Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 11, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | One Horizon Group, Inc. | |
Entity Central Index Key | 225,211 | |
Document Type | 10-Q | |
Trading Symbol | OHGI | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 6,220,492 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash | $ 262 | $ 260 |
Accounts receivable, net | 982 | 1,208 |
Other assets | 485 | 471 |
Total current assets | 1,729 | 1,939 |
Property and equipment, net | 36 | 42 |
Intangible assets, net | 7,883 | 8,407 |
Investment | 17 | 17 |
Total assets | 9,665 | 10,405 |
Current liabilities: | ||
Accounts payable | 352 | 364 |
Accrued expenses | 404 | 206 |
Accrued compensation | 228 | 156 |
Income taxes | 90 | 90 |
Convertible debenture, net | 3,177 | 3,068 |
Total current liabilities | 4,251 | 3,884 |
Long-term liabilities | ||
Amount due to related parties | 2,343 | 2,343 |
Deferred income taxes | 161 | 172 |
Mandatorily redeemable preferred shares | 62 | 62 |
Total liabilities | 6,817 | 6,461 |
Stockholders' Equity | ||
Preferred stock: $0.0001 par value, authorized 50,000,000 shares; issued and outstanding 170,940 shares | 1 | 1 |
Common stock: $0.0001 par value, authorized 33,333,333 shares; issued and outstanding 6,236,729 shares as of March 31,2017 (December 2016 - 6,144,762) | 4 | 4 |
Additional paid-in capital | 37,859 | 37,501 |
Accumulated deficit | (34,875) | (33,591) |
Accumulated other comprehensive income (loss) | (141) | 29 |
Total stockholders' equity | 2,848 | 3,944 |
Total liabilities and stockholders' equity | $ 9,665 | $ 10,405 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
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 | 170,940 | 170,940 |
Preferred stock: outstanding | 170,940 | 170,940 |
Common stock: par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock: authorized | 33,333,333 | 33,333,333 |
Common stock: issued | 6,236,729 | 6,144,762 |
Common stock: outstanding | 6,236,729 | 6,144,762 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
Revenue | $ 373 | $ 609 |
Cost of revenue - Hardware | 2 | 26 |
Cost of revenue - Amortization of intangibles | 500 | 512 |
Total cost of revenue | 502 | 538 |
Gross margin | (129) | 71 |
Expenses: | ||
General and administrative | 846 | 964 |
Depreciation | 8 | 15 |
Research and development | 134 | 188 |
Total expenses | 988 | 1,167 |
Loss from operations | (1,117) | (1,096) |
Other income and expense: | ||
Interest expense | (179) | (180) |
Foreign exchange | 1 | 7 |
Total other income and expense | (178) | (173) |
Loss before income taxes | (1,295) | (1,269) |
Income taxes benefit | 11 | 11 |
Net loss for the period | (1,284) | (1,258) |
Less: Preferred Dividends | (25) | |
Net loss attributable to One Horizon Group, Inc. Common stockholders | $ (1,284) | $ (1,283) |
Loss per share attributable to One Horizon Group, Inc. stockholders | ||
Basic and diluted net loss per share (in dollars per share) | $ (0.21) | $ (0.22) |
Weighted average number of shares outstanding | ||
Basic and diluted (in shares) | 6,176 | 5,857 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
Net loss | $ (1,284) | $ (1,258) |
Other comprehensive income (loss): | ||
Foreign currency translation adjustment gain (loss) | (170) | 372 |
Comprehensive loss | (1,454) | (886) |
Total comprehensive loss | $ (1,454) | $ (886) |
Condensed Consolidated Stateme6
Condensed Consolidated Statement of Stockholders' Equity (unaudited) - 3 months ended Mar. 31, 2017 - USD ($) $ in Thousands | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated deficit [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total |
Balance at beginning at Dec. 31, 2016 | $ 1 | $ 4 | $ 37,501 | $ (33,591) | $ 29 | $ 3,944 |
Balance at beginning (in shares) at Dec. 31, 2016 | 171 | 6,145 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net loss | (1,284) | (1,284) | ||||
Foreign currency translations | (170) | (170) | ||||
Shares issued for services | 176 | $ 176 | ||||
Shares issued for services (in shares) | 92 | 92,000 | ||||
Options issued for services | 59 | $ 59 | ||||
Warrants issued for services | 123 | 123 | ||||
Balance at ending at Mar. 31, 2017 | $ 1 | $ 4 | $ 37,859 | $ (34,875) | $ (141) | $ 2,848 |
Balance at ending (in shares) at Mar. 31, 2017 | 171 | 6,237 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities: | ||
Net loss for the period | $ (1,284) | $ (1,258) |
Adjustment to reconcile net loss for the period to net cash provided by (used in) operating activities: | ||
Depreciation of property and equipment | 8 | 15 |
Amortization of intangible assets | 500 | 512 |
Increase in allowance for doubtful accounts | 100 | |
Amortization of debt issue costs | 34 | 33 |
Amortization of beneficial conversion feature | 25 | 25 |
