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TGHI Touchpoint

Filed: 9 Apr 21, 12:24pm

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

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

 

For the fiscal year ended December 31, 2020.

 

OR

  

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

  

Commission File Number 001-36530

  

Touchpoint Group Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

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

 4300 Biscayne Blvd, Suite 203,

Miami, FL

 33137
(Address of principal executive offices) (Zip Code)

  

+1 (305) 420-6640

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

The aggregate market value of the registrant’s voting and non-voting common equity stock held by non-affiliates of the registrant was approximately $0.84 million as of June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, based on the last sale price of the registrant’s common stock on such date of $0.05 per share, as reported on the OTCQB Market.

 

As of March 23, 2021, 170,949,876 shares of the registrant’s common stock, par value $0.0001, were outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

Item Description Page 
  Cautionary Note Concerning Forward-Looking Statements ii
     
  Part I  
Item 1 Business 1
Item 1A Risk Factors 5
Item 1B Unresolved Staff Comments 12
Item 2 Properties 12
Item 3 Legal Proceedings 12
Item 4 Mine Safety Disclosures 12
     
  Part II  
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 13
Item 6 Selected Financial Data 13
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
Item 7A Quantitative and Qualitative Disclosures about Market Risk 19
Item 8 Financial Statements and Supplementary Data 19
Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosures  
Item 9A Controls and Procedures 19
Item 9B Other Information 20
     
  Part III  
Item 10 Directors, Executive Officers and Corporate Governance 22
Item 11 Executive Compensation 27
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 31
Item 13 Certain Relationships and Related Transactions, and Director Independence 32
Item 14 Principal Accounting Fees and Services 33
     
  Part IV  
Item 15 Exhibits, Financial Statement Schedules 34
Item 16 Form 10-K Summary 39
  Signatures 39

 

 

  

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

  

The statements made in this Annual Report on Form 10-K, and in other materials that the Company has filed or may file with the Securities and Exchange Commission (the “SEC”), in each case that are not historical facts, contain “forward-looking information” within the meaning of the Private Securities Litigation Reform Act of 1995, and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which can be identified by the use of forward-looking terminology such as “may,” “will,” “anticipates,” “expects,” “projects,” “estimates,” “believes,” “seeks,” “could,” “should,” or “continue,” the negative thereof, and other variations or comparable terminology as well as any statements regarding the evaluation of strategic alternatives.  These forward-looking statements are based on the current plans and expectations of management and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements.  These risks include, but are not limited to, risks and uncertainties relating to our current cash position and our need to raise additional capital in order to be able to continue to fund our operations; our ability to retain our managerial personnel and to attract additional personnel; competition; our ability to protect intellectual property rights, and any and other factors, including the risk factors identified in the documents we have filed, or will file, with the SEC.

 

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

 

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

 

ii 

 

 

PART I

 

ITEM 1. BUSINESS

 

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

 

Current Structure of the Company

 

We have the following subsidiaries:

  

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

 

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

  

Summary Description of Core Business

 

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

 

We are based in the United States of America and the United Kingdom.

 

 1

 

 

Our Growth Strategy

  

In addition to growing the customer base of Touchpoint, we will look at growth through the following methods:

 

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

 

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

 

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

 

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

 

CORPORATE HISTORY

 

We were initially incorporated in Pennsylvania in 1972. We changed our domicile from Pennsylvania to Delaware in 2013. In 2019 we changed our name to Touchpoint Group Holdings, Inc.

 

Our authorized capital is 750,000,000 shares of common stock, par value $0.0001 per share, and 50,0000,000 shares of preferred stock, par value $0.0001 per share. As of March 23, 2021, 170,949,876 shares of our common stock are issued and outstanding and no preferred stock is issued and outstanding.

 

 2

 

 

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

 

On May 18, 2018, we entered into and consummated an Exchange Agreement (the “Exchange Agreement”) with Banana Whale Studios Pte. Ltd. and the founding shareholders of Banana Whale (the “Banana Whale Stockholders”), pursuant to which we acquired 51% of the outstanding shares (“Controlling Interest in Banana Whale”) of Banana Whale in exchange for a number of our shares of common stock to be based upon the earnings of Banana Whale. On February 4, 2019, we entered into and consummated an agreement (the “Agreement”) with Banana Whale and the Banana Whale Stockholders, pursuant to which we sold the Controlling Interest in Banana Whale in exchange for $2,000,000, consisting of $1,500,000 in cash and a promissory note of $500,000 (the “BWS Note”).

  

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

  

In December 2019, an agreement regarding the remaining amount due on the BWS Note was reached, pursuant to which the Company received $250,000 in December 2019 and the balance payable over the 2 years ending December 2021 whereby the Company will receive an amount equal to 25% of reported earnings before income tax, depreciation and amortization (“EBITDA”) each quarter up to a maximum amount of $250,000 in aggregate. As of March 23, 2021, no amounts have been received under the BWS Note other than the $250,000 received in December 2019.

 

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

 

Disposal of Discontinued Operations

 

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

 

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

 

 3

 

 

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

 

 The return of 89,334 shares of our common stock held by William J. Browning for cancellation; and

 

 

The repayment of advances made to Browning totaling $210,000 over a 24 month period ending January 31, 2022. To date we have only received repayment credits totaling $6,000.

 

Currently, we are looking to negotiate a sale of our ownership interest in Love Media.  

 

Recent Developments

 

We continue to seek cost-effective acquisitions in the sports and entertainment sectors that would be synergistic with the Touchpoint app and platform, enabling the livestreaming of content to fans. On February 16, 2021, we announced the signing of a Touchpoint licensing agreement with Dance it Out LLC (“DIO”), owned by International Fitness Guru and Shark Tank celebrity Billy Blanks Jr.

 

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

 

Corporate Information

 

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

 

Our Strategy

 

Our strategy is to grow the Touchpoint business and to make acquisitions in the digital media, sports and entertainment space.

 

Employees

 

As of December 31, 2020, we had four employees, all of whom were full-time employees. 

 

 4

 

 

ITEM 1A. RISK FACTORS

 

RISKS RELATED TO OUR BUSINESS

 

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

 

For the fiscal years ended December 31, 2020 and 2019, we reported losses from operations of $3.2 million and $3.7 million, respectively, and negative cash flow from operating activities from operations of $0.8 million and $2.1 million, respectively. As of December 31, 2020, we had an aggregate accumulated deficit of approximately $64.9 million. Such losses have historically required us to seek additional funding through the issuance of debt or equity securities.

 

As a result of these net losses and cash flow deficits and other factors, our independent auditors issued an audit opinion with respect to our consolidated financial statements for the two years ended December 31, 2020 that indicated that without obtaining sufficient additional equity or debt funding, there is a substantial doubt about our ability to continue as a going concern.

 

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

 

We are a trading company and depend upon our business for our operating cash flows.

 

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

 

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

 

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

 

 5

 

 

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

 

 straining our financial resources to acquire a company;

       

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

 

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

 

 retention of employees from the acquired company;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

  

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

  

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

 

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

 

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

 

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

 

Many countries, provincial, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future. As a result, the Company has seen delays in commencement of operations by licensees of the Touchpoint App and platform which leads to subsequent delays in subscriptions being processed. All of the Company employees and management can operate from home whilst the stay-at-home orders remain in place.

 

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

 

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

  

 6

 

 

Our executive officers do not reside in the United States.

 

Our U.S. stockholders would face difficulty in:

 

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

 

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

   

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

 

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

 

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

  

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

 

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

 

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

 

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

  

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

 

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

 

 7

 

 

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

 

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

  

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

 

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

  

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

 

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

  

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

 

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

 

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

 

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

 

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

 

 8

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 actual or anticipated fluctuations in our operating results;

     

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

 

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

 

 overall stock market fluctuations;

     

 announcements concerning our business or those of our competitors;

     

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

     

 conditions or trends in the industry;

     

 litigation;

     

 changes in market valuations of other similar companies;

     

 future sales of common stock;

     

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

 

 general market conditions.

 

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

 

 9

 

 

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

 

On March 16, 2021 entered into a Standby Equity Commitment Agreement (“SECA”), with MacRab, LLC (“MacRab”) providing that, upon the terms and subject to the conditions thereof, MacRab is committed to purchase, on an unconditional basis, shares of our common stock (“Put Shares”) at an aggregate price of up to $5,000,000 over the course of its term. Pursuant to the SECA, the purchase price for each of the Put Shares equals 90% of the lesser of the (i) “Market Price,” which is defined as the average of the two lowest volume weighted average the Valuation Period. The Valuation Period is the 8 trading days immediately following the date MacRab receives the Put Shares in its brokerage account,. As a result, if we sell shares of common stock under the Equity Purchase Agreement, we will be issuing common stock at below market prices, which could cause the market price of our common stock to decline, and if such issuances are significant in number, the amount of the decline in our market price could also be significant. In general, we are unlikely to sell shares of common stock under the Equity Purchase Agreement at a time when the additional dilution to stockholders would be substantial unless we are unable to obtain capital to meet our financial obligations from other sources on better terms at such time. However, if we do, the dilution that could result from such issuances could have a material adverse impact on existing stockholders and could cause the price of our common stock to fall rapidly based on the amount of such dilution. Under the SECA MacRab received 2,272,727 stock purchase warrants with an exercise price of $0.044 upon the signing of the agreement. MacRab retains the rights to the warrants if the agreement is ever terminated.

