registrant’s telephone number, including area code)

 

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

 

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
(Do not check if smaller reporting company)  Emerging growth company ☐    

 

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

 

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

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of November 14, 2018, 75,901,431 shares of the registrant’s common stock, par value $0.0001 per share, were outstanding. 

 

 

 

 

 

TABLE OF CONTENTS

 

Part I – FINANCIAL INFORMATION  
     
Item 1. Financial Statements 4
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 23
     
Item 4. Controls and Procedures 23
     
Part II – OTHER INFORMATION  
     
Item 1. Legal Proceedings 24
     
Item 1A. Risk Factors 25
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25
     
Item 3. Defaults Upon Senior Securities 25
     
Item 4. Mine Safety Disclosures 25
     
Item 5. Other Information 25
     
Item 6. Exhibits 25
     
SIGNATURES 26

 

2

 

 

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. Among these risks and uncertainties are the competition we face; our ability to retain customers and attract new customers; our ability to establish and expand strategic alliances; governmental regulation and related actions in our international operations including changes in taxes and currency restrictions; increased market and competitive risks, risks related to the acquisition or integration of future businesses or joint ventures; our ability to obtain or maintain relevant intellectual property rights; failure to protect our trademarks and internally developed software; security breaches and other compromises of information security; our dependence on third party facilities, equipment, systems and services; system disruptions or flaws in our technology and systems; fraudulent use of our name or services; our ability to maintain data security; and our ability to obtain additional financing if required; 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.

 

SPECIAL NOTE REGARDING NASDAQ NOTIFICATION

 

On May 10, 2018, the Company received written notification from NASDAQ that the minimum bid price per share for its common share was below $1.00 for a period of 30 consecutive business days and that the Company did not meet the minimum bid price requirement set forth in NASDAQ Listing Rule 5550 (a)(2). The notification does not impact the Company’s listing on The Nasdaq Capital Market at this time.

 

On November 7, 2018 the Company received confirmation from NASDAQ that they have granted a further period of 180 calendar days to regain compliance with NASDAQ’s minimum bid price requirement. To regain compliance, the Company’s common shares must have a closing bid price of at least $1.00 for a minimum of 10 consecutive business days. The Company will work to regain compliance during this 180-day compliance period.

  

3

 

 

PART I – FINANCIAL INFORMATION

 

ONE HORIZON GROUP, INC.

Condensed Consolidated Balance Sheets

September 30, 2018 and December 31, 2017

(in thousands, except share data)

 

   September 30,   December 31, 
   2018
(unaudited)
   2017 
Assets          
           
Current assets:          
Cash  $535   $763 
Accounts receivable, net   490    102 
Prepaid compensation   550    550 
Amounts due from related parties   15     
Other assets   635    28 
Total current assets   2,225    1,443 
           
Property and equipment, net   39    2 
Intangible assets, net   16,387    5,340 
Goodwill   1,247     
Prepaid compensation, net of current portion   1,604    2,017 
Total assets  $21,502   $8,802 
           
Liabilities and Stockholders’ Equity          
           
Current liabilities:          
Accounts payable  $354   $167 
Accrued expenses   70    55 
Accrued compensation   318    251 
Amount due to related parties       32 
Convertible notes, net of debt discount       45 
Total current liabilities   742    550 
           
Long-term liabilities          
           
Promissory notes, related parties   1,000    1,000 
Total liabilities   1,742    1,550 
           
Equity          
Preferred stock:          
$0.0001 par value, authorized 50,000,000; No shares issued and outstanding        
Common stock:          
$0.0001 par value, authorized 200,000,000 shares issued and outstanding 59,353,874 shares as of September 30, 2018 (December 2017 - 30,255,123)   6    3 
Additional paid-in capital   63,303    48,356 
           
Accumulated Deficit   (49,150)   (41,085)
Stock subscription receivable        
Accumulated other comprehensive income   (37)   (22)
Total One Horizon Group, Inc., stockholders’ equity   14,122    7,252 
 Non-controlling interest   5,638     
Total stockholders’ equity   19,760    7,252 
           
Total liabilities and equity  $21,502   $8,802 

 

See accompanying notes to condensed consolidated financial statements.

 

4

 

 

ONE HORIZON GROUP, INC.

Condensed Consolidated Statements of Operations

For the three and nine months ended September 30, 2018 and 2017

(in thousands, except per share data)

 

    Three Months ended September 30,     Nine Months ended September 30,  
    2018
unaudited
    2017
unaudited
    2018
unaudited
    2017
unaudited
 
                         
Revenue   $ 317     $ 397     $ 885     $ 514  
                                 
Cost of revenue - Software and production costs     177       1       288       1  
  - Amortization of intangible assets     1,047       405       2,276       449  
      1,224       406       2,564       450  
                                 
Gross margin (deficiency)     (907 )     (9 )     (1,679 )     64  
                                 
Operating expenses:                                
General and administrative     1,544       338       4,147       911  
Depreciation     3       2       5       16  
Acquisition services                 1,874        
                                 
      1,547       340       6,626       927  
                                 
Loss from operations     (2,454 )     (349 )     (8,305 )     (863 )
                                 
Other income and expense:                                
Interest expense     (18 )     (179 )     (408 )     (536 )
Foreign exchange     (3 )           (4 )     1  
                                 
      (21 )     (179 )     (412 )     (535 )
                                 
Loss before income taxes and discontinued items     (2,475 )     (528 )     (8,717 )     (1,398 )
                                 
Income tax benefit                        
                                 
Loss on continuing operations     (2,475 )     (528 )     (8,717 )     (1,398 )
                                 
Loss from discontinued operations           (244 )           (2,428)  
                                 
Net loss for the period     (2,475 )     (772 )     (8,717 )     (3,826 )
Net loss attributable to non-controlling interest     186             652        
                                 
Net loss attributable to One Horizon Group Inc. common stockholders   $ (2,289 )   $ (772 )   $ (8,065 )   $ (3,826 )
                                 
Earnings per share                                
                                 
Basic and diluted net loss per share – continuing operations   $ (0.05 )   $ (0.07 )   $ (0.21 )   $ (0.21 )
                                 
Basic and diluted net loss per share – discontinued operations   $     $ (0.03 )   $     $ (0.36 )
                                 
Weighted average number of shares outstanding                                
Basic and diluted     52,671       7,541       42,275       6,680  

 

See accompanying notes to condensed consolidated financial statements.

 

5

 

 

ONE HORIZON GROUP, INC.

Condensed Consolidated Statements of Comprehensive Loss

For the three and nine months ended September 30, 2018 and 2017

(in thousands)

 

    Three Months ended
September 30,
    Nine Months ended
September 30,
 
    2018
unaudited
    2017
unaudited
    2018
unaudited
    2017
unaudited
 
                         
Net loss   $ (2,289 )   $ (772 )   $ (8,065 )   $ (3,826 )
Other comprehensive income:                                
Foreign currency translation adjustment loss     (1 )     (221 )     (15 )     (51 )
Total Comprehensive loss   $ (2,290 )   $ (993 )   $ (8,080 )   $ (3,877 )

 

See accompanying notes to condensed consolidated financial statements

 

6

 

 

ONE HORIZON GROUP, INC.

Condensed Consolidated Statement of Equity

For the nine months ended September 30, 2018

(in thousands)

(unaudited)

 

   Number
of
Shares
   Amount   Additional
Paid-in
Capital
   Accumulated
deficit
   Accumulated
Other
Comprehensive
Income
(Loss)
   Non-controlling
interest
   Total
Equity
 
                             
Balance December 31, 2017   30,255   $3   $48,356   $(41,085)  $(22)  $   $7,252 
                                    
Net loss               (8,065)       (652)   (8,717)
Foreign currency translations                   (15)       (15)
                                    
Issuance of shares for services   6,095    1    3,799                3,800 
Issuance of shares for acquisitions   10,127    1    7,929            6,290    14,220 
Issuance of shares for exercise of convertible promissory notes   677        406                406 
Issuance of shares for exercise of warrants   4,425        1,246                1,246 
Increase in service compensation due to change in exercise price             544                   544 
Conversion benefit on convertible notes           200                200 
                                    
Issuance of shares for cash   7,775    1    823                824 
                                    
Balance September 30, 2018   59,354   $6   $63,303   $(49,150)  $(37)  $5,638   $19,760 

 

See accompanying notes to condensed consolidated financial statements

 

7

 

 

ONE HORIZON GROUP, INC.

Condensed Consolidated Statements of Cash Flows 

For the nine months ended September 30, 2018 and 2017

(in thousands)

 

   2018
(unaudited)
   2017
(unaudited)
 
Cash flows from operating activities:          
           
Net loss for the period  $(8,717)  $(1,398)
           
Adjustment to reconcile net loss for the period to net cash flows from operating activities:          
Depreciation of property and equipment   5    18 
Amortization of intangible assets   2,276    449 
Amortization of debt issue costs       99 
Amortization of beneficial conversion feature   355    76 
Amortization of debt discount       150 
Shares issued for services   3,392     
Warrants issued for services       123 
Amortization of shares issued for services   872    92 
Options issued for services       145 
Changes in operating assets and liabilities:          
    Accounts receivable   (377)   2 
    Other assets   (114)   12 
Accounts payable and accrued expenses   (65   242 
  Net cash flows from continuing operating activities   (2,373)   10 
           
  Net cash flows from discontinued operating activities       (374)
  Net cash flows from total operating activities   (2,373)   (364)
           
Cash used in investing activities:          
           
Cash consideration on acquisitions (net of cash acquired)   (108)    
Acquisition of fixed assets   (6)   (1)
Net cash flows from investing activities – continuing operations   (114)   (1)
           
   Net cash flows from investing activities – discontinued operations       (261)
   Net cash flows from total investing activities   (114)   (262)
           
Cash flows from financing activities:          
           
Proceeds from issuance of shares   824    265 
Proceeds from exercise of warrants   1,246    146 
Proceeds from issuance of convertible notes   200     
Repayment of advances from related parties (net)   (47)   100 
Net cash flows from financing activities   2,223    511 
           
Decrease in cash during the period   (264)   (115)
Foreign exchange effect on cash   36    26 
           
Cash at beginning of the period – continuing operations   763    106 
Cash at beginning of the period – discontinued operations       153 
           
Cash at end of the period  $535   $170 

 

Supplementary Information:

 

    2018     2017  
             
Non-cash financing transactions:              
Common stock issued for business combinations   14,220      
Common stock issued for conversion of debt and accrued interest   406      

 

See accompanying notes to condensed consolidated financial statements.

 

8

 

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

 

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

 

Description of Business

 

One Horizon Group, Inc (“the Company”) has four core businesses following the acquisition of 123Wish Inc., Love Media House, Inc (formerly called C-Rod, Inc.) and Banana Whale Studios PTE Ltd in the nine months ended September 30, 2018 (See Note 3). The core trading businesses are:

 

  (i) Secure Messaging – offers digitally secure messaging software and sells licenses primarily into the gaming, security and educational markets.

  (ii) 123Wish – an experience based platform where subscribers have a chance to play and win experiences from celebrities, athletes and artists.

  (iii) Love Media House (formerly called C-Rod) - a full-service music production, artist representation and digital media business.
  (iv) Banana Whale Studios – a B2B software provider in the online gaming industry that develops and supplies online games to Asian gaming platforms.

 

The Company is based in the United States of America, Hong Kong, Singapore, China 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 Securities and Exchange Commission’ instructions. 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 Securities and Exchange Commission’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, 2017, as filed with the Securities and Exchange Commission on April 2, 2018.

 

Current Structure of the Company

 

The Company has the following subsidiaries:

    Subsidiary name % Owned
  123Wish, Inc. 51%
  One Horizon Hong Kong Ltd 100%
  Horizon Network Technology Co. Ltd 100%
  Love Media House, Inc 100%
  Banana Whale Studios PTE Ltd 51%
  Browning Production & Entertainment Inc (acquired October 22, 2018) 51%

 

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

 

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

 

Note 2. Summary of Significant Accounting Policies

 

Liquidity and Capital Resources

 

Historically, the Company has incurred net losses and negative cash flows from operations. The Company has principally financed these losses from the sale of equity securities and the issuance of debt instruments.

 

During the nine months ended September 30, 2018 the Company issued additional shares of common stock for cash in the amount of $2,070,000, of which $547,000 was raised in the three months ended September 30, 2018.

 

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

 

At September 30, 2018 the Company had cash of $535,000. Subsequent to September 30, 2018 the Company has raised a further amount of cash totaling $825,000 and is considering raising additional funds in the region of $2.0 million the last quarter of 2018 and the first quarter of 2019 which is expected to give the Company sufficient cash resources to cover forecasted expenditure into 2020.

 

9

 

 

However, actual results could materially differ from the Company’s projections. Accordingly, the Company may be required to raise additional funds through various sources. While the Company believes it is probable that such financings could be secured, there can be no assurance that 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.

 

Foreign Currency Translation

 

The reporting currency of the Company is the United States dollar. Assets and liabilities other than those denominated in U.S. dollars, primarily in Singapore, the United Kingdom and China, 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 part of the investment in the subsidiaries is sold or liquidated. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations.

 

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

 

Accounts receivable, revenue recognition and concentrations

 

New Accounting Standard - In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”). Topic 606 supersedes the revenue recognition requirements in ASU Topic 605, Revenue Recognition (“Topic 605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 also includes Subtopic 340-40, Other Assets and Deferred Costs- Contracts with Customers, which discussed the deferral of incremental costs of obtaining a contract with a customer, including the period of amortization of such costs. The new standard was adopted by the Company in our fiscal year beginning January 1, 2018. The two permitted transition methods under the new standard are the full retrospective method, in which the new standard would be applied to each prior reporting period presented and the cumulative effect of applying the new standard would be recognized at the earliest period shown, or the modified retrospective method, in which the cumulative effect of applying the new standard would be recognized at the date of initial application. Based on our assessment, the impact of the new standard on our revenue recognition in prior periods is not significant; accordingly, while the Company would have used the modified retrospective method of adoption of the new standard, there was no cumulative effect of adoption on January 1, 2018 retained earnings.

 

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 new 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 under ASC 606 as described below:

 

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

 

  2. 123Wish derives income from user subscriptions, sale of merchandise, sale of tickets for experiences with social media influencers and artists, and the sale of corporate sponsorships, each of which is a separate performance obligation. User subscriptions cover a defined period of time (typically one month) and the revenue is recognized as the Company satisfies the requisite performance obligation (over the defined subscription period). Sale of merchandise and tickets are recognized when the customer has paid for the item and when the merchandise and/or ticket has been delivered to the customer. Corporate sponsorship packages are non-refundable and relate to brand association. The Company has no further service deliverable to the sponsor and the revenue is recognized when the agreement is entered into by both parties and the required marketing materials have been delivered to the corporate sponsor for their use.

 

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

 

The Company does not have off-balance sheet credit exposure related to its customers. As of September 30, 2018 four customers accounted for 87% of the accounts receivable balance and as of December 31, 2017, one customer accounted for 100% of the accounts receivable balance. Three customers accounted for 46% of the revenue for the nine months ended September 30, 2018 and one customer accounted for 76% of the revenue for the quarter ended September 30, 2018.

 

10

 

 

Research and Development Expenses

 

Research and development expenses include all direct costs, primarily salaries for Company personnel and outside consultants, costs related to the development of new products, significant enhancements to existing products, and the portion of costs of development of internal-use software required to be expensed. Research and development costs are charged to operations as incurred with the exception of those software development costs that may qualify for capitalization.

 

Income Taxes

 

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

 

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

  

11

 

 

Net Loss per Share

 

Basic net loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. Diluted loss per share takes into consideration common shares outstanding (computed under basic loss per share) and potentially dilutive securities. For the three and nine month periods ended September 30, 2018 and 2017, outstanding warrants are antidilutive because of net losses, and as such, their effect has not been included in the calculation of diluted net loss per share. Common shares issuable are considered outstanding as of the original approval date for purposes of earnings per share computations.

 

Accumulated Other Comprehensive Income (Loss)

 

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

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the fiscal 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.

 

Share-Based Compensation

 

The Company accounts for stock-based awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes option pricing model, which includes subjective judgements about the expected life of the awards, forfeiture rates and stock price volatility.

 

Fair Value Measurements

 

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

  Level 1 - Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

  Level 2 - Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

  Level 3 - Pricing inputs that are generally observable inputs and not corroborated by market data.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

12

 

 

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

 

Note 3. Acquisitions

 

123Wish, Inc.

 

On January 31, 2018 the Company completed the acquisition of a 51% controlling interest in 123 Wish, Inc. (formerly Once in a Lifetime LLC) a Delaware corporation in exchange for the issuance of 1,333,334 fully paid and non-assessable shares of common stock with a fair value of $1.39 million. In addition, the Company shall issue fully paid and non-assessable shares of common stock equal to 2.5 times of the net, after tax, earnings of 123 Wish for the nine month period after the date of acquisition and fully paid and non-assessable shares of common stock equal to 4.5 times the net, after tax, earnings of 123 Wish for the second six month period after the date of acquisition. 123 Wish, Inc. has proprietary applications which use the social media aspect of the internet.

 

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

 

Consideration Paid:

 

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

 

The consideration paid was 1,333,334 common shares valued at $1.04 per share. Separately identifiable intangible assets include technology which were valued by management using discounted cash flow and replacement cost approaches. Management’s analysis is provisional in nature and is subject to change based on the availability of new information about facts and circumstances that existed as of the acquisition date.

 

As of September 30, 2018, the Company has estimated that no additional share amounts will need to be issued as contingent consideration and therefore is not included in the Company’s allocation of the purchase price in the table above. The financial results of 123 Wish, Inc. have been included in the Company’s condensed consolidated financial statements since the date of acquisition, and the amount of stockholders’ equity and net loss attributable to the non-controlling interest has been recorded as a separate line item in the accompanying statements of operations and stockholders’ equity.

 

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

 

On February 26, 2018 the Company completed the acquisition of 100% ownership of Love Media House, Inc. (“LMH”) a Florida corporation in exchange for $150,000 cash and 1,376,147 fully paid and non-assessable shares of common stock with a fair value of $1,541,285. LMH is in the music and video content business. The financial statements of LMH have been included in the condensed consolidated financial statements from the date of acquisition.