Amortization of debt discount | 50 | 50 |
Amortization of shares issued for services | 22 | |
Shares issued for services | 176 | |
Warrants issued for services | 123 | |
Options issued for services | 59 | 188 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 226 | 402 |
Other assets | (36) | (71) |
Accounts payable and accrued expenses | 258 | (106) |
Deferred income taxes | (11) | (11) |
Net cash provided by (used in) operating activities | 150 | (121) |
Cash flows from investing activities: | ||
Acquisition of intangible assets | (129) | (116) |
Acquisition of property and equipment | (2) | (2) |
Net cash (used in) investing activities | (131) | (118) |
Cash flows from financing activities: | ||
(Decrease) in long-term borrowing, net | (3) | |
Dividends paid | (25) | |
Net cash used in financing activities | (28) | |
Increase (Decrease) in cash during the period | 19 | (267) |
Foreign exchange effect on cash | (17) | 78 |
Cash at beginning of the period | 260 | 1,172 |
Cash at end of the period | $ 262 | $ 1,583 |
Description of Business, Organi
Description of Business, Organization and Principles of Consolidation | 3 Months Ended |
Mar. 31, 2017 | |
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” or “Horizon”) develops proprietary software primarily in the Voice over Internet Protocol (VoIP) and bandwidth optimization markets (“Horizon Globex”) and provides it to telecommunication companies under perpetual license arrangements (“Master License”) throughout the world. In addition, the Company either sells related user licenses and software maintenance services to or enters into revenue sharing agreements with telecommunication companies. Horizon, through its Chinese company Suzhou Aishuo Network Information Co. Ltd., provides the Aishuo App to end user customers through App stores based in China. Our Aishuo customers purchase call credits for Public Service Telephone Network (PSTN) access using a variety of Chinese on-line payment services including Union Pay and Apple Pay. Interim Period Financial Statements The accompanying unaudited interim 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’s 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 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 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, 2016, as filed with the Securities and Exchange Commission on April 10, 2017. Principles of Consolidation The consolidated financial statements include the accounts of One Horizon Group, Inc. and its wholly owned subsidiaries One Horizon Group plc, Horizon Globex GmbH, Abbey Technology GmbH, One Horizon Group Pte., Limited, Horizon Globex Ireland Limited, Global Phone Credit Limited and One Horizon Hong Kong Limited, and its wholly-owned subsidiary, Horizon Network Technology Co. Ltd. (“HNT”). In addition, included in the consolidated financial statements as of and for the three months ended March 31, 2017 are the accounts of Suzhou Aishuo Network Information Co., Ltd. which is controlled by One Horizon Group, Inc. through various contractual arrangements . All significant intercompany balances and transactions have been eliminated in consolidation. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies Liquidity and Capital Resources As we continue to pursue our operations and our business plan, we expect to incur further losses in 2017, which when combined with our continued investment in our intellectual property, will generate negative cash flows. As of March 31, 2017, the Company did not have any available credit facilities. As a result, we are in the process of seeking new financing by way of sale of either convertible debt or equities. Whilst we have been successful in the past in obtaining the necessary capital to support our investment and operations there is no assurance that we will be able to obtain additional financing under acceptable terms and conditions, or at all. In the event, we are unable to obtain sufficient additional funding when needed in order to fund our ongoing research and development activities as well as our operations, we would not be able to continue as a going concern and maybe forced to severely curtail or cease operations and liquidate the Company. The condensed consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or amounts of liabilities that might result from the outcome of these uncertainties. Our current independent registered public accounting firm included a paragraph emphasizing this going concern uncertainty in their audit report dated April 10, 2017, regarding our 2016 financial statements. Foreign Currency Translation The reporting currency of the Company is the United States dollar. Assets and liabilities of operations other than those denominated in U.S. dollars, primarily in