Form S-3 One Horizon Group, Inc.

Registration statement under Securities Act of 1933

Published: 2018-10-24 17:24:26
Submitted: 2018-10-24
s113407_s3.htm S-3


ENT> S-3 1 s113407_s3.htm S-3

 

As filed with the Securities and Exchange Commission on October 24, 2018

Registration No. 333- ________

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-3

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

ONE HORIZON GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

 

46-3561419

I.R.S. Employer Identification Number

 

34 South Molton Street, London W1K 5RG, United Kingdom

+44(0)20 7409 5248

(Address, including zip code, and telephone number, including area code of registrant’s principal executive offices)

 

Martin Ward

34 South Molton Street, London W1K 5RG, United Kingdom

+44(0)20 7409 5248

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

Vincent J. McGill, Esq.

Mandelbaum Salsburg, P.C.

1270 Avenue of the Americas, Suite 1808

New York, New York 10020

Phone: (212) 324.1876

Fax: (973) 325.7467

E-mail: vmcgill@lawfirm.ms

 

Approximate date of commencement of proposed sale to the public: From time-to-time after the effective date of this registration statement.

 

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: ☐

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plants, check the following box: ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

 

 

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐

 

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐

 

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. (Check one):

 

Large accelerated filer ☐
 
Accelerated filer ☐
 
Non-accelerated filer ☐
 
Smaller reporting company ☒
 
 
 
 
 
 
 
 
 
 
 
(Do not check if a 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 Securities Act. ☐

 

CALCULATION OF REGISTRATION FEE
Title of each class of
securities to be registered
  Amount
to be
registered(1)
   Proposed
maximum
offering price
per share(2)
   Proposed
maximum
aggregate
offering price(2)
   Amount of
registration fee(2)
 
Common Stock, par value $0.0001 per share   15,484,039   $0.265   $4,103,270   $497.32 

  

(1)
Pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), this registration statement shall be deemed to cover an indeterminate number of additional securities to be offered as a result of stock splits, stock dividends or similar transactions. The shares may be offered for resale by the selling stockholder pursuant to the prospectus contained herein. 
 
 
(2)
Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(c) under the Securities Act, based on an average of the high and low reported sales prices of the registrant’s shares of common stock, as reported on The NASDAQ Capital Market on October 19, 2018.

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

The information in this prospectus is not complete and may be changed. The selling stockholder may not sell these securities under this prospectus until the registration statement of which it is a part and filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED OCTOBER 24, 2018

 

ONE HORIZON GROUP, INC.

 

15,484,039 Shares of Common Stock

 

This prospectus relates to the resale by Zhanming Wu (the “Selling Stockholder”) of 15,484,039 shares of our common stock (the “Shares”), including 129,630 shares (the “Warrant Shares”) which the Selling Stockholder may acquire upon exercise of warrants (the “Warrants”). See “Selling Stockholder.”

 

The Selling Stockholder may sell the Shares from time-to-time on the principal market on which the stock is traded at the prevailing market price or in negotiated transactions.

 

We will not receive any of the proceeds from the sale of the Shares by the Selling Stockholder; however, we will receive the proceeds from the exercise of the Warrants, unless such exercise is made on a cashless basis. We will pay the expenses of registering the Shares.

 

Investing in our common stock involves a high degree of risk. You should consider carefully the risk factors beginning on page 7 of this prospectus before purchasing any of the shares offered by this prospectus.

 

Our common stock is listed on The NASDAQ Capital Market under the symbol “OHGI.”

 

The last reported closing sale price of our common stock on The NASDAQ Capital Market on October 23, 2018 was $0.262 per share.

 

We may amend or supplement this prospectus from time-to-time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is ____ __, 2018.

 

 

 

TABLE OF CONTENTS

 

 
Page
 
 
3
4
7
12
13
14
15
15
16
16
16

 

This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the common stock offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this prospectus nor any sale made in connection with this prospectus shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this prospectus or that the information contained by reference to this prospectus is correct as of any time after its date.

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus, any free writing prospectus we authorize to be delivered to you in connection with this offering and the documents we have filed with the Securities and Exchange Commission that are incorporated herein by reference include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21B of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

 

Words such as “may,” “should,” “anticipate,” “estimate,” “expect,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. Forward-looking statements represent management’s present judgment regarding future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the 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; the potential delisting of our common stock from The NASDAQ Capital Market; our ability to retain our managerial personnel and to attract additional personnel; competition; our ability to protect intellectual property rights, and any and other factors, including the risk factors identified in the documents we have filed, or will file, with the Securities and Exchange Commission. Please also see the discussion of risks and uncertainties under the caption “Risk Factors,” beginning on page 7 of this prospectus.

 

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this prospectus 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 prospectus or the date of the document incorporated by reference in this prospectus. 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.

 

You should rely only on the information contained in or incorporated by reference in this prospectus and any freewriting prospectus we have authorized to be delivered to you in connection with this offering. We have not authorized anyone to provide you with information that is different. The information contained or incorporated by reference in this prospectus and any free writing prospectus we authorize to be delivered to you in connection with this offering is accurate only as of the respective dates thereof, regardless of the time of delivery of this prospectus or any such free writing prospectus or of any sale of our securities offered hereby. It is important for you to read and consider all information contained in this prospectus and any free writing prospectus we authorize to be delivered to you in connection with this offering, including the documents incorporated by reference therein, in making your investment decision. You should also read and consider the information in the documents to which we have referred you under the captions “Where You Can Find More Information” and “Incorporation of Certain Information by Reference” in this prospectus.

 

Unless we have indicated otherwise, or the context otherwise requires, references in this prospectus supplement and the accompanying prospectus to the “Company,” “One Horizon” “we,” “us” and “our” refer to One Horizon Group, Inc. and its subsidiaries.

 

 

PROSPECTUS SUMMARY

 

This summary highlights selected information contained elsewhere or incorporated by reference in this prospectus. This summary does not contain all the information you should consider before investing in our securities. You should consider all of the information contained in this prospectus, including the factors described under the heading “Risk Factors” on page 7 and the financial and other information incorporated by reference in this prospectus, as well as the information included in any free writing prospectus that we have authorized for use in connection with this offering, before making an investment decision.

 

Overview 

 

We are a holding company which, through our operating subsidiaries, is engaged in the digital media, entertainment and secure messaging businesses, described below.

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

On May 18, 2018, we acquired 51% of the outstanding shares of
Banana Whale Studios Pte. Ltd., a Singapore corporation (“Banana Whale”). In exchange for the interest in Banana Whale, we agreed to issue to its current stockholders the number of shares of our common stock determined by dividing six times the net after tax earnings of Banana Whale during the twenty-four-month period ending May 31, 2020, (the “Measurement Period”) by the average of the closing price of our common stock during the ten trading days immediately preceding the end of the Measurement Period (the “Market Value”). If Banana Whale’s net after tax earnings during the Measurement Period exceeds $5,655,000, we will issue to the stockholders of Banana Whale a number of additional shares of common stock equal to Banana Whale’s net after-tax earnings for the Measurement Period, divided by the Market Value of the common stock; provided, that if Banana Whale’s net after tax earnings during the Measurement Period exceeds $5,655,000 by more than 20%, we will deliver to the stockholders of Banana Whale a number of additional shares of common stock equal to two (2) times Banana Whale’s net after-tax earnings for the Measurement Period, divided by the Market Value of the common stock. To the extent the number of shares which we are obligated to issue to the stockholders of Banana Whale exceeds 7,777,152 shares, representing 19.99% of our outstanding shares of common stock immediately prior to the acquisition (the “Excess Shares”), instead of issuing the Excess Shares to the Banana Whale Stockholders we will pay them an amount in cash for the excess Shares based upon the Market Value.

 

As a condition to closing the acquisition, Banana Whale’s stockholders demanded and we have deposited in escrow for their benefit 7,383,000 shares of our common stock as security for our obligation to issue such shares to which they may become entitled. If the number of shares to which the stockholders of Banana Whale become entitled is less than 7,383,000, the excess shares will be returned to us for cancellation. We also granted Banana Whale the right to use our secure messaging software.

 

Banana Whale is a B2B software provider in the $100+ billion-dollar gaming industry focusing on innovation and next generation games and entertainment. 

 

Recent Developments

 

Acquisition of a Controlling Interest in Browning Productions

& Entertainment, Inc
.

 

On October 22, 2018, we entered into an Exchange Agreement pursuant to which we acquired a majority of the outstanding shares (the “Control Shares”) of Browning Productions

& Entertainment, Inc
., a Florida corporation (“Browning”), from William J. Browning, the sole stockholder of Browning. Browning produces television programs which have aired internationally as well as nationally.