 

13

 

 

The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed as of February 26, 2018 (In thousands):

 

Consideration Paid:

 

Cash   $ 150  
Common stock     1,541  
    $ 1,691  
         
Fair values of identifiable assets acquired and liabilities assumed:        
         
Assets acquired:        
Cash   $ 5  
Other intangible assets     910  
Goodwill     828  
Total assets acquired     1,743  
         
Liabilities assumed:        
Accounts payable     52  
Total Liabilities Assumed     52  
         
Net Assets Acquired   $ 1,691  

 

The consideration paid was 1,376,000 common shares plus $150,000 in cash. Separately identifiable intangible assets were customer relationships and were valued by management. The customer relationships were valued using discounted cash flow and replacement cost approaches. Management’s analysis is provisional in nature and is subject to change based on the availability of new information about facts and circumstances that existed as of the acquisition date.

 

As of September 30, 2018, the Company has estimated that no additional share amounts will need to be issued as contingent consideration and therefore is not included in the Company’s allocation of the purchase price in the table above. The financial results of LMH have been included in the Company’s condensed consolidated financial statements since the date of acquisition.

 

Banana Whale Studios PTE Ltd

 

On May 24, 2018 the Company completed the acquisition of 51% ownership of Banana Whale Studios PTE Ltd (“Banana Whale”) a Singapore corporation in exchange for an initial allocation of 7,383,000 fully paid shares of common stock with a fair value of $4,983,000. The acquisition of Banana Whale is based on an earnout formula solely and should Banana Whale fail to reach forecasted profit numbers during the first 24 months then some, or all of the shares allocated would be refundable to the Company. Banana Whale develops and supplies online games to Asian gaming platforms on a B2B basis with their revenue generated on a revenue share basis. The financial statements of Banana Whale have been included in the condensed consolidated financial statements from the date of acquisition.

 

The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed as of May 24, 2018 (In thousands):

 

Consideration Paid:

 

Common stock   $ 4,983  
Non-controlling interest     4,937  
    $ 9,920  

 

14

 

 

Fair values of identifiable assets acquired and liabilities assumed:

         
Assets acquired:        
Cash   $ 42  
Accounts receivable     11  
Equipment     37  
Other intangible assets     10,118  
Total assets acquired     10,208  
         
Liabilities assumed:        
Accounts and advances payable     288  
Total Liabilities Assumed     288  
         
Net Assets Acquired   $ 9,920  

 

The consideration paid was 7,383,000 common shares valued at $0.675 per share. Separately identifiable intangible assets include technology which were valued by management using discounted cash flow and replacement cost approaches. Management’s analysis is provisional in nature and is subject to change based on the availability of new information about facts and circumstances that existed as of the acquisition date.

 

As of September 30, 2018, the Company has estimated that no additional share amounts will need to be issued (or refunded) as contingent consideration and therefore is not included in the Company’s allocation of the purchase price in the table above. The financial results of Banana Whale have been included in the Company’s condensed consolidated financial statements since the date of acquisition and the amount of stockholders’ equity and net loss attributable to the non-controlling interest has been recorded as a separate line item in the accompanying statements of operations and stockholders’ equity.

 

Note 4. Intangible Assets

 

Intangible assets consist primarily of software development costs, acquired gaming software and customer and reseller relationships which are amortized over the estimated useful life, generally on a straight-line basis with the exception of customer relationships, which are generally amortized over the greater of straight-line or the related asset’s pattern of economic benefit.(in thousands)

 

    September 30     December 31  
    2018     2017  
             
Horizon software   $ 6,527     $ 6,527  
Social online application software     2,210        
Customer lists     997        
Gaming software     10,118        
      19,852       6,527  
Less accumulated amortization     (3,465 )     (1,187 )
                 
Intangible assets, net   $ 16,387     $ 5,340  

 

15

 

 

Amortization of intangible assets for each of the next five years is estimated to be $3,900,000 per year.

 

Note 5. Goodwill

 

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

 

    September 30     December 31  
    2018     2017  
             
123Wish, Inc.   $ 419     $  
Love Media House, Inc. (formerly C. Rod, Inc.)     828        
    $ 1,247     $  

 

Note 6. Convertible notes

 

In February 2018 the convertible note holders converted their notes into common stock, together with the interest accrued thereon. The amounts converted at $0.60 per share totaled $405,833 giving rise to 676,389 new shares of common stock.

 

Note 7. Share Capital

 

Common Stock

 

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

 

During the nine months ended September 30, 2018 the Company:

 

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

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

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

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

  Issued 172,222 shares of common stock for conversion of convertible note and accrued interest in the amount of $103,000

  Issued 172,222 shares of common stock for services provided with a fair value of $200,000

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

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

  Issued 1,376,147 shares of common stock, with a fair value of $1,541,285, as part consideration for the acquisition of C-Rod, Inc.

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

  Issued 7,383,000 shares of common stock, with a fair value of $4,983,000, for the acquisition of 51% of Banana Whale Studios Pte., Ltd
  Issued 1,575,000 shares of common stock for services provided with a fair value of $787,500
  Issued 850,000 shares of common stock for exercise of warrants at a price of $0.50 per share
  Issued 600,000 shares of common stock for services provided with a fair value of $306,000
  Issued 300,000 shares of common stock for services provided with a fair value of $150,000
  Issued 1,750,000 shares of common stock for cash of $0.20 per share

  Issued 1,850,000 shares of common stock for exercise of warrants at a price of $0.10 per share
  Issued 35,000 shares of common stock, with a fair value of $18,200, for an option to acquire an interest in an acquisition target.
  Issued 1,525,000 shares of common stock for cash of $114,375
  Issued 975,000 shares of common stock for exercise of warrants at a price of $0.075 per share
  Issued 4,500,000 shares of common stock for cash of $360,000
  Issued 1,000,000 shares of common stock for services provided with fair value of $175,000

 

16

 

 

Stock Purchase Warrants

 

As at September 30, 2018, the Company had reserved 330,869 shares of its common stock for the outstanding warrants with weighted average exercise price of $15.88. Such warrants expire at various times up to July 2020.

 

During the nine months ended September 30, 2018, 155,518 warrants were forfeited, 4,425,000 warrants were exercised, for proceeds of $1,246,000.

 

After September 30, 2018, the Company sold 4,250,000 units, each consisting of one share of common stock and one warrant to purchase an additional share of common stock for total proceeds of $425,000 and issued 2,000,000 shares of common stock that were exercised for total proceeds of $400,000

 

During the nine months ended September 30, 2018, the Company agreed to reduce the exercise price on 6.5 million outstanding warrants, which resulted in additional compensation cost of $544,000, in order to obtain additional funding.

 

Note 8. Segment Information

 

The Company has the following business segments for the nine months ended September 30, 2018 and 2017.

 

The Company’s revenues were generated in the following business segments (in thousands)

 

    September 30,     September 30,  
    2018     2017  
             
Sale of secure messaging licenses   $ 228     $ 514  
123Wish (from January 2018)     108        
Love Media House (from March 2018)     405        
Banana Whale (from May 2018)     144        
Total   $ 885     $ 514  

 

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

 

    September 30,     September 30,  
    2018     2017  
             
Sale of secure messaging licenses   $ 136     $  
123Wish (from January 2018)     732        
Love Media House (from March 2018)     322        
Banana Whale (from May 2018)     272        
Corporate costs     3,285       911  
Total   $ (4,475   $ 911  

 

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

 

    September 30,     September 30,  
    2018     2017  
             
Sale of secure messaging licenses   $ (1,059 )   $ 102  
123Wish (from January 2018)     (623 )      
Love Media House (from March 2018)     52        
Banana Whale Studios (from May 2018)     (355 )      
Corporate costs, discontinued operations and acquisition costs     (6,320 )     (3,156 )
Total   $ (8,305 )   $ (3,054 )

 

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Note 9. Employment Agreements

 

In connection with the acquisitions described in Note 3, the Company has entered into Employment Agreements (the “Agreements”) with three members of management of 123Wish and C-Rod. The Agreements have an initial employment period of two years and are automatically renewed annually thereafter. The Agreements entitle the members of management to a fixed base salary, along with incentive compensation that is calculated using pre-tax earnings and is payable in shares of the Company’s common stock.

 

Note 10. Legal proceedings

 

On May 30, 2018, Zhanming Wu (“Wu”), the record owner of 15,000,000 shares of common stock of One Horizon Group, Inc. (the “Company”), commenced an action in the Court of Chancery of the State of Delaware [Case No.2018-0387-JRS; the “Injunction Action”] against the Company and its directors and officers (collectively, the “Director Defendants”) alleging multiple breaches of contract between the Company and Wu, and seeking (i) damages; (ii) to enjoin the Company from issuing, offering, selling or granting any shares of its common stock to any person or entity, or consummate any merger, acquisition or similar transaction without the prior approval of Wu, and to prevent the Individual Defendants from undermining that right by engaging in any further transactions designed to entrench themselves as directors and officers of the Company and to dilute Wu’s stock ownership below 30% of the outstanding shares of the Company, (iii) to enforce Wu’s right to appoint four directors to the Company’s Board of Directors, (iv) to rescind the issuance of 7,383,000 shares to the former stockholders of Banana Whale Studios Pte. Ltd (“Banana Whale”) in exchange for 51% of the outstanding shares of Banana Whale (the “Banana Whale Acquisition”), (iv) to obtain a declaration that the Individual Defendants have breached their fiduciary duty of loyalty by taking actions to entrench themselves on the Company’s Board of Directors; and (v) seeking an award of attorneys’ fees and costs in connection with the litigation and such other relief as the Court deems fair and equitable.

 

On June 11, 2018, Wu commenced a second action in the Court of Chancery of the State of Delaware [Case No.2018-0427-JRS; the “225 Action”] under Section 225 of the Delaware General Corporation Law seeking (i) to appoint four directors to the Company’s Board of Directors, (ii) to enjoin the Company and its affiliates from issuing, offering, selling or granting any shares of the Company’s common stock to any person or entity, or consummate any merger, acquisition or similar transaction without the prior approval of Wu during the pendency of the action and (iii) seeking an award of attorneys’ fees and costs in connection with the litigation and such other relief as the Court deems fair and equitable.

 

On October 15, 2018, the parties entered into an agreement (the “Settlement Agreement”) which provides for the immediate cessation of all activities in the two actions and which will result in the dismissal of the two actions upon the fulfillment by the Company of certain conditions. Among the conditions to dismissal which the Company is required to meet to obtain the complete dismissal of the actions are the issuance of 354,409 shares to Wu to reimburse a portion of the expenses incurred in connection with the actions, the nomination and election to the Company’s Board of Directors of up to two individuals designated by Wu, the redemption of up to approximately 850,000 shares of common stock at $0.65 each, from certain investors whom Wu recommended to invest in the Company (the “Additional Investors”) should they request that the Company do so and the facilitation of the sale of shares of the Company’s common stock by Wu, including the registration of such shares for sale under the Securities Act. Based on ASC 840, which requires that conditionally redeemable securities be classified outside of permanent stockholders’ equity, $552,500 was reclassified as mezzanine equity effective October 15, 2018. Pending the re-election of Wu’s nominees to the Board of Directors at the Company’s 2018 Annual Meeting of Stockholders, the Company will continue to comply with the terms of the Status Quo Order issued in July in connection with the 225 Action. The 225 Action will be dismissed and the Company will no longer be obliged to comply with the Status Quo Order upon the re-election of Wu’s nominees to the Board of Directors at the Company’s 2018 Annual Meeting of Stockholders.

 

A Stipulation of Dismissal in respect of the Injunction Action will be filed and the parties will exchange releases upon the fulfillment of certain conditions, including the registration of Wu’s shares and the removal of the restrictive legend from Wu’s shares and the shares held by the Additional Investors. Notwithstanding such dismissal, should the registration of Wu’s shares lapse for any reason prior to October 1, 2019, Wu shall be entitled to enforce his rights under the side letters which were the basis of many of his claims, which letters are deemed to be a part of the Settlement Agreement as if set forth therein. If the Dismissal Stipulation has been filed in the Injunction Action and Wu’s shares have remained continuously registered until October 1, 2019, the side letters shall be deemed of no force and effect.

 

Note 11. Subsequent Events

 

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

 

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

 

The Company has agreed to register for resale the initial 150,000 shares issued to Mr. Browning.

 

The Company has a right of first refusal to purchase the remaining shares of Browning.

 

In the event the Company’s common stock is delisted from NASDAQ, Mr. Browning has the right to request that we return to him the Control Shares, provided that he has not disposed of one-half of the shares issued and issuable to him in connection with the acquisition.

 

The Company also has agreed to provide Browning with a working capital loan in an initial amount of $150,000, which is to be repaid out of the post-closing net profit of Browning.

 

On October 9, 2018, the Company acquired a direct eighty percent ownership interest in the software, source code and other intellectual property underpinning the 123Wish experience marketplace platform operated by its subsidiary, 123Wish. In exchange for this ownership the Company issued 3,000,000 shares of its common stock and lent an additional $100,000 in working capital to 123Wish. 

 

In October and November 2018 the Company issued an aggregate of 4,550,000 shares of its common stock to consultants for services provided.

 

On November 15, 2018, the Company issued and sold 9,500,000 shares of its common stock to two accredited investors, for a purchase price of $1,425,000.

   

18

 

 

ITEM 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 nine months ended September 30, 2018 and 2017 and notes thereto contained elsewhere in this Report, and our annual report on Form 10-K for the twelve months ended December 31, 2017 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

 

Business

 

In October 2018 the Company executed the acquisition of a majority of Browning Production and Entertainment, Inc. a Florida based television production company.

 

This addition to the Company increases its group of digitally based software and media businesses based in Asia and the United States of America.

  

19

 

 

Results of Operations

 

Comparison of three months ended September 30, 2018 and 2017

 

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

September 30,

   Change 
   2018   2017   Increase/
(decrease)
   Percentage
Change
 
                 
Revenue  $317   $397   $(80)   (20.2)
                     
Cost of revenue   1,224    406    818    201.5 
                     
Gross margin   (907)   (9)   (898)   (9,977.8)
                     
Operating expenses:                    
                     
General and administrative   1,544    338    1,206    356.8 
Depreciation   3    2    1    50.0 
Acquisition costs               N/A 
                     
Total operating expenses   1,547    340    1,207    355.0 
                     
Loss from operations   (2,454)   (349)   (2,105)   (603.2)
                     
Other expense   (21)   (179)   158    88.3 
Loss for the period for continuing operations   (2,475)   (528)   (1,947)   (368.8)
                     
Loss for discontinued operations       (244)   244    N/A 
Total net loss   (2,475)   (772)   (1,703)   (220.6)

 

20

 

 

Revenue: Our revenue for the three months ended September 30, 2018 was split between our operations as follows:

 

  Secure messaging - $50,000 for the sale of user licenses

 

  123Wish - $3,000 for subscriptions and sponsorships

 

  LMH - $144,000 for music and video production services
     
  Banana Whale - $120,000 for B2B software provided in the online gaming industry.

 

Gross Margin: Gross margin deficit, for the three months ended September 30, 2018 was approximately $907,000 as compared to $9,000 margin deficit for the three months ended September 30, 2017, due to the increase in amortization of software development costs, offset by increased revenues.

 

Operating Expenses: General and administrative expenses and depreciation were approximately $1.6 million and $0.34 million during the three months ended September 30, 2018 and 2017, respectively. The major costs included in the three months ended September 30, 2018 were consulting costs including due diligence and advisory costs incurred in the acquisitions strategy of the Company.

 

Net Loss: Net Loss from continuing operations, for the three months ended September 30, 2018 was approximately $2.5 million as compared to net loss of approximately $0.5 million for the same period in 2017. The increase in the losses is attributable to the increase in General and Administrative expenses, offset by an increase in revenue, as discussed above.

  

21

 

 

Comparison of nine months ended September 30, 2018 and 2017

 

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)

 

   

Nine Months Ended 

September 30, 

    Change  
    2018     2017     Increase/
(decrease)
    Percentage
Change
 
                         
Revenue   $ 885     $ 514     $ 371       72.2  
                                 
Cost of revenue     2,564       450       2,114       469.8  
                                 
Gross margin     (1,679 )     64       (1,743 )     (2,723.4 )
                                 
Operating expenses:                                
                                 
General and administrative     4,147       911       3,236       355.2  
Acquisition costs     1,874             1,874       N/A  
Depreciation     5       16       (11 )     (68.8 )
                                 
Total operating expenses     6,626       927       5,699       614.8  
                                 
Loss from operations     (8,305 )     (863 )     (7,442 )     (862.3 )
                                 
Other income (expense)     (412 )     (535 )     123       23.0  
Loss for the period for continuing operations     (8,717 )     (1,398 )     (7,317 )     523.5  
                                 
Loss for discontinued operations           (2,428 )     2,428       N/A  
Net loss     (8,717 )     (3,826 )     (4,891 )     (127.8 )

 

Revenue: Our revenue for the nine months ended September 30, 2018 was approximately $0.9 million as compared to approximately $0.5 million for the nine months ended September 30, 2017, an increase of approximately $0.4 million, or 72.2%. The increase was due to the increases in revenue generated by the newly acquired subsidiaries.

 

Cost of Revenue: Cost of revenue was approximately $2. 6 million for the nine months ending September 30, 2018 as compared to $0. 5 million for the nine months ended September 30, 2017. The main reason for the increase was the amortization charge of $1.8 million relating to software development costs.

 

Gross Margin: Gross margin deficit for the nine months ended September 30, 2018 was approximately $1.7 million as compared to a gain of $0.1 million for the nine months ended September 30, 2017, a decrease of approximately $1.7 million. The decrease was mainly due to the amortization charge of $1.83 million, offset by increased revenues, as set forth above herein.

 

Operating Expenses: Operating expenses, including general and administrative expenses, depreciation and acquisition costs were approximately $6.6 million and $0.9 million during the nine months ended September 30, 2018 and 2017, respectively. The Company incurred the increased costs as a result of the strategy of business acquisitions and the operational costs relating thereto.

 

Net Loss: Net Loss after discontinued operations, for the nine months ended September 30, 2018 was approximately $8.7 million as compared to loss of approximately $3.8 million for the same period in 2017. The increase in loss was primarily due to the increase in non-cash general and administrative expenses, and acquisition costs offset by an increase in revenues mentioned above.