Switzerland, Ireland, 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 Accounts receivable result primarily from sale of software and licenses to customers and are recorded at their principal amounts. The categories of sales and receivables and their terms of payment are as follows: a) Master License Agreement (“Agreement”) deposits b) Software consultancy and hardware fees c) Maintenance and operational fees and end user licenses fees Receivables are generally unsecured. The Company does not have off-balance sheet credit exposure related to its customers. As of March 31, 2017 and December 31, 2016, two customers accounted for 55% and 61%, respectively, of the accounts receivable balance. Intangible Assets Intangible assets include software development costs and customer lists and are amortized on a straight-line basis over the estimated useful lives of five years for customer lists and ten years for software development. The Company periodically evaluates whether changes have occurred that would require revision of the remaining estimated useful life. The Company performs periodic reviews of its capitalized intangible assets to determine if the assets have continuing value to the Company. Based on these valuations, no impairment charges were recognized during the three months ended March 31, 2017. The Company expenses software development costs as incurred until technological feasibility has been established, at which time those costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. The Company has determined that after technological feasibility for software products is reached, the Company continues to address all high risk development issues through coding and testing prior to release of the products to customers. The amortization of these costs is included in cost of revenue over the estimated life of the products. During the three months ended March 31, 2017 and 2016 software development costs of $129,000 and $116,000 respectively, have been capitalized. Revenue Recognition The Company recognizes revenue when it is realized or realizable and earned. The Company establishes persuasive evidence of a sales arrangement for each type of revenue transaction based on a signed contract with the customer and that delivery has occurred or services have been rendered, price is fixed and determinable, and collectability is reasonably assured. ● Software and licenses – revenue from sales of perpetual licenses to telecom entities is recognized when payments are due under extended payment term arrangements. Revenue from sales of perpetual licenses to other entities is recognized over the agreed collection period. ● Revenue for user licenses purchased by customers is recognized when the user license is delivered. ● Revenue for maintenance services is recognized over the period of delivery of the services. ● Revenues from Aishuo retail sales are recognized when the Public Switched Telephone Network (“PSTN”) calls and texts are made. For purposes of revenue recognition for perpetual licenses, the Company considers payment terms exceeding one year as a presumption that the fee in the transaction is not fixed and determinable. During the three months ended March 31, 2017, $287,000 or 30% of the Company’s revenue was concentrated in the hands of one major customer. In the three months ended March 31, 2016 the equivalent amount was $523,000 or 86% of the revenue. 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. Debt Issue Costs Debt issue costs related to long-term debt are shown as a reduction of debt outstanding and amortized over the term of the related debt using the effective interest method. Income Taxes Deferred income tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, operating loss, and tax credit carryforwards, and are measured using the enacted income tax rates and laws that will be in effect when the differences are expected to be recovered or settled. Realization of certain deferred income tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction. The Company records a valuation allowance to reduce deferred income tax assets to amounts that are more likely than not to be realized. The initial recording and any subsequent changes to valuation allowances are based on a number of factors (positive and negative evidence). The Company considers its actual historical results to have a stronger weight than other, more subjective, indicators when considering whether to establish or reduce a valuation allowance. The Company continually evaluates its uncertain income tax positions and may record a liability for any unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense and other expense, respectively. Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in: (1) calculating its income tax expense, deferred tax assets, and deferred tax liabilities; (2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized. Historically the Company has not filed income tax returns and the related required informational filings in the US. Certain informational filings if not filed contain penalties. The Company is currently addressing this issue with advisors to determine the amount, 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 condensed 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 month periods ended March 31, 2017 and 2016, outstanding stock options, warrants and convertible debt 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 year. The Company makes estimates for, among other items, useful lives for depreciation and amortization, determination of future cash flows associated with impairment testing for long-lived assets, determination of the fair value of stock options and warrants, 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. |
Intangible Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Note 3. Intangible Assets Intangible assets consist primarily of software development costs 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 straight line over the related asset’s pattern of economic benefit. (in thousands) March 31 December 31 2017 2016 Horizon software $ 18,400 $ 18,634 ZTEsoft Telecom software 441 438 Contractual relationships 885 885 19,726 19,957 Less accumulated amortization (11,843 ) (11,550 ) Intangible assets, net $ 7,883 $ 8,407 Amortization of intangible assets for each of the next five years is estimated to be $2,100,000 per year |
Related-Party Transactions
Related-Party Transactions | 3 Months Ended |
Mar. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related-Party Transactions | Note 4. Related-Party Transactions At March 31, 2017, $2,343,000 of related party debt was outstanding and will mature on April 1, 2018, which is unsecured and is interest free. In March 2015 the Company entered into a sales contract in the normal course of business with a customer (Horizon Latin America) in which the Company holds minority ownership interest. The customer purchased perpetual software license for $500,000. As at March 31, 2017 Horizon Latin America owed the Company $250,000 (2016: $250,000) The Company owns a cost based investment interest of 10% in the customer with limited voting rights or board representation, which is accounted for as investments in the accompanying balance sheets. |
Share Capital
Share Capital | 3 Months Ended |
Mar. 31, 2017 | |
Stockholders' Equity Note [Abstract] | |
Share Capital | Note 5. Share Capital Preferred Stock The Company’s authorized capital includes 50,000,000 shares of preferred stock of $0.0001 par value. The designation of rights including voting powers, preferences, and restrictions shall be determined by the Board of Directors before the issuance of any shares. Shares of Series A Preferred Stock were convertible into shares of common stock in July 2016, the scheduled maturity date. However, the Company is in negotiations with Series A Preferred Stock investors regarding new terms. As of March 31, 2017, none of the holders of the Series A Preferred Stock have elected to convert the Series A Preferred Stock into shares of common stock. 170,940 shares of Series A preferred stock are issued and outstanding as of March 31, 2017. Mandatorily Redeemable Preferred Shares The Company’s subsidiary One Horizon Group Plc has 50,000 shares of redeemable preferred stock issued and outstanding, par value of £1. These shares are non-voting, non-participating, redeemable and have been presented as a long-term liability. Common Stock The Company is authorized to issue 33.3 million shares of common stock, par value of $0.0001 per share, after giving effect to the reverse stock split. During the three months ended March 31, 2017 the Company: ● Issued 92,000 shares of common stock for services provided with a fair value of $176,000. Stock Purchase Warrants At March 31, 2017, the Company had reserved 887,919 shares of its common stock for the following outstanding warrants: Number of Warrants Weighted average Expiry Intrinsic value 887,919 12.66 To December 2019 - During the three months ended March 31, 2017 no warrants were forfeited, 238,095 warrants were issued and none exercised. For services performed and valued under Black-Scholes valuation method. The assumptions used in calculating the fair value under the Black-Scholes option valuation model are set forth in the following table for warrants issued by the Company for the three months ended March 31, 2017 and 2016. Common stock fair value $ 1.92 Risk-free interest rate 2.5 % Expected dividend yield 0 % Expected warrant life (years) 0.5 Expected stock price volatility 107 % |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Note 6. Stock-Based Compensation The shareholders approved a stock option plan on August 6, 2013, the 2013 Equity Incentive Plan (“2013 Plan”). The 2013 Plan is for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, cash bonuses and other stock-based awards to employees, directors and consultants of the Company. There have been no options issued in the three months ended March 31, 2017. A summary of the 2013 Plan for the three months ended March 31, 2017 is as follows: Number of Weighted Options Exercise Price Outstanding at January 1, 2017 141,250 14.82 Outstanding at March 31, 2017 141,250 14.82 As at March 31, 2017 there was unrecognized compensation expense of approximately $140,000 to be recognized over the remaining vesting periods. At March 31, 2017, 822,667 shares of common stock were reserved for all outstanding options and future commitments under the 2013 Equity Incentive Plan. Prior to the 2013 Plan the Company issued stock options to employees “Other Stock Options”. A summary of the Company’s other stock options for the three months ended March 31, 2017 is as follows: Number of Weighted Options Exercise Price Outstanding at January 1, 2017 145,950 $ 3.18 Outstanding at March 31, 2017 145,950 $ 3.18 As of March 31, 2017 there was unrecognized compensation expense of approximately $32,000, related to Other Stock Options, to be recognized over the remaining vesting period. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Segment Information | Note 7. Segment Information The Company has two business segments, both of which involve the development and licensing of software for mobile VoIP. One for business to business line and one for business to consumer line, primarily represented by Aishuo for the three months ended March 31, 2017 and 2016 activity in the business to consumer line is not material for separate segment presentation. The Company’s revenues were generated in the following geographic areas: (in thousands) March 31 March 31 2017 2016 China $ 49,000 $ 60,000 Rest of Asia 304,000 548,000 EMEA 20,000 1,000 The Americas 0 0 Total $ 373,000 $ 609,000 |
Subsequent Event
Subsequent Event | 3 Months Ended |
Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Event | Note 8. Subsequent Event On April 19, 2017, in connection with a special meeting of the shareholders of One Horizon Group, Inc. (the “Company”) which authorized the Board of Directors to effect a six-to-one reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding common stock, par value $0.0001 per share, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment (the “Amendment”) to the Certificate of Incorporation of the Company to effect the Reverse Stock Split, which became effective on April 28, 2017. On April 20, 2017, the Company attended a hearing with Nasdaq’s Hearing Panel in which they presented their case for continued listed with The Nasdaq Stock Market LLC. On April 26, 2017, the Company received a decision letter from The Nasdaq Stock Market LLC (“Nasdaq”) granting its request for continued listing, subject to the Company effecting a reverse stock split on or before May 15, 2017, and evidencing a closing bid price of $1.00 or more for a minimum of ten prior consecutive trading days. On May 12, 2017, the Company received notice from The NASDAQ Stock Market LLC (NASDAQ) indicating that the Company has regained compliance with the minimum bid price requirement under NASDAQ Listing Rule 5550(a)(2) for continued listing on The NASDAQ Capital Market. Accordingly, the Company is in compliance with all applicable listing standards and its common stock will continue to be listed on The NASDAQ Capital Market. |
Summary of Significant Accoun16
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Liquidity and Capital Resources | Liquidity and Capital Resources As we continue to pursue our operations and our business plan, we expect to incur further losses in 2017, which when combined with our continued investment in our intellectual property, will generate negative cash flows. As of March 31, 2017, the Company did not have any available credit facilities. As a result, we are in the process of seeking new financing by way of sale of either convertible debt or equities. Whilst we have been successful in the past in obtaining the necessary capital to support our investment and operations there is no assurance that we will be able to obtain additional financing under acceptable terms and conditions, or at all. In the event, we are unable to obtain sufficient additional funding when needed in order to fund our ongoing research and development activities as well as our operations, we would not be able to continue as a going concern and maybe forced to severely curtail or cease operations and liquidate the Company. The condensed consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or amounts of liabilities that might result from the outcome of these uncertainties. Our current independent registered public accounting firm included a paragraph emphasizing this going concern uncertainty in their audit report dated April 10, 2017, regarding our 2016 financial statements. |