 

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

 

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

 

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

 

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

 

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

 

Settlement of Litigation with Zhanming Wu

 

 

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

 

 

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

 

On October 15, 2018, the parties entered into an agreement (the “Settlement Agreement”) which provides for the immediate cessation of all activities in the two actions and which will result in the dismissal of the two actions upon our fulfillment of certain conditions. Among the obligations which we are required to fulfill to obtain the complete dismissal of the actions are the issuance of 354,409 shares to Mr. Wu to reimburse a portion of the expenses incurred in connection with the actions, the nomination and election to our Board of Directors of up to two individuals designated by Mr. Wu, the redemption of up to approximately 850,000 shares of common stock from certain investors whom Mr. Wu recommended to invest in our company (the “Additional Investors”) should they request that we do so and the facilitation of the sale of shares of our common stock by Mr. Wu, including the registration of such shares for sale under the Securities Act. Pending the re-election of Mr. Wu’s nominees to the Board of Directors at our 2018 Annual Meeting of Stockholders, we will continue to comply with the terms of the Status Quo Order issued in July in connection with the 225 Action.

 

Corporate Information

 

Our principal executive offices are located at 34 South Molton Street, London W1K 5RG, United Kingdom, and our telephone number at that location is +44(0)20 7409 5248. The URL for our website is www.onehorizongroup.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 prospectus.

 

The Offering

 

Shares Offered
 
15,484,039 shares of common stock offered by the Selling Stockholder.
 
 
 
Shares Outstanding
 
67,801,431 shares of common stock.*

 

Use of Proceeds
 

We will not receive any proceeds from the sale of the Shares offered by this prospectus; however, we will receive the proceeds from the exercise of the Warrants, unless such exercise is made on a cashless basis.

 
 
 
Listing
 
Our common stock is listed on The NASDAQ Capital Market under the trading symbol “OHGI.” 
 
 
 
Plan of Distribution
 
The Selling Stockholder may sell the Shares from time-to-time on the principal market on which the stock is traded at the prevailing market price or in negotiated transactions. See “Plan of Distribution.” 
 
 
 
Risk Factors
 
You should carefully read and consider the information set forth or described under “Risk Factors” in this prospectus and all other information contained or incorporated by reference in this prospectus. 

 

 

 
*
Does not include the 129,630 Warrant Shares and an additional 4,736,387 shares which may be acquired upon exercise of other outstanding warrants. 

 

 

RISK FACTORS

 

An investment in our common stock involves a high degree of risk. Before deciding whether to invest in our securities, you should consider carefully the risks described below and all other information in this prospectus and under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on April 2, 2018, which is incorporated by reference in this prospectus, as well as any updates thereto contained in subsequent filings with the SEC, and in any free writing prospectus that we have authorized for use in connection with this offering. If any of these risks actually occur, our business, financial condition and results of operations could be seriously harmed. This could cause the trading price of our common stock to decline, resulting in a loss of all or part of your investment.

 

RISKS ASSOCIATED WITH OUR BUSINESS AND INDUSTRY

 

During 2017, we restructured our business operations and our efforts have been focused recently on acquiring entertainment and gaming properties. We are unlikely to generate significant revenues until we complete such acquisitions and integrate their businesses into our company. The failure to successfully integrate the businesses of these entertainment and gaming properties and establish market acceptance of these entertainment and gaming properties, would significantly harm our business.

 

In August 2017, we sold a portion of our existing business operations. Until recently, we were seeking to acquire businesses in the gaming, security and educational markets. We recently acquired C-Rod, Inc. and a controlling interest in each of Once In A Lifetime LLC and Banana Whale Studios Pte Ltd. We are unlikely to generate significant revenues until we integrate their operations into our company.

 

We expect that these recently acquired entertainment and gaming properties will account for a majority of our revenue for the foreseeable future. Broad market acceptance of these businesses is, therefore, critical to our future success and our ability to continue to generate revenues. Failure to achieve broad market acceptance of these entertainment and gaming properties as a result of competition, technological change, or otherwise, would significantly harm our business. Our future financial performance will depend primarily on the continued market acceptance of our entertainment and gaming properties and on the development, introduction and market acceptance of any future enhancements to those properties. There can be no assurance that we will be successful in marketing our entertainment and gaming properties, and any failure to do so would significantly harm our business.

 

We may be unable to effectively manage our planned expansion.

 

Our planned expansion may strain our financial resources. In addition, any significant growth into new markets may require an expansion of our employee base for managerial, operational, financial, and other purposes. During any growth, we may face problems related to our operational and financial systems and controls. We would also need to continue to expand, train and manage our employee base. Continued future growth will impose significant added responsibilities upon the members of management to identify, recruit, maintain, integrate, and motivate new employees.

 

If we are unable to successfully manage our expansion, we may encounter operational and financial difficulties which would in turn adversely affect our business and financial results.

 

 

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

 

We attempted to estimate 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. 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.

 

We operate in a fast-evolving industry, which may make it difficult to evaluate our business and prospects.

 

We recently acquired C-Rod, Inc. and a controlling interest in Once In A Lifetime LLC and Banana Whale Studios Pte Ltd. Our future success depends in part on our ability to anticipate customer demands, expand and enhance our entertainment and gaming offerings and adapt to technological advances on a timely and cost-effective basis. Further, our entertainment and gaming properties must remain competitive with those of other companies with substantially greater resources. We may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of new entertainment offerings or enhanced versions of existing entertainment and gaming offerings. Also, we may not be able to adapt new or enhanced services to emerging industry standards, and our new entertainment and gaming offerings may not be favorably received. We cannot assure you that we will be profitable every year. We expect that our operating expenses will increase as we expand. Any significant failure to realize anticipated revenue growth could result in operating losses.

 

The activities of 123 Wish are subject to regulation in certain jurisdictions, and the failure to comply with those regulations could result in fines and other penalties.

 

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

 

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

 

While we are organized under the laws of State of Delaware, our management, our officers and directors are non-U.S. residents, and our headquarters are located outside of the United States. Consequently, it may be difficult for investors to effect service of process on such officers and directors in the United States and to enforce in the United States judgments obtained in United States courts against such persons based on the civil liability provisions of the United States securities laws. Since all our assets are located outside of the U.S. it may be difficult or impossible for U.S. investors to collect a judgment against us. As well, any judgment obtained in the United States against us may not be enforceable.

 

 

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

 

We attribute our success to the leadership and contributions of our managing team comprising executive directors and key executives, in particular, to Mark White, our Chief Executive Officer, and Martin Ward, our Chief Financial Officer, and the management of the companies which we acquire.

 

Our continued success is therefore dependent to a large extent on our ability to retain the services of these key management personnel. The loss of their services without timely and qualified replacement, would adversely affect our operations and hence, our revenue and profits.

 

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 lose our competitive advantages if we are not able to protect any proprietary technology and intellectual property rights against infringement, and any related litigation could be time-consuming and costly.

 

Our success and ability to compete depends to a significant degree on our proprietary technology incorporated in our software. If any of our competitors’ copies or otherwise gains access to our proprietary technology or develops similar technologies independently, we would not be able to compete as effectively. The measures we take to protect the proprietary technology software, and other intellectual property rights, which presently are based upon a combination of patents, patents pending, copyright, trade secret and trademark laws, may not be adequate to prevent their unauthorized use. Further, the laws of foreign countries may provide inadequate protection of such intellectual property rights.

 

We may need to bring legal claims to enforce or protect such intellectual property rights. Any litigation, whether successful or unsuccessful, could result in substantial costs and divert resources from intended uses. In addition, notwithstanding any rights we have secured in our intellectual property, other persons may bring claims against us that we have infringed on their intellectual property rights, including claims based upon the content we license from third parties or claims that our intellectual property right interests are not valid. Any claims against us, with or without merit, could be time-consuming and costly to defend or litigate, divert our attention and resources, result in the loss of goodwill associated with our service marks or require us to make changes to our website or other of our technologies.

 

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 secure messaging platform and software application are 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.

 

 

Our strategy with respect to our intellectual property is to patent our core software concepts wherever possible. All of our software is developed “in-house,” and then licensed to our customers. We take steps, including by contracts, to ensure that any changes, modifications or additions to the secure messaging platform requested by our customers remain the sole intellectual property of our company. However, our efforts in this regard may be inadequate to deter misappropriation of our proprietary information or we may be unable to detect unauthorized use and take appropriate steps to enforce our rights. Policing unauthorized use of our intellectual property is difficult and there can be no assurance that the steps taken by us will prevent misappropriation of our intellectual property.

 

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.

 

If we fail to fulfill our obligations under the Settlement Agreement, Mr. Wu has the right to reassert his claims in the actions against us.