 

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

 

Pursuant to the SECA, we are prohibited from delivering a Put Notice to MacRab if the purchase shares would cause MacRab to beneficially own more than 4.99% of our then-outstanding shares of common stock. These restrictions, however, do not prevent MacRab from selling shares of common stock received in connection with the $5,000,000 MacRab equity line (the “Equity Line”), including shares purchased pursuant to the warrants granted to MacRab, and then receiving additional shares of common stock in connection with a subsequent issuance. In this way, MacRab could sell more than 4.99% of the outstanding shares of common stock in a relatively short time frame while never holding more than 4.99% at any one time. As a result, existing stockholders and new investors could experience substantial diminution in the value of their shares of common stock. Additionally, we do not have the right to control the timing and amount of any sales by MacRab of the shares issued under the Equity Line.

 

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

 

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

 

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

 

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

     

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

 

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

 

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

  

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

 

 10

 

 

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

 

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

 

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

 

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

 

Shares eligible for future sale may adversely affect the market.

 

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months, subject only to the current public information requirement. Affiliates may sell after six months, subject to the Rule 144 volume, manner of sale (for equity securities), current public information, and notice requirements. Of the 129,288,825 shares of our common stock outstanding as of December 31, 2020, approximately 51,056,666 shares are tradable without restriction. Given the limited trading of our common stock, resale of even a small number of shares of our common stock pursuant to Rule 144 or an effective registration statement may adversely affect the market price of our common stock.

 

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

 

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

 

 11

 

 

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

 

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

  

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

 

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

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

Not applicable to smaller reporting companies.

 

ITEM 2. PROPERTIES

 

We do not currently own any real property. As at December 31, 2020 we leased the following offices:

 

Location Approximate size Approximate monthly rent 
      
USA 1000 sq.ft. $5,000 
UK 150 sq.ft. $1,250 

 

ITEM 3. LEGAL PROCEEDINGS

 

In 2019 we received a claim from the landlord of a property leased by Maham LLC, then a possible acquisition target, under which we were a guarantor. Our counsel has responded to the claim, denying the claim and requesting additional information.

 

In 2019 we received a claim from the former management of Love Media regarding a claim for unpaid wages. Our legal counsel has responded disputing the validity of their claim in its entirety.

 

We do not believe that the ultimate resolution of these claims will have a material impact on the Company’s financial statements, but actual results could differ from our expectations.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

 12

 

 

PART II

  

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

 

Market Information

 

Our common stock is currently quoted on the OTCQB tier of the OTC Markets under the symbol, “TGHI.” Prior to October 23, 2019, our common stock was quoted on the OTCQB under the symbol, “OHGI.” Prior to March 8, 2019, our common stock was listed on the Nasdaq Capital Market (the “Nasdaq)

 

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

 

Quarter Ended High  Low 
         
March 31, 2021 (1) $0.09  $0.01 
         
December 31, 2020 $0.03  $0.01 
September 30, 2020 $0.05  $0.03 
June 30, 2020 $0.11  $0.01 
March 31, 2020 $0.15  $0.01 
         
December 31, 2019 $0.25  $0.06 
September 30, 2019 $0.75  $0.02 
June 30, 2019 $1.80  $0.70 
March 31, 2019 (2) $0.18  $0.03 

 

 (1)Through March 23, 2021.
 (2)On March 8, 2019, following our application to terminate or Nasdaq listing, Nasdaq suspended our common stock from trading on the Nasdaq and the OTCQB commenced the quotation of our common stock.

 

On March 23, 2021, the closing price of our common stock on the OTCQB was $0.059.

 

Record Holders

 

As of March 23, 2021, we had approximately 280 record holders of our common stock. The number of record holders does not include persons who held our common stock in nominee or “street name” accounts through brokers.

 

Dividend Policy

 

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

 

Securities Authorized for Issuance under Equity Compensation Plans

 

On December 27, 2018, our stockholders approved the 2018 Equity Incentive Plan (“2018 Plan”). The 2018 Plan provides for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, cash bonuses and other stock-based awards to employees, directors and consultants of the Company. No options were issued during the years ended December 31, 2020 or 2019, and there were no options outstanding as of December 31, 2020 or 2019.

 

Sales of Unregistered Equity Securities

 

Except as previously reported in our periodic reports filed under the Exchange Act, we did not issue any unregistered equity securities during the fiscal year ended December 31, 2020.

 

Repurchases of Equity Securities

 

We did not repurchase any equity securities during the fourth quarter of 2020.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable.

 

 13

 

 

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

 

The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our audited consolidated financial statements and notes for the fiscal years ended December 31, 2020 and 2019. The following discussion and analysis contain forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. See “Cautionary Note Concerning Forward-Looking Statements.” You also should specifically consider the various risk factors identified in this Annual Report on Form 10-K that could cause actual results to differ materially from those anticipated in these forward-looking statements.

 

Overview

 

We are engaged in media and digital technology, primarily in sports entertainment and related technologies that bring fans closer to athletes and celebrities.

 

Current Structure of the Company

 

We have the following subsidiaries:

 

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

 

In addition 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, with limited operations, for financial reporting purposes in accordance with generally accepted accounting principles in the United States (“GAAP”).

 

Summary Description of Core Business

 

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

 

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

 

 14

 

 

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

 

We are based in the United States of America and the United Kingdom.

 

Disposal of Discontinued Operations

 

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

 

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

 

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

 

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

 

 During the year ended December 31, 2020, we only received $3,000 from William J. Browning and therefore the balance of $204,000 remains outstanding and we will commence legal action to attempt to try and recover the outstanding balance. A provision against the outstanding balance has been provided for.

.

COVID-19 Effects

 

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

 

Many countries, provincial state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future. As a result, we have seen delays in commencement of operations by certain licensees of the Touchpoint App and platform which leads to subsequent delays in subscriptions being processed. All of the Company employees and management can operate from home whilst the stay-at-home orders remain in place.

 

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

 

 15

 

 

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

 

For the fiscal years ended December 31, 2020 and 2019, our continuing operations generated revenues of $174,000 and $170,000, respectively; and reported net losses of $3,545,000 and $3,298,000, respectively, and negative cash flow from continuing operating activities of $767,000 and $1,431,000, respectively. As noted in our consolidated financial statements, we had an accumulated deficit of approximately $64.9 million and recurring losses from operations as of December 31, 2020. We anticipate that we will continue to report losses and negative cash flow. Our auditors have raised substantial doubt regarding our ability to continue as a going concern as a result of our historical recurring losses and negative cash flows from operations. See “Risk Factors—We have a history of operating losses and our auditors have indicated that unless there is additional equity or debt funding in 2021, there is a substantial doubt about our ability to continue as a going concern.”

 

Results of Operations

 

The following table sets forth information from our statements of operations for the years ended December 31, 2020 and 2019. 

 

Comparison of years ended December 31, 2020 and 2019 (in thousands) excluding discontinued items.

 

 For the Years Ended Year to Year
Comparison
 
 December 31, Increase/ Percentage 
 2020 2019 (decrease) Change 
Revenue$174 $170 $4  2.4%
             
Cost of revenue            
Software and production costs -  4  (4) (100.0)%
Amortization of intangible assets 555  553  2  2 
  555  557  (2)   
             
Gross deficit (381) (387) 6  27.4% 
             
Operating Expenses            
             
General and administrative 2,319  3,321  (1,002) (30.2)%
Impairment charge 500  -  500  N/A 
Depreciation -  1  (1) N/A 
Total Operating Expenses 2,819  3,322  (503) (15.1)%
             
Loss from Operations (3,200) (3,709) 509  13.7% 
             
Other Income(expense)            
Interest expense (232) (87) (145) (166.7)%
Other Income 179  553  (374) (67.6)%
Provision for other receivables (287) -  (287)   
Loss on disposal of investment -  (50) 50  N/A 
Foreign currency exchange (losses) gains (5) (5) (0) N/A%
  (345) 411  (756) (183.9)%
             
Loss from continuing operations$(3,545)$(3,298) (234) (7.1)%

  

 16

 

 

Revenue: Our revenue for continuing operations for the year ended December 31, 2020 was approximately $174,000 as compared to approximately $170,000 for the year ended December 31, 2019, an increase of approximately $4,000 or 2.3%.

 

Cost of Revenue: Cost of revenue is primarily the amortization of intangible assets relating to subsidiaries acquired together with our intellectual property.

 

Gross Deficit:  Gross deficit for the year ended December 31, 2020 was approximately $381,000 as compared to $387,000 for the year ended December 31, 2019. 

 

Operating Expenses: Operating expenses including general and administrative expenses, consultancy expenses, depreciation and impairment charges were approximately $2.3 million for the year ended December 31, 2020, as compared to approximately $3.3 million, for 2019, a decrease of approximately $1.0 million or 30.6%. The decrease in expenses primarily arose due to decreases in consulting costs, employee costs, travel costs etc.

 

Impairment charge: As a result of the current pandemic and its impact on our ability to conduct customer marketing efforts and the inherent uncertainties in the entertainment and software industries within the United Kingdom and the United States, the Company has updated its short-term projections. As a result of this re-evaluation, during the year ended December 31, 2020, the Company recorded an impairment loss of approximately $0.5 million. While the Company believes its estimates and assumptions are reasonable, variations from those estimates could produce materially different results.

 

Other Income (Expense): Net other income/(expense) totaled approximately $(0.3) million for the year ended December 31, 2020 as compared to approximately $0.4 million in the year ended December 31, 2019, a decrease of approximately $0.7 million. The decrease in net other income is due primarily to a decrease in interest expense charges and other income recognized from the planned disposition of Banana Whale and Browning.