Foreign Currency Translation | Foreign Currency Translation The reporting currency of the Company is the United States dollar. Assets and liabilities of operations other than those denominated in U.S. dollars, primarily in Switzerland, Ireland, 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 | Accounts Receivable Accounts receivable result primarily from sale of software and licenses to customers and are recorded at their principal amounts. The categories of sales and receivables and their terms of payment are as follows: a) Master License Agreement (“Agreement”) deposits b) Software consultancy and hardware fees c) Maintenance and operational fees and end user licenses fees Receivables are generally unsecured. The Company does not have off-balance sheet credit exposure related to its customers. As of March 31, 2017 and December 31, 2016, two customers accounted for 55% and 61%, respectively, of the accounts receivable balance. |
Intangible Assets | Intangible Assets Intangible assets include software development costs and customer lists and are amortized on a straight-line basis over the estimated useful lives of five years for customer lists and ten years for software development. The Company periodically evaluates whether changes have occurred that would require revision of the remaining estimated useful life. The Company performs periodic reviews of its capitalized intangible assets to determine if the assets have continuing value to the Company. Based on these valuations, no impairment charges were recognized during the three months ended March 31, 2017. The Company expenses software development costs as incurred until technological feasibility has been established, at which time those costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. The Company has determined that after technological feasibility for software products is reached, the Company continues to address all high risk development issues through coding and testing prior to release of the products to customers. The amortization of these costs is included in cost of revenue over the estimated life of the products. During the three months ended March 31, 2017 and 2016 software development costs of $129,000 and $116,000 respectively, have been capitalized. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue when it is realized or realizable and earned. The Company establishes persuasive evidence of a sales arrangement for each type of revenue transaction based on a signed contract with the customer and that delivery has occurred or services have been rendered, price is fixed and determinable, and collectability is reasonably assured. ● Software and licenses – revenue from sales of perpetual licenses to telecom entities is recognized when payments are due under extended payment term arrangements. Revenue from sales of perpetual licenses to other entities is recognized over the agreed collection period. ● Revenue for user licenses purchased by customers is recognized when the user license is delivered. ● Revenue for maintenance services is recognized over the period of delivery of the services. ● Revenues from Aishuo retail sales are recognized when the Public Switched Telephone Network (“PSTN”) calls and texts are made. For purposes of revenue recognition for perpetual licenses, the Company considers payment terms exceeding one year as a presumption that the fee in the transaction is not fixed and determinable. During the three months ended March 31, 2017, $287,000 or 30% of the Company’s revenue was concentrated in the hands of one major customer. In the three months ended March 31, 2016 the equivalent amount was $523,000 or 86% of the revenue. |
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. |
Debt Issue Costs | Debt Issue Costs Debt issue costs related to long-term debt are shown as a reduction of debt outstanding and amortized over the term of the related debt using the effective interest method. |