  

22

 

 

Liquidity and Capital Resources

 

Nine Months Ended September 30, 2018 and September 30, 2017

 

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

 

   

For the Nine Months Ended

September 30,

 (in thousands)  

 
    2018     2017  
Net cash flows from total operating operations     (2,373 )     (364 )
Net cash flows from total investing activities     (114 )     (262 )
Net cash flows from total financing activities     2,223       511  

 

Net cash used by operating activities was approximately $2.37 million for the nine months ended September 30, 2018 as compared to net cash used in operating activities of approximately $0.36 million for the same period in 2017. The increase in cash used by operations was primarily due to the cost of pursuing the acquisition strategy.

 

Net cash used in investing activities was approximately $0.11 million and $0.26 million for the nine months ended September 30, 2018 and 2017, respectively. Net cash used in investing activities for the nine months ended September 30, 2018 related to cash consideration in the acquisition of LMH offset by the cash acquired in the Banana Whale acquisition.

 

Net cash generated in financing activities was approximately $2.22 million for the nine months ended September 30, 2018 as compared to $0.51 million for the nine months ended September 30, 2017. The cash generated from financing activities was primarily from the proceeds from the sale of new shares of common stock, the exercise of common stock warrants and proceeds from convertible debt during the nine months ended September 30, 2018.

 

At September 30, 2018 the Company had cash of $0.54 million.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable.

 

ITEM 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 current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2018, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of September 30, 2018, 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 has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

  

23

 

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

On May 30, 2018, Zhanming Wu (“Wu”), the record owner of 15,000,000 shares of common stock of One Horizon Group, Inc. (the “Company”), commenced an action in the Court of Chancery of the State of Delaware [Case No.2018-0387-JRS; the “Injunction Action”] against the Company and its directors and officers (collectively, the “Director Defendants”) alleging multiple breaches of contract between the Company and Wu, and seeking (i) damages; (ii) to enjoin the Company from issuing, offering, selling or granting any shares of its common stock to any person or entity, or consummate any merger, acquisition or similar transaction without the prior approval of Wu, and to prevent the Individual Defendants from undermining that right by engaging in any further transactions designed to entrench themselves as directors and officers of the Company and to dilute Wu’s stock ownership below 30% of the outstanding shares of the Company, (iii) to enforce Wu’s right to appoint four directors to the Company’s Board of Directors, (iv) to rescind the issuance of 7,383,000 shares to the former stockholders of Banana Whale Studios Pte. Ltd (“Banana Whale”) in exchange for 51% of the outstanding shares of Banana Whale (the “Banana Whale Acquisition”), (iv) to obtain a declaration that the Individual Defendants have breached their fiduciary duty of loyalty by taking actions to entrench themselves on the Company’s Board of Directors; and (v) seeking an award of attorneys’ fees and costs in connection with the litigation and such other relief as the Court deems fair and equitable.

 

On June 11, 2018, Wu commenced a second action in the Court of Chancery of the State of Delaware [Case No.2018-0427-JRS; the “225 Action”] under Section 225 of the Delaware General Corporation Law seeking (i) to appoint four directors to the Company’s Board of Directors, (ii) to enjoin the Company and its affiliates from issuing, offering, selling or granting any shares of the Company’s common stock to any person or entity, or consummate any merger, acquisition or similar transaction without the prior approval of Wu during the pendency of the action and (iii) seeking an award of attorneys’ fees and costs in connection with the litigation and such other relief as the Court deems fair and equitable.

 

On October 15, 2018, the parties entered into an agreement (the “Settlement Agreement”) which provides for the immediate cessation of all activities in the two actions and which will result in the dismissal of the two actions upon the fulfillment by the Company of certain conditions. Among the conditions to dismissal which the Company is required to meet to obtain the complete dismissal of the actions are the issuance of 354,409 shares to Wu to reimburse a portion of the expenses incurred in connection with the actions, the nomination and election to the Company’s Board of Directors of up to two individuals designated by Wu, the redemption of up to approximately 850,000 shares of common stock at $0.65 each, from certain investors whom Wu recommended to invest in the Company (the “Additional Investors”) should they request that the Company do so and the facilitation of the sale of shares of the Company’s common stock by Wu, including the registration of such shares for sale under the Securities Act. Pending the re-election of Wu’s nominees to the Board of Directors at the Company’s 2018 Annual Meeting of Stockholders, the Company will continue to comply with the terms of the Status Quo Order issued in July in connection with the 225 Action. The 225 Action will be dismissed and the Company will no longer be obliged to comply with the Status Quo Order upon the re-election of Wu’s nominees to the Board of Directors at the Company’s 2018 Annual Meeting of Stockholders.

 

A Stipulation of Dismissal in respect of the Injunction Action will be filed and the parties will exchange releases upon the fulfillment of certain conditions, including the registration of Wu’s shares and the removal of the restrictive legend from Wu’s shares and the shares held by the Additional Investors. Notwithstanding such dismissal, should the registration of Wu’s shares lapse for any reason prior to October 1, 2019, Wu shall be entitled to enforce his rights under the side letters which were the basis of many of his claims, which letters are deemed to be a part of the Settlement Agreement as if set forth therein. If the Dismissal Stipulation has been filed in the Injunction Action and Wu’s shares have remained continuously registered until October 1, 2019, the side letters shall be deemed of no force and effect.

 

24

 

 

ITEM 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, 2017 (the “2017 Form 10-K”) and under the caption “Risk Factors” in our Registration Statement on Form S-3 (Registration No. 333-225945) filed on September 28, 2018 and declared effective on August 7, 2018, which sections are incorporated by reference into this report. Prospective investors are encouraged to consider the risks described in our 2017 Form 10-K, the Registration Statement, 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.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Except as previously reported in the reports we have filed under the Exchange Act, during the period covered by this report, we have not issued or sold any unregistered equity securities other than: 

 

1. 850,000 shares of common stock to an accredited investor, upon exercise of warrants at an exercise price of $0.50 per share. The issuance of the shares was exempt from the registration requirements of the Securities Act under Rule 506 of Regulation D and Section 4(a)(2) of the Securities Act. The certificates representing the shares were endorsed with the customary Securities Act legend.

 

2. 225,000 shares of common stock to a consultant for services having a fair value of $168,750. The issuance of the shares was exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act. The certificates representing the shares were endorsed with the customary Securities Act legend.

 

3. 850,000 shares of common stock to a consultant for services having a fair value of $425,000. The issuance of the shares was exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act. The certificates representing the shares were endorsed with the customary Securities Act legend.

 

4. 1,575,000 shares of common stock to a consultant for services having a fair value of $787,500. The issuance of the shares was exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act. The certificates representing the shares were endorsed with the customary Securities Act legend.

 

5. 300,000 shares of common stock to a consultant for services having a fair value of $150,000. The issuance of the shares was exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act. The certificates representing the shares were endorsed with the customary Securities Act legend.

 

6. 600,000 shares of common stock to a consultant for services provided with a fair value of $306,000. The issuance of the shares was exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act. The certificates representing the shares were endorsed with the customary Securities Act legend.

 

7. 500,000 shares of common stock to a consultant for services rendered having a fair value of $265,000 pursuant to a Documentary Rights Agreement. The issuance of the shares was exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act. The certificates representing the shares were endorsed with the customary Securities Act legend.

 

8. 1,750,000 shares of our common stock to an accredited investor for gross proceeds of $350,000. The issuance and sale of the shares were exempt from the registration requirements of the Securities Act under Rule 506 of Regulation D and Section 4(a)(2) of the Securities Act. The certificates representing the shares were endorsed with the customary Securities Act legend.

 

9. 1,850,000 shares of common stock to an accredited investor, upon exercise of warrants at an exercise price of $0.10 per share. The issuance of the shares was exempt from the registration requirements of the Securities Act under Rule 506 of Regulation D and Section 4(a)(2) of the Securities Act. The certificates representing the shares were endorsed with the customary Securities Act legend.

 

25

 

 

10. 35,000 shares of common stock having a fair value of $18,200 for an option to acquire an interest in an acquisition target. The issuance of the shares was exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act. The certificates representing the shares were endorsed with the customary Securities Act legend. 

 

Subsequent to the period covered by this report, we issued the following unregistered equity securities:

 

In October 2016, we issued, (i) 500,000 shares of common stock having a fair value of $76,500 to Maxim Partners, LLC for extending the term of its M&A Agreement; (ii) 3,000,000 shares of common stock having a fair value of $459,000 in connection with the transfer to us of an eighty percent ownership interest in the software and source code and all other intellectual property underpinning the 123Wish experience marketplace platform operated by our subsidiary, 123Wish; and (iii) 500,000 shares of common stock having a fair value of $76,500 and 350,000 shares of common stock having a fair value of $53,550 for services rendered.

 

In November 2018, we issued (i) 1,250,000 shares of common stock having a fair value of $225,000 to One Percent Investments Inc. pursuant to Consulting Agreement; (ii) 1,300,000 shares of common stock having a fair value of $234,000 to BK Consulting Group, LLC for consulting services;  (iii) 500,000 shares of common stock having a fair value of $90,000 to Bespoke Growth Partners, Inc. in reimbursement of expenses; (iv) a total of 650,000 shares of common stock having a fair value of $117,000 for consulting services; and (v) a total of 9,500,000 shares of common stock to Bespoke Growth Partners, Inc. and BK Consulting Group, LLC for a total purchase price of $1,425,000, pursuant to Securities Purchase Agreements.  

  

The issuance of the foregoing shares were exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act. The certificates representing the foregoing shares were endorsed with the customary Securities Act restrictive legend.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

Item 6. Exhibits

 

10.1 Subscription Agreement with First Choice International Company, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-3 (Registration No. 333-227247 ) filed on September 10, 2018 and declared effective on September 14, 2018).
   
10.2 Settlement Agreement relating to the Wu Litigation (incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-3 (Registration No. 333-227971) filed on October 24, 2018 and declared effective on November 2, 2018).
   
10.3 Exchange Agreement with Browning Productions & Entertainments, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 24, 2018).
   
10.4 Subscription Agreement with Bespoke Growth Partners, Inc. (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 21, 2018).

 

10.5 Securities Purchase Agreement with First Choice International Company, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 19, 2018).
   
10.6 Consulting Agreement with One Percent Investments, Inc.
   
10.7 Securities Purchase Agreement with Bespoke Growth Partners, Inc.
   
10.8 Securities Purchase Agreement with BK Consulting Group, LLC.

 

31.1 Certification of principal executive officer pursuant to Rule 13a-14 or Rule 15d-14 of Exchange Act. Exchange Act of 1934.
   
31.2 Certification of principal financial officer pursuant to Rule 13a-14 or Rule 15d-14 of the Exchange Act.
   
32.1 Certification of principal executive officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
   
32.2 Certification of principal financial officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
   

101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation
101.DEF XBRL Taxonomy Extension Definition
101.LAB XBRL Taxonomy Extension Label
101.PRE XBRL Taxonomy Extension Presentation

 

26

 

 

SIGNATURES

 

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

 

  ONE HORIZON GROUP, INC.  
       
Date: November 16, 2018 By: /s/ Mark White  
    Mark White  
    President, Chief Executive Officer and Director  
       
  By: /s/ Martin Ward  
    Martin Ward  
    Chief Financial Officer, Principal  
    Finance and Accounting Officer and Director  

 

27

 

EX-10.6 2 s113922_ex10-6.htm EXHIBIT 10.6

 

Exhibit 10.6 

 

CONSULTING AGREEMENT

 

This Consulting Agreement (the “Agreement”) is made as of November 9, 2018, (“Effective Date”), by and between One Horizon Group, Inc. (NASDAQ: OHGI), a Delaware Corporation with an office and place of business located at 34 South Molton Street, London W1K 5RG UK (“OHGI” or the “Company”), and One Percent Investments, Inc. with an address at 330 Clematis Street, Suite 217, West Palm Beach, FL 33401 (“Consultant”). The Company and/or the Consultant may each be referred to herein as a “Party,” and collectively as the “Parties.”

 

WHEREAS, the Company is exploring potential strategic alliances and/or business transactions to acquire additional technology for data analytics in advancement of its business growth;

 

WHEREAS, Consultant has experience working with digital technology companies and performing related research and evaluation and has introduced the Company to a number of potential strategic alliances, which may lead to the completion of business transactions and Consultant has also been advising the Company in regards to expansion of its professional staff in support of the same;

 

NOW THEREFORE, the Company has requested that consultant undertake these services at the direction of the Company and engage in related activities (“Consulting Services”); and the Company agrees to retain the Consultant to provide the Consulting Services and the Consultant will provide the Consulting Services for the “Term” (as defined in Section 1) of this Agreement;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged, and intending to be legally bound hereby, the Consultant and the Company agree as follows:

 

1.             TERM. This Agreement shall commence upon receipt of the Compensation st forth in Section 4(a) and shall extend thereafter for an initial period of six (6) months (“Term”). Unless immediate termination is otherwise specifically permitted herein or by applicable law (e.g. for material breach), the Company may cancel this Agreement by providing thirty (30) calendar days written notice to Consultant (“Termination Notice”). Notwithstanding, in the event of termination, the Compensation (Section 4) shall be immediately due and payable.

 

2.             CONSULTING SERVICES. The Company expressly acknowledges and agrees that the Consulting Services are to be performed in a commercially reasonable manner and are not legal or broker-dealer services and that the execution of this Agreement does not guaranty any particular success or result.

 

3.             APPROVAL OF INFORMATION. The Company shall furnish the Consultant with such information as is reasonably required in order for the Consultant to perform its duties hereunder (all such information so furnished, “Information”). The Company recognizes and confirms that the Consultant (i) will use, and rely primarily on, the Information and information available from generally recognized public sources (“Public Information”) in rendering the Consulting Services without having independently verified the same, (ii) does not assume responsibility for the accuracy of completeness of the Information and Public Information, (iii) will not make an appraisal of any assets of the Company, and/or (iv) will provide the Consulting Services based on the Information and the Public Information.

 

Page 1 of 5 

 

 

It is the Company’s responsibility to make certain that the Information to be furnished by the Company, when delivered, will be true and correct in all material respects and will not contain any misstatement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. The Company shall promptly notify the Consultant of any material inaccuracy or misstatement in, or material omission from, any Information theretofore delivered to the Consultant, or in any Public Information to the extent that the Company is aware of the same.

 

4.COMPENSATION.

 

For the Consulting Services rendered during the Term, the following “Compensation” shall be due and owing the Consultant from the Company:

 

a)The Company shall issue and immediately and irrevocably deliver to the Consultant One Million Two Hundred and Fifty Thousand (1,250,000) shares of OHGI Common Stock (“Consultant Shares”).

 

b)At no time may Consultant be deemed to be the beneficial owner of more than 4.99% of OHGI’s Common Stock, as determined under the beneficial ownership rules of the Securities Exchange Commission (“SEC”) by virtue of the ownership by Consultant of OHGI Common Stock (“4.99% Blocker”).

 

c)Upon closing of any transaction for which the Consulting Services have been provided, and also subject to the 4.99% Blocker, Consultant shall be issued an additional Five Hundred Thousand (500,000) shares of OHGI Common Stock (“Subsequent Consultant Shares”).

 

d)Subject to the 4.99% Blocker, the Company agrees to register the Consultant Shares and any Subsequent Consultant Shares within thirty (30) days from the issuance of the same pursuant to Company-filed S-3 Registration Statement(s).

 

e)Unless otherwise indicated in this Agreement, Subsequent Consultant Shares shall be issued to Consultant within ten (10) business days from the closing of any strategic alliance or transaction.

 

f)As may be applicable, the Company agrees to take any and all action(s) necessary to clear of restriction the Consultant Shares and any and all Subsequent Consultant Shares awarded to the Consultant under this Section 4 upon presentation of any Rule 144 application by the Consultant or its broker, including, without limitation, (i) authorizing the Company’s transfer agent to remove the restrictive legend on the Consultant Shares or any and all Subsequent Consultant Shares;

 

Page 2 of 5 

 

 

(ii)expediting the acquisition of a legal opinion from the Company’s authorized counsel at Company’s expense (or, in the event the Consultant uses its own counsel, at the Company’s expense up to $500) favorably opining as to the removal of the restrictive legend; and

 

(iii)cooperating and communicating with the Consultant and its broker in order to use the Company’s commercially reasonable efforts to clear the Consultant Shares and any and all Subsequent Consultant Shares of restriction as soon as possible after presentation of a Rule 144 application by the Consultant or its broker to either the Company or its transfer agent. Further, the Company agrees not to unreasonably withhold or delay the approval of any application filed by the Consultant or its broker under Rule 144 to clear the Consultant Shares or any and all Subsequent Consultant Shares of restriction.

 

g)The Parties shall negotiate and agree in good faith regarding the Consultant’s Compensation for any Consulting Services to be provided beyond the scope of this Agreement and/or the Term depending upon the Company’s needs at such time and the services being requested.

 

5.             LIMITATION OF ENGAGEMENT. The Company acknowledges that the Consultant is providing the Consulting Services as an independent contractor.

 

6.             CONFIDENTIALITY. Other than as required by applicable law, neither the Consultant nor any of its employees, agents, and/or officers or directors shall disclose any knowledge or information they have obtained in the course of performing the Consulting Services, if such knowledge or information concerns the confidential or non-public affairs of the Company, without the Company’s prior consent. The existence of this Agreement is also privileged and confidential subject to applicable Securities Laws.

 

7.COMPLIANCE AND GOVERNING LAW.

 

a)OHGI, in connection with the issuance of any stock to Consultant hereunder, as may be applicable, shall be responsible for any and all compliance with applicable Securities Laws, rules and regulations.

 

b)Company recognizes that failure to timely make its filings under the Securities Exchange Act of 1934 (“Exchange Act”) will materially hinder the effectiveness of the Consulting Services and will constitute automatic grounds for cancellation by the Consultant and all Compensation paid to the Consultant up to and including the date of such failure shall be deemed fully earned by the Consultant as of such date.

 

c)This Agreement shall be governed by and construed in accordance with the laws of the State of Florida applicable to agreements made and to be fully performed therein. Any disputes that arise under this Agreement, even after the termination of this Agreement, will be heard only in the courts located in Palm Beach County, Florida. The Parties expressly agree to submit themselves to and expressly waive any rights they may have to contest the jurisdiction, venue or authority of any such courts.