 

The Settlement Agreement entered into with respect to the actions commenced by Mr. Wu obligates us to take certain actions as a condition to the dismissal of the actions and the release of all of the rights claimed by Mr. Wu under the agreements he entered with us. In particular, we must issue to Mr. Wu a re-executed copy of the 7% Promissory Note in the principal amount of $500,000 due August 31, 2019, which note already has been delivered; and issue to Mr. Wu 354,409 shares of our common stock in reimbursement of a portion of the expenses incurred in connection with the actions (the “Reimbursement Shares”), which issuance has been effected. In addition, we agreed to nominate and cause the election to our Board of Directors, and the re-election at our 2018 and 2019 Annual Meeting of Stockholders, of up to two individuals designated by Mr. Wu. Upon the re-election of Mr. Wu’s nominees at the 2018 Annual Meeting, the 225 Action will be dismissed. To ensure the election of Mr. Wu’s nominees, each of Mark White and Martin Ward have granted Mr. Wu a proxy entitling him to vote their shares in connection with the election of our directors and matters related thereto.

 

The Settlement Agreement also requires that we redeem at a price of $0.65 per share up to approximately 850,000 shares of common stock from the Additional Investors should they exercise the right we granted them to “put” the shares to us at any time during the period commencing January 1, 2019 and ending December 31, 2020. To the extent we are obligated to redeem any shares from any holder, we may do so by issuing to the holder a promissory note payable in aggregate monthly instalments of $4,000 plus interest accrued at the rate of 6% per annum.

 

In addition, the Settlement Agreement requires that we facilitate the sale of the Shares by Mr. Wu and the approximately 850,000 shares held by the Additional Investors. Such cooperation includes the registration of the Shares for resale under the Securities Act, and the delivery to Mr. Wu and the Additional Investors of un-legended certificates at the time such delivery can be effected in accordance with the Securities Act.

 

Once we have delivered to Mr. Wu the re-executed 7% Promissory Note and the Reimbursement Shares; effected the registration of the Shares for resale by Mr. Wu; caused un-legended certificates to be delivered to Mr. Wu and the Additional Investors; delivered to the Additional Investors which exercise the put rights, a promissory note in redemption of their shares; and delivered to Mr. Wu the proxies of Messrs. White and Ward; and we have appointed and our stockholders have re-elected the two directors designated by Mr. Wu; the parties will exchange releases and a stipulation of dismissal will be filed terminating the initial action commenced by Mr. Wu. Despite the dismissal of the actions commenced by Mr. Wu (if the above conditions are satisfied), the letter agreement with Mr. Wu dated August 2, 2017, pursuant to which Mr. Wu claims certain veto rights with respect to certain actions to be taken by us, and the resignations of Messrs. White and Ward previously delivered to Mr. Wu, will not be deemed void until October 1, 2019, provided that Mr. Wu will not be entitled to seek to enforce the rights evidenced by such instruments, following the satisfaction of the above conditions and dismissal of the first action, unless on or prior to September 30, 2019, any of his shares are registered on a continuously effective registration statement.

 

If we fail to deliver any of the instruments or agreements or take any of the actions described above, Mr. Wu will have the right to reassert his claims in the actions against us.

 

10 

 

RISKS ASSOCIATED WITH OUR COMMON STOCK

 

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, 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.

 

We have identified material weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future. If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.

 

Our management is responsible for establishing and maintaining adequate internal controls over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Though we have substantially improved our corporate governance and internal controls policies, we have identified material weakness in our internal controls with respect to a lack of in-house U.S. GAAP expertise. We will continue to take steps to remediate this material weakness and to improve our control process and procedures with respect to U.S. GAAP expertise and in general as part of our continuing efforts to become compliant with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. However, there is no assurance as to whether and when we will establish effective internal controls over our financial reporting.

 

Our shares of common stock are from time-to-time thinly-traded, so stockholders may be unable to sell at or near ask prices or at all if they need to sell shares to raise money or otherwise desire to liquidate their shares.

 

Our common stock has from time-to-time been “thinly traded,” meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give stockholders any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.

 

11 

 

Our failure to meet the continued listing requirements of the NASDAQ Capital Market could result in a de-listing of our common stock.

 

Our shares of common stock are currently listed on The NASDAQ Capital Market. If we fail to meet the requirements for continued listing on The NASDAQ Capital Market, The NASDAQ Capital Market may take steps to de-list our common stock. Such a de-listing would likely have a negative effect on the price of our common stock and would impair our stockholders’ ability to sell or purchase our common stock when they wish to do so.

 

On May 10, 2018, we received a written alert from NASDAQ Listing Qualifications that our closing bid price for the last 30 consecutive businesses was less than $1 per share. As a result, we are below the continued listing requirement to maintain a minimum bid price of $1 per share as set forth in NASDAQ Listing Rule 5550(a)(2). However, NASDAQ Listing Rule 581(c)(3)(A) provides us a compliance period of 180 calendar days to regain compliance. If at any time during this 180 days period the closing bid price of our common stock is at least $1 for a minimum of ten consecutive business days, we will regain compliance.

 

In the event of a de-listing, we would take actions to restore our compliance with The NASDAQ Capital Market’s listing requirements, but we can provide no assurance that any action taken by us would result in our common stock becoming listed again, or that any such action would stabilize the market price or improve the liquidity 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.

 

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.

 

USE OF PROCEEDS

 

We will not receive any of the proceeds resulting from the sale of common stock by the Selling Stockholder; however, we will receive the proceeds from the exercise of the Warrants, unless such exercise is made on a cashless basis.

 

12 

 

SELLING STOCKHOLDER

 

This prospectus relates to the resale by Zhanming Wu, the Selling Stockholder, of 15,484,039 shares of our common stock, including 129,630 shares which he may acquire upon exercise of the Warrants. Mr. Wu acquired (x) 13,000,000 shares of common stock in November 2017 upon conversion of $3,000,000 principal amount of our 8% Series A Convertible Debentures (the “Debentures”), including accrued but unpaid interest on the entire outstanding principal amount of the Debentures, pursuant to an agreement dated as of September 4, 2017; (y) an additional 2,000,000 shares of common stock in November 2017 from Mark White, our chief executive officer and a director of our company, in connection with Mr. White’s acquisition of 555,555 shares of our Series A-1 Convertible Preferred Stock from the holders thereof; and (z) an additional 354,409 shares of common stock pursuant to the Settlement Agreement in reimbursement for a portion of the expenses he incurred in connection with the lawsuits he filed against the Company and its directors. We agreed to register the Shares pursuant to the Settlement Agreement.

 

The following table sets forth the number of shares of our common stock beneficially owned by the Selling Stockholder before this offering. The number of shares owned are those beneficially owned, as determined under the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares of common stock as to which a person has sole or shared voting power or investment power and any shares of common stock which the person has the right to acquire within 60 days through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement. As of October 17, 2018, we had outstanding 67,801,431 shares of common stock.

 

We have assumed all shares of common stock reflected in the table will be sold from time-to-time in the offering covered by this prospectus. Because the Selling Stockholder may offer all or any portions of the shares of common stock listed in the table below, no estimate can be given as to the amount of those shares of common stock covered by this prospectus that will be held by the Selling Stockholder upon the termination of the offering.

 

Name of Selling Stockholder 
 
Number of
Shares of
Common
Stock
Beneficially
Owned
Before
Offering
 
Number of
Shares of
Common
Stock 
Offered
 

 Percentage
of Common
Stock
Beneficially

Owned Before

Offering

 

Number of
Shares of
Common
Stock 

Owned After
Offering

 

Percentage
of Common
Stock
Beneficially

Owned After
Offering

 
 
 
 
 
 
 
 
 
 
 
 
 
Zhanming Wu
 
15,484,039(1)
 
15,484,039
 
      22.79%
 
0
 
 

 

 

(1)

Includes 129,630 shares which Mr. Wu may acquire upon exercise of the Warrants.

 

The Selling Stockholder is not a broker-dealer or an affiliate of a broker-dealer. Neither the Selling Stockholder nor any of its affiliates has held any position, office or other material relationship with us or with any of our predecessors or affiliates during the last three years.

 

13 

 

PLAN OF DISTRIBUTION

 

The Selling Stockholder and any of its pledgees, assignees and successors-in-interest may, from time-to-time, sell any or all of the Shares on The NASDAQ Capital Market or any other stock exchange, market or trading facility on which our shares of common stock are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Stockholder may use any one or more of the following methods when selling Shares:

 

 
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
 
block trades in which the broker-dealer will attempt to sell the Shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
 
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
 
an exchange distribution in accordance with the rules of the applicable exchange;
 
privately negotiated transactions;
 
settlement of short sales;
 
in transactions through broker-dealers that agree with the Selling Stockholder to sell a specified number of such Shares at a stipulated price per Share;
 
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
 
a combination of any such methods of sale; or
 
any other method permitted pursuant to applicable law.