Income Taxes | Income Taxes Deferred income tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, operating loss, and tax credit carryforwards, and are measured using the enacted income tax rates and laws that will be in effect when the differences are expected to be recovered or settled. Realization of certain deferred income tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction. The Company records a valuation allowance to reduce deferred income tax assets to amounts that are more likely than not to be realized. The initial recording and any subsequent changes to valuation allowances are based on a number of factors (positive and negative evidence). The Company considers its actual historical results to have a stronger weight than other, more subjective, indicators when considering whether to establish or reduce a valuation allowance. The Company continually evaluates its uncertain income tax positions and may record a liability for any unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense and other expense, respectively. Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in: (1) calculating its income tax expense, deferred tax assets, and deferred tax liabilities; (2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized. Historically the Company has not filed income tax returns and the related required informational filings in the US. Certain informational filings if not filed contain penalties. The Company is currently addressing this issue with advisors to determine the amount, 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 condensed 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 month periods ended March 31, 2017 and 2016, outstanding stock options, warrants and convertible debt 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 year. The Company makes estimates for, among other items, useful lives for depreciation and amortization, determination of future cash flows associated with impairment testing for long-lived assets, determination of the fair value of stock options and warrants, 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. |
Intangible Assets (Tables)
Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | Intangible assets consist primarily of software development costs 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 straight line over the related asset’s pattern of economic benefit. (in thousands) March 31 December 31 2017 2016 Horizon software $ 18,400 $ 18,634 ZTEsoft Telecom software 441 438 Contractual relationships 885 885 19,726 19,957 Less accumulated amortization (11,843 ) (11,550 ) Intangible assets, net $ 7,883 $ 8,407 |
Share Capital (Tables)
Share Capital (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Stockholders' Equity Note [Abstract] | |
Schedule of stock purchase warrants | At March 31, 2017, the Company had reserved 887,919 shares of its common stock for the following outstanding warrants: Number of Warrants Weighted average Expiry Intrinsic value 887,919 12.66 To December 2019 - |
Schedule of black-scholes option valuation model for warrant issued | The assumptions used in calculating the fair value under the Black-Scholes option valuation model are set forth in the following table for warrants issued by the Company for the three months ended March 31, 2017 and 2016. Common stock fair value $ 1.92 Risk-free interest rate 2.5 % Expected dividend yield 0 % Expected warrant life (years) 0.5 Expected stock price volatility 107 % |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of equity incentive plan | A summary of the 2013 Plan for the three months ended March 31, 2017 is as follows: Number of Weighted Options Exercise Price Outstanding at January 1, 2017 141,250 14.82 Outstanding at March 31, 2017 141,250 14.82 |
Schedule of other stock options | A summary of the Company’s other stock options for the three months ended March 31, 2017 is as follows: Number of Weighted Options Exercise Price Outstanding at January 1, 2017 145,950 $ 3.18 Outstanding at March 31, 2017 145,950 $ 3.18 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Schedule of revenues by geographic areas | The Company’s revenues were generated in the following geographic areas: (in thousands) March 31 March 31 2017 2016 China $ 49,000 $ 60,000 Rest of Asia 304,000 548,000 EMEA 20,000 1,000 The Americas 0 0 Total $ 373,000 $ 609,000 |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Details Narrative) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017USD ($)Number | Mar. 31, 2016USD ($) | Dec. 31, 2016Number | |
Capitalized cost for software development | $ | $ 129 | $ 116 | |
Customer Lists [Member] | |||
Useful life of intangible assets | 5 years | ||
Software Development [Member] | |||
Useful life of intangible assets | 10 years | ||
Customer Concentration Risk [Member] | Accounts Receivable [Member] | |||
Number of customers | Number | 2 | 2 | |
Percentage of concentration risk | 55.00% | 61.00% | |
Customer Concentration Risk [Member] | Sales Revenue [Member] | |||
Number of customers | Number | 1 | ||
Percentage of concentration risk | 30.00% | 86.00% | |
Revenue | $ | $ 287 | $ 523 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Intangible assets, gross | $ 19,726 | $ 19,957 |