 

Page 3 of 5 

 

 

d)It is specifically understood that the Consultant is not and does not hold itself out to be a ‘broker/dealer’ as that term is understood in applicable law (including the ‘Paul Anka’ SEC no-action letter dated July 24, 1991, and the ‘Country Business, Inc.’ SEC no-action letter dated November 8, 2006) in reference to the Company procuring financing sources and merger and/or acquisition candidates, and the Consultant does not normally provide such services.

 

e)Any Compensation obligation hereunder shall survive the merger, acquisition or other change in the form of entity of the Company and to the extent it remains unfulfilled, shall be assigned and transferred to any successor to the Company.

 

f)It is understood and agreed that the Company and not the Consultant is responsible to perform any and all due diligence on any broker/dealer, lender, merger or acquisition candidate, strategic partner or transaction introduced to the Company by the Consultant under this Agreement prior to the Company receiving funds or closing any transaction.

 

8.             NOTICE. All notices and correspondence hereunder shall be in writing and sent by e-mail or FedEx to the applicable Party at the addresses set forth above.

 

9.             INDEMNIFICATION. The Company agrees to indemnify, defend and hold harmless the Consultant, its officers, directors, members, employees, affiliates, and agents against all losses, expenses, damages and costs, including reasonable attorneys’ fees, resulting from any act, action or omission, arising out of or related to the services provided by Consultant under this Agreement, except for acts of the Consultant of willful misconduct or gross negligence related to this Agreement.

 

10.           LIMITATIONS. Any liability of the Consultant, its officers, directors, members, employees, affiliates, agents or representatives shall not exceed ten percent (10%) of the initial value in United States Dollars of the Compensation actually paid to the Consultant by the Company pursuant to Section 4 of this Agreement.

 

11.           EXPENSES. The Company will reimburse the Consultant for its receipted expenses approved by the Company in advance, including, but not limited to, expenses relating to the Consultant’s travel and lodging, which expenses during the Term shall not exceed fifty thousand dollars ($50,000). The Consultant shall always seek advance approval from the Company for any single expense that exceeds five thousand dollars ($5,000). The Company shall also reimburse Consultant upon presentation of any expenses incurred by the Consultant for collection of any Compensation due to the Consultant under Section 4 of this Agreement, including but not limited to reasonable attorneys’ fees and court costs. Reimbursement shall be made within fifteen (15) business days following the receipt by the Company of the Consultant’s invoice related to any such expenses.

 

Page 4 of 5 

 

 

12.           MISCELLANEOUS. This Agreement shall not be modified or amended except in writing signed by the Parties; shall be binding upon and inure to the benefit of the Parties and their respective assigns or successors; and constitutes the entire agreement of the Parties and supersedes any prior agreements. If any provision of this Agreement is determined to be invalid or unenforceable in any respect, such determination will not affect such provision in any other respect, and the remainder of the Agreement shall remain in full force and effect. This Agreement may be executed in counterparts (including e-mail scans) each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

One Horizon Group, Inc. represents and warrants that all of the Consultant Shares and any and all Subsequent Consultant Shares shall be or will have been validly issued, fully paid and non-assessable and that the Company’s Board of Directors has or shall have duly authorized the issuance and transfer thereof to Consultant. The Company agrees to promptly file this Agreement with the appropriate governing bodies and to reference the same in its next Exchange Act filing.

 

IN WITNESS WHEREOF, the Parties below have each caused this Agreement to be executed as of the date first set forth above.

 

One Percent Investments, Inc. One Horizon Group, Inc.
           
By: /s/ Mark Peikin   By: /s/ Martin Ward  
Name: Mark Peikin   Name: Martin Ward  
Duly Authorized   Title: CFO  
      Duly Authorized  

 

Page 5 of 5 

 

EX-10.7 3 s113922_ex10-7.htm EXHIBIT 10.7

 

Exhibit 10.7

 

SECURITIES PURCHASE AGREEMENT

 

Securities Purchase Agreement (this “Agreement”) between One Horizon Group, Inc., a Delaware corporation (the “Company”), and the purchaser whose name appears on the signature page hereof (the “Purchaser”).

 

Preliminary Statement

 

The Company is offering up to nine million five hundred thousand (9,500,000) shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) for a purchase price of Fifteen Cents ($.15) per share (the “Offering”).

 

The Shares are only being offered to non-“U.S. Persons,” as defined in Rule 902(k) of Regulation S under the Securities Act of 1933, as amended (the “Securities Act”), and to ‘accredited investors,” as defined in Rule 501(a) of Regulation D promulgated under Section 4(a)(2) of the Securities Act (“Regulation D”), pursuant to Rule 506 of Regulation D and Section 4(a)(2).

 

The Offering will commence on November 8, 2018, and terminate on the close of business on November 15, 2018 (the “Offering Period”). The Company may hold one or more closings at any time during the Offering Period (each a “Closing”) until the termination or expiration of the Offering Period.

 

Purchaser desires to purchase, and the Company is willing to sell to the Purchaser, upon the terms and conditions stated in this Agreement, the number of Shares set forth on the signature page hereof (the “Purchased Shares”), for the purchase price set forth thereon (the “Purchase Price”).

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and Purchaser agree as follows:

 

ARTICLE I.

PURCHASE AND SALE

 

1.1       Purchase of the Shares. Subject to the terms and conditions of this Agreement, the Purchaser intends to be legally bound and the Company agrees to issue the Purchased Shares against its receipt of the Purchase Price for the Purchased Shares.

 

1.2       Deliveries. At each Closing, the Purchaser will deposit the Purchase Price for the Purchased Shares to an account designated by the Company by wire transfer of immediately available funds. The Company will deliver to the Purchaser certificates and/or Direct Registration Statements representing the Purchased Shares against the Company’s receipt of the Purchase Price.

 

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ARTICLE II.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to Purchaser as follows:

 

2.1        Organization; Good Standing; and Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The shares of the Company’s Common Stock are currently traded on NASDAQ.

 

2.2        Authorization. The Company possesses the legal right and capacity to execute, deliver and perform this Agreement. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of the Company’s certificate of incorporation or bylaws. The Company has taken all action required by law, its certificate of incorporation, its bylaws, or otherwise to authorize the execution and delivery of this Agreement and the issuance of the Purchased Shares, and the Company has full power, authority, and legal right and has taken all action required by law, its certificate of incorporation, bylaws, or otherwise to consummate the transactions herein contemplated. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, receivership, fraudulent conveyance or similar laws affecting or relating to the enforcement of creditors’ rights generally, and by equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

2.3        Issuance of the Purchased Shares. The Purchased Shares, when issued against payment of the Purchase Price, will be duly authorized, and duly and validly issued, fully paid and non-assessable, free and clear of all security interests, liens, encumbrances and other restrictions, other than restrictions on transfer provided for under the Securities Act and in this Agreement.

 

2.4        SEC Filings; Financial Statements.

 

(a)        There has been available on the SEC EDGAR website, copies of each report, registration statement and definitive proxy statement filed by Company with the SEC since at least January 1, 2017 (the “Company SEC Reports”), which are all the forms, reports and documents filed by Company with the SEC from January 1, 2017 to the date of this Agreement. As of their respective dates, the Company SEC Reports (i) were prepared in accordance and complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Company SEC Reports; and (ii) did not at the time they were filed (and if amended or superseded by a filing prior to the date of this Agreement then on the date of such filing and as so amended or superseded) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

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(b)       Each set of financial statements (including, in each case, any related notes thereto) contained in the Company SEC Reports comply as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, do not contain footnotes as permitted by Form 10-Q promulgated under the Exchange Act) and each fairly presents in all material respects the financial position of Company at the respective dates thereof and the results of its operations and cash flows for the periods indicated.

 

2.5        Information. The information concerning the Company set forth in this Agreement and the Company SEC Reports is complete and accurate in all material respects and does not contain any untrue statements of a material fact or omit to state a material fact required to make the statements made, in light of the circumstances under which they were made, not misleading.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser hereby represents and warrants to the Company as follows:

 

3.1       Incorporation; Authority. Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its or his obligations hereunder. The execution and delivery of this Agreement and performance by Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of Purchaser. This Agreement, when delivered by Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of Purchaser, enforceable against it or him in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

3.2       Own Account. Purchaser understands that the Purchased Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Purchased Shares as principal for its own account and not with a view to or for distributing or reselling the Purchased Shares or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Purchased Shares in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of Purchased Shares in violation of the Securities Act or any applicable state securities law. Purchaser is acquiring the Purchased Shares hereunder in the ordinary course of its business.

 

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3.3       Purchaser Status. At the time Purchaser was offered the Shares, it was, and as of the date hereof it is, either: (i) an “accredited investor” as defined in Rule 501(a) under the Securities Act or (ii) a non- “U.S. Person” as defined in Rule 902(k) of Regulation S under the Securities Act and that all negotiations with respect to the Purchased Shares occurred outside the United States.

  

3.4       Experience of Purchaser. Purchaser, either alone or together with its or his representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Purchased Shares. Purchaser is able to bear the economic risk of an investment in the Purchased Shares and, at the present time, is able to afford a complete loss of such investment.

 

3.5        General Solicitation. Purchaser is not purchasing the Purchased Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

3.6       Access to Information. Purchaser acknowledges that it or he has had the opportunity to review this Agreement (including all exhibits and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the Shares and the merits and risks of investing in the securities of the Company; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company owns or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. 

  

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1       Transfer Restrictions.

 

(a)       The Purchased Shares only may be disposed of in compliance with state and federal securities laws. In connection with any transfer of the Purchased Shares other than pursuant to an effective registration statement or Rule 144, to the Company or to an “affiliate” (as defined in Rule 405 of the Securities Act) of a Purchaser, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Purchased Shares under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.

  

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(b)       The Purchaser agrees to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Purchased Shares in the following form:

 

If the Purchaser is an “accredited investor”:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.”

 

If the Purchaser is a non- “U.S. Person”:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN OFFERED TO INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”)) AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON REGULATION S PROMULGATED UNDER THE SECURITIES ACT.”

 

“TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

 

4.2       Use of Proceeds. The Company shall use the net proceeds from the sale of the Purchased Shares hereunder for working capital purposes.

 

4.3       Registration. The Company hereby agrees to file a registration statement under the Securities Act for the resale of the Purchased Shares and any other securities issued upon conversion or exchange or otherwise in respect thereof, including without limitation pursuant to any stock dividend, stock split, merger, consolidation or other recapitalization transaction (collectively, the “Registrable Securities”), in accordance with Appendix A annexed hereto not more than fifteen (15) days after the date of the first Closing and not more than fifteen (15) days after the date of any subsequent Closing(s).

 

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4.4       Indemnification.

 

(a)        The Company agrees to indemnify and hold harmless Purchaser and each of the other Indemnified Parties (as hereinafter defined) from and against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements, and any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise (including, without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing, pursing or defending any such action, suit, proceeding or investigation (whether or not in connection with litigation in which any Indemnified Party is a party) (collectively, “Losses”), directly or indirectly, caused by, relating to, based upon, arising out of, or in connection with, Purchaser’s purchase of the Purchased Shares pursuant to the terms of this Agreement, any breach by the Company of any representation, warranty, covenant or agreement contained in this Agreement, or the enforcement by Purchaser of its rights under this Agreement, except to the extent that any such Losses are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from the willful misconduct of the Indemnified Party seeking indemnification hereunder.

 

(b)       These indemnification provisions shall extend to the following persons (collectively, the “Indemnified Parties”): Purchaser, its present and former affiliated entities, partners, employees, legal counsel, agents, advisors and controlling persons (within the meaning of the federal securities laws), and the officers, directors, partners, stockholders, members, managers, employees, legal counsel, agents, advisors and controlling persons of any of them and any assigns. These indemnification provisions shall be in addition to any liability that the Company may otherwise have to any Indemnified Party.

 

(c)        If any action, suit, proceeding or investigation is commenced, as to which an Indemnified Party proposes to demand indemnification, it shall notify the Company with reasonable promptness; provided, however, that any failure by an Indemnified Party to notify the Company shall not relieve the Company from its obligations hereunder. An Indemnified Party shall have the right to retain counsel of its own choice to represent it, and the fees, expenses and disbursements of such counsel shall be borne by the Company. Any such counsel shall, to the extent consistent with its professional responsibilities, cooperate with the Company and any counsel designated by them. The Company shall be liable for any settlement of any claim against any Indemnified Party made with the written consent of the Company. The Company shall not, without the prior written consent of Purchaser, settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent (i) includes, as an unconditional term thereof, the giving by the claimant to all of the Indemnified Parties of an unconditional release from all liability in respect of such claim; and (ii) does not contain any factual or legal admission by or with respect to an Indemnified Party or an adverse statement with respect to the character, professionalism, expertise or reputation of any Indemnified Party or any action or inaction of any Indemnified Party.

 

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(d)        In order to provide for just and equitable contribution, if a claim for indemnification pursuant to these indemnification provisions is made but it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification in such case, then the Company shall contribute to the Losses to which any Indemnified Party may be subject: (i) in accordance with the relative benefits received by the Company and its stockholders, subsidiaries and affiliates, on the one hand, and the Indemnified Party, on the other hand; and (ii) if (and only if) the allocation provided in clause (i) of this sentence is not permitted by applicable law, in such proportion as to reflect not only the relative benefits, but also the relative fault of the Company, on the one hand, and the Indemnified Party, on the other hand, in connection with the statements, acts or omissions that resulted in such Losses as well as any relevant equitable considerations. No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for fraudulent misrepresentation. The relative benefits received (or anticipated to be received) by the Company and its stockholders, subsidiaries and affiliates shall be deemed to be equal to the purchase price for the Purchased Shares.

 

(e)        The indemnification provisions shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Indemnified Parties and their respective successors, assigns, heirs and personal representatives and shall remain operative and in full force and effect after the Closing and for the maximum time period allowable under applicable law.

 

ARTICLE V.
MISCELLANEOUS

 

5.1        Waivers. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein or in any other documents. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. Any party hereto may, at or before any Closing, waive any conditions to its obligations that are unfulfilled.

 

5.2       Binding Effect; Benefits. This Agreement shall inure to the benefit of the parties hereto and shall be binding upon them and their respective their heirs, executors, administrators, successors, legal representatives and assigns. Except as otherwise set forth herein, nothing in this Agreement, expressed or implied, is intended to confer upon any person other than the parties hereto or their respective successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement.

 

5.3        Assignment; Delegation. No party to this Agreement may assign its rights or delegate its obligations hereunder without the prior written consent of all of the other parties.

 

5.4        Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements, statements, representations or promises, oral and written, among the parties hereto with respect to the subject matter hereof.

 

5.5        Notices. Any notice, demand or other communication which any party hereto may be required, or may elect, to give to anyone interested hereunder shall be sufficiently given if (a) deposited, prepaid, with a recognized international courier service, (b) delivered personally, (c) upon the expiration of twenty four (24) hours after transmission, if sent by facsimile if a confirmation of transmission is produced by the sending machine (and a copy of each facsimile promptly shall be sent as provided in clause (a), in each case to the parties at their respective addresses set forth below their signatures to this Agreement (or at such other address for a party as shall be specified by like notice; provided that the notices of a change of address shall be effective only upon receipt thereof).

 

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5.6        Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of law principles. EACH PARTY HERETO WAIVES TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY BREACH OR ALLEGED BREACH HEREOF.

 

5.7        Severability. If any term or provision of this Agreement shall to any extent be finally determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby, and each term and provision of the agreement shall be valid and enforced to the fullest extent permitted by law, provided that as so enforced, each of the parties receives substantially all of the benefits contemplated hereby.

 

5.8       Counterparts. This Agreement may be executed through the use of separate signature pages or in any number of counterparts and by facsimile, and each of such counterparts shall, for all purposes, constitute one agreement binding on all parties, notwithstanding that all parties are not signatories to the same counterpart. Signatures may be facsimiles.

 

[signature page is on the following page]

 

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IN WITNESS WHEREOF, the undersigned, being duly authorized, have caused this Agreement to be duly executed as of the 15 day of November, 2018.

 

  ONE HORIZON GROUP, INC.
     
  By: /s/ Martin Ward
    Name: Martin Ward
    Title: Chief Financial Officer

  

  BESPOKE GROWTH PARTNERS, INC.
(“Purchaser”)
     
  By: /s/ Mark Peikin
    Name: Mark Peikin
    Title: President

 

Number of Purchased Shares: 4,750,000

 

Purchase Price: $712,500 

 

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Appendix A

 

REGISTRATION RIGHTS

 

(a)  As used in this Appendix A the following capitalized terms used without definition shall have the meanings assigned to them below:

 

  1. Damages” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company filed pursuant hereto, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law based upon, or arising out of, any of such party’s obligations arising hereunder.
     
  2. Exchange Act” means the Securities Exchange Act of 1934, as amended from time-to-time, and the rules and regulations promulgated thereunder.
     
  3. Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
     
  4. Registrable Securities” means the Purchased Shares or other securities issued upon conversion or exchange or otherwise in respect thereof, including without limitation pursuant to any stock dividend, stock split, merger, consolidation or other recapitalization transaction.
     
  5. SEC” means the Securities and Exchange Commission.
     
  6.

SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act, as in effect from time-to-time.

 

  7. Securities Act” means the Securities Act of 1933, as amended from time-to-time, and the rules and regulations promulgated thereunder.
     

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  8. Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and the fees and expenses of counsel to the Buyer.

 

(b) Not later than fifteen (15) days after the date of the first Closing or any subsequent Closing, the Company will file a registration statement under the Securities Act for the resale of the Registrable Securities by the Purchaser on Form S-3, or if the Company does not then qualify to use Form S-3, Form S-1 or such other form as it is then eligible to use for the resale of the Registrable Securities (the “Registration Statement”) and shall use its reasonable commercial efforts to have the Registration Statement declared effective by the SEC and maintain the effectiveness of the Registration Statement until all of the Registrable Securities have been sold or are eligible for sale pursuant to Rule 144 without restriction. The Company shall furnish the Purchaser with a copy of the prospectus included in the Registration Statement at the time it is declared effective and any amendments or supplements thereto. The Company shall notify Purchaser of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; provided that the Company may postpone for up to ninety (90) days the delivery of any such supplement or amendment if the Company’s Board of Directors determines in good faith that disclosure of the new information to be contained therein would reasonably be expected to have a material adverse effect on (i) any proposal or plan by the Company or any of its affiliates to engage in any acquisition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer, reorganization or similar transaction; or (ii) any pending or threatened litigation to which the Company is, or is threatened to be made, a party.