 

The Selling Stockholders also may sell the Shares under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.

 

Broker-dealers engaged by the Selling Stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholder (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

 

In connection with the sale of the Shares, the Selling Stockholder may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Shares in the course of hedging the positions they assume. The Selling Stockholder also may sell securities short and deliver these securities to close out its short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholder also may enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The Selling Stockholder and any broker-dealers or agents that are involved in selling the Shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the Shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

 

We have agreed to pay certain fees and expenses incurred by us incident to the registration of the Shares.

 

Because the Selling Stockholder may be deemed to be an “underwriter” within the meaning of the Securities Act, it will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder. In addition, any Shares covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. The Selling Stockholder has advised us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the Shares by such Selling Stockholder.

 

14 

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the Shares may not simultaneously engage in market making activities with respect to our common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of our common stock by the Selling Stockholder or any other person. We will make copies of this prospectus available to the Selling Stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act.

 

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

Articles 7 and 8 of our Articles of Incorporation provide as follows:

 

“7.
To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or to its stockholders for monetary damages for any breach of fiduciary duty as a director. No amendment to, modification of or repeal of this paragraph shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.

 

8.
The Corporation shall indemnify, advance expenses, and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a “Covered Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except for claims for indemnification (following the final disposition of such Proceeding) or advancement of expenses not paid in full, the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized in the specific case by the Board of Directors of the Corporation. Any amendment, repeal or modification of this paragraph shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.”

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us pursuant to the foregoing provisions or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

LEGAL MATTERS

 

The validity of the Shares offered by this prospectus will be passed upon for us by Mandelbaum Salsburg P.C., New York, New York.

 

15 

 

EXPERTS

 

The consolidated financial statements of One Horizon Group, Inc. as of and for the years ended December 31, 2017, and 2016, appearing in our Annual Report (Form 10-K) for the year ended December 31, 2017, have been audited by Cherry Bekaert LLP, an independent registered public accounting firm, as set forth in their report thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm, as experts in accounting and auditing.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, in accordance therewith, file annual, quarterly and current reports, proxy statements and other information with the Commission. You may read and copy any reports, statements or other information that we file with the Commission at the Commission’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The Commission maintains an Internet website (http://sec.report) that contains reports, proxy statements and information statements and other information regarding issuers that file electronically with the Commission. Our Commission filings are also available on our Internet website (http://www.one horizoninc.com). The information contained on or connected to our website is not, and you must not consider the information to be, a part of this prospectus supplement.

 

We have filed with the Commission a registration statement on Form S-3 (Registration No. 333-_____), of which this prospectus is a part, under the Securities Act with respect to the securities offered hereby. This prospectus does not contain all of the information set forth in the registration statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information concerning our company and the securities offered hereby, reference is made to the registration statement. Statements contained in this prospectus as to the contents of any contract or other documents are not necessarily complete, and in each instance, reference is made to the copy of such contract or documents filed as exhibits to the registration statement, each such statement being qualified in all respects by such reference.

 

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

 

The SEC allows us to “incorporate by reference” certain of our publicly-filed documents into this prospectus, which means that information included in those documents is considered part of this prospectus. Information that we file with the SEC after the date of this prospectus will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this prospectus and the termination of the offering, and also between the date of the initial registration statement and prior to effectiveness of the registration statement.

 

These documents filed with the SEC are incorporated by reference in this prospectus (other than, in each case, documents or information therein deemed to have been furnished and not filed in accordance with SEC rules):

 

our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on April 2, 2018;
 
 
our Quarterly Report on Form 10-Q for the period ended March 31, 2018 filed with the SEC on May 16, 2018 and our Quarterly Report on Form 10-Q for the period ended June 30, 2018 filed with the SEC on August 17, 2018;

 

our Current Reports on Form 8-K filed with the SEC on April 3, 2018, May 1, 2018 (Form 8-K/A), May 10, 2018; May 15, 2018; May 22, 2018; May 24, 2018, as amended on July 27, 2018 and as further amended on August 2, 2018; June 7, 2018; July 2, 2018; July 10, 2018; August 2, 2018; August 10, 2018;  August 21, 2018; September 21, 2018; September 28, 2018; October 9, 2018; October 17, 2018; October 23, 2018; and October 24, 2018 ; and 

16 

 

the description of our common stock in the Registration Statement on Form 8-A filed with the SEC on July 2, 2014 (File No. 001-36530), including any amendment or report filed for the purpose of updating such description.

 

Any statement contained in a document incorporated or deemed to be incorporated by reference in this prospectus shall be deemed modified, superseded or replaced for purposes of this prospectus to the extent that a statement contained in this prospectus, or in any subsequently filed document that also is deemed to be incorporated by reference in this prospectus, modifies, supersedes or replaces such statement. Any statement so modified, superseded or replaced shall not be deemed, except as so modified, superseded or replaced, to constitute a part of this prospectus. None of the information that we disclose under Item 2.02 or Item 7.01 of any Current Report on Form 8-K or any corresponding information, either furnished under Item 9.01 or included as an exhibit therein, that we may from time-to-time furnish to the SEC will be incorporated by reference into, or otherwise included in, this prospectus, except as otherwise expressly set forth in the relevant document. Subject to the foregoing, all information appearing in this prospectus is qualified in its entirety by the information appearing in the documents incorporated by reference.

 

You may obtain a copy of these filings, without charge, by writing or calling us at:

 

One Horizon Group, Inc. 

34 South Molton Street, London W1K 5RG, United Kingdom 

Attention: Martin Ward 

+44(0)20 7409 5248

 

You should rely only on the information incorporated by reference or provided in this prospectus or any prospectus. We have not authorized anyone else to provide you with different information. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front page of those documents.

 

17 

 

PART II

 

INFORMATION NOT REQUIRED IN THE PROSPECTUS

 

Item 14. Other Expenses of Issuance and Distribution.

 

We will pay all expenses in connection with the registration and sale of the common stock by the Selling Stockholders. The estimated expenses of issuance and distribution are set forth below.

 

SEC filing fee  $497.32 
Legal expenses   5,000.00 
Accounting expenses   2,500.00 
Miscellaneous   502.68 
Total  $8,500.00 

 

Item 15. Indemnification of Directors and Officers.

 

Articles 7 and 8 of our Articles of Incorporation provide as follows:

 

 
“7.
To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or to its stockholders for monetary damages for any breach of fiduciary duty as a director. No amendment to, modification of or repeal of this paragraph nine shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.

 

 
8.
The Corporation shall indemnify, advance expenses, and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a “Covered Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except for claims for indemnification (following the final disposition of such Proceeding) or advancement of expenses not paid in full, the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized in the specific case by the Board of Directors of the Corporation. Any amendment, repeal or modification of this paragraph 10 shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.”

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed hereby in the Securities Act and we will be governed by the final adjudication of such issue.

 

II-1 

 

Item 16. Exhibits.

 

Exhibit No.
 
Description

 

 

 

 

 
 
 

 

Item 17. Undertakings.

 

1. The undersigned registrant hereby undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.

 

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

 

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

 

Provided, however, that paragraphs (1)(i) and (1)(ii) of this section do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement.

 

2. The undersigned registrant hereby undertakes that, for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

3. The undersigned registrant hereby undertakes to remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.

 

4. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

II-2 

 

5. The undersigned registrant hereby undertakes that, for the purposes of determining liability to any purchaser:

 

(i) If the registrant is relying on Rule 430B:

 

(A) For purposes of determining liability under the Securities Act of 1933, each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

 

(B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference in the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or

 

(ii) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

6. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the undersigned registrant according the foregoing provisions, or otherwise, the undersigned registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue.

 

II-3 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing Form S-3 and has duly caused this amendment to this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in London, England, on October 24, 2018.

 

 
ONE HORIZON GROUP, INC.
 
 
 
 
By:
/s/ Mark White
 
 
Mark White
 
 

President and Chief Executive Officer 

(Principal Executive Officer)

 
 
 
 
By:
/s/ Martin Ward
 
 
Martin Ward
 
 
Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)

 

Each person whose signature appears below constitutes and appoints Mark White and Martin Ward, and each of them severally, as his true and lawful attorney in fact and agent, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post effective amendments) to the Registration Statement, and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and all post effective amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, each acting alone, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Act of 1933, this amendment to this registration statement has been signed below by the following persons in the capacities on October 24, 2018.