Less accumulated amortization | (11,843) | (11,550) |
Intangible assets, net | 7,883 | 8,407 |
Horizon Software [Member] | ||
Intangible assets, gross | 18,400 | 18,634 |
ZTEsoft Telecom Software [Member] | ||
Intangible assets, gross | 441 | 438 |
Contractual Relationships [Member] | ||
Intangible assets, gross | $ 885 | $ 885 |
Related-Party Transactions (Det
Related-Party Transactions (Details Narrative) (USD $) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2015 | Mar. 31, 2016 | |
Due from related party | $ 2,343 | ||
Maturity date | Apr. 1, 2018 | ||
Horizon Latin America [Member] | |||
Due from related party | $ 250 | $ 250 | |
Initial payments received upon perpetual software license | $ 500 | ||
Percentage ownership interest | 10.00% |
Share Capital (Details)
Share Capital (Details) - First Warrant [Member] | 3 Months Ended |
Mar. 31, 2017USD ($)$ / sharesshares | |
Number of Warrants | shares | 887,919 |
Weighted average exercise price (in dollars per share) | $ / shares | $ 12.66 |
Expiry | 2019-12 |
Intrinsic value | $ |
Share Capital (Details 1)
Share Capital (Details 1) - $ / shares | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Share Capital Details 1 | ||
Common stock fair value | $ 1.92 | $ 1.92 |
Risk-free interest rate | 2.50% | 2.50% |
Expected dividend yield | 0.00% | 0.00% |
Expected warrant life (years) | 6 months | 6 months |
Expected stock price volatility | 107.00% | 107.00% |
Share Capital (Details Narrativ
Share Capital (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Preferred stock, authorized | 50,000,000 | 50,000,000 | |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | |
Preferred stock, issued | 170,940 | 170,940 | |
Preferred stock, outstanding | 170,940 | 170,940 | |
Common stock, authorized | 33,333,333 | 33,333,333 | |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | |
Number of shares issued for services | 92,000 | ||
Fair value issued for services | $ (176) | ||
Warrant [Member] | |||
Number of common shares reserved for outstanding warrants | 887,919 | ||
Number of shares issued upon new issue | 238,095 | ||
Number of warrants forfeited | 0 | ||
Mandatorily Redeemable Preferred Shares [Member] | One Horizon Group Plc [Member] | |||
Temporary equity issued | 50,000 | ||
Mandatorily Redeemable Preferred Shares [Member] | One Horizon Group Plc [Member] | GBP [Member] | |||
Temporary equity par value (in pound per share) | $ 1 | ||
Private Placement [Member] | 10% Series A Convertible Preferred Stock [Member] | |||
Preferred stock, issued | 170,940 | ||
Preferred stock, outstanding | 170,940 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - 2013 Equity Incentive Plan [Member] | 3 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Outstanding at beginning | shares | 141,250 |
Options issued | shares | |
Outstanding at ending | shares | 141,250 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | |
Outstanding at beginning | $ / shares | $ 14.82 |
Options issued | $ / shares | |
Outstanding at ending | $ / shares | $ 14.82 |
Stock-Based Compensation (Det28
Stock-Based Compensation (Details 1) - Other Stock Options [Member] | 3 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Outstanding at beginning | shares | 145,950 |
Options issued | shares | |
Outstanding at ending | shares | 145,950 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | |
Outstanding at beginning | $ / shares | $ 3.18 |
Options issued | $ / shares | |
Outstanding at ending | $ / shares | $ 3.18 |
Stock-Based Compensation (Det29
Stock-Based Compensation (Details Narrative) $ in Thousands | Mar. 31, 2017USD ($)shares |
2013 Equity Incentive Plan [Member] | |
Unrecognized compensation expense | $ 140 |
Number of common stock reserved for future issuance | shares | 822,667 |
Other Stock Options [Member] | |
Unrecognized compensation expense | $ 32 |
Segment Information (Details)
Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | $ 373 | $ 609 |
China [Member] | ||
Revenues | 49 | 60 |
Rest of Asia [Member] | ||
Revenues | 304 | 548 |
EMEA [Member] | ||
Revenues | 20 | 1 |
The Americas [Member] | ||
Revenues | $ 0 | $ 0 |
Segment Information (Details Na
Segment Information (Details Narrative) | 3 Months Ended |
Mar. 31, 2017Number | |
Segment Reporting [Abstract] | |
Number of segments | 2 |
Subsequent Event (Details)
Subsequent Event (Details) - $ / shares | Apr. 28, 2017 | May 15, 2017 | May 12, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Common stock: par value (in dollars per share) | $ 0.0001 | $ 0.0001 | |||
Subsequent Event [Member] | |||||
Description of reverse stock split | Six-to-one | ||||
Common stock: par value (in dollars per share) | $ 0.0001 | ||||
Share price (in dollars per share) | $ 1 | $ 1 |