 

As a condition to the registration of the Registrable Securities, the Purchaser shall furnish the Company and its counsel with such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such Registrable Securities as is reasonably required to file the Registration Statement and cause the timely registration of the Registrable Securities.

 

The Company shall pay all expenses (other than Selling Expenses), and stock transfer taxes applicable to the sale of the Registrable Securities, and the fees and expenses of counsel to the Purchaser) incurred in connection with the registration of the Registrable Securities, including all registration, filing and accounting fees, and fees and disbursements of counsel for the Company.

 

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(c)(1) To the extent permitted by law, the Company will indemnify and hold harmless the Purchaser, and the partners, members, officers, directors, and shareholders of the Purchaser, and each Person, if any, who controls the Purchaser, against any Damages, and the Company will pay to the Purchaser, controlling Person, or other aforementioned Person any legal fees and other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that such indemnity shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of the Purchaser, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

 (c)(2) To the extent permitted by law, the Purchaser will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the Registration Statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel for the Company, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of the Purchaser expressly for use in connection with such registration; and the Purchaser will pay to the Company and each other aforementioned Person any legal fees and other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that such indemnity shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Purchaser, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by the Purchaser by way of such indemnity exceed the Purchase Price.

 

  (c)(3) Promptly after receipt by an indemnified party of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel reasonably mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one (1) counsel) shall have the right to retain one (1) separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action will not relieve such indemnifying party of any liability to the indemnified party, except to the extent, and only to the extent, that such failure actually and materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than as provided herein.

 

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  (c)(4) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Appendix A but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Appendix A provides for indemnification in such case; or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Appendix A, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall the aggregate amounts payable by the Purchaser by way of indemnity or contribution exceed the Purchase Price.

 

(d) The obligations of the Company and the Purchaser under this Appendix A shall survive the completion of any offering of the Registrable Securities in a registration under this Appendix A, and otherwise shall survive the termination of this Agreement for the maximum time period allowable under applicable law.

 

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EX-10.8 4 s113922_ex10-8.htm EXHIBIT 10.8

 

Exhibit 10.8

 

SECURITIES PURCHASE AGREEMENT

 

Securities Purchase Agreement (this “Agreement”) between One Horizon Group, Inc., a Delaware corporation (the “Company”), and the purchaser whose name appears on the signature page hereof (the “Purchaser”).

 

Preliminary Statement

 

The Company is offering up to nine million five hundred thousand (9,500,000) shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) for a purchase price of Fifteen Cents ($.15) per share (the “Offering”).

 

The Shares are only being offered to non-“U.S. Persons,” as defined in Rule 902(k) of Regulation S under the Securities Act of 1933, as amended (the “Securities Act”), and to ‘accredited investors,” as defined in Rule 501(a) of Regulation D promulgated under Section 4(a)(2) of the Securities Act (“Regulation D”), pursuant to Rule 506 of Regulation D and Section 4(a)(2).

 

The Offering will commence on November 8, 2018, and terminate on the close of business on November 15, 2018 (the “Offering Period”). The Company may hold one or more closings at any time during the Offering Period (each a “Closing”) until the termination or expiration of the Offering Period.

 

Purchaser desires to purchase, and the Company is willing to sell to the Purchaser, upon the terms and conditions stated in this Agreement, the number of Shares set forth on the signature page hereof (the “Purchased Shares”), for the purchase price set forth thereon (the “Purchase Price”).

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and Purchaser agree as follows:

 

ARTICLE I.

PURCHASE AND SALE

 

1.1       Purchase of the Shares. Subject to the terms and conditions of this Agreement, the Purchaser intends to be legally bound and the Company agrees to issue the Purchased Shares against its receipt of the Purchase Price for the Purchased Shares.

 

1.2       Deliveries. At each Closing, the Purchaser will deposit the Purchase Price for the Purchased Shares to an account designated by the Company by wire transfer of immediately available funds. The Company will deliver to the Purchaser certificates and/or Direct Registration Statements representing the Purchased Shares against the Company’s receipt of the Purchase Price.

 

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ARTICLE II.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to Purchaser as follows:

 

2.1        Organization; Good Standing; and Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The shares of the Company’s Common Stock are currently traded on NASDAQ.

 

2.2        Authorization. The Company possesses the legal right and capacity to execute, deliver and perform this Agreement. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of the Company’s certificate of incorporation or bylaws. The Company has taken all action required by law, its certificate of incorporation, its bylaws, or otherwise to authorize the execution and delivery of this Agreement and the issuance of the Purchased Shares, and the Company has full power, authority, and legal right and has taken all action required by law, its certificate of incorporation, bylaws, or otherwise to consummate the transactions herein contemplated. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, receivership, fraudulent conveyance or similar laws affecting or relating to the enforcement of creditors’ rights generally, and by equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

2.3        Issuance of the Purchased Shares. The Purchased Shares, when issued against payment of the Purchase Price, will be duly authorized, and duly and validly issued, fully paid and non-assessable, free and clear of all security interests, liens, encumbrances and other restrictions, other than restrictions on transfer provided for under the Securities Act and in this Agreement.

 

2.4        SEC Filings; Financial Statements.

 

(a)        There has been available on the SEC EDGAR website, copies of each report, registration statement and definitive proxy statement filed by Company with the SEC since at least January 1, 2017 (the “Company SEC Reports”), which are all the forms, reports and documents filed by Company with the SEC from January 1, 2017 to the date of this Agreement. As of their respective dates, the Company SEC Reports (i) were prepared in accordance and complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Company SEC Reports; and (ii) did not at the time they were filed (and if amended or superseded by a filing prior to the date of this Agreement then on the date of such filing and as so amended or superseded) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

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(b)       Each set of financial statements (including, in each case, any related notes thereto) contained in the Company SEC Reports comply as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, do not contain footnotes as permitted by Form 10-Q promulgated under the Exchange Act) and each fairly presents in all material respects the financial position of Company at the respective dates thereof and the results of its operations and cash flows for the periods indicated.

 

2.5        Information. The information concerning the Company set forth in this Agreement and the Company SEC Reports is complete and accurate in all material respects and does not contain any untrue statements of a material fact or omit to state a material fact required to make the statements made, in light of the circumstances under which they were made, not misleading.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser hereby represents and warrants to the Company as follows:

 

3.1       Incorporation; Authority. Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its or his obligations hereunder. The execution and delivery of this Agreement and performance by Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of Purchaser. This Agreement, when delivered by Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of Purchaser, enforceable against it or him in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

3.2       Own Account. Purchaser understands that the Purchased Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Purchased Shares as principal for its own account and not with a view to or for distributing or reselling the Purchased Shares or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Purchased Shares in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of Purchased Shares in violation of the Securities Act or any applicable state securities law. Purchaser is acquiring the Purchased Shares hereunder in the ordinary course of its business.

 

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3.3       Purchaser Status. At the time Purchaser was offered the Shares, it was, and as of the date hereof it is, either: (i) an “accredited investor” as defined in Rule 501(a) under the Securities Act or (ii) a non- “U.S. Person” as defined in Rule 902(k) of Regulation S under the Securities Act and that all negotiations with respect to the Purchased Shares occurred outside the United States.

  

3.4 Experience of Purchaser. Purchaser, either alone or together with its or his representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Purchased Shares. Purchaser is able to bear the economic risk of an investment in the Purchased Shares and, at the present time, is able to afford a complete loss of such investment.

 

3.5 General Solicitation. Purchaser is not purchasing the Purchased Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

3.6        Access to Information. Purchaser acknowledges that it or he has had the opportunity to review this Agreement (including all exhibits and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the Shares and the merits and risks of investing in the securities of the Company; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company owns or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. 

  

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1       Transfer Restrictions.

 

(a)       The Purchased Shares only may be disposed of in compliance with state and federal securities laws. In connection with any transfer of the Purchased Shares other than pursuant to an effective registration statement or Rule 144, to the Company or to an “affiliate” (as defined in Rule 405 of the Securities Act) of a Purchaser, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Purchased Shares under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.

  

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(b)       The Purchaser agrees to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Purchased Shares in the following form:

 

If the Purchaser is an “accredited investor”:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.”

 

If the Purchaser is a non- “U.S. Person”:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN OFFERED TO INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”)) AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON REGULATION S PROMULGATED UNDER THE SECURITIES ACT.”

 

“TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

 

4.2       Use of Proceeds. The Company shall use the net proceeds from the sale of the Purchased Shares hereunder for working capital purposes.

 

4.3       Registration. The Company hereby agrees to file a registration statement under the Securities Act for the resale of the Purchased Shares and any other securities issued upon conversion or exchange or otherwise in respect thereof, including without limitation pursuant to any stock dividend, stock split, merger, consolidation or other recapitalization transaction (collectively, the “Registrable Securities”), in accordance with Appendix A annexed hereto not more than fifteen (15) days after the date of the first Closing and not more than fifteen (15) days after the date of any subsequent Closing(s).

 

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4.4       Indemnification.

 

(a)        The Company agrees to indemnify and hold harmless Purchaser and each of the other Indemnified Parties (as hereinafter defined) from and against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements, and any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise (including, without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing, pursing or defending any such action, suit, proceeding or investigation (whether or not in connection with litigation in which any Indemnified Party is a party) (collectively, “Losses”), directly or indirectly, caused by, relating to, based upon, arising out of, or in connection with, Purchaser’s purchase of the Purchased Shares pursuant to the terms of this Agreement, any breach by the Company of any representation, warranty, covenant or agreement contained in this Agreement, or the enforcement by Purchaser of its rights under this Agreement, except to the extent that any such Losses are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from the willful misconduct of the Indemnified Party seeking indemnification hereunder.

 

(b)       These indemnification provisions shall extend to the following persons (collectively, the “Indemnified Parties”): Purchaser, its present and former affiliated entities, partners, employees, legal counsel, agents, advisors and controlling persons (within the meaning of the federal securities laws), and the officers, directors, partners, stockholders, members, managers, employees, legal counsel, agents, advisors and controlling persons of any of them and any assigns. These indemnification provisions shall be in addition to any liability that the Company may otherwise have to any Indemnified Party.

 

(c)        If any action, suit, proceeding or investigation is commenced, as to which an Indemnified Party proposes to demand indemnification, it shall notify the Company with reasonable promptness; provided, however, that any failure by an Indemnified Party to notify the Company shall not relieve the Company from its obligations hereunder. An Indemnified Party shall have the right to retain counsel of its own choice to represent it, and the fees, expenses and disbursements of such counsel shall be borne by the Company. Any such counsel shall, to the extent consistent with its professional responsibilities, cooperate with the Company and any counsel designated by them. The Company shall be liable for any settlement of any claim against any Indemnified Party made with the written consent of the Company. The Company shall not, without the prior written consent of Purchaser, settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent (i) includes, as an unconditional term thereof, the giving by the claimant to all of the Indemnified Parties of an unconditional release from all liability in respect of such claim; and (ii) does not contain any factual or legal admission by or with respect to an Indemnified Party or an adverse statement with respect to the character, professionalism, expertise or reputation of any Indemnified Party or any action or inaction of any Indemnified Party.

 

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(d)        In order to provide for just and equitable contribution, if a claim for indemnification pursuant to these indemnification provisions is made but it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification in such case, then the Company shall contribute to the Losses to which any Indemnified Party may be subject: (i) in accordance with the relative benefits received by the Company and its stockholders, subsidiaries and affiliates, on the one hand, and the Indemnified Party, on the other hand; and (ii) if (and only if) the allocation provided in clause (i) of this sentence is not permitted by applicable law, in such proportion as to reflect not only the relative benefits, but also the relative fault of the Company, on the one hand, and the Indemnified Party, on the other hand, in connection with the statements, acts or omissions that resulted in such Losses as well as any relevant equitable considerations. No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for fraudulent misrepresentation. The relative benefits received (or anticipated to be received) by the Company and its stockholders, subsidiaries and affiliates shall be deemed to be equal to the purchase price for the Purchased Shares.

 

(e)        The indemnification provisions shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Indemnified Parties and their respective successors, assigns, heirs and personal representatives and shall remain operative and in full force and effect after the Closing and for the maximum time period allowable under applicable law.

 

ARTICLE V.
MISCELLANEOUS

 

5.1        Waivers. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein or in any other documents. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. Any party hereto may, at or before any Closing, waive any conditions to its obligations that are unfulfilled.

 

5.2       Binding Effect; Benefits. This Agreement shall inure to the benefit of the parties hereto and shall be binding upon them and their respective their heirs, executors, administrators, successors, legal representatives and assigns. Except as otherwise set forth herein, nothing in this Agreement, expressed or implied, is intended to confer upon any person other than the parties hereto or their respective successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement.

 

5.3        Assignment; Delegation. No party to this Agreement may assign its rights or delegate its obligations hereunder without the prior written consent of all of the other parties.

 

5.4        Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements, statements, representations or promises, oral and written, among the parties hereto with respect to the subject matter hereof.

 

5.5        Notices. Any notice, demand or other communication which any party hereto may be required, or may elect, to give to anyone interested hereunder shall be sufficiently given if (a) deposited, prepaid, with a recognized international courier service, (b) delivered personally, (c) upon the expiration of twenty four (24) hours after transmission, if sent by facsimile if a confirmation of transmission is produced by the sending machine (and a copy of each facsimile promptly shall be sent as provided in clause (a), in each case to the parties at their respective addresses set forth below their signatures to this Agreement (or at such other address for a party as shall be specified by like notice; provided that the notices of a change of address shall be effective only upon receipt thereof).

 

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5.6        Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of law principles. EACH PARTY HERETO WAIVES TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY BREACH OR ALLEGED BREACH HEREOF.

 

5.7        Severability. If any term or provision of this Agreement shall to any extent be finally determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby, and each term and provision of the agreement shall be valid and enforced to the fullest extent permitted by law, provided that as so enforced, each of the parties receives substantially all of the benefits contemplated hereby.

 

5.8       Counterparts. This Agreement may be executed through the use of separate signature pages or in any number of counterparts and by facsimile, and each of such counterparts shall, for all purposes, constitute one agreement binding on all parties, notwithstanding that all parties are not signatories to the same counterpart. Signatures may be facsimiles.

 

[signature page is on the following page]

 

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IN WITNESS WHEREOF, the undersigned, being duly authorized, have caused this Agreement to be duly executed as of the 15 day of November, 2018.

 

  ONE HORIZON GROUP, INC.
     
  By: /s/ Martin Ward
    Name: Martin Ward
    Title: Chief Financial Officer

  

 

BK CONSULTING GROUP, LLC
(“Purchaser”)

     
  By:

/s/ Brian Kantor

    Name: Brian Kantor
    Title: Manager

 

Number of Purchased Shares: 4,750,000

 

Purchase Price: $712,500 

 

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Appendix A

 

REGISTRATION RIGHTS

 

(a)  As used in this Appendix A the following capitalized terms used without definition shall have the meanings assigned to them below:

 

  1. Damages” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company filed pursuant hereto, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law based upon, or arising out of, any of such party’s obligations arising hereunder.
     
  2. Exchange Act” means the Securities Exchange Act of 1934, as amended from time-to-time, and the rules and regulations promulgated thereunder.
     
  3. Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
     
  4. Registrable Securities” means the Purchased Shares or other securities issued upon conversion or exchange or otherwise in respect thereof, including without limitation pursuant to any stock dividend, stock split, merger, consolidation or other recapitalization transaction.
     
  5. SEC” means the Securities and Exchange Commission.

 

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  6.

SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act, as in effect from time-to-time.

 

  7. Securities Act” means the Securities Act of 1933, as amended from time-to-time, and the rules and regulations promulgated thereunder.

 

  8. Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and the fees and expenses of counsel to the Buyer.

 

(b) Not later than fifteen (15) days after the date of the first Closing or any subsequent Closing, the Company will file a registration statement under the Securities Act for the resale of the Registrable Securities by the Purchaser on Form S-3, or if the Company does not then qualify to use Form S-3, Form S-1 or such other form as it is then eligible to use for the resale of the Registrable Securities (the “Registration Statement”) and shall use its reasonable commercial efforts to have the Registration Statement declared effective by the SEC and maintain the effectiveness of the Registration Statement until all of the Registrable Securities have been sold or are eligible for sale pursuant to Rule 144 without restriction. The Company shall furnish the Purchaser with a copy of the prospectus included in the Registration Statement at the time it is declared effective and any amendments or supplements thereto. The Company shall notify Purchaser of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; provided that the Company may postpone for up to ninety (90) days the delivery of any such supplement or amendment if the Company’s Board of Directors determines in good faith that disclosure of the new information to be contained therein would reasonably be expected to have a material adverse effect on (i) any proposal or plan by the Company or any of its affiliates to engage in any acquisition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer, reorganization or similar transaction; or (ii) any pending or threatened litigation to which the Company is, or is threatened to be made, a party.

 

As a condition to the registration of the Registrable Securities, the Purchaser shall furnish the Company and its counsel with such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such Registrable Securities as is reasonably required to file the Registration Statement and cause the timely registration of the Registrable Securities.

 

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The Company shall pay all expenses (other than Selling Expenses), and stock transfer taxes applicable to the sale of the Registrable Securities, and the fees and expenses of counsel to the Purchaser) incurred in connection with the registration of the Registrable Securities, including all registration, filing and accounting fees, and fees and disbursements of counsel for the Company.

 

(c)(1) To the extent permitted by law, the Company will indemnify and hold harmless the Purchaser, and the partners, members, officers, directors, and shareholders of the Purchaser, and each Person, if any, who controls the Purchaser, against any Damages, and the Company will pay to the Purchaser, controlling Person, or other aforementioned Person any legal fees and other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that such indemnity shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of the Purchaser, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

 (c)(2) To the extent permitted by law, the Purchaser will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the Registration Statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel for the Company, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of the Purchaser expressly for use in connection with such registration; and the Purchaser will pay to the Company and each other aforementioned Person any legal fees and other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that such indemnity shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Purchaser, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by the Purchaser by way of such indemnity exceed the Purchase Price.