 

/s/ Mark White
 
Mark White
 

President, Chief Executive Officer and a Director 

(Principal Executive Officer) 

 
 
/s/ Martin Ward
 

Martin Ward 

Chief Financial Officer 

(Principal Financial and Accounting Officer)

 
 
/s/ Richard Vos
 

Richard Vos 

Director

 
 
/s/ Nicholas Carpinello
 

Nicholas Carpinello 

Director

 

/s/ Robert Law
 

Robert Law 

Director

 

II-4 

s113407_ex5-1.htm EXHIBIT 5.1


> ENT> EX-5.1 2 s113407_ex5-1.htm EXHIBIT 5.1

 

Exhibit 5.1

 

 

 Mandelbaum Salsburg P.C. 

 

Vincent J. McGill  

1270 AVENUE OF THE AMERICAS, SUITE 1808 Direct 

Dial: 212 324-1876 
Partner NEW YORK, NEW YORK 10020 E-mail: vmcgill@lawfirm.ms

 

October 24, 2018

 

Board of Directors 

One Horizon Group, Inc. 

34 South Molton Street 

London W1K 5RG, United Kingdom

 

Re: Registration Statement on Form S-3 for Offering of Shares of Common Stock by Selling Stockholder

 

Gentlemen:

 

You have requested our opinion with respect to certain matters in connection with the resale by Zhanming Wu (the “Selling Stockholder”) of 15,484,039 shares (the “Shares”) of the common stock, $0.0001 par value (the “Common Stock”) of One Horizon Group, Inc., a Delaware corporation (the “Company”), including 129,630 shares of Common Stock (the “Warrant Shares”) issuable upon exercise of warrants (the “Warrant”), pursuant to the Registration Statement on Form S-3 of the Company filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”).

 

The Selling Stockholder acquired (x) 3,000,000 shares of Common Stock (the “Conversion Shares”) in November 2017 upon conversion of $3,000,000 principal amount of the Company’s 8% Series A Convertible Debentures (the “Debentures”), including accrued but unpaid interest on the entire outstanding principal amount of the Debentures, pursuant to an agreement dated as of September 4, 2017 (the “Debenture Conversion Agreement”); (y) an additional 2,000,000 shares of Common Stock (the “Transferred Shares”) in November 2017 from Mark White, the Company’s chief executive officer and a director of the Company, pursuant to the terms of a letter dated September 14, 2017 (the “Letter Agreement”), as consideration for the Selling Stockholder’s previous contribution to Mr. White of $250,000 to be used in connection with Mr. White’s purchase of 555,555 shares the Company’s Series A-1 Convertible Preferred Stock from the holders thereof; and (z) an additional 354,409 shares of Common Stock from the Company (the “Reimbursement Shares”) in reimbursement for a portion of the expenses he incurred in connection with the lawsuits he filed against the Company and its directors pursuant to a Settlement Agreement dated October 15, 2018 (the “Settlement Agreement”). The Selling Stockholder acquired the Warrants, together with the Debentures, pursuant to a Securities Purchase Agreement dated as of December 27, 2014 (the “Securities Purchase Agreement”).

 

In connection with this opinion, we have examined and relied upon the Registration Statement, the Company’s Certificate of Incorporation, as amended, the Company’s Bylaws, each as currently in effect, the Securities Purchase Agreement, the Debenture Conversion Agreement, the Letter Agreement, the Settlement Agreement, the Warrants, and the originals, or copies certified to our satisfaction, of such records, documents, certificates, opinions, memoranda and other instruments as in our judgment are necessary or appropriate to enable us to render the opinion expressed below. In rendering this opinion, we have assumed the genuineness and authenticity of all signatures on original documents; the authenticity of all documents submitted to us as originals; the conformity to originals of all documents submitted to us as copies; the accuracy, completeness and authenticity of certificates of public officials; and the due authorization, execution and delivery of all documents where authorization, execution and delivery are prerequisites to the effectiveness of such documents (except we have not assumed due execution and delivery by the Company of any such documents).

 

On the basis of the foregoing and in reliance thereon, we are of the opinion that: 

 

1. The Conversion Shares, the Transferred Shares and the Reimbursement Shares have been validly issued, fully paid and are non-assessable.

 

 

 

 

2.

The Warrant Shares issuable upon exercise of the Warrant, when issued against payment of the exercise price specified in the Warrants, will be, validly issued, fully paid and non-assessable.

 

We are attorneys licensed to practice in the State of New York and are familiar with the General Corporation Law of the State of Delaware (“the “DGCL”). Our opinion is limited to the laws of the State of New York, the DGCL, including the applicable provisions of the Delaware Constitution and reported judicial decisions interpreting the foregoing, New York law and the federal laws of the United States of America to the extent referred to specifically herein. We express no opinion herein as to any other laws, statutes, regulations or ordinances. We have made such inquiries and review of matters of fact and law as we determined necessary to render the opinions contained herein. We assume no obligation to revise or supplement this opinion letter in the event of future changes in such laws or the interpretations thereof or such facts. We express no opinion as to whether the laws of any particular jurisdiction apply and no opinion to the extent that the laws of any jurisdiction other than those identified above are applicable to the subject matter hereof. We are not rendering any opinion as to compliance with any federal or state antifraud law, rule or regulation relating to securities, or to the sale or issuance thereof. 

 

Our opinion expressed herein is as of the date hereof, and we undertake no obligation to advise you of any changes in applicable law or any other matters that may come to our attention after the date hereof that may affect our opinions expressed herein. 

 

We hereby consent to the reference to our firm under the caption “Legal Matters” in the Registration Statement and to the filing of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not thereby admit that we are experts with the meaning of the Securities Act or the rules and regulations of the Commission thereunder.

 

  Very truly,
   
  /s/ Mandelbaum Salsburg P.C.

 

 

s113407_ex10-1.htm EXHIBIT 10.1


> ENT> EX-10.1 3 s113407_ex10-1.htm EXHIBIT 10.1

 

Exhibit 10.1

 

SETTLEMENT AGREEMENT

 

Settlement Agreement dated as of October 15, 2018 (this “Agreement”) by and among Zhanming Wu (“Wu”), having an address c/o Dachao Asset Management (Shanghai) Co., Ltd., No. 868 Puming Road, Bldg No. 5, Room 703, Shanghai, F4 200123, China, One Horizon Group, Inc., a Delaware corporation (the “Company”) having an office at 34 South Molton Street, London W1K 5RG, UK, Mark White, a director, stockholder, President and Chief Executive Officer of the Company, Martin Ward, a director, stockholder and Chief Financial Officer of the Company, Richard Vos, a director of the Company, Nicholas Carpinello, a director of the Company, and Robert Law, a director of the Company. Messrs. White, Ward, Vos, Carpinello and Law are collectively referred to hereinafter as the “Director Defendants.”

 

Wu, the owner of 15,000,000 shares of the Company’s common stock (the “Shares”), and warrants to purchase an additional 129,630 shares of the Company’s common stock (the “Warrant Shares”), has commenced the actions set forth on Exhibit A against the Company and the Director Defendants in the Chancery Court of the State of Delaware (the “Chancery Court”), which actions are currently pending before Vice Chancellor Joseph R. Slights, III, in the Chancery Court (the “Actions”).

 

The parties desire to settle the claims in the Actions without the admission of liability on the part of any party by entering into this Agreement to facilitate the Company’s efforts to raise capital through the issuance of debt and equity securities to enable it to seek to pursue its business objectives.

 

Capitalized terms used in this Agreement that are not otherwise defined in this Agreement shall have the respective meanings assigned to them in the exhibits and appendices attached hereto.

 

NOW THEREFORE, on the stated premises and for and in consideration of the mutual covenants and agreements hereinafter set forth and the mutual benefits to the parties to be derived herefrom, and intending to be legally bound hereby, it is hereby agreed as follows:

 

ARTICLE I

SETTLEMENT OF ACTIONS

 

1.1 Settlement of Actions. Wu and the Company agree to the full and complete settlement of all claims asserted in the Actions in accordance with the terms, subject to the conditions and compliance with the covenants and other agreements, set forth in this Agreement.

 

1.2 Deliveries: (a) Immediately following the appointment by the Company’s Board of Directors of the Designated Directors (as defined herein) in accordance with Section 2.4 of this Agreement, Wu, the Company and the Director Defendants shall enter into a stipulation whereby they shall agree to stay each of the Actions and shall petition the Court of Chancery to grant the stay in each of the Actions. The stipulation shall provide that the Status Quo Order dated July 19, 2018 entered by the Chancery Court in the 225 Action shall remain in effect throughout the stay and until the 225 Action is dismissed without prejudice as provided herein. The agreement to stay each of the Actions is subject to Wu’s absolute, unfettered right to lift the stay in each such Action by notification of his decision thereof to the Chancery Court and to prosecute one or both of the Actions as provided in this Article I.