 

Net Loss: Net loss from continuing operations for the year ended December 31, 2020 was approximately $3.5 million as compared to a net loss from continuing operations of $3.3 million for the same period in 2019.  Going forward, management believes the Company will continue to grow the business and increase profitability through organic growth and acquisitions.

 

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

 

 17

 

 

Years Ended December 31, 2020 and December 31, 2019

 

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

 

 For the Years Ended
December 31
(in thousands)
 
 2020 2019 
Net cash provided by/(used in) operating activities from continuing operations (767) (1,431)
Net cash provided by/(used in)operating activities from discontinued operations -  (577)
Net cash provided by/(used in)investing activities from continuing operations (18) 1,623 
Net cash provided by/(used in)investing activities from discontinued operations -  (40)
Net cash provided by financing activities from continuing operations 645  291 
Net cash provided by financing activities from discontinued operations -  69 

 

Net cash used by operating activities from continuing operations was approximately $0.8 million for the year ended December 31, 2020 as compared to approximately $1.4 million for the same period in 2019. The decrease in cash used in operating activities from continuing operations is largely due to the decrease in cash expenditures in 2020 as compared to 2019 related to management activities.

 

Net cash used by investing activities from continuing operations was approximately $0.02 million for the year ended December 31, 2020 as compared to net cash raised of approximately $1.6 million for the previous year. Net cash provided in 2019 by investing activities was primarily the disposal of the interest in Banana Whale Studios PTE LTD. 

 

Net cash provided by financing activities from continuing operations amounted to approximately $0.6 million for 2020 and $0.3 million for 2019. Cash provided by financing activities in 2020 and 2019 was primarily from the funds received from convertible loans raised.

 

Off-Balance Sheet Arrangements

 

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

 

Critical Accounting Policies and Estimates

 

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

 

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

 

Together with our critical accounting policies set forth below, our significant accounting policies are summarized in Note 2 of our audited financial statements as of and for the year ended December 31, 2020.

 

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Revenue Recognition

 

Revenue for the sale of the software license is recognized when the customer has use of the services and has access to use the software. Revenue from maintenance services are recognized as the services are provided and charged. The Company also generates revenue through the development and deployment of customized customer apps based on its existing technologies. Based on the terms of the Operator Agreements, the Company recognizes revenue upon approval of the app and related design documents by the customer. Included within deferred revenue is amounts billed and/or collected from customer prior to achieving customer approval. The Company also recognizes revenue through hosting and maintenance fees billed to customers under the Operator Agreements and is eligible to receive a portion of revenues generated through the customer app, as defined. Revenues were generated through the revenue sharing arrangement in 2021.

 

Recent Accounting Pronouncements

 

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update permits the use of either the modified retrospective or fully retrospective method of transition. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

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

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

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

 

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

 

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures for the year ended December 31, 2020. Our Chief Executive Officer and Chief Financial Officer concluded that due to the deficiency in the internal control over financial reporting discussed below, our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(e) under the Exchange Act) were not effective as of December 31, 2020.

 

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 Management’s Report on Internal Control over Financial Reporting

 

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

 

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

 

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

 

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

  

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

 

Our management, including our Chief Executive Officer and our Chief Financial Officer, has assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Due to a lack of accounting personnel, the Company’s inability to segregate various accounting functions, lack of a control function over original documentation of agreements, and a lack of a documented control environment with respect to our operating entities, management has concluded that there was a material weakness in our internal control environment based on these matters and has concluded that as of December 31, 2020, our internal control over financial reporting was not effective.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. The rules of the SEC do not require an attestation of the management’s report by our registered public accounting firm in this annual report.

 

Changes in Internal Control over Financial Reporting

 

During the year ended December 31, 2020, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

Entry into a Material Definitive Agreements

 

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Catalyst Corporate Solutions, LLC Accord and First Amended Consulting Agreement

 

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

 

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

 

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Board of Directors and Executive Officers

  

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

 

Directors and Executive Officers

 

Name Age Position
     
Mark White  60 President, Chief Executive Officer and Director
     
Martin Ward  63 Chief Financial Officer and Director
     
Nicholas Carpinello  71 Director
     
Nalin Jay 44 Director
     
Robert Law  70 Director
     
Aling Zhang 63 Director
     
Pengfei Li 33 Director

 

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

 

Mark White. Mr. White was appointed as President, Chief Executive Officer and a director of the Company on September 8, 2017. Mr. White founded and became Chief Executive Officer of a predecessor of the Company, One Horizon Group PLC, in 2004 and served as Chief Executive Officer and a Director of One Horizon Group, Inc. from 2012 to 2014. His entrepreneurial career in the distribution of electronic equipment and telecommunications spans over 25 years.

 

He founded Next Destination Limited in 1993, the European distributor for Magellan GPS and satellite products, and sold the business in 1997. Prior to that, Mr. White was Chief Executive Officer for Garmin Europe, where he built up the company’s European distribution network.

 

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

 

Martin Ward. Mr. Ward has served as Chief Financial Officer and a director of the Company since 2012, and as Chief Financial Officer and Company Secretary of One Horizon Group and its predecessor since 2004. During that time, he has overseen the Company’s United Kingdom arm float on the London AIM market and in 2012 merge with an OTC market company that was uplisted the NASDAQ Capital Market in 2014. Mr. Ward is a Fellow of the Institute of Chartered Accountants in England and Wales (“ICAEW”) and qualified as a Chartered Accountant in 1983.

 

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Nicholas Carpinello. Mr. Carpinello has served as a member of the Board of Directors since 2013. He is an Independent Director of the Company and is the Chairman of the Audit Committee and a member of the Compensation and the Nomination & Governance Committees. He has been the owner of Carpinello Enterprises LLC d/b/a Cottman Transmission Center, a U.S. nationwide auto service franchise since 2004. Mr. Carpinello’s years of professional experience are extensive and include experience as CFO and Treasurer with multinational public and private manufacturers of armored vehicles and, later in his career, CFO of privately-held companies in the computer science field. He is a Certified Public Accountant, an alumnus of Arthur Andersen & Co., and holds a BA degree in Accounting from the University of Cincinnati.

 

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

 

In addition, Mr. Jay has a long and successful track record in sports, where he has advised a number of Premier League and Championship teams on issues ranging from player acquisition, global sponsorship (with a particular focus on Asia), player and team performance and corporate strategy. Carnegie Stewart’s sporting clients have included Lee Grant, Gianfranco Zola, Aaron Ramsey, Ole Solskjaer, and Roberto Martinez.

 

Mr. Nalin is a graduate of the London School of Economics and a non-practicing Barrister and Member of Lincoln’s Inn.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Compensation of Directors

 

Non-employee directors are entitled to receive compensation for serving as directors and may receive option grants from our company. Employee directors do not receive any compensation for their services as directors. All of our directors are reimbursed for expenses incurred by them in connection with attending Board of Directors’ meetings. The following table sets forth all cash compensation paid or where unpaid, accrued by us in 2020 to each of our non-employee directors.

 

Name 

Fees Earned, Accrued or Paid in Cash ($) 

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

 

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

 

For the two years ended December 31, 2020 and 2019, the Independent Directors salaries were either paid or accrued in U.S. Dollars or GB Pounds. On December 29, 2020, the board agreed to exchange their accrued and unpaid compensation as of September 30, 2020, into common stock based on the closing price of $0.0162 on December 28, 2020.

 

Independent Directors

 

Our Board of Directors has determined that Nicholas Carpinello, Robert Law and Nalin Jay are “independent directors” within the meaning of NASDAQ Marketplace Rule 5605(a)(2).

 

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Board Meetings; Committees and Membership

 

The Board of Directors held seven meetings during the fiscal year ended December 31, 2020. During 2020, more than 75% of the directors attended aggregate of (i) the total number of meetings of the Board of Directors and (ii) the total number of meetings of all committees of the Board on which such director served.

 

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

 

Audit Committee

 

Our Audit Committee consists of Messrs. Carpinello, Law and Jay, each of whom is independent. The Audit Committee held 2 meetings during 2020 and acted by written consent 2 times. The Audit Committee assists the Board of Directors oversight of (i) the integrity of financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, and (iv) the performance of our internal audit function and independent auditor and prepares the report that the SEC requires to be included in our annual proxy statement. The audit committee operates under a written charter. Mr. Carpinello is the Chairman of our audit committee.

  

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

 

Nominating and Corporate Governance Committee

 

The purpose of the Nominating and Corporate Governance Committee is to assist the Board of Directors in identifying qualified individuals to become members of our Board of Directors, in determining the composition of the Board of Directors and in monitoring the process to assess Board effectiveness. Each of Messrs. Carpinello, Law and Jay are members of the Nominating and Corporate Governance Committee. Mr. Jay serves as Chairman of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held 2 meetings during 2020 and acted by written consent 2 times. The Nominating and Corporate Governance Committee operates under a written charter.

 

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

 

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

 

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

 

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

 

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Compensation Committee

 

The Compensation Committee is responsible for overseeing and, as appropriate, making recommendations to the Board of Directors regarding the annual salaries and other compensation of our executive officers and general employees and other policies, and for providing assistance and recommendations with respect to our compensation policies and practices. Each of Messrs. Carpinello, Law and Jay are members of the Compensation Committee. The Compensation Committee operates under a written charter. Mr. Law is the Chairman of Compensation Committee. The Compensation Committee held 2 meetings during 2020 and acted by written consent 2 times.

 

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

 

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

 

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

 

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

 

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

 

Code of Ethics

 

Our board of directors has adopted a Policy Statement on Business Ethics and Conflicts of Interest (“Code of Ethics”) applicable to all employees, including the Company’s chief executive officer and chief financial officer. A copy of the Code of Ethics and Business Conduct is available on the Company’s website

 

Delinquent Section 16(a) Reports

 

Section 16(a) of the Exchange Act and the rules thereunder require our officers and directors, and persons that own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and to furnish us with copies. Based solely on our review of the copies of the Section 16(a) forms received by us, or written representations from certain reporting persons, we believe that during the fiscal year ended December 31, 2020 all of our officers, directors, and beneficial owners of more than 10% of our outstanding shares of common stock filed on a timely basis all reports required by Section 16(a) of the Exchange Act, except as follows: Mr. Jay failed to file a Form 3 in connection with his appointment in December 2019.

 

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Stockholder Communications

 

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

 

Touchpoint Group Holdings, Inc.

4300 Biscayne Blvd, Suite 203 

Miami FL 33137

Attn: Board Administration

 

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

 

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

 

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

 

ITEM 11. EXECUTIVE COMPENSATION

 

The following tables set forth, for the periods indicated, the total compensation awarded to, earned by or paid to each person who served as the principal executive officer during the fiscal year ended December 31, 2020 and each other executive officer whose total compensation awarded to, earned by or paid to such other executive officer for 2020 was in excess of $100,000 for services rendered in all capacities to the Company and its subsidiaries (together, the “Named Executive Officers”).

 

2020 Summary Compensation Table

 

Name and Principal Position Period Salary ($)  Bonus ($)  Stock Award(s) ($)  Option Awards ($)  Non-
Equity
Incentive
Plan
Compensation
  Non-Qualified Deferred Compensation Earnings ($)  All Other Compensation  ($)  Total ($) 
                           
Mark White CEO (1) 2020  480,000     0     0     0     0     0     0   480,000 
  2019  480,000   0   0   0   0   0   0   480,000 
Martin Ward, CFO (2) 2020  240,000   0   0   0   0   0   0   240,000 
  2019  240,000   0   0   0   0   0   0   240,000 

 

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For the two years ended December 31, 2020 and 2019, Mr. White’s and Mr. Ward’s salaries were either paid or accrued in U.S. Dollars. On December 29, 2020, the board agreed to exchange their accrued and unpaid compensation as of September 30, 2020, into common stock based on the closing price of $0.0162 on December 28, 2020.

 

We have entered into an employment agreement with Mark White which continues for an initial term through July 31, 2022, and which automatically renews for one-year terms thereafter, subject to the rights of both parties to terminate the agreement. Mr. White’s employment agreement provided for a signing grant of 64,000 shares of the Company’s common stock, an annual salary of $480,000 per annum, an annual bonus to be determined by the Board and an acquisition bonus whereby Mr. White will receive additional shares each time the Company completes an acquisition of a new business. Mr. White’s agreement contains customary non-disclosure and non-compete provisions which are operative during the term of his agreement and for one year thereafter. Mr. White’s agreement provides for severance of one year’s salary if his agreement is terminated by the Company without cause or in the event of a change in control of the Company. In addition, we have agreed that upon termination of Mr. White’s employment agreement, upon request we would register our shares of common stock then held by him for sale under the Securities Act.

 

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

 

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Elements of Compensation

 

Mark White and Martin Ward were provided with the following primary elements of compensation in 2020 and 2019:

 

Base Salary

 

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

 

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

 

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

 

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

 

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

 

Mark White’s and Martin Ward’s base salary for 2020 and 2019 is listed in “—2020 Summary Compensation Table.”

 

Equity Awards – Years Ended 2020 and 2019

 

We did not grant any equity awards to Mark White and Martin Ward during 2020 and 2019.

 

Outstanding Equity Awards at 2020 Year-End

 

As of December 31, 2020, there were no unexercised options, stock that has not vested or equity incentive plan awards held by any of the Company’s named executive officers.

 

Other Benefits

 

We did not pay any other benefits or perquisites to Mark White and Martin Ward during years ended 2020 and 2019.

 

Pension Benefit

 

None during years ended 2020 and 2019.

 

Nonqualified Deferred Compensation

 

None during years ended 2020 and 2019.

 

Retirement/Resignation Plans

 

None during years ended 2020 and 2019.

 

Equity Incentive Plan

 

In 2018 we adopted the 2018 Equity Incentive Plan (the “2018 Plan”), which authorizes the issuance of shares of common stock for grants of stock options, stock appreciation rights, restricted stock, stock units, bonus stock, dividend equivalents, other stock related awards and performance awards that may be settled in cash, stock, or other property. The 2018 Plan, as amended, authorizes the issuance of up to 15,000,000 shares; provided that as of February 1 of each fiscal year commencing February 1, 2020 and ending on February 1, 2027, the number of shares available for all awards under the Plan shall automatically be increased by an amount equal to the lesser of (i) 5,000,000 shares of common stock or the equivalent of such number of shares after the plan administrator, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization or similar transaction in accordance with the terms of the 2018 Plan; (ii) 5% of the number of outstanding shares of common stock on such date; and (iii) an amount determined by the Board. Any reverse stock split, if approved and effected, will not reduce the number of shares available under the 2018 Plan.

 

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

  

Equity Compensation Plan Information

 

The table below sets forth information as of December 31, 2020.

 

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

 

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

 

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

 

As of December 31, 2020, under the 2018 Plan, no equity grants have been made, and 15,000,000 shares of our common stock remain available for issuance.

 

Executive Compensation Philosophy

 

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

 

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Incentive Bonus

 

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

 

Long-Term, Stock-Based Compensation

 

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

  

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

 

The following table sets forth certain information regarding beneficial ownership of our common stock as of March 23, 2021 by (i) each person (or group of affiliated persons) who is known by us to own more than 5% of the outstanding shares of our common stock, (ii) each director, executive officer and director nominee, and (iii) all of our directors, executive officers and director nominees as a group. As of March 23, 2021, we had 170,949,876 shares of common stock issued and outstanding.

 

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of April 24, 2020. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named below, any shares that such person or persons has the right to acquire within 60 days of April 24, 2020  is deemed to be outstanding for such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

 

Name Amount And
Nature of
Beneficial
Ownership (1)
  Percent 
       
Owners of More than 5% of Outstanding Shares:      
         
Directors and Named Executive Officers:        
         
Mark White  37,431,296   21.8 
         
Martin Ward  16,566,914   9.7 
         
Nalin Jay  1,500,000    0.9 
         
Nicholas Carpinello  1,851,852   1.1 
         
Robert Law  1,578,937   0.9 
         
All Executive Officers and Directors as a Group (5 persons):  58,928,999   34.4 

 

(1)Based on 170,949,876 shares of common stock outstanding on March 23, 2021. Except as otherwise indicated, each of the stockholders listed above has sole voting and investment power over the shares beneficially owned.

 

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

 

Our Policy Concerning Transactions with Related Persons

 

Under Item 404 of SEC Regulation S-K, a related person transaction is any actual or proposed transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, including those involving indebtedness not in the ordinary course of business, to which we or our subsidiaries were or are a party, or in which we or our subsidiaries were or are a participant, in which the amount involved exceeded or exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years and in which any of our directors, nominees for director, executive officers, beneficial owners of more than 5% of any class of our voting securities (a “significant shareholder”), or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.

 

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

 

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

 

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

 

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

 

  December 31, 
  2020 
Loans due to stockholders and related parties   
Due within one year $1,000 
Long-term  0 
  $1,000 

 

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

 

Indemnification

 

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

 

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

  

 32

 

 

Director Independence 

 

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

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

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

 

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

 

Principal Accountant Fees and Services

 

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

 

Aggregate fees for professional services rendered to the Company by Cherry for the years ended December 31, 2020 and 2019 were as follows:

 

Services Provided 2020  2019 
Audit Fees $80,000  $119,000 
Audit Related Fees  0   4,500 
Tax Fees  0   - 
All Other Fees  0   - 
Total $80,000  $123,500 

 

Audit Fees

 

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

 

Audit-Related Fees

 

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

 

Tax Fees

 

There were no tax fees billed or accrued during 2020 or 2019. 

 

All Other Fees

 

There were no other fees billed or accrued during 2020 or 2019.

  

 33

 

  

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a)(1) Financial Statements

 

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

 

(2) Financial Statement Schedules

 

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

 

(3) Exhibits.

 

   

 

Exhibit
Number
 Title of Document Location
     
3.5 Certificate of incorporation, as filed with Delaware Secretary of State Incorporated by reference from Definitive Information Statement on Form 14C Appendix D filed May 26, 2013
     
3.6 Certificate of Amendment to Certificate of Incorporation effecting a 1-for-6 reverse stock split Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed May 1, 2017.
     
     
3.8 Bylaws Incorporated by reference from Definitive Information Statement on Form 14C Appendix E filed May 26, 2013

 

 34

 

 

Exhibit
Number
 Title of Document Location
     
     
10.1 Exchange Agreement dated February 26, 2018 with C-Rod, Inc. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed February 28, 2018
     
10.2† Employment Agreement with Mark White Incorporated by reference to Exhibit 10.28 to Annual Report on Form 10-K filed April 2, 2018
     
10.3† Employment Agreement with Martin Ward Incorporated by reference to Exhibit 10.29 to Annual Report on Form 10-K filed April 2, 2018
     
10.4† 2018 Equity Incentive Plan Incorporated by reference to Exhibit 10.30 to Annual Report on Form 10-K filed April 2, 2018
     

 35

 

 

Exhibit
Number
 Title of Document Location
     
10.5 Exchange Agreement dated as of October 22, 2018 for the acquisition of a majority of the outstanding shares of Browning Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on October 24, 2018
     
10.6 Agreement dated as of February 4, 2019 relating to Disposition of Banana Whale Studios Pte. Ltd. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 5, 2019
     
10.7 Promissory Note of Banana Whale Studios Pte Ltd dated February 4, 2019. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 5, 2019

  

 36

 

 

Exhibit
Number
 Title of Document Location
     
10.8 MacRab, LLC Standby Equity Commitment Agreement entered into on March 16, 2021. Incorporated by reference to Exhibit 10.1 to Company’s Current Reporton Form 8-K filed March 22, 2021.
     
10.9 MacRab, LLC Registration Rights Agreement entered into on March 16, 2021 Incorporated by reference to Exhibit 10.2 to Company’s Current Reporton Form 8-K filed March 22, 2021.
     
10.10 MacRab, LLC Common Stock Purchase Warrant entered into on March 16, 2021 Incorporated by reference to Exhibit 10.3 to Company’s Current Reporton Form 8-K filed March 22, 2021.
     
10.11 Geneva Roth Remark Holdings, Inc. convertible promissory note #4, entered into in December 2020. Filed herewith
     
10.12 Geneva Roth Remark Holdings, Inc. convertible promissory note #5, entered into in December 2020. Filed herewith
     
10.13 Geneva Roth Remark Holdings, Inc. convertible promissory note #6, entered into in January 2021. Filed herewith
     
10.14 Geneva Roth Remark Holdings, Inc. convertible promissory note #7, entered into in February 2021. Filed herewith
     
10.15 EMA Financial, LLC convertible promissory note entered into in August 2020. Filed herewith
     
10.16 FirstFire Global Opportunities Fund, LLC convertible promissory note entered into in February 2021. Filed herewith
     
10.17 LGH Investments, Inc. convertible promissory note entered into in March 2021 Filed herewith
     
10.18 Jefferson Street Capital, LLC convertible promissory note entered into in March 2021 Filed herewith
     
10.19 Equity Purchase Agreement entered into on August 5, 2019 and dated as of July 18, 2019 with Crown Bridge Partners, LLC. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 9, 2019
     
10.20 Registration Rights Agreement entered into on August 5, 2019 and dated as of July 18, 2019, with Crown Bridge Partners, LLC Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 9, 2019
     
10.21 Convertible promissory note issued to Bespoke Growth Partners, Inc. on July 11, 2019 Incorporated by reference to Exhibit 10.50 to Registration Statement on Form S-1 (Registration No. 333-233825) filed September 18, 2019 and declared effective September 23, 2019
     
10.22 Consulting Agreement dated August 5, 2019 by and between the registrant and Catalyst Corporate Solutions, LLC Incorporated by reference to Exhibit 10.45 to Form 10-K filed April 24, 2020
     
10.23 Accord and First Amended Consulting Agreement dated April 16, 2020 by and between the registrant and Catalyst Corporate Solutions, LLC Incorporated by reference to Exhibit 10.46 to Form 10-K filed April 24, 2020
     
10.24 Consulting Agreement dated April 16, 2020 by and between the registrant and Quantum Lexicon Incorporated by reference to Exhibit 10.47 to Form 10-K filed April 24, 2020
     
10.25 Convertible Promissory Note dated November 21, 2019 issued by the registrant to Bespoke Growth Partners, Inc. Incorporated by reference to Exhibit 10.48 to Form 10-K filed April 24, 2020
     
14.1 Policy Statement on Business Ethics and Conflicts of Interest Incorporated by reference from the Annual Report on Form 10-KSB for the year ended December 31, 2004, filed May 23, 2005
     
21.1 Subsidiaries Filed herewith
     
23.1 Consent of Cherry Bekaert, LLP Filed herewith
     
31.1 Certification of Principal Executive Officer Pursuant to Rule 13a-14 Filed herewith
     
31.2 Certification of Principal Financial Officer Pursuant to Rule 13a-14 Filed herewith
     
32.1 Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Filed herewith
     
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  

 

 37

 

Exhibit
Number
 Title of Document Location
     
101.INS XBRL Instance Filed herewith
     
101.SCH XBRL Taxonomy Extension Schema Filed herewith
     
101.CAL XBRL Taxonomy Extension Calculation Filed herewith
     
101.DEF XBRL Taxonomy Extension Definition Filed herewith
     
101.LAB XBRL Taxonomy Extension Labels Filed herewith
     
101.PRE XBRL Taxonomy Extension Presentation Filed herewith

 

† Management contract, compensation plan or arrangement.

 

 38

 

  

 

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.

 

 TOUCHPOINT GROUP HOLDINGS, INC.
   

Date: April 9, 2021

By: /s/ Mark White
  Mark White
  President and Chief Executive Officer (principal executive officer)
   

Date: April 9, 2021

By:/s/ Martin Ward
  Martin Ward
  Chief Financial Officer (principal financial officer and principal accounting officer)

 

POWER OF ATTORNEY

 

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

 

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

 

Signature Title Date
     
/s/ Mark White President, Chief Executive Officer and Director April 9, 2021
Mark White    
     
/s/ Martin Ward Chief Financial Officer and Director April 9, 2021
Martin Ward    
     
/s/ Nicholas Carpinello Director April 9, 2021
Nicholas Carpinello    
     
/s/ Robert Law Director April 9, 2021
Robert Law    
     
/s/ Nalin Jay Director April 9, 2021
Nalin Jay    
     
  Director April 9, 2021
Ajing Zhang    
     
  Director April 9, 2021
Pengfei Li    

 

 39

 

 

TOUCHPOINT GROUP HOLDINGS, INC. 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 

DECEMBER 31, 2020 AND 2019

 

 Page
Report of Independent Registered Public Accounting FirmF-2
Consolidated Financial Statements: 
Consolidated Balance Sheets as of December 31, 2020 and 2019F-3
Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019F-4
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2020 and 2019F-5
Consolidated Statements of Temporary and Stockholders’ (Deficit) Equity for the Years Ended December 31, 2020 and 2019F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019F-7
Notes to Consolidated Financial StatementsF-9

   

F-1

 

Report of Independent Registered Public Accounting Firm

  

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

Miami, Florida

 

Opinion on the Financial Statements 

We have audited the accompanying consolidated balance sheets of Touchpoint Group Holdings, Inc. (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive loss, temporary and stockholders’ (deficit) equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern Matters 

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

 

Basis for Opinion 

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

 

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

 

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

 

Critical Audit Matter – Impairment of Intangible Assets

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the Company’s Audit Committee and that: (i) relates to accounts or disclosures that are material to the financial statements and (ii) involved especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 

Critical Audit Matter Description

 

As disclosed in Note 2 to the financial statements, the Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate impairment may have occurred. An impairment loss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributed to the assets or the business to which the assets relate. Impairment losses, if any, are measured as the amount by which the carrying value exceeds the fair value of the assets. As further discussed in Note 2, the Company recorded an impairment charge totaling $500,000 during the year ended December 31, 2020.

 

A high degree of auditor judgment and effort was required in performing audit procedures to evaluate the reasonableness of management’s cash flow forecasts and the significant assumptions used. Significant uncertainty exists with these assumptions because they are sensitive to future market or economic conditions.

 

How the Critical Audit Matter Was Addressed In the Audit

 

Obtained an understanding of the internal controls and processes over the valuation of the intangible assets, including management's controls over forecasts of future cash flows and selection of other significant assumptions.

 

Evaluated the sufficiency and appropriateness of the impairment valuation model used by management.

 

Evaluated the significant assumptions and inputs used in the future cash flow model and reviewed corroborating documentation to support the assumptions and inputs.

 

Performed a sensitivity analysis over the Company’s intangible impairment analysis.

 

/s/ Cherry Bekaert, LLP 

 

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

 

Tampa, Florida

April 9, 2021

 

F-2

 

 

TOUCHPOINT GROUP HOLDINGS, INC.

Consolidated Balance Sheets 

December 31, 2020 and 2019

(in thousands, except share data)

 

  December 31, 
  2020  2019 
       
Assets      
Current assets:      
Cash $118  $258 
Accounts receivable, net  124   80 
Prepaid compensation  550   550 
Other receivable  66   210 
Other current assets  160   88 
   1,018   1,186 
Current assets of discontinued operations  1   29 
Total current assets  1,019   1,215 
         
Other receivable  -   250 
Fixed assets  3   - 
Goodwill  419   419 
Intangible assets, net  930   1,992 
Prepaid compensation (non-current)  367   917 
Non current assets of discontinued operations  5   34 
         
Total assets $2,743  $4,827 
         
Liabilities, Temporary Equity and Stockholders’ (Deficit)/Equity        
         
Current liabilities:        
Accounts payable $314  $530 
Accrued expenses  327   219 
Accrued compensation  55   388 
Amounts due to related parties  34   - 
Deferred revenue  60   - 
Loans payable  734   290 
Promissory notes, related parties  1,000   1,000 
   2,524   2,427 
Current liabilities of discontinued operations  11   428 
Total current liabilities  2,535   2,855 
         
Total liabilities  2,535   2,855 
         
Temporary Equity - redeemable common stock outstanding 848,611  605   605 
         
Stockholders’ (Deficit)/Equity        
Touchpoint Group Holdings, Inc. stockholders’ (Deficit)/Equity        
Preferred stock: $0.0001 par value, authorized 50,000,000; nil shares issued or outstanding      

Common stock: $0.0001 par value, authorized 750,000,000 shares, issued and outstanding 129,288,825 (2020) and 4,132,600 (2019)

  13   2 
Additional paid-in capital  63,551   61,749 
Accumulated Deficit  (64,907)  (61,362)
Accumulated other comprehensive loss  (24)  (24)
Total Touchpoint Group Holdings, Inc. stockholders’ (Deficit)/Equity  (1,367  365 
Non-controlling interest  970   1,002 
Total stockholders’ (deficit)/equity  (397  1,367 
Total liabilities, temporary equity and stockholders’ (Deficit)/Equity $2,743  $4,827 

  

See accompanying notes to consolidated financial statements.

 

F-3

 

 

TOUCHPOINT GROUP HOLDINGS, INC.

Consolidated Statements of Operations 

For the years ended December 31, 2020 and 2019

(in thousands, except per share data)

 

  Years Ended December 31, 
  2020  2019 
       
Revenue $174  $170 
Cost of revenue        
Software and production costs  -   4 
Amortization of intangible assets  555   553 
   555   557 
Gross deficit  (381)  (387)
         
Expenses:        
General and administrative  2,319   3,321 
Impairment charge  500   - 
Depreciation  -   1 
   2,819   3,322 
         
Loss from operations  (3,200)  (3,709)
         
Other income and expense:        
Interest expense  (232)  (87)
Other income (Note 3)  179   553 
Provision for other receivables  (287)  - 

Foreign currency exchange (losses)

  (5)  (5
Loss on disposal of investment  -   (50
   (345  411 
         
Loss from continuing operations  (3,545)  (3,298)
         
Loss from discontinued operations  -   (3,330)
Net loss for the year  (3,545)  (6,628)
Net loss attributable to non controlling interest  -   120 
Net loss attributable to Touchpoint Group Holdings, Inc. common stockholders $(3,545) $(6,508)
         
Earnings per share        
Basic and diluted net loss per share        
- Continuing operations $(0.12) $(0.85)
- Discontinued operations $-  $(0.88)
Weighted average number of shares outstanding        
Basic and diluted  30,307   3,768 

   

See accompanying notes to consolidated financial statements.

 

F-4

 

 

TOUCHPOINT GROUP HOLDINGS, INC.

Consolidated Statements of Comprehensive Loss 

For the years ended December 31, 2020 and 2019

(in thousands)

 

  Years Ended December 31, 
  2020  2019 
       
Net loss $(3,545) $(6,508)
Other comprehensive loss:        
Foreign currency translation adjustment gain (loss)  -   11 
         
Total comprehensive loss $(3,545) $(6,497)

   

See accompanying notes to consolidated financial statements.

 

F-5

 

 

TOUCHPOINT GROUP HOLDINGS, INC.

Consolidated Statements of Temporary and Stockholders’ (Deficit)/Equity 

For the years ended December 31, 2020 and 2019

(in thousands)

 

  Temporary Equity  Common Stock  Additional Paid-In  Stock Subscription  Accumulated  Accumulated Other Comprehensive  Non-Controlling  Total Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Receivable  Deficit  Income  Interest  (Deficit)/Equity 
Balance January 1, 2019  34  $605   3,502  $2  $62,606   (1,425 $(54,854) $(35 $1,571  $7,865 
                                         
Net loss                    (6,508)     (120)  (6,628)
                                         
Foreign currency translation                       11      11 
                                         
Disposal of equity in subsidiary                                  (449  (449
                                         
Additional Shares issued for business acquisition          82       127               127 
                                         
Shares issued for services        300      189               189 
                                         
Shares subscription cancelled        (340     (1,275  1,275              
                                         
Share subscription settled through services provided                    150               150 
                                         
Shares issued for commitment fees        180      67               67 
                                         
                                         
Shares issued as security for loan        179      -               - 
                                         
Shares issued for commitment fee        196      35               35 
                                         
Balances, December 31, 2019  34  $605   4,099  $2  $61,749  $-  $(61,362) $(24) $1,002  $1,367 
                                         
Net loss                    (3,545)     -   (3,545)
                                         
Shares issued for settlement of amounts owing for accrued compensation.        61,279   6   977                983 
                                         
Cancellation of shares on sale of subsidiary        (89      (2           (32  (34
                                         
Return of shares from Banana Whale        (474                     
                                         
Shares issued for cash          646       20                   20 
                                         
Shares issued for financing commitments          560       34                   34 
                                         
Shares issued for conversion of note payable        32,069   3   263               266 
                                         
Shares issued for services        24,000   2   510                   512 
                                         
Correction of shares not subject to reverse split        7,200                        
                                         
Balances, December 31, 2020  34  $605   129,290  $13  $63,551  $-  $(64,907) $(24) $970  $(397

 

See accompanying notes to consolidated financial statements.

 

F-6

 

 

TOUCHPOINT GROUP HOLDINGS, INC.

Consolidated Statements of Cash Flows 

For the years ended December 31, 2020 and 2019

(in thousands)

 

  Years Ended December 31, 
  2020  2019 
       
Cash used in operating activities:      
Operating activities:      
Net loss for the year $(3,545) $(3,298)
         
Adjustment to reconcile net loss for the year to net cash used in operating activities:        
Depreciation of property and equipment  -   1 
Amortization of intangible assets  555   553 
Impairment charge  500   - 
Shares issued for financing commitment  34   102 
Forgiveness of note receivable  3   - 
Shares issued for contract revision  -   127 
Shares issued for services to be provided  256   - 
Amortization of shares issued for services  603   955 
Non-cash interest expense  84   18 
Loss on disposal of investment  -   50 
Common shares issued for services received  115   189 
Other income (non-cash) (Note 3)  (379)  (553)
Changes in operating assets and liabilities:        
Accounts receivable  350   (102)
Other assets  37   21 
Deferred revenue  60   - 
Accounts payable and accrued expenses  560   506 
         
Net cash flows from continuing operating activities  (767)  (1,431)
         
Net cash flows from discontinued operating activities  -   (633)
         
Net cash flows from operating activities  (767)  (2,064)
         
Cash used in investing activities:        
Cash advances to acquisition target  -   (140
Proceeds from sale of investments  -   50 
Proceeds from sale of interest in subsidiary  -   1,750 

Change in other assets

  (18  - 
Net cash flows from investing activities – continuing operations  (18  1,660 
         
Cash flows from investing activities – discontinued operations  -   (77)
         
Net cash flows from investing activities  (18  1,583 
         
Cash flows from financing activities:        
Proceeds from loans  797   762 
Repayments on loans  (190)  (490
Cash proceeds from issuance of shares  20   - 
Cash proceeds from note receivable  3   - 
Advances from related parties  15   19 
Net cash flows from financing activities – continuing operations  645   291 
Cash flows from financing activities – discontinued operations  -   69 
Net cash flows from financing activities  645   360 
         
Decrease in cash during the year  (140)  (121)
Foreign exchange effect on cash  -   10 
         
Cash at the beginning of the year - continuing operations  258   313 
Cash at the beginning of the year – discontinued operations  -   58 
Cash at end of the year – total $118  $260 

   

See accompanying notes to consolidated financial statements.

 

F-7

 

 

TOUCHPOINT GROUP HOLDINGS, INC.

Consolidated Statements of Cash Flows (continued) 

For the years ended December 31, 2020 and 2019

(in thousands)

 

  Year Ended December 31, 
  2020  2019 
       
Cash paid for interest $11  $ 
Non-cash transactions:        
Common stock issued in settlement of amounts due $983   $ 
Common stock issued for provision of services $512   $ 
Disposal of interest in subsidiary $   $(449
Shares issued for conversion of notes payable $266   $ 
Share subscription settled through securities provided $   $150 

  

See accompanying notes to consolidated financial statements.

 

F-8

 

 

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

December 31, 2020 and 2019

 

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

 

Description of Business

 

The Company has the following businesses:

 

 (i)

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

 

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

 

 (ii)The Company is in negotiations to sell its interests in Love Media House, Inc. (“Love Media House”) and as such, it is considered to be discontinued operations. See Note 3 for more information.
   
 (iii)The Company disposed of its interest in Browning Productions & Entertainment, Inc. (“Browning”) and its results for 2019 are treated as discontinued operations. See Note 3 for more information.
   
 (iv)123 Wish, Inc. is considered dormant. All operations have been moved to TG.

  

The Company is primarily based in the United States of America and the United Kingdom

 

Current Structure of the Company

 

The Company has the following subsidiaries: 

 

Subsidiary name % Owned 
    
● 123Wish, Inc. (considered dormant)  51%
● One Horizon Hong Kong Ltd  (Limited Operations)  100%
● Horizon Network Technology Co. Ltd (Limited Operations)  100%
● Love Media House, Inc. (discontinued operations)  100%
● Touchpoint Connect Limited  100%
     

 

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

 

During the year ended December 31, 2020 the main trading of the Group is conducted through the Company and no significant activities are undertaken in the subsidiary companies.

 

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

 

F-9

 

 

 

Note 2. Summary of Significant Accounting Policies

 

Liquidity and Capital Resources 

 

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

 

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

 

At December 31, 2020, the Company had cash of $118,000. Together with the Company’s new Equity Line with MacRab, and current operational plan and budget, the Company believes that it has the potential to generate positive cash flows in the second half of 2021. However, actual results could differ materially from the Company’s projections.

 

Covid-19

 

The outbreak of the novel strain of coronavirus, specifically identified as “COVID- 19”, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operations in future periods.

 

Basis of Accounting and Presentation

 

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

 

Foreign Currency Translation

 

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

 

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

 

F-10

 

 

Cash

 

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

 

Accounts Receivable, Concentrations and Revenue Recognition

 

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

 

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

 

— Continued operations 

 

 1Touchpoint – Revenue for the sale of the software license is recognized when the customer has use of the services and has access to use the software. Revenue from  the usage of the software is shared between the customer and Touchpoint in accordance with their operator agreement. The Company also generates revenue through the development and deployment of customized customer apps based on its existing technologies. Based on the terms of the Operator Agreements, the Company recognizes revenue upon approval of the app and related design documents by the customer. Included within deferred revenue is amounts billed and/or collected from customer prior to achieving customer approval. The Company also recognizes revenue through hosting and maintenance fees billed to customers under the Operator Agreements and is eligible to receive a portion of revenues generated through the customer app, as defined. Revenues were generated through the revenue sharing arrangement in 2021.

 

— Discontinued operations 

 

 1Love Media House derived income from recording and video services. Income was recognized when the recording and video services are performed and the final customer product is delivered and the point at which the performance obligation is satisfied. Those revenues were non-refundable.
 2Browning derived income from the advertising associated with the airing of television series produced by Browning and also licenses income from the showing of series on certain channels based on the number of viewers attracted. Advertising revenue was recognized when the series to which the advertising relates is aired.

 

The Company does not have off-balance sheet credit exposure related to its customers. As of December 31, 2020, five customers and two customers respectively, accounted for 100% of the accounts receivable balance. three customers and five customers accounted for 100% of the revenue for the year ended December 31, 2020 and December 31, 2019 respectively.

 

Intangible Assets

 

Intangible assets include software development costs and acquired technology and are amortized on a straight-line basis over the estimated useful lives ranging from four to five years. The Company periodically evaluates whether changes have occurred that would require revision of the remaining estimated useful life. The Company performs periodic reviews of its capitalized intangible assets to determine if the assets have continuing value to the Company. 

 

F-11

 

 

Impairment of Other Long-Lived Assets

 

The Company evaluates the recoverability of its property and equipment and other long-lived assets whenever events or changes in circumstances indicate impairment may have occurred. An impairment loss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributed to the assets or the business to which the assets relate. Impairment losses, if any, are measured as the amount by which the carrying value exceeds the fair value of the assets.

 

As a result of the current pandemic and its impact on our ability to conduct customer marketing efforts and the inherent uncertainties in the entertainment and software industries within the United States and elsewhere globally, the Company has updated its short-term projections. As a result of this re-evaluation, during the year ended December 31, 2020, the Company recorded an impairment loss of approximately $0.5 million. While the Company believes its estimates and assumptions are reasonable, variations from those estimates could produce materially different results.

 

As set out in Note 3, during the year ended December 31, 2019, the Company recorded an impairment charge related to the Company’s discontinued operations of $2.4 million. 

 

Income Taxes

 

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

 

Net Loss per Share

 

Basic net loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. Diluted loss per share takes into consideration common shares outstanding (computed under basic loss per share) and potentially dilutive securities. For the years ended December 31, 2020 and 2019, all outstanding warrants are antidilutive because of net losses, and as such, their effect has not been included in the calculation of diluted net loss per share. Common shares issuable are considered outstanding as of the original approval date for purposes of earnings per share computations.

 

Accumulated Other Comprehensive Income (Loss)

 

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

 

Use of Estimates

 

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

 

F-12

 

 

Recently Adopted Accounting Pronouncements

 

 In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update permits the use of either the modified retrospective or fully retrospective method of transition. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.

 

F-13

 

 

Note 3. Discontinued Operations

 

On January 1, 2019 the Company sold its 51% interest in Banana Whale to a third party in return for $1,500,000 in cash, a promissory note in the principal amount of $500,000 (the “Banana Whale Note”) and the return of 295,322 shares of the Company’s common stock issued upon acquisition.

 

In December 2019, an agreement regarding the remaining amount due on the Banana Whale Note of $500,000 was reached pursuant to which the Company received $250,000 in December 2019. In addition, the balance is payable over the two years ending December 2021 whereby the Company will receive an amount equal to 25% of reported EBITDA each quarter up to a maximum amount of $250,000 in the aggregate. As of December 31, 2020, no payments have been received.

 

During the year ended December 31, 2019, the Company decided to sell its interests in its subsidiaries, Love Media House and Browning. In connection with this determination, the Company concluded the intangible assets related to these subsidiaries were impaired. Accordingly, the Company recorded an impairment charge of approximately $2.4 million which was included in the loss from discontinued operations for the year ended December 31, 2019.

 

On February 18, 2020, the Company completed the sale of its interest in Browning to William J. Browning, the holder of the remaining Browning shares. Under the Recission Agreement, Browning and Mr. Browning agreed to repay advances totaling $210,000, made to Browning by the Company, over a 24-month period ending January 31, 2022 with an early repayment discount, equal to the amount of payment received during the six months ending August 31, 2020. Commencing September 1, 2020, the then balance outstanding is to be repaid in equal instalments over the remaining 17 months together with interest of 1% per month. During the year ended December 31, 2020, the Company received $3,000 and in addition credited Browning with an additional $3,000 repayment discount reducing the outstanding principal to $204,000 as of December 31, 2020. The Company has fully provided for this amount by offsetting against the gain on sale. The Company intends to commence legal action against Mr. Browning for the amounts due.

 

In June 2020, Mr. Browning returned the 89,334 shares of Company common stock issued under the original acquisition. The shares have now been cancelled by the Company.

 

During the year ended December 31, 2020, the Company realized a gain of $379,000 on the sale of its 51% interest in Browning.

 

The Company has accounted for the operations of Love Media House and Browning as discontinued operations. The Statements of Operations for the years ended December 31, 2020 and 2019 for discontinued operations is as follows (in thousands):

 

Discontinued operations Years Ended
December 31,
 
  2020  2019 
       
Revenue $  $467 
Cost of revenue        
Hardware     193 
Amortization     150 
      343 
Gross Profit/(deficit)     124 
Expenses        
General and administrative     987 
Depreciation     8 
Other expenses     19 
Impairment     2,440 
      3,454 
Loss from Discontinued Operations    $(3,330)

 

F-14

 

 

The balance sheet of discontinued operations as of December 31, 2020 and 2019 is as follows: (in thousands)

 

  December 31, 
  2020  2019 
Current Assets        
Cash $  $2 
Accounts Receivable      
Other current assets  1   27 
   1   29 
Property and equipment  5   34 
Intangible assets      
Goodwill      
  $6  $63 
         
Current Liabilities        
Accounts payable and accrued expenses $  $36 
Deferred revenue     15 
Loans payable     115 
Finance contracts, due within one year     51 
Notes payable – related parties  11   211 
         
  $11  $428 

 

Note 4. Intangible Assets

 

As a result of the current pandemic and its impact on our ability to conduct customer marketing efforts and the inherent uncertainties in the entertainment and software industries within the United Kingdom and the United States, the Company has updated its short-term projections. As a result of this re-evaluation, during the year ended December 31, 2020, the Company recorded an impairment loss of approximately $0.5 million. While the Company believes its estimates and assumptions are reasonable, variations from those estimates could produce materially different results.

 

Intangible assets consist of the following (in thousands):

 

  December 31, 
  2020  2019 
       
Touchpoint software $2,443  $2,950 
Less accumulated amortization  (1,513)  (958)
   930   1,992 
         
Goodwill  419   419 
         
Intangible assets, net $1,349  $2,411 

 

F-15

 

 

Note 5. Notes Payable

 

a) Promissory notes, related parties

 

The promissory notes due to Zhanming Wu ($500,000) and the Company’s CEO, Mark White ($500,000), both considered related parties, including accrued interest of 7% per annum from issuance, were due for repayment on August 31, 2019. Such payments were not made and the parties are in negotiations to extend the maturity dates of the promissory notes, but there can be no guarantee that commercially reasonable terms will agreed upon. As of December 31, 2020, the counterparties had not demanded repayment of the promissory notes.

 

b) Century River Limited

 

The remaining principal balance of $10,000 of the $500,000 loan received from Century River Limited, a company controlled by the Company’s CEO, Century River Limited was repaid on June 10, 2020.

 

c) Bespoke Growth Partners Convertible #1

 

In July 2019, the Company issued a convertible promissory note in the original principal amount of $100,000 to Bespoke Growth Partners. The loan was originally due on January 26, 2020 and bore interest of 20% per annum. During the year ended December 31, 2020 the Company repaid $84,210 of principal and $16,061 of interest on the note by issuing an aggregate of 12,813,123 shares of Company common stock to Bespoke Growth Partners. The balance owing as of December 31, 2020 was $15,790.

 

d) Bespoke Growth Partners Convertible #2

 

In November 2019, the Company issued a convertible promissory note to Bespoke Growth Partners. The note was due on May 21, 2020 with an interest rate of 20% per annum. During the year ended December 31, 2020 the Company received proceeds under the note of $175,000. The balance outstanding as of December 31, 2020, including pro-rata loan discount, was $262,500.

 

The Company is in negotiation with Bespoke to revise the repayment terms and date on both loans with Bespoke Growth Partners.

 

e) Labrys Fund

 

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

 

F-16

 

 

a) Geneva Roth Remark Holdings, Inc.

 

In May 2020, the Company issued a convertible promissory note in the principal amount of $133,000 to Geneva Roth Remark Holdings, Inc. The note is due May 19, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. During the year ended December 31, 2020 the Company issued 15,255,651 common shares as full repayment of the $133,000 promissory note.

 

b) Geneva Roth Remark Holdings, Inc. Note #2

 

In July 2020, the Company issued a convertible promissory note in the principal amount of $63,000 to Geneva Roth Remark Holdings, Inc. The note is due July 27, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. The balance owing as of December 31, 2020 is $63,000. The final balance was repaid in February 2021 by the issue of 7,037,234 shares of common stock.

 

c) Geneva Roth Remark Holdings, Inc, Note #3

 

In October 2020, the Company issued a convertible promissory note in the principal amount of $55,000 to Geneva Roth Remark Holdings, Inc. The note is due October 21, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. The balance owing as of December 31, 2020 is $55,000. The loan was repaid in full by cash on April 1, 2021.

 

d) Geneva Roth Remark Holdings, Inc. Note #4

 

In December 2020, the Company issued a convertible promissory note in the principal amount of $53,500 to Geneva Roth Remark Holdings, Inc. The note is due December 14, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. The balance owing as of December 31, 2020 is $53,500.

 

e) Geneva Roth Remark Holdings, Inc. Note #5

 

In December 2020, the Company issued a convertible promissory note in the principal amount of $45,500 to Geneva Roth Remark Holdings, Inc. The note is due December 30, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. The balance owing as of December 31, 2020 is $45,500.

 

f) Firstfire Global Opportunities Fund, LLC. Loan #1

 

In June 2020, the Company issued a convertible promissory note in the principal amount of $145,000 to Firstfire Global Opportunities Fund, LLC. The note is due June 15, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35% of the lowest trading price in the last 15 days. During the year ended December 31, 2020 the amount of $33,004 was converted to 4,000,000 common shares of the Company. The balance owing as of December 31, 2020 is $111,996. The final balance was repaid in February 2021 by the issue of 6,300,000 shares of common stock.

 

g) EMA Financial, LLC

 

In August 2020, the Company issued a convertible promissory note in the principal amount of $125,000 to EMA Financial, LLC. The note is due October 30, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at the lower of $0.05 per share and a discount of 35% to the average trading price. The balance owing as of December 31, 2020 is $125,000. In February 2021 the Company issued 10,365,144 shares of common stock in full settlement of the outstanding balance due. 

F-17

 

 

Note 6. Related Party Transaction

 

During the year ended December 31, 2020 the Company settled $967,671 owing to certain directors and officers of the Company through the issuance on December 29, 2020 of 59,732,764 common shares of the Company at $0.0162 being the closing price on December 28, 2020.

 

Note 7. Share Capital

 

Common Stock

 

The Company is authorized to issue 750 million shares of common stock, par value of $0.0001.

 

During the year ended December 31, 2020, the Company issued shares of common stock as follows:

 

12,813,132 shares of common stock, with an aggregate fair value of $100,271, in partial settlement of principal and interest owing to Bespoke Growth Partners.

 

7,200,000 shares of common stock to adjust shares issued in 2019 for consulting services which were not subject to reverse split.

 

559,673 shares of common stock for a commitment fee payable to Crown Bridge Partners under the agreement dated in July 2019.

 

645,757 shares of common stock for cash of $19,969.

 

5,000,000 shares of common stock, with a fair value of $60,000, for services to be provided.

 

5,000,000 shares of common stock, with a fair value of $68,500, for services to be provided.

 

2,000,000 shares of common stock, with a fair value of $27,400, for services to be provided.

 

3,000,000 shares of common stock, with a fair value of $169,500, for services to be provided.

 

9,000,000 shares of common stock, with a fair value of $187,000, for services provided.

 

19,255,651 shares of common stock, with a fair value of $166,004, for part conversion of convertible promissory notes

 

61,279,454 shares of common stock for settlement of amounts owing in the aggregate of $982,908.

 

During the year ended December 31, 2020 563,760 shares of common stock were returned to the Company for cancellation.

 

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

 

 81,933 shares of common stock, with a fair value of $126,760, as additional compensation related to acquisition of Browning.
   
 200,000 shares of common stock, with a fair value of $150,000, for consulting services to be provided.
   
 100,000 shares of common stock with a fair value of $38,750 for consulting services to be provided

 

F-18

 

 

 179,104 shares of common stock as security against the loan payable to Labrys Fund LP. The shares were received back by the Company for cancellation in February 2020.
   
 370,000 shares of common stock for a commitment fee payable to Crown Bridge Partners

 

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

 

Stock Purchase Warrants

 

As of December 31, 2020, the Company had no warrants outstanding.

 

During the year ended December 31, 2020, no warrants were issued, exercised and 2,890 were forfeited. During the year ended December 31, 2019 no warrants were issued, exercised or forfeited.

 

Note 8. Stock-Based Compensation

 

On August 6, 2013, the Company’s shareholders approved the 2013 Equity Incentive Plan (“2013 Plan”). The 2013 Plan provides for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, cash bonuses and other stock-based awards to employees, directors and consultants of the Company.

 

There were no options issued in the years ended December 31, 2020 and 2019 and there are no options outstanding as at December 31, 2020.

 

In March 2018, the Company adopted the 2018 Equity Incentive Plan (the “2018 Plan”) to provide additional incentives to the employees, directors and consultants of the Company to promote the success of the Company’s business. During the year ended December 31, 2020, no common stock of the Company was issued under the 2018 Plan.

 

F-19

 

 

Note 9. Income Taxes

 

The difference between the applicable statutory tax rates and the provision for income tax recorded by the Company is primarily attributable to the change in the Company’s valuation allowance against its deferred tax assets and the tax treatment of certain gains and losses recorded under GAAP.

 

The potential benefit of net operating loss carryforwards has not been recognized in the consolidated financial statements since the Company cannot determine that it is more likely than not that such benefit will be utilized in future years. The tax years 2006 through 2020 remain open to examination by federal authorities in certain jurisdictions in which the Company operates, namely China and Hong Kong. The components of the net deferred tax assets and the amount of the valuation allowance are as follows: (in thousands)

 

  December 31, 
  2020  2019 
       
Deferred tax assets        
Net operating loss carryforwards  4,768   4,494 
Valuation allowance  (4,768)  (4,494)
Net deferred tax assets $  $ 

 

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 U.S. Certain informational filings if not filed contain penalties. The Company is currently addressing this issue with advisors to determine the amount of potential payments due. Given the complexity of the issue the Company is unable to quantify a range of potential loss. Accordingly, no liability has been recorded in the accompanying consolidated balance sheets in respect of this matter. However, such potential penalties may be material to the Company’s financial statements.

 

Note 10. Legal Proceedings

 

In 2019 we received a claim from the landlord of a property leased by Maham LLC, then a possible acquisition target, under which we were a guarantor. Our counsel has responded to the claim, denying the claim and requesting additional information.

 

In 2019 we received a claim from the former management of Love Media regarding a claim for unpaid wages. Our legal counsel has responded disputing the validity of their claim in its entirety.

 

We do not believe that the ultimate resolution of these claims will have a material impact on the Company’s financial statements, but actual results could differ from our expectations.

 

Note 11. Subsequent Events

 

On March 16, 2021, the Company completed on a Standby Equity Commitment Agreement (“SECA”) with MacRab LLC whereby during the 24 months commencing on March 15, 2021, the Company has the option to sell up to $5.0 million of the Company’s common stock to MacRab at a price equal to 90% of the average of the two lowest volume weighted average prices during the eight trading day days following the clearing date associated with the respective put under the SECA. Under the SECA MacRab are entitled to 2,272,727 stock purchase warrants with an exercise price of $0.044 upon the signing of the agreement. MacRab retains the rights to the warrants if the agreement is ever terminated.

 

Geneva Roth Remark Holdings, Inc. Note #6

 

On January 13, 2021, the Company the Company issued a convertible promissory note in the principal amount of $55,000 to Geneva Roth Remark Holdings, Inc. The note is due July 12, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35%.

 

Geneva Roth Remark Holdings, Inc. Note #7

 

On February 8, 2021, the Company the Company issued a convertible promissory note in the principal amount of $55,000 to Geneva Roth Remark Holdings, Inc. The note is due August 4, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35%.

 

FirstFire Global Opportunities Fund, LLC. Note #2

 

On February 5, 2021, the Company the Company issued a convertible promissory note in the principal amount of $100,000 to FirstFire Global Opportunities Fund, LLC. The note is due August 1, 2021 and has an interest rate of 10% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a discount of 35%.

 

LGH Investments, LLC.

 

On March 4, 2021, the Company the Company issued a convertible promissory note in the principal amount of $165,000 to LGH Investments, LLC. The note carries an OID of 10% and has an interest rate of 8% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a fixed price of $0.03 per share of common stock.

 

Jefferson Street Capital, LLC.

 

On March 17, 2021, the Company the Company issued a convertible promissory note in the principal amount of $165,000 to Jefferson Street Capital, LLC. The note carries an OID of 10% and has an interest rate of 8% per annum. The promissory note is convertible, at the option of the holder, after 180 days into common shares of the Company at a fixed price of $0.03 per share of common stock.

 

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