 

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  (c)(3) Promptly after receipt by an indemnified party of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel reasonably mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one (1) counsel) shall have the right to retain one (1) separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action will not relieve such indemnifying party of any liability to the indemnified party, except to the extent, and only to the extent, that such failure actually and materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than as provided herein.

 

  (c)(4) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Appendix A but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Appendix A provides for indemnification in such case; or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Appendix A, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall the aggregate amounts payable by the Purchaser by way of indemnity or contribution exceed the Purchase Price.

 

(d) The obligations of the Company and the Purchaser under this Appendix A shall survive the completion of any offering of the Registrable Securities in a registration under this Appendix A, and otherwise shall survive the termination of this Agreement for the maximum time period allowable under applicable law.

 

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EX-31 5 s113922_ex31-1.htm EXHIBIT 31-1

 

Exhibit 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER 

PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT

 

I, Mark White, certify that:

 

      1. I have reviewed this quarterly report on Form 10-Q of One Horizon Group, Inc.;

 

      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

      4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

            a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

            b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

            c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

            d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

      5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

            a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

            b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: November 16, 2018

 

/s/ Mark White  
Mark White  
Chief Executive Officer (Principal Executive Officer)

 

 
EX-31 6 s113922_ex31-2.htm EXHIBIT 31-2

 

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER 

PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT

 

I, Martin Ward, certify that:

 

      1. I have reviewed this quarterly report on Form 10-Q of One Horizon Group, Inc.;

 

      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

      4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

            a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

            b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

            c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

            d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

      5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

            a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

            b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: November 16, 2018

 

/s/ Martin Ward  
Martin Ward  
Chief Financial Officer (Principal Financial Officer)

 

 
EX-32.1 7 s113922_ex32-1.htm EXHIBIT 32-1

 

Exhibit 32.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER 

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

      In connection with the Quarterly Report of One Horizon Group, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended September 30, 2018, as filed with the Securities and Exchange Commission (the “Report”), Mark White, Chief Executive Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that:

 

      (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

      (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Dated: November 16, 2018

 

/s/ Mark White  
Mark White  
Chief Executive Officer (Principal Executive Officer)

  

[A signed original of this written statement required by Section 906 has been provided to One Horizon Group, Inc. and will be retained by One Horizon Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.]

 

 
EX-32.2 8 s113922_ex32-2.htm EXHIBIT 32-2

 

Exhibit 32.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER 

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

      In connection with the Quarterly Report of One Horizon Group, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended September 30, 2018, as filed with the Securities and Exchange Commission (the “Report”), Martin Ward, Chief Financial Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that:

 

      (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

      (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Dated: November 16, 2018

 

/s/ Martin Ward  
Martin Ward  
Chief Financial Officer (Principal Financial Officer)

 

[A signed original of this written statement required by Section 906 has been provided to One Horizon Group, Inc. and will be retained by One Horizon Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.]

 

 
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Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Nov. 14, 2018
Document And Entity Information    
Entity Registrant Name One Horizon Group, Inc.  
Entity Central Index Key 0000225211  
Document Type 10-Q  
Trading Symbol OHGI  
Document Period End Date Sep. 30, 2018  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity's Reporting Status Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Ex Transition Period false  
Entity Common Stock, Shares Outstanding   75,901,431
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2018  
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Condensed Consolidated Balance Sheets (unaudited) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Current assets:    
Cash $ 535 $ 763
Accounts receivable, net 490 102
Prepaid compensation 550 550
Amounts due from related parties 15
Other assets 635 28
Total current assets 2,225 1,443
Property and equipment, net 39 2
Intangible assets, net 16,387 5,340
Goodwill 1,247
Prepaid compensation, net of current portion 1,604 2,017
Total assets 21,502 8,802
Current liabilities:    
Accounts payable 354 167
Accrued expenses 70 55
Accrued compensation 318 251
Amount due to related parties 32
Convertible notes, net of debt discount 45
Total current liabilities 742 550
Long-term liabilities    
Promissory notes, related parties 1,000 1,000
Total liabilities 1,742 1,550
Equity    
Preferred stock: $0.0001 par value, authorized 50,000,000; No shares issued and outstanding
Common stock: $0.0001 par value, authorized 200,000,000 shares issued and outstanding 59,353,874 shares as of September 30, 2018 (December 2017 - 30,255,123) 6 3
Additional paid-in capital 63,303 48,356
Accumulated Deficit (49,150) (41,085)
Stock subscription receivable
Accumulated other comprehensive income (37) (22)
Total One Horizon Group, Inc., stockholders' equity 14,122 7,252
Non-controlling interest 5,638
Total stockholders' equity 19,760 7,252
Total liabilities and equity $ 21,502 $ 8,802
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Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares
Sep. 30, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Preferred stock par value (in dollars per share) $ 0.0001 $ 0.0001
Preferred stock authorized 50,000,000 50,000,000
Preferred stock issued
Preferred stock outstanding
Common stock par value (in dollars per share) $ 0.0001 $ 0.0001
Common stock authorized 200,000,000 200,000,000
Common stock issued 59,353,874 30,255,123
Common stock outstanding 59,353,874 30,255,123
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Condensed Consolidated Statements of Operations (unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Revenue $ 317 $ 397 $ 885 $ 514
Cost of revenue 1,224 406 2,564 450
Gross margin (deficiency) (907) (9) (1,679) 64
Operating expenses:        
General and administrative 1,544 338 4,147 911
Depreciation 3 2 5 16
Acquisition services 1,874
Total expenses 1,547 340 6,626 927
Loss from operations (2,454) (349) (8,305) (863)
Other income and expense:        
Interest expense (18) (179) (408) (536)
Foreign exchange (3) (4) 1
Total other income and expense (21) (179) (412) (535)
Loss before income taxes and discontinued items (2,475) (528) (8,717) (1,398)
Income tax benefit
Loss on continuing operations (2,475) (528) (8,717) (1,398)
Loss from discontinued operations (244) (2,428)
Net loss for the period (2,475) (772) (8,717) (3,826)
Net loss attributable to non-controlling interest 186 652
Net loss attributable to One Horizon Group Inc. common stockholders $ (2,289) $ (772) $ (8,065) $ (3,826)
Earnings per share        
Basic and diluted net loss per share - continuing operations (in dollars per share) $ (0.05) $ (0.07) $ (0.21) $ (0.21)
Basic and diluted net loss per share - discontinued operations (in dollars per share) $ (0.03) $ (0.36)
Weighted average number of shares outstanding        
Basic and diluted (in shares) 52,671 7,541 42,275 6,680
Software And Production Costs [Member]        
Cost of revenue $ 177 $ 1 $ 288 $ 1
Amortization Of Intangible Assets [Member]        
Cost of revenue $ 1,047 $ 405 $ 2,276 $ 449
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Condensed Consolidated Statements of Comprehensive Loss (unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Statement of Comprehensive Income [Abstract]        
Net loss $ (2,289) $ (772) $ (8,065) $ (3,826)
Other comprehensive income:        
Foreign currency translation adjustment loss (1) (221) (15) (51)
Total Comprehensive loss $ (2,290) $ (993) $ (8,080) $ (3,877)
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Condensed Consolidated Statement of Equity (Unaudited) - 9 months ended Sep. 30, 2018 - USD ($)
$ in Thousands
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Non-controlling interest [Member]
Total
Balance at beginning at Dec. 31, 2017 $ 3 $ 48,356 $ (41,085) $ (22) $ 7,252
Balance at beginning (in shares) at Dec. 31, 2017 30,255          
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss (8,065) (652) (8,717)
Foreign currency translations (15) (15)
Issuance of shares for services $ 1 3,799 3,800
Issuance of shares for services (in shares) 6,095          
Issuance of shares for acquisitions $ 1 7,929 6,290 14,220
Issuance of shares for acquisitions (in shares) 10,127          
Issuance of shares for exercise of convertible promissory notes 406 406
Issuance of shares for exercise of convertible promissory notes (in shares) 677          
Issuance of shares for exercise of warrants 1,246 1,246
Issuance of shares for exercise of warrants (in shares) 4,425          
Increase in service compensation due to change in exercise price   544 544
Conversion benefit on convertible notes 200 200
Issuance of shares for cash $ 1 823 $ 824
Issuance of shares for cash (in shares) 7,775         1,750,000
Balance at ending at Sep. 30, 2018 $ 6 $ 63,303 $ (49,150) $ (37) $ 5,638 $ 19,760
Balance at ending (in shares) at Sep. 30, 2018 59,354          
XML 21 R7.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Cash flows from operating activities:    
Net loss for the period $ (8,717) $ (1,398)
Adjustment to reconcile net loss for the period to net cash flows from operating activities:    
Depreciation of property and equipment 5 18
Amortization of intangible assets 2,276 449
Amortization of debt issue costs 99
Amortization of beneficial conversion feature 355 76
Amortization of debt discount 150
Shares issued for services 3,392
Warrants issued for services 123
Amortization of shares issued for services 872 92
Options issued for services 145
Changes in operating assets and liabilities:    
Accounts receivable (377) 2
Other assets (114) 12
Accounts payable and accrued expenses (65) 242
Net cash flows from continuing operating activities (2,373) 10
Net cash flows from discontinued operating activities (374)
Net cash flows from total operating activities (2,373) (364)
Cash used in investing activities:    
Cash consideration on acquisitions (net of cash acquired) (108)
Acquisition of fixed assets (6) (1)
Net cash flows from investing activities - continuing operations (114) (1)
Net cash flows from investing activities - discontinued operations (261)
Net cash flows from total investing activities (114) (262)
Cash flows from financing activities:    
Proceeds from issuance of shares 824 265
Proceeds from exercise of warrants 1,246 146
Proceeds from issuance of convertible notes 200
Repayment of advances from related parties (net) (47) 100
Net cash flows from financing activities 2,223 511
Decrease in cash during the period (264) (115)
Foreign exchange effect on cash 36 26
Cash at beginning of the period - continuing operations 763 106
Cash at beginning of the period - discontinued operations 153
Cash at end of the period 535 170
Non-cash financing transactions:    
Common stock issued for business combinations 14,220
Common stock issued for conversion of debt and accrued interest $ 406
XML 22 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
Description of Business, Organization and Principles of Consolidation
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business, Organization and Principles of Consolidation

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

 

Description of Business

 

One Horizon Group, Inc (“the Company”) has four core businesses following the acquisition of 123Wish Inc., Love Media House, Inc (formerly called C-Rod, Inc.) and Banana Whale Studios PTE Ltd in the nine months ended September 30, 2018 (See Note 3). The core trading businesses are:

 

  (i) Secure Messaging – offers digitally secure messaging software and sells licenses primarily into the gaming, security and educational markets.

  (ii) 123Wish – an experience based platform where subscribers have a chance to play and win experiences from celebrities, athletes and artists.

  (iii) Love Media House (formerly called C-Rod) - a full-service music production, artist representation and digital media business.
  (iv) Banana Whale Studios – a B2B software provider in the online gaming industry that develops and supplies online games to Asian gaming platforms.

 

The Company is based in the United States of America, Hong Kong, Singapore, China 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 Securities and Exchange Commission’ instructions. 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 Securities and Exchange Commission’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, 2017, as filed with the Securities and Exchange Commission on April 2, 2018.

 

Current Structure of the Company

 

The Company has the following subsidiaries:

    Subsidiary name % Owned
  123Wish, Inc. 51%
  One Horizon Hong Kong Ltd 100%
  Horizon Network Technology Co. Ltd 100%
  Love Media House, Inc 100%
  Banana Whale Studios PTE Ltd 51%
  Browning Production & Entertainment Inc (acquired October 22, 2018) 51%

 

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

 

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

XML 23 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

 

Liquidity and Capital Resources

 

Historically, the Company has incurred net losses and negative cash flows from operations. The Company has principally financed these losses from the sale of equity securities and the issuance of debt instruments.

 

During the nine months ended September 30, 2018 the Company issued additional shares of common stock for cash in the amount of $2,070,000, of which $547,000 was raised in the three months ended September 30, 2018.

 

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

 

At September 30, 2018 the Company had cash of $535,000. Subsequent to September 30, 2018 the Company has raised a further amount of cash totaling $825,000 and is considering raising additional funds in the region of $2.0 million the last quarter of 2018 and the first quarter of 2019 which is expected to give the Company sufficient cash resources to cover forecasted expenditure into 2020.

 

However, actual results could materially differ from the Company’s projections. Accordingly, the Company may be required to raise additional funds through various sources. While the Company believes it is probable that such financings could be secured, there can be no assurance that 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.

 

Foreign Currency Translation

 

The reporting currency of the Company is the United States dollar. Assets and liabilities other than those denominated in U.S. dollars, primarily in Singapore, the United Kingdom and China, 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 part of the investment in the subsidiaries is sold or liquidated. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations.

 

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

 

Accounts receivable, revenue recognition and concentrations

 

New Accounting Standard - In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”). Topic 606 supersedes the revenue recognition requirements in ASU Topic 605, Revenue Recognition (“Topic 605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 also includes Subtopic 340-40, Other Assets and Deferred Costs- Contracts with Customers, which discussed the deferral of incremental costs of obtaining a contract with a customer, including the period of amortization of such costs. The new standard was adopted by the Company in our fiscal year beginning January 1, 2018. The two permitted transition methods under the new standard are the full retrospective method, in which the new standard would be applied to each prior reporting period presented and the cumulative effect of applying the new standard would be recognized at the earliest period shown, or the modified retrospective method, in which the cumulative effect of applying the new standard would be recognized at the date of initial application. Based on our assessment, the impact of the new standard on our revenue recognition in prior periods is not significant; accordingly, while the Company would have used the modified retrospective method of adoption of the new standard, there was no cumulative effect of adoption on January 1, 2018 retained earnings.

 

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 new 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 under ASC 606 as described below:

 

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

 

  2. 123Wish derives income from user subscriptions, sale of merchandise, sale of tickets for experiences with social media influencers and artists, and the sale of corporate sponsorships, each of which is a separate performance obligation. User subscriptions cover a defined period of time (typically one month) and the revenue is recognized as the Company satisfies the requisite performance obligation (over the defined subscription period). Sale of merchandise and tickets are recognized when the customer has paid for the item and when the merchandise and/or ticket has been delivered to the customer. Corporate sponsorship packages are non-refundable and relate to brand association. The Company has no further service deliverable to the sponsor and the revenue is recognized when the agreement is entered into by both parties and the required marketing materials have been delivered to the corporate sponsor for their use.

 

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

 

The Company does not have off-balance sheet credit exposure related to its customers. As of September 30, 2018 four customers accounted for 87% of the accounts receivable balance and as of December 31, 2017, one customer accounted for 100% of the accounts receivable balance. Three customers accounted for 46% of the revenue for the nine months ended September 30, 2018 and one customer accounted for 76% of the revenue for the quarter ended September 30, 2018.

 

Research and Development Expenses

 

Research and development expenses include all direct costs, primarily salaries for Company personnel and outside consultants, costs related to the development of new products, significant enhancements to existing products, and the portion of costs of development of internal-use software required to be expensed. Research and development costs are charged to operations as incurred with the exception of those software development costs that may qualify for capitalization.

 

Income Taxes

 

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

 

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

  

Net Loss per Share

 

Basic net loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. Diluted loss per share takes into consideration common shares outstanding (computed under basic loss per share) and potentially dilutive securities. For the three and nine month periods ended September 30, 2018 and 2017, outstanding warrants are antidilutive because of net losses, and as such, their effect has not been included in the calculation of diluted net loss per share. Common shares issuable are considered outstanding as of the original approval date for purposes of earnings per share computations.

 

Accumulated Other Comprehensive Income (Loss)

 

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

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the fiscal 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.

 

Share-Based Compensation

 

The Company accounts for stock-based awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes option pricing model, which includes subjective judgements about the expected life of the awards, forfeiture rates and stock price volatility.

 

Fair Value Measurements

 

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

  Level 1 - Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

  Level 2 - Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

  Level 3 - Pricing inputs that are generally observable inputs and not corroborated by market data.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

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

XML 24 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisitions
9 Months Ended
Sep. 30, 2018
Business Combinations [Abstract]  
Acquisitions

Note 3. Acquisitions

 

123Wish, Inc.

 

On January 31, 2018 the Company completed the acquisition of a 51% controlling interest in 123 Wish, Inc. (formerly Once in a Lifetime LLC) a Delaware corporation in exchange for the issuance of 1,333,334 fully paid and non-assessable shares of common stock with a fair value of $1.39 million. In addition, the Company shall issue fully paid and non-assessable shares of common stock equal to 2.5 times of the net, after tax, earnings of 123 Wish for the nine month period after the date of acquisition and fully paid and non-assessable shares of common stock equal to 4.5 times the net, after tax, earnings of 123 Wish for the second six month period after the date of acquisition. 123 Wish, Inc. has proprietary applications which use the social media aspect of the internet.

 

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

 

Consideration Paid:

 

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

 

The consideration paid was 1,333,334 common shares valued at $1.04 per share. Separately identifiable intangible assets include technology which were valued by management using discounted cash flow and replacement cost approaches. Management’s analysis is provisional in nature and is subject to change based on the availability of new information about facts and circumstances that existed as of the acquisition date.

 

As of September 30, 2018, the Company has estimated that no additional share amounts will need to be issued as contingent consideration and therefore is not included in the Company’s allocation of the purchase price in the table above. The financial results of 123 Wish, Inc. have been included in the Company’s condensed consolidated financial statements since the date of acquisition, and the amount of stockholders’ equity and net loss attributable to the non-controlling interest has been recorded as a separate line item in the accompanying statements of operations and stockholders’ equity.

 

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

 

On February 26, 2018 the Company completed the acquisition of 100% ownership of Love Media House, Inc. (“LMH”) a Florida corporation in exchange for $150,000 cash and 1,376,147 fully paid and non-assessable shares of common stock with a fair value of $1,541,285. LMH is in the music and video content business. The financial statements of LMH have been included in the condensed consolidated financial statements from the date of acquisition.

 

The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed as of February 26, 2018 (In thousands):

 

Consideration Paid:

 

Cash   $ 150  
Common stock     1,541  
    $ 1,691  
         
Fair values of identifiable assets acquired and liabilities assumed:        
         
Assets acquired:        
Cash   $ 5  
Other intangible assets     910  
Goodwill     828  
Total assets acquired     1,743  
         
Liabilities assumed:        
Accounts payable     52  
Total Liabilities Assumed     52  
         
Net Assets Acquired   $ 1,691  

 

The consideration paid was 1,376,000 common shares plus $150,000 in cash. Separately identifiable intangible assets were customer relationships and were valued by management. The customer relationships were valued using discounted cash flow and replacement cost approaches. Management’s analysis is provisional in nature and is subject to change based on the availability of new information about facts and circumstances that existed as of the acquisition date.

 

As of September 30, 2018, the Company has estimated that no additional share amounts will need to be issued as contingent consideration and therefore is not included in the Company’s allocation of the purchase price in the table above. The financial results of LMH have been included in the Company’s condensed consolidated financial statements since the date of acquisition.

 

Banana Whale Studios PTE Ltd

 

On May 24, 2018 the Company completed the acquisition of 51% ownership of Banana Whale Studios PTE Ltd (“Banana Whale”) a Singapore corporation in exchange for an initial allocation of 7,383,000 fully paid shares of common stock with a fair value of $4,983,000. The acquisition of Banana Whale is based on an earnout formula solely and should Banana Whale fail to reach forecasted profit numbers during the first 24 months then some, or all of the shares allocated would be refundable to the Company. Banana Whale develops and supplies online games to Asian gaming platforms on a B2B basis with their revenue generated on a revenue share basis. The financial statements of Banana Whale have been included in the condensed consolidated financial statements from the date of acquisition.

 

The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed as of May 24, 2018 (In thousands):

 

Consideration Paid:

 

Common stock   $ 4,983  
Non-controlling interest     4,937  
    $ 9,920  

 

Fair values of identifiable assets acquired and liabilities assumed:

         
Assets acquired:        
Cash   $ 42  
Accounts receivable     11  
Equipment     37  
Other intangible assets     10,118  
Total assets acquired     10,208  
         
Liabilities assumed:        
Accounts and advances payable     288  
Total Liabilities Assumed     288  
         
Net Assets Acquired   $ 9,920  

 

The consideration paid was 7,383,000 common shares valued at $0.675 per share. Separately identifiable intangible assets include technology which were valued by management using discounted cash flow and replacement cost approaches. Management’s analysis is provisional in nature and is subject to change based on the availability of new information about facts and circumstances that existed as of the acquisition date.

 

As of September 30, 2018, the Company has estimated that no additional share amounts will need to be issued (or refunded) as contingent consideration and therefore is not included in the Company’s allocation of the purchase price in the table above. The financial results of Banana Whale have been included in the Company’s condensed consolidated financial statements since the date of acquisition and the amount of stockholders’ equity and net loss attributable to the non-controlling interest has been recorded as a separate line item in the accompanying statements of operations and stockholders’ equity.

XML 25 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets
9 Months Ended
Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets

Note 4. Intangible Assets

 

Intangible assets consist primarily of software development costs, acquired gaming software and customer and reseller relationships which are amortized over the estimated useful life, generally on a straight-line basis with the exception of customer relationships, which are generally amortized over the greater of straight-line or the related asset’s pattern of economic benefit.(in thousands)

 

    September 30     December 31  
    2018     2017  
             
Horizon software   $ 6,527     $ 6,527  
Social online application software     2,210        
Customer lists     997        
Gaming software     10,118        
      19,852       6,527  
Less accumulated amortization     (3,465 )     (1,187 )
                 
Intangible assets, net   $ 16,387     $ 5,340  

 

Amortization of intangible assets for each of the next five years is estimated to be $3,900,000 per year.

XML 26 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Goodwill
9 Months Ended
Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill

Note 5. Goodwill

 

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

 

    September 30     December 31  
    2018     2017  
             
123Wish, Inc.   $ 419     $  
Love Media House, Inc. (formerly C. Rod, Inc.)     828        
    $ 1,247     $  
XML 27 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
Convertible notes
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Convertible notes

Note 6. Convertible notes

 

In February 2018 the convertible note holders converted their notes into common stock, together with the interest accrued thereon. The amounts converted at $0.60 per share totaled $405,833 giving rise to 676,389 new shares of common stock.

XML 28 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
Share Capital
9 Months Ended
Sep. 30, 2018
Stockholders' Equity Note [Abstract]  
Share Capital

Note 7. Share Capital

 

Common Stock

 

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

 

During the nine months ended September 30, 2018 the Company:

 

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

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

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

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

  Issued 172,222 shares of common stock for conversion of convertible note and accrued interest in the amount of $103,000

  Issued 172,222 shares of common stock for services provided with a fair value of $200,000

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

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

  Issued 1,376,147 shares of common stock, with a fair value of $1,541,285, as part consideration for the acquisition of C-Rod, Inc.

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

  Issued 7,383,000 shares of common stock, with a fair value of $4,983,000, for the acquisition of 51% of Banana Whale Studios Pte., Ltd
  Issued 1,575,000 shares of common stock for services provided with a fair value of $787,500
  Issued 850,000 shares of common stock for exercise of warrants at a price of $0.50 per share
  Issued 600,000 shares of common stock for services provided with a fair value of $306,000
  Issued 300,000 shares of common stock for services provided with a fair value of $150,000
  Issued 1,750,000 shares of common stock for cash of $0.20 per share

  Issued 1,850,000 shares of common stock for exercise of warrants at a price of $0.10 per share
  Issued 35,000 shares of common stock, with a fair value of $18,200, for an option to acquire an interest in an acquisition target.
  Issued 1,525,000 shares of common stock for cash of $114,375
  Issued 975,000 shares of common stock for exercise of warrants at a price of $0.075 per share
  Issued 4,500,000 shares of common stock for cash of $360,000
  Issued 1,000,000 shares of common stock for services provided with fair value of $175,000

 

Stock Purchase Warrants

 

As at September 30, 2018, the Company had reserved 330,869 shares of its common stock for the outstanding warrants with weighted average exercise price of $15.88. Such warrants expire at various times up to July 2020.

 

During the nine months ended September 30, 2018, 155,518 warrants were forfeited, 4,425,000 warrants were exercised, for proceeds of $1,246,000.

 

After September 30, 2018, the Company sold 4,250,000 units, each consisting of one share of common stock and one warrant to purchase an additional share of common stock for total proceeds of $425,000 and issued 2,000,000 shares of common stock that were exercised for total proceeds of $400,000

 

During the nine months ended September 30, 2018, the Company agreed to reduce the exercise price on 2.7 million outstanding warrants, which resulted in additional compensation cost of $544,000, in order to obtain additional funding.

XML 29 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
Segment Information
9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
Segment Information

Note 8. Segment Information

 

The Company has the following business segments for the nine months ended September 30, 2018 and 2017.

 

The Company’s revenues were generated in the following business segments (in thousands)

 

    September 30,     September 30,  
    2018     2017  
             
Sale of secure messaging licenses   $ 228     $ 514  
123Wish (from January 2018)     108        
Love Media House (from March 2018)     405        
Banana Whale (from May 2018)     144        
Total   $ 885     $ 514  

 

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

 

    September 30,     September 30,  
    2018     2017  
             
Sale of secure messaging licenses   $ 136     $  
123Wish (from January 2018)     732        
Love Media House (from March 2018)     322        
Banana Whale (from May 2018)     272        
Corporate costs     3,285       911  
Total   $ (4,475)     $ 911  

 

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

 

    September 30,     September 30,  
    2018     2017  
             
Sale of secure messaging licenses   $ (1,059 )   $ 102  
123Wish (from January 2018)     (623 )      
Love Media House (from March 2018)     52        
Banana Whale Studios (from May 2018)     (355 )      
Corporate costs, discontinued operations and acquisition costs     (6,320 )     (3,156 )
Total   $ (8,305 )   $ (3,054 )

XML 30 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Employment Agreements
9 Months Ended
Sep. 30, 2018
Employment Agreements  
Employment Agreements

Note 9. Employment Agreements

 

In connection with the acquisitions described in Note 3, the Company has entered into Employment Agreements (the “Agreements”) with three members of management of 123Wish and C-Rod. The Agreements have an initial employment period of two years and are automatically renewed annually thereafter. The Agreements entitle the members of management to a fixed base salary, along with incentive compensation that is calculated using pre-tax earnings and is payable in shares of the Company’s common stock.

XML 31 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
Legal proceedings
9 Months Ended
Sep. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Legal proceedings

Note 10. Legal proceedings

  

On May 30, 2018, Zhanming Wu (“Wu”), the record owner of 15,000,000 shares of common stock of One Horizon Group, Inc. (the “Company”), commenced an action in the Court of Chancery of the State of Delaware [Case No.2018-0387-JRS; the “Injunction Action”] against the Company and its directors and officers (collectively, the “Director Defendants”) alleging multiple breaches of contract between the Company and Wu, and seeking (i) damages; (ii) to enjoin the Company from issuing, offering, selling or granting any shares of its common stock to any person or entity, or consummate any merger, acquisition or similar transaction without the prior approval of Wu, and to prevent the Individual Defendants from undermining that right by engaging in any further transactions designed to entrench themselves as directors and officers of the Company and to dilute Wu’s stock ownership below 30% of the outstanding shares of the Company, (iii) to enforce Wu’s right to appoint four directors to the Company’s Board of Directors, (iv) to rescind the issuance of 7,383,000 shares to the former stockholders of Banana Whale Studios Pte. Ltd (“Banana Whale”) in exchange for 51% of the outstanding shares of Banana Whale (the “Banana Whale Acquisition”), (iv) to obtain a declaration that the Individual Defendants have breached their fiduciary duty of loyalty by taking actions to entrench themselves on the Company’s Board of Directors; and (v) seeking an award of attorneys’ fees and costs in connection with the litigation and such other relief as the Court deems fair and equitable.

  

On June 11, 2018, Wu commenced a second action in the Court of Chancery of the State of Delaware [Case No.2018-0427-JRS; the “225 Action”] under Section 225 of the Delaware General Corporation Law seeking (i) to appoint four directors to the Company’s Board of Directors, (ii) to enjoin the Company and its affiliates from issuing, offering, selling or granting any shares of the Company’s common stock to any person or entity, or consummate any merger, acquisition or similar transaction without the prior approval of Wu during the pendency of the action and (iii) seeking an award of attorneys’ fees and costs in connection with the litigation and such other relief as the Court deems fair and equitable.

  

On October 15, 2018, the parties entered into an agreement (the “Settlement Agreement”) which provides for the immediate cessation of all activities in the two actions and which will result in the dismissal of the two actions upon the fulfillment by the Company of certain conditions. Among the conditions to dismissal which the Company is required to meet to obtain the complete dismissal of the actions are the issuance of 354,409 shares to Wu to reimburse a portion of the expenses incurred in connection with the actions, the nomination and election to the Company’s Board of Directors of up to two individuals designated by Wu, the redemption of up to approximately 850,000 shares of common stock at $0.65 each, from certain investors whom Wu recommended to invest in the Company (the “Additional Investors”) should they request that the Company do so and the facilitation of the sale of shares of the Company’s common stock by Wu, including the registration of such shares for sale under the Securities Act. Based on ASC 840, which requires that conditionally redeemable securities be classified outside of permanent stockholders’ equity, $552,500 was reclassified as mezzanine equity effective October 15, 2018. Pending the re-election of Wu’s nominees to the Board of Directors at the Company’s 2018 Annual Meeting of Stockholders, the Company will continue to comply with the terms of the Status Quo Order issued in July in connection with the 225 Action. The 225 Action will be dismissed and the Company will no longer be obliged to comply with the Status Quo Order upon the re-election of Wu’s nominees to the Board of Directors at the Company’s 2018 Annual Meeting of Stockholders.

  

A Stipulation of Dismissal in respect of the Injunction Action will be filed and the parties will exchange releases upon the fulfillment of certain conditions, including the registration of Wu’s shares and the removal of the restrictive legend from Wu’s shares and the shares held by the Additional Investors. Notwithstanding such dismissal, should the registration of Wu’s shares lapse for any reason prior to October 1, 2019, Wu shall be entitled to enforce his rights under the side letters which were the basis of many of his claims, which letters are deemed to be a part of the Settlement Agreement as if set forth therein. If the Dismissal Stipulation has been filed in the Injunction Action and Wu’s shares have remained continuously registered until October 1, 2019, the side letters shall be deemed of no force and effect.

XML 32 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events
9 Months Ended
Sep. 30, 2018
Subsequent Events [Abstract]  
Subsequent Events

Note 11. Subsequent Events

  

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

  

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

  

The Company has agreed to register for resale the initial 150,000 shares issued to Mr. Browning.

  

The Company has a right of first refusal to purchase the remaining shares of Browning.

  

In the event the Company’s common stock is delisted from NASDAQ, Mr. Browning has the right to request that we return to him the Control Shares, provided that he has not disposed of one-half of the shares issued and issuable to him in connection with the acquisition.

  

The Company also has agreed to provide Browning with a working capital loan in an initial amount of $150,000, which is to be repaid out of the post-closing net profit of Browning.

  

On October 9, 2018, the Company acquired a direct eighty percent ownership interest in the software, source code and other intellectual property underpinning the 123Wish experience marketplace platform operated by its subsidiary, 123Wish. In exchange for this ownership the Company issued 3,000,000 shares of its common stock and lent an additional $100,000 in working capital to 123Wish. 

  

In October and November 2018 the Company issued an aggregate of 4,550,000 shares of its common stock to consultants for services provided.

  

On November 15, 2018, the Company issued and sold 9,500,000 shares of its common stock to two accredited investors, for a purchase price of $1,425,000.

XML 33 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2018
Accounting Policies [Abstract]  
Liquidity and Capital Resources

Liquidity and Capital Resources

 

Historically, the Company has incurred net losses and negative cash flows from operations. The Company has principally financed these losses from the sale of equity securities and the issuance of debt instruments.

 

During the nine months ended September 30, 2018 the Company issued additional shares of common stock for cash in the amount of $2,070,000, of which $547,000 was raised in the three months ended September 30, 2018.

 

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

 

At September 30, 2018 the Company had cash of $535,000. Subsequent to September 30, 2018 the Company has raised a further amount of cash totaling $825,000 and is considering raising additional funds in the region of $2.0 million the last quarter of 2018 and the first quarter of 2019 which is expected to give the Company sufficient cash resources to cover forecasted expenditure into 2020.

 

However, actual results could materially differ from the Company’s projections. Accordingly, the Company may be required to raise additional funds through various sources. While the Company believes it is probable that such financings could be secured, there can be no assurance that 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.

Foreign Currency Translation

Foreign Currency Translation

 

The reporting currency of the Company is the United States dollar. Assets and liabilities other than those denominated in U.S. dollars, primarily in Singapore, the United Kingdom and China, 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 part of the investment in the subsidiaries is sold or liquidated. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations.

 

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

Accounts receivable, revenue recognition and concentrations

Accounts receivable, revenue recognition and concentrations

 

New Accounting Standard - In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”). Topic 606 supersedes the revenue recognition requirements in ASU Topic 605, Revenue Recognition (“Topic 605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 also includes Subtopic 340-40, Other Assets and Deferred Costs- Contracts with Customers, which discussed the deferral of incremental costs of obtaining a contract with a customer, including the period of amortization of such costs. The new standard was adopted by the Company in our fiscal year beginning January 1, 2018. The two permitted transition methods under the new standard are the full retrospective method, in which the new standard would be applied to each prior reporting period presented and the cumulative effect of applying the new standard would be recognized at the earliest period shown, or the modified retrospective method, in which the cumulative effect of applying the new standard would be recognized at the date of initial application. Based on our assessment, the impact of the new standard on our revenue recognition in prior periods is not significant; accordingly, while the Company would have used the modified retrospective method of adoption of the new standard, there was no cumulative effect of adoption on January 1, 2018 retained earnings.

 

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 new 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 under ASC 606 as described below:

 

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

 

  2. 123Wish derives income from user subscriptions, sale of merchandise, sale of tickets for experiences with social media influencers and artists, and the sale of corporate sponsorships, each of which is a separate performance obligation. User subscriptions cover a defined period of time (typically one month) and the revenue is recognized as the Company satisfies the requisite performance obligation (over the defined subscription period). Sale of merchandise and tickets are recognized when the customer has paid for the item and when the merchandise and/or ticket has been delivered to the customer. Corporate sponsorship packages are non-refundable and relate to brand association. The Company has no further service deliverable to the sponsor and the revenue is recognized when the agreement is entered into by both parties and the required marketing materials have been delivered to the corporate sponsor for their use.

 

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

 

The Company does not have off-balance sheet credit exposure related to its customers. As of September 30, 2018 four customers accounted for 87% of the accounts receivable balance and as of December 31, 2017, one customer accounted for 100% of the accounts receivable balance. Three customers accounted for 46% of the revenue for the nine months ended September 30, 2018 and one customer accounted for 76% of the revenue for the quarter ended September 30, 2018.

Research and Development Expenses

Research and Development Expenses

 

Research and development expenses include all direct costs, primarily salaries for Company personnel and outside consultants, costs related to the development of new products, significant enhancements to existing products, and the portion of costs of development of internal-use software required to be expensed. Research and development costs are charged to operations as incurred with the exception of those software development costs that may qualify for capitalization.

Income Taxes

Income Taxes

 

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

 

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

Net Loss per Share

Net Loss per Share

 

Basic net loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. Diluted loss per share takes into consideration common shares outstanding (computed under basic loss per share) and potentially dilutive securities. For the three and nine month periods ended September 30, 2018 and 2017, outstanding warrants are antidilutive because of net losses, and as such, their effect has not been included in the calculation of diluted net loss per share. Common shares issuable are considered outstanding as of the original approval date for purposes of earnings per share computations.

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss)

 

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

Use of Estimates

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.

Share-Based Compensation

Share-Based Compensation

 

The Company accounts for stock-based awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes option pricing model, which includes subjective judgements about the expected life of the awards, forfeiture rates and stock price volatility.

Fair Value Measurements

Fair Value Measurements

 

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

  Level 1 - Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

  Level 2 - Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

  Level 3 - Pricing inputs that are generally observable inputs and not corroborated by market data.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

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

XML 34 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisitions (Tables)
9 Months Ended
Sep. 30, 2018
123Wish, Inc. [Member]  
Schedule of assets acquired and liabilities

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

 

Consideration Paid:

 

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

Love Media House, Inc. [Member]  
Schedule of assets acquired and liabilities

The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed as of February 26, 2018 (In thousands):

 

Consideration Paid:

 

Cash   $ 150  
Common stock     1,541  
    $ 1,691  
         
Fair values of identifiable assets acquired and liabilities assumed:        
         
Assets acquired:        
Cash   $ 5  
Other intangible assets     910  
Goodwill     828  
Total assets acquired     1,743  
         
Liabilities assumed:        
Accounts payable     52  
Total Liabilities Assumed     52  
         
Net Assets Acquired   $ 1,691  

Banana Whale Studios PTE Ltd [Member]  
Schedule of assets acquired and liabilities

The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed as of May 24, 2018 (In thousands):

 

Consideration Paid:

 

Common stock   $ 4,983  
Non-controlling interest     4,937  
    $ 9,920  

 

Fair values of identifiable assets acquired and liabilities assumed:

         
Assets acquired:        
Cash   $ 42  
Accounts receivable     11  
Equipment     37  
Other intangible assets     10,118  
Total assets acquired     10,208  
         
Liabilities assumed:        
Accounts and advances payable     288  
Total Liabilities Assumed     288  
         
Net Assets Acquired   $ 9,920  

XML 35 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets (Tables)
9 Months Ended
Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of intangible assets

Intangible assets consist primarily of software development costs, acquired gaming software and customer and reseller relationships which are amortized over the estimated useful life, generally on a straight-line basis with the exception of customer relationships, which are generally amortized over the greater of straight-line or the related asset’s pattern of economic benefit.(in thousands)

 

    September 30     December 31  
    2018     2017  
             
Horizon software   $ 6,527     $ 6,527  
Social online application software     2,210        
Customer lists     997        
Gaming software     10,118        
      19,852       6,527  
Less accumulated amortization     (3,465 )     (1,187 )
                 
Intangible assets, net   $ 16,387     $ 5,340  

XML 36 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
Goodwill (Tables)
9 Months Ended
Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of goodwill

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

 

    September 30     December 31  
    2018     2017  
             
123Wish, Inc.   $ 419     $  
Love Media House, Inc. (formerly C. Rod, Inc.)     828        
    $ 1,247     $  
XML 37 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
Segment Information (Tables)
9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
Schedule of revenues

The Company’s revenues were generated in the following business segments (in thousands)

 

    September 30,     September 30,  
    2018     2017  
             
Sale of secure messaging licenses   $ 228     $ 514  
123Wish (from January 2018)     108        
Love Media House (from March 2018)     405        
Banana Whale (from May 2018)     144        
Total   $ 885     $ 514  

Schedule of direct costs, general and administrative expenses

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

 

    September 30,     September 30,  
    2018     2017  
             
Sale of secure messaging licenses   $ 136     $  
123Wish (from January 2018)     732        
Love Media House (from March 2018)     322        
Banana Whale (from May 2018)     272        
Corporate costs     4,180       911  
Total   $ 5,642     $ 911
Schedule of net income (loss)

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

 

    September 30,     September 30,  
    2018     2017  
             
Sale of secure messaging licenses   $ (1,059 )   $ 102  
123Wish (from January 2018)     (623 )      
Love Media House (from March 2018)     52        
Banana Whale Studios (from May 2018)     (355 )      
Corporate costs, discontinued operations and acquisition costs     (7,215 )     (3,156 )
Total   $ (9,200 )   $ (3,054 )
XML 38 R24.htm IDEA: XBRL DOCUMENT v3.10.0.1
Description of Business, Organization and Principles of Consolidation (Details Narrative)
Sep. 30, 2018
123Wish, Inc. [Member]  
Ownership percentage acquired 51.00%
One Horizon Hong Kong Ltd [Member]  
Ownership percentage acquired 100.00%
Horizon Network Technology Co. Ltd [Member]  
Ownership percentage acquired 100.00%
Love Media House, Inc. [Member]  
Ownership percentage acquired 100.00%
Banana Whale Studios PTE Ltd [Member]  
Ownership percentage acquired 51.00%
Browning Production And Entertainment Inc [Member]  
Ownership percentage acquired 51.00%
XML 39 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Details Narrative)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2018
USD ($)
Number
Segment
Sep. 30, 2018
USD ($)
Number
Segment
Dec. 31, 2017
USD ($)
Segment
Dec. 31, 2018
USD ($)
Oct. 02, 2018
USD ($)
Sep. 30, 2017
USD ($)
Cash $ 535 $ 535 $ 763     $ 170
Subsequent Event [Member]            
Cash       $ 2,000 $ 825  
Customer Concentration Risk [Member] | Accounts Receivable [Member]            
Percentage of concentration risk   87.00% 100.00%      
Number of customers 4 4 1      
Customer Concentration Risk [Member] | Sales Revenue, Net [Member]            
Percentage of concentration risk 76.00% 46.00%        
Number of customers | Segment 1 1        
Convertible Notes Payable [Member]            
Original debt converted $ 2,070 $ 547        
XML 40 R26.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisitions (Details) - USD ($)
$ in Thousands
9 Months Ended
Feb. 22, 2018
Jan. 31, 2018
Sep. 30, 2018
Dec. 31, 2017
Consideration Paid:        
Common stock     $ 18,200  
Assets acquired:        
Goodwill     1,247
123Wish, Inc. [Member]        
Consideration Paid:        
Common stock $ 1,387 $ 1,400    
Non controlling interest 1,353      
Consideration paid 2,740      
Assets acquired:        
Cash 14      
Other intangible assets 2,307      
Goodwill 419   $ 419
Net Assets Acquired $ 2,740      
XML 41 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisitions (Details 1) - USD ($)
$ in Thousands
9 Months Ended
Feb. 26, 2018
Sep. 30, 2018
Dec. 31, 2017
Consideration Paid:      
Common stock   $ 18,200  
Assets acquired:      
Goodwill   $ 1,247
Love Media House, Inc. (formerly C-Rod, Inc.)      
Consideration Paid:      
Cash $ 150    
Common stock 1,541    
Consideration paid 1,691    
Assets acquired:      
Cash 5    
Other intangible assets 910    
Goodwill 828    
Total assets acquired 1,743    
Liabilities assumed:      
Accounts payable 52    
Total Liabilities Assumed 52    
Net Assets Acquired $ 1,691    
XML 42 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisitions (Details 2) - USD ($)
$ in Thousands
9 Months Ended
May 24, 2018
Sep. 30, 2018
Consideration Paid:    
Common stock   $ 18,200
Banana Whale Studios PTE Ltd [Member]    
Consideration Paid:    
Common stock $ 4,983  
Non-controlling interest 4,937  
Consideration paid 9,920  
Assets acquired:    
Cash 42  
Accounts receivable 11  
Equipment 37  
Other intangible assets 10,118  
Total assets acquired 10,208  
Liabilities assumed:    
Accounts and advances payable 288  
Total Liabilities Assumed 288  
Net Assets Acquired $ 9,920  
XML 43 R29.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisitions (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
9 Months Ended
May 24, 2018
Feb. 26, 2018
Feb. 22, 2018
Jan. 31, 2018
Sep. 30, 2018
Sep. 30, 2017
Number of shares issued upon acquistion         35,000  
Number of shares issued upon acquistion,value         $ 18,200  
Cash         $ 108
123Wish, Inc. [Member]            
Ownership percentage acquired         51.00%  
Number of shares issued upon acquistion       1,333,334    
Number of shares issued upon acquistion,value     $ 1,387 $ 1,400    
Share price (in dollars per share)       $ 1.04    
Love Media House, Inc. (formerly C-Rod, Inc.)            
Ownership percentage acquired   100.00%        
Number of shares issued upon acquistion   1,376,147        
Number of shares issued upon acquistion,value   $ 1,541        
Cash   $ 150        
Banana Whale Studios PTE Ltd [Member]            
Ownership percentage acquired 51.00%          
Number of shares issued upon acquistion 7,383,000          
Number of shares issued upon acquistion,value $ 4,983          
Share price (in dollars per share) $ 0.675          
XML 44 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets (Details) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Intangible assets, gross $ 19,852 $ 6,527
Less accumulated amortization (3,465) (1,187)
Intangible assets, net 16,387 5,340
Horizon Software [Member]    
Intangible assets, gross 6,527 6,527
Social Online Application Software [Member]    
Intangible assets, gross 2,210
Customer Lists [Member]    
Intangible assets, gross 997  
Gaming Software [Member]    
Intangible assets, gross $ 10,118
XML 45 R31.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets (Details Narrative)
$ in Thousands
Sep. 30, 2018
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]  
Amortization of intangible assets first year $ 3,900,000
Amortization of intangible assets second year 3,900,000
Amortization of intangible assets third year 3,900,000
Amortization of intangible assets four year 3,900,000
Amortization of intangible assets five year $ 3,900,000
XML 46 R32.htm IDEA: XBRL DOCUMENT v3.10.0.1
Goodwill (Details) - USD ($)
$ in Thousands
Sep. 30, 2018
Feb. 22, 2018
Dec. 31, 2017
Goodwill $ 1,247  
123Wish, Inc. [Member]      
Goodwill 419 $ 419
Love Media House, Inc. C. Rod, Inc.[Member]      
Goodwill $ 828  
XML 47 R33.htm IDEA: XBRL DOCUMENT v3.10.0.1
Convertible notes (Details Narrative) - Convertible Notes Payable [Member]
$ / shares in Units, $ in Thousands
1 Months Ended
Feb. 28, 2018
USD ($)
$ / shares
shares
Debt conversion price (in dollars per share) | $ / shares $ 0.60
Number of shares converted | shares 676,389
Value of shares converted | $ $ 405,833
XML 48 R34.htm IDEA: XBRL DOCUMENT v3.10.0.1
Share Capital (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
9 Months Ended
Oct. 09, 2018
Oct. 02, 2018
Feb. 26, 2018
Feb. 22, 2018
Jan. 31, 2018
Sep. 30, 2018
Sep. 30, 2017
Dec. 31, 2017
Common stock, authorized           200,000,000   200,000,000
Common stock, par value (in dollars per share)           $ 0.0001   $ 0.0001
Number of shares issued for services           225,000    
Proceeds from issuance of shares           $ 824 $ 265  
Fair value of issued shares for services           $ 357,750    
Number of shares issued upon acquistion           35,000    
Value of shares issued upon acquistion           $ 18,200    
Number of shares issued for services           100,000    
Fair value of issued shares for services           $ 204    
Number of shares issued conversion of convertible note and accrued interest           504,167    
Value of shares issued conversion of convertible note and accrued interest           $ 302,500    
Number of shares issued conversion of convertible note and accrued interest           172,222    
Value of shares issued conversion of convertible note and accrued interest           $ 103,000    
Number of shares issued for services           172,222    
Fair value of issued shares for services           $ 200,000    
Number of shares issued for services           50,000    
Fair value of issued shares for services           $ 80    
Number of shares issued for services           100,000    
Fair value of issued shares for services           $ 85    
Number of shares issued for services           225,000    
Fair value of issued shares for services           $ 168,750    
Number of shares issued for services           850,000    
Fair value of issued shares for services           $ 425    
Number of shares issued for services           1,575,000    
Fair value of issued shares for services           $ 787,500    
Number of shares issued for services           600,000    
Fair value of issued shares for services           $ 306    
Number of shares issued for services           300,000    
Fair value of issued shares for services           $ 150    
Number of shares issued for services           1,000,000    
Fair value of issued shares for services           $ 175    
Number of shares issued for cash           1,750,000    
Number of shares issued for cash           4,500,000    
Number of value issued for cash           $ 360    
Number of shares issued for cash           1,525,000    
Number of value issued for cash           $ 114,375    
Share price (in dollars per share)           $ 0.20    
Proceeds from warrants exercises           $ 1,246 $ 146  
Subsequent Event [Member]                
Ownership percentage acquired 80.00%              
Number of shares issued upon acquistion 3,000,000              
Warrant [Member]                
Number of shares issued for services           425,000    
Proceeds from issuance of shares           $ 400,000    
Fair value of issued shares for services           $ 2,000,000    
Warrant issued           750,000    
Exercise price (in dollars per share)           $ 0.75    
Number of common shares reserved for outstanding warrants           330,869    
Exercise price (in dollars per share)           $ 15.88    
Warrants exercised           4,425,000    
Proceeds from warrants exercises           $ 1,246,000    
Warrants outstanding           6,500    
Compensation cost           $ 544,000    
Warrant [Member] | Subsequent Event [Member]                
Number of shares issued for services   4,250,000            
Warrant [Member]                
Warrant issued           850,000    
Exercise price (in dollars per share)           $ 0.50    
Warrant [Member]                
Warrant issued           1,850,000    
Exercise price (in dollars per share)           $ 0.10    
123Wish, Inc. [Member]                
Ownership percentage acquired           51.00%    
Number of shares issued upon acquistion         1,333,334      
Value of shares issued upon acquistion       $ 1,387 $ 1,400      
Love Media House, Inc. (formerly C-Rod, Inc.)                
Ownership percentage acquired     100.00%          
Number of shares issued upon acquistion     1,376,147          
Value of shares issued upon acquistion     $ 1,541          
Banana Whale Studios Pte [Member]                
Ownership percentage acquired           51.00%    
Number of shares issued upon acquistion           7,383,000    
Value of shares issued upon acquistion           $ 4,983    
XML 49 R35.htm IDEA: XBRL DOCUMENT v3.10.0.1
Segment Information (Details) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Revenue $ 885 $ 514
123Wish, Inc. [Member]    
Revenue 108
Love Media House [Member]    
Revenue 405
Banana Whale [Member]    
Revenue 144
Secure Messaging Licenses [Member]    
Revenue $ 228 $ 514
XML 50 R36.htm IDEA: XBRL DOCUMENT v3.10.0.1
Segment Information (Details 1) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Direct costs, general and administrative expenses $ 1,544 $ 338 $ 4,147 $ 911
123Wish, Inc. [Member]        
Direct costs, general and administrative expenses     732
Love Media House [Member]        
Direct costs, general and administrative expenses     322
Banana Whale [Member]        
Direct costs, general and administrative expenses     272
Secure Messaging Licenses [Member]        
Direct costs, general and administrative expenses     136
Corporate costs [Member]        
Direct costs, general and administrative expenses     $ 3,285 $ 911
XML 51 R37.htm IDEA: XBRL DOCUMENT v3.10.0.1
Segment Information (Details 2) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Net income (loss) $ (2,475) $ (772) $ (8,717) $ (3,826)
123Wish, Inc. [Member]        
Net income (loss)     (623)
Love Media House [Member]        
Net income (loss)     52
Banana Whale [Member]        
Net income (loss)     (355)
Secure Messaging Licenses [Member]        
Net income (loss)     (1,059) 102
Corporate costs [Member]        
Net income (loss)     $ (6,320) $ (3,156)
XML 52 R38.htm IDEA: XBRL DOCUMENT v3.10.0.1
Legal proceedings (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
5 Months Ended 9 Months Ended
Oct. 15, 2018
Oct. 09, 2018
May 30, 2018
May 30, 2018
Sep. 30, 2018
Number of shares issued upon acquistion         35,000
Mezzanine equity         $ 552,500
Effective date of mezzanine equity         Oct. 15, 2018
Subsequent Event [Member]          
Number of shares issued upon acquistion   3,000,000      
Ownership percentage   80.00%      
One Horizon Hong Kong Ltd [Member]          
Ownership percentage         100.00%
Banana Whale Studios PTE Ltd [Member]          
Ownership percentage         51.00%
Zhanming Wu [Member] | Settlement Agreement [Member] | Subsequent Event [Member]          
Number of shares issued upon acquistion 354,409        
Redeemed of common stock 850,000        
Share price (in dollars per share) $ 0.65        
Zhanming Wu [Member] | One Horizon Hong Kong Ltd [Member]          
Number of shares issued upon acquistion       15,000,000  
Filing Date       On May 30, 2018  
Name of Defendant       Director Defendants  
Name of Court       Court of Chancery of the State of Delaware  
Zhanming Wu [Member] | Banana Whale Studios PTE Ltd [Member]          
Number of shares issued upon acquistion     7,383,000    
Ownership percentage     51.00% 51.00%  
XML 53 R39.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events (Details Narrative) - USD ($)
$ in Thousands
2 Months Ended 9 Months Ended
Nov. 15, 2018
Oct. 22, 2018
Oct. 09, 2018
May 10, 2018
Nov. 30, 2018
Sep. 30, 2018
Sep. 30, 2017
Subsequent Event [Line Items]              
Proceeds from issuance of shares           $ 824 $ 265
Number of shares issued           35,000  
Number of shares sold (in shares)           1,750,000  
Purchase price           $ 824  
Subsequent Event [Member]              
Subsequent Event [Line Items]              
Number of shares issued     3,000,000        
Working capital loan amount     $ 100,000        
Ownership percentage     80.00%        
Subsequent Event [Member] | Consultant [Member]              
Subsequent Event [Line Items]              
Number of shares issued for services         4,550,000    
Subsequent Event [Member] | Two Accredited Investors [Member]              
Subsequent Event [Line Items]              
Number of shares sold (in shares) 9,500,000            
Purchase price $ 1,425,000            
Mr.William J Browning [Member]              
Subsequent Event [Line Items]              
Proceeds from issuance of shares       $ 10,000      
Number of shares issued       35,000      
Mr.William J Browning [Member] | Subsequent Event [Member]              
Subsequent Event [Line Items]              
Proceeds from issuance of shares   $ 10,000          
Number of shares issued   150,000          
Additional shares of common stock   150,000          
Description of extent number of shares   <p style="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0">To the extent the number of shares which we are obligated to issue to Mr. Browning exceeds 13,553,506 shares, representing 19.99% of our outstanding shares of common stock immediately prior to the acquisition (the “Excess Shares”).</p>          
Number of shares resale   150,000          
Working capital loan amount   $ 150,000          
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