 

 1

 

(b)       Upon the re-election of the Designated Directors by the Company’s stockholders at the Company’s 2018 annual meeting of stockholders, Wu shall cause his attorneys to file with the Chancery Court a stipulation of dismissal without prejudice with respect to the 225 Action (as defined in Exhibit A). For the avoidance of doubt, nothing in the dismissal without prejudice of the 225 Action shall act as a bar to assertion of the facts, claims or allegations in the Injunction Action (as defined in Exhibit A) and such dismissal shall not constitute waiver, acquiescence, collateral estoppel, res judicata or any other bar to assertion of the claims in the Injunction Action and the raising of any such defense to the Injunction Action shall constitute a breach of this Agreement.

 

(c)        Upon satisfaction of all of the following conditions (the “Dismissal Conditions”) by the Company and the Director Defendants, as applicable, Wu agrees to cause his counsel to file a stipulation of dismissal with prejudice of the Injunction Action (“Dismissal Stipulation”) in the form set forth in Exhibit B:

 

(i) delivery to Wu of the 7% Promissory Note in accordance with Section 1.2(d);

 

(ii) delivery to Wu of the Reimbursement Shares (defined below) in accordance with Section 1.2(d);

 

(iii) registration of all of the Shares, the Reimbursement Shares, and the Warrant Shares pursuant to an effective registration statement under the Securities Act of 1933 (the “Securities Act”);

 

(iv) the removal of the restrictive legend from the Investor Shares and any shares of the Company’s common stock held by Wu, in each case in accordance with Section 2.2;

 

(v) delivery of the Investor Notes to those Investors which exercise the Put Rights contained in Section 2.3;

 

(vi) the Designated Directors have become and are serving as members of the Company’s Board of Directors;

 

(vii) delivery to Wu of the proxies of Messrs. White and Ward in accordance with Section 2.4(c);

 

 2

 

(viii) delivery to Wu of a release executed on behalf of the Company and each of the Director Defendants in favor of Wu in the form of Exhibit C annexed hereto, releasing Wu from and against any and all claims which they may ever have had against him with respect to actions occurring on or prior to the date that the release becomes effective, other than those which they may have as a result of a breach by Wu of this Agreement, provided such release shall become effective only if and when the Dismissal Stipulation in the Injunction Action is filed; and

 

(ix) no breach of any other material provision of this Agreement by the Company or the Director Defendants has occurred and is continuing.

 

Upon satisfaction of the Dismissal Conditions by the Company and the Director Defendants, as applicable, Wu shall also deliver to Mandelbaum Salsburg, P.C., counsel to the Company, for the benefit of the Company and the Director Defendants, a release executed by Wu in favor of the Company and each of Director Defendants in the form of Exhibit D annexed hereto, releasing the Company and each of the other defendants in the Actions from and against any and all claims which Wu may ever have had against them with respect to actions occurring on or prior to the date that the release becomes effective, other than those which Wu may have as a result of a breach by the Company of this Agreement.

 

(d) Concurrently herewith the Company shall deliver to Wu (i) a 7% Promissory Note executed by the Company and payable to Wu in the principal amount of $500,000 due August 31, 2019 in the form of Exhibit E annexed hereto, which the Company was obligated to issue to Wu as part of the consideration for the conversion of the Company’s 8% Series A Convertible Debenture due December 22, 2017 previously held by him pursuant to an Agreement dated September 4, 2017; and (ii) shares of the Company’s common stock in such number as is determined by dividing $100,000 (which amount reflects the Company’s reimbursement of a portion of the legal expenses incurred by Wu in prosecuting the Actions) by the average of the closing prices of the Company’s shares of common stock on The NASDAQ Stock Market during the five consecutive trading days ending on the second day immediately preceding the date of this Agreement (such shares, the “Reimbursement Shares”).

 

1.3       If the re-election of the Designated Directors by the Company’s stockholders does not occur at the Company’s 2018 annual meeting of stockholders or such meeting is not to be held on or before December 27, 2018, Wu shall have the right in his sole discretion to prosecute the 225 Action. In the event the Court of Chancery declines to enter a stay of the 225 Action, or lifts the stay of the 225 Action prior to December 27, 2018 for any reason and the re-election of the Designated Directors by the Company’s stockholders at the Company’s 2018 annual meeting of stockholders not been completed prior thereto, Mr. Wu, at his choice, has the option to prosecute the 225 Action or dismiss the 225 Action without prejudice.

 

 3

 

1.4 If the Dismissal Conditions shall fail to be satisfied at any time on or after March 1, 2019, Wu shall have the right in his sole discretion to prosecute the Injunction Action. In the event the Court of Chancery declines to enter a stay of the Injunction Action, or lifts the stay of the Injunction Action prior to March 1, 2019 for any reason and any of the Dismissal Conditions have not been completed prior thereto, Mr. Wu, at his choice, has the option to prosecute the Injunction Action or dismiss the Injunction Action without prejudice. In addition, if the Company or the Directors Defendants breach Section 1.2(d) or Article II of this Agreement at any time, Wu shall have the right in his sole discretion to prosecute the Injunction Action.

 

ARTICLE II

COVENANTS

 

2.1 Registration. The parties hereby agree to the Registration Rights Terms set forth in Appendix A annexed hereto as if set forth in this Section 2.1.

 

2.2 Removal of Restrictive Legend from Investor Shares. (a) Each of the individuals named on Exhibit F (the “Investors”) acquired the number of shares of common stock of the Company (the “Investor Shares”) set forth opposite his name on such schedule. The Company consents to the removal of the restrictive legend from the certificates representing the Investor Shares pursuant to Rule 144 under the Securities Act and will instruct its counsel to prepare a legal opinion to the Company’s transfer agent in support thereof. Such consent and opinion letter shall be delivered to the Company’s transfer agent (with a copy to Wu) within five days of the date of this Agreement. Provided that an Investor cooperates with the Company’s counsel and executes and delivers such factual certificate as it may reasonably request, if counsel shall fail to deliver its opinion within five days hereof or the Company’s transfer agent shall fail to deliver the Investor Shares without a restrictive or other legend contained thereon within seven days hereof to or for the accounts the Investors, there shall be issued to a cooperating Investor a number of shares of common stock equal to 3.0% of the number of shares attributed to him on Exhibit F for each 20-day period counsel fails to deliver such opinion or the Company’s transfer agent fails to deliver unlegended Investor Shares to an Investor, as appropriate. After the restrictive legend is removed from the certificates representing any Investor Shares, the Company shall not take any action, and shall not cause its counsel or transfer agent to take any action, to affix or re-affix any restrictive legends on, or to place any “stop transfer” order on, such Investor Shares except during any period of time when the Company is not in compliance with its reporting obligations, other than Form 8-K reports, under the Exchange Act.

 

 4

 

(b) Upon any Company registration statement being declared effective by the SEC with respect to the registration of any shares of the Company’s common stock held by Wu, the Company will consent to the removal of the restrictive legend from the certificates representing such registered shares of the Company’s common stock and will instruct its counsel to prepare a legal opinion to the Company’s transfer agent in support thereof. Such consent and opinion letter will be delivered to the Company’s transfer agent (with a copy to Wu) within five days of the effectiveness date of such registration statement. Provided that Wu cooperates with the Company’s counsel and executes and delivers such factual certificate as it may reasonably request, if counsel shall fail to deliver its opinion within five days thereof or the Company’s transfer agent shall fail to deliver such registered shares without a restrictive or other legend contained thereon with seven days thereof to or for the account Wu, there shall be issued to Wu a number of shares of common stock equal to 3.0% of the number of shares covered by such registration statement for each 30-day period counsel fails to deliver such opinion or the Company’s transfer agent fails to deliver unlegended shares to Wu. After the restrictive legend is removed from the certificates representing any of Wu’s shares, the Company shall not take any action, and shall not cause its counsel or transfer agent to take any action, to affix or re-affix any restrictive legends on, or to place any “stop transfer” order on, such shares except during any period of time when (i) the Company is not in compliance with its reporting obligations under the Exchange Act or (ii) a stop order issued by the SEC under Section 8 of the Securities Act remains outstanding with respect to the registration statement under which the Shares, the Reimbursement Shares and the Warrant Shares are registered; provided, however, that the exception set forth in clause (ii) above shall not apply and may not be relied by the Company if the Shares, the Reimbursement Shares and the Warrant Shares can all be sold by Wu without compliance with the volume or manner-of-sale restrictions under Rule 144 under the Securities Act and the Company is in compliance with its reporting obligations under the Exchange Act.

 

2.3 Put Right Granted to Investors. The Company hereby grants to each of the Investors the right to demand that the Company repurchase the Investor Shares owned by him for a purchase price of $0.65 per share at any time commencing January 1, 2019, and ending December 31, 2020, to the extent not previously sold; provided that payment of the purchase price for the Investor Shares shall be made by delivery by the Company of a promissory note in the form of Exhibit G annexed hereto (the “Investor Notes”) to each demanding Investor, which Investor Note shall be payable in aggregate monthly installments of $4,000, together with accrued interest on the unpaid principal amount at the rate of 6% per annum, on the last day of each calendar month commencing the month after the month in which an Investor exercises his put right. The amount of principal payable by the Company to any Investor each month under the Investor Note in connection with the exercise of the put right with respect to less than all of the shares owned by such Investor shall be the product obtained by multiplying $4,000 times a fraction of which the numerator is the number of shares as to which the Investor has exercised his put right and the denominator of which is the number of Investor Shares ascribed to such Investor on Exhibit F.

 

 5

 

2.4 Director Designees. (a) From and after the date hereof through and including the earlier of (i) the date as of which the number of Shares of Common Stock beneficially owned by Wu shall be less than four million five hundred thousand (4,500,000) shares and shall represent less than ten percent (10%) of the number of shares of common stock then outstanding and (ii) December 31, 2020, but in no event prior to the Company’s 2019 annual meeting of the stockholders (the earlier of such dates being the “Expiration Date”), Wu shall have the right to designate two members for appointment and election, as applicable, to the Company’s Board of Directors. Within five days of the date hereof, the Company, and the Company’s Board of Directors or committee thereof, as applicable, shall increase the authorized number of directors on the Company’s Board of Directors by two directorships, providing for a total of seven (7) directors, and shall fill the two vacancies created by such newly created directorships by appointing the two (2) individuals designated in writing by Wu from time to time (the “Designated Directors”), as directors of the Company to serve until the next annual meeting to elect the Company’s directors following the date of their appointment and until their successors are duly elected and qualified; provided that prior to such appointment each individual designated to become a director (y) provides the Company with an appropriate biography for inclusion in reports filed by the Company with the SEC and (z) consents in writing to be named as a director of the Company. If Wu shall decline to name one or both of his designees at this time, he shall be permitted to do so at any time prior to the Expiration Date. Further, if for any reason one or both of Wu’s designees shall be unwilling or unable to serve as a director, Wu may designate a substitute in his sole discretion and without any input from the Company with respect thereto. For purposes hereof, a substitute is deemed a “Designated Director.” At each annual or special meeting of the Company’s stockholders, or action by written consent, to elect the Company’s directors following the date of the Designated Directors’ appointment and to and including the Expiration Date, the Company, and the Company’s Board of Directors or committee thereof, as applicable, shall (i) nominate for re-election by the Company’s stockholders at each such annual or special meeting, or action by written consent, each of the Designated Directors to serve until the next annual meeting to elect the Company’s directors following each such election and until their successors are duly elected and qualified and (ii) recommend the election of each such Designated Director in any proxy statement or similar recommendation delivered or conveyed to the Company’s stockholders in connection with each such annual or special meeting, or action by written consent, to elect directors. In addition to the foregoing, the Company, and the Company’s Board of Directors or committee thereof, as applicable, agree to cause the nomination and election of the Designated Directors as provided in this Agreement and appoint the Designated Directors to each existing or future committee of the Company’s Board of Directors, including the compensation committee and the nominating and corporate governance committee, provided that the Director Nominees need not be members of the audit committee, and for the avoidance of doubt and in furtherance of the foregoing, the Company and the Company’s Board of Directors or committee thereof, as applicable, agree not to recommend to the Company’s stockholders for election, and not to take any other action in furtherance of the election of, in each case, any other directors to the extent the nomination and election of such other directors would cause the Designated Directors not to be nominated and elected as provided in this Agreement.

 

 6

 

(b)       Each of Messrs. White and Ward agrees, from and after the date hereof through and including the Expiration Date, to vote, or cause to be voted, all shares of the Company’s common stock owned by them, or over which they have voting control, from time to time, in whatever manner as shall be necessary to ensure that at each annual or special meeting of stockholders at which an election of directors is held, and at every adjournment or postponement thereof, or pursuant to any written consent of the stockholders, that the Designated Directors shall be elected to the Board of Directors. Each of Messrs. White and Ward also agrees, from and after the date hereof through and including the Expiration Date, to vote, or cause to be voted, all shares of the Company’s common stock owned by such stockholder, or over which such stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that no Designated Director is removed from office as a member of the Board of Directors prior to the first anniversary of the Expiration Date. Each of Messrs. White and Ward agrees to execute any written consents required to perform his obligations under this Agreement.

 

(c) Each of Messrs. White and Ward hereby appoints Wu and any designee of Wu, and each of them individually, from the date hereof until the Expiration Date (at which time this proxy shall automatically be revoked), his proxies and attorneys-in-fact, with full power of substitution and resubstitution, to vote or act by written consent with respect to the shares of the Company’s common stock beneficially owned by White or Ward, as applicable, with respect to the election and/or removal of the Company’s directors. Wu agrees to exercise such proxy and vote such shares of Messrs. White and Ward in accordance with the recommendations of management of the Company in any proxy statement or similar recommendation delivered or conveyed to the Company’s stockholders to the extent such recommendation is not otherwise inconsistent with this Section 2.4. This proxy and power of attorney is given to secure the performance of the duties of each of Messrs. White and Ward under this Agreement. Each of Messrs. White and Ward shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy. This proxy and power of attorney granted by each of Messrs. White and Ward shall be irrevocable from and after the date hereof through and including the Expiration Date, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy, and shall revoke any and all prior proxies granted by each of Messrs. White and Ward with respect to the shares of the Company’s common stock owned by White or Ward, as applicable. The power of attorney granted by each of Messrs. White and Ward herein is a durable power of attorney and shall survive the bankruptcy, death, or incapacity of such stockholder. The proxy and power of attorney granted hereunder shall terminate on the Expiration Date.

 

(d) Each of Messrs. White and Ward represents to Wu that he owns the number of shares of common stock of the Company set forth opposite his name on Exhibit H hereto and agrees not to dispose of, assign, pledge, sell or otherwise transfer such shares of common stock prior to the Expiration Date.

 

(e) The Company agrees to provide the same compensation, directors’ and officers’ liability insurance coverage, indemnification rights, advancement rights, and other benefits (e.g., reimbursement of reasonable travel expenses to attend meetings of the Company’s Board of Directors and committees thereof) to the Designated Directors that it provides to the other non-management directors on the Company’s Board of Directors.

 

 7

 

2.5 Suspension and Termination of Certain Agreements. Upon and from the filing of the Dismissal Stipulation in the Injunction Action until September 30, 2019 (the “Side Letter Suspension Period”), Wu will not enforce his rights under (i) the “Side Letter” dated August 2, 2017, (ii) the Agreement dated September 4, 2017 (as such terms are defined in Defendants Reply Brief In Support Of Defendants’ Motion to Dismiss dated August 10, 2018), or (iii) the resignations of Mark White and Martin Ward previously delivered to Wu (such agreements in clauses (i) through (iii), collectively, the “Side Letters”); provided however, that if any of Wu’s unsold Shares, unsold Reimbursement Shares, or unsold Warrant Shares shall cease to be registered on a continuously current effective registration statement under the Securities Act at any time during the Side Letter Suspension Period, then Wu shall immediately upon the cessation of the effectiveness of such registration statement or the failure of the Company to keep such registration statement current be entitled to enforce his rights under the Side Letters (and the terms in such Side Letters shall become and be deemed to be a part of this Agreement as if set forth in this Section 2.5 and whether or not the Side Letters otherwise would have been or would be or remain enforceable as standalone agreements at such time). If the Dismissal Stipulation has been filed in the Injunction Action and the proviso set forth in the immediately preceding sentence has not previously been triggered, then on and after October 1, 2019, the Side Letters, and the terms in the Side Letters, shall be deemed void and of no further force and effect. Notwithstanding the foregoing, the Side Letters shall be deemed void and of no further force and effect on the date that Wu no longer beneficially owns any securities or other investments in the Company.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to Wu as follows:

 

3.1. Organization, Good Standing, Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.

 

3.2. Authorization. The Company possesses the legal right and capacity to execute, deliver and perform this Agreement, without obtaining any approval, authorization, consent or waiver or giving any notice except for such filings as may be required to be made with NASDAQ as a result of the issuance of any shares provided for hereunder and such filings as are required by the Exchange Act. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, receivership, fraudulent conveyance or similar laws affecting or relating to the enforcement of creditors’ rights generally, and by equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

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3.3. Conflicts; Defaults. The execution and delivery of this Agreement by the Company does not, and the performance by the Company of its obligations hereunder will not: (i) violate, conflict with, or constitute a breach or default under any of the terms of its certificate of incorporation or bylaws; (ii) require any authorization, approval, consent, registration, declaration or filing with, from or to any governmental authority; (iii) violate any law, statute, judgment, decree, injunction, order, writ, rule or regulation applicable to the Company, including without limitation, the rules of The NASDAQ Stock Market applicable to the Company; or (iv) with or without the giving of notice and the lapse of time, or both, violate or constitute a breach of any material agreement to which the Company is a party.

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF WU

 

Wu hereby represents and warrants to the Company as follows:

 

4.1. Due Execution and Delivery. This Agreement has been duly executed and delivered by Wu and constitutes the valid, legal and binding obligation of Wu, enforceable against Wu in accordance with its respective terms, except to the extent such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, receivership, fraudulent conveyance or similar laws affecting or relating to the enforcement of creditors’ rights generally, and by equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

4.2. Conflicts; Defaults. The execution and delivery of this Agreement by Wu does not, and the performance by Wu of his obligations hereunder, will not: (i) require any authorization, approval, consent, registration, declaration or filing with, from or to any governmental authority; (ii) violate any law, statute, judgment, decree, injunction, order, writ, rule or regulation applicable to Wu; or (iii) with or without the giving of notice and the lapse of time, or both, violate or constitute a breach of any material agreement to which Wu is a party.

 

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF DIRECTOR DEFENDANTS

 

Each of the Defendant Directors severally but not jointly hereby represents and warrants to Wu as follows:

 

5.1. Due Execution and Delivery. This Agreement has been duly executed and delivered by him and constitutes his valid, legal and binding obligation, enforceable against him in accordance with its respective terms, except to the extent such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, receivership, fraudulent conveyance or similar laws affecting or relating to the enforcement of creditors’ rights generally, and by equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

5.2. Conflicts; Defaults. The execution and delivery of this Agreement by each of the Director Defendants does not, and the performance by each of them of their obligations hereunder, will not: (i) require any authorization, approval, consent, registration, declaration or filing with, from or to any governmental authority; (ii) violate any law, statute, judgment, decree, injunction, order, writ, rule or regulation applicable to them; or (iii) with or without the giving of notice and the lapse of time, or both, violate or constitute a breach of any material agreement to which they are a party.

 

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ARTICLE 6

MISCELLANEOUS

 

6.1. Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements, statements, representations or promises, oral and written, among the parties hereto with respect to the subject matter hereof. No party hereto shall be bound by or charged with any written or oral arguments, representations, warranties, statements, promises or understandings not specifically set forth in this Agreement.

 

6.2. Amendments. This Agreement may not be amended without the written consent of the parties to this Agreement.

 

6.3. Governing Law.  This Agreement shall be governed by, enforced, and construed under and in accordance with the laws of Delaware, without giving effect to principles of conflicts of law thereunder. Venue for all matters shall be in Wilmington, Delaware. Each of the parties (a) irrevocably consents and agrees that any legal or equitable action or proceedings arising under or in connection with this Agreement shall be brought exclusively in the Court of Chancery of the State of Delaware. By execution and delivery of this Agreement, each party hereto irrevocably submits to and accepts, with respect to any such action or proceeding, generally and unconditionally, the jurisdiction of the aforesaid court, and irrevocably waives any and all rights such party may now or hereafter have to object to such jurisdiction.

 

6.4 Notices.  Any notice or other communications required or permitted hereunder shall be in writing and shall be sufficiently given if personally delivered or sent by overnight courier or registered mail or certified mail, postage prepaid, or electronic mail with a follow up copy by overnight courier, addressed as follows:

 

If to Wu:

 

Zhanming Wu

Address: c/o Dachao Asset Management (Shanghai) Co., Ltd.

No. 868 Puming Road, Bldg No. 5, Room 703

Shanghai, F4 200123, China

 

If to the Company and the Director Defendants:

 

One Horizon Group, Inc.

34 South Molton Street

London W1K 5RG, United Kingdom

Attn: Mark White, Chief Executive Officer

 

with a copy (which shall not constitute notice) by electronic mail to:

 

Mandelbaum Salsburg P.C.

1270 Avenue of the Americas, Suite 1808

New York, NY 10020

Attention: Vincent J. McGill, Esq.

E-mail: vmcgill@lawfirm.ms

 

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or such other addresses as shall be furnished in writing by any party in the manner for giving notices hereunder, and any such notice or communication shall be deemed to have been given (i) upon receipt, if personally delivered, (ii) on the second (2nd) day after dispatch, if sent by overnight courier, and (iii) three (3) days after mailing, if sent by registered or certified mail.

 

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

 

6.6 No Third Party Beneficiaries. This Agreement is strictly between Wu, the Company and the Director Defendants, and, except as specifically contemplated by this Agreement including the exhibits hereto, no other person other than the Investors shall be deemed to be a third party beneficiary of this Agreement.

 

6.7 Expenses. Each of Wu, on the one hand, and the Company and the Director Defendants, on the other hand, will bear their own respective expenses, including legal fees, incurred in connection with this Agreement.

 

6.8. Waivers. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein or in any other documents. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

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

 

6.10 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall be but a single instrument.

 

6.11. Specific Enforcement. Each party acknowledges and agrees that each party hereto will be irreparably damaged in the event any of the provisions of this Agreement are not performed by the parties in accordance with their specific terms or are otherwise breached. Accordingly, it is agreed that each of the parties shall be entitled to seek an injunction to prevent breaches of this Agreement, and to seek specific enforcement of this Agreement and its terms and provisions.

 

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6.12 Equitable Adjustment. All references herein to numbers of shares and price per share shall be appropriately adjusted in the event of any split or reverse split of the Common Stock of the Company.

 

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute and deliver this Agreement as of the first date written above.

 

COMPANY: WU:  
     
One Horizon Group, Inc. /s/ Zhanming Wu  
  Zhanming Wu  

By: /s/ Mark White  
  Name: Mark White  
  Title: President and Chief Executive Officer  

 

DIRECTOR DEFENDANTS:

/s/ Mark White   /s/ Martin Ward  
Mark White   Martin Ward  
/s/ Richard Vos   /s/ Nicholas Carpinello  
Richard Vos   Nicholas Carpinello  
/s/ Robert Law      
Robert Law      

 

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Appendix A

 

REGISTRATION RIGHTS TERMS

 

1. Capitalized terms used without definition in this Appendix A shall have the meanings assigned to them below or otherwise defined in the Agreement to which this Appendix A is attached: 

 

Damages” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company filed pursuant hereto, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law based upon, or arising out of, any of such party’s obligations arising hereunder.

 

Effectiveness Date” means the sixtieth day after the Filing Date.

 

Exchange Act” means the Securities Exchange Act of 1934, as amended from time-to-time, and the rules and regulations promulgated thereunder.

 

Filing Date” means the date upon which the Registration Statement is filed with the SEC, which in no event shall be later than the Shelf Registration Statement Filing Date or the Additional Registration Statement Filing Date, as applicable.

 

Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

Registrable Securities” means the Shares, Warrant Shares, the Reimbursement Shares, and or other securities issued upon conversion or exchange or otherwise in respect thereof, including without limitation pursuant to any stock dividend, stock split, merger, consolidation or other recapitalization transaction.

 

Rule 144” means Rule 144 as promulgated by the SEC under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the SEC.

 

 “Rule 415” means Rule 415 as promulgated by the SEC under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the SEC.

 

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 “SEC” means the Securities and Exchange Commission.

 

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

 

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

 

Settlement Date” means October 15, 2018.

 

2. (a) Not later than ten (10) days after the Settlement Date (such date, the “Shelf Registration Statement Filing Date”), the Company will file a registration statement on Form S-3 under the Securities Act for the resale by Wu of the Registrable Securities for an offering to be made on a delayed or continuous basis pursuant to Rule 415 (the “Shelf Registration Statement”).  The Company shall use its reasonable commercial efforts to have the Shelf Registration Statement declared effective by the SEC as soon as practicable and, in any event, by the Effectiveness Date.  The Company shall keep the registration statement continuously effective and current under the Securities Act until all Registrable Securities covered by such registration statement have been sold, or may be sold without the volume or manner-of-sale restrictions and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144(c)(1), as determined by the counsel to the Company and set forth in a written opinion letter by the counsel to the Company to such effect, addressed, delivered and reasonably acceptable to the applicable transfer agent and the holders of such securities (the “Effectiveness Period”). Notwithstanding anything to the contrary set forth in this Section 2, in the event the SEC does not permit the Company to register all of the Registrable Securities in the initial Shelf Registration Statement referenced in this Section 2(a) because of the SEC’s interpretation of Rule 415 (a “415 Notice”) or otherwise, the Company shall promptly provide Wu with the written correspondence in which such objection is made by the SEC and work with counsel to Wu to prepare a written response thereto that is mutually acceptable to Wu and the Company. If the SEC continues to object to the Company’s use of the Shelf Registration Statement to register all of the Registrable Securities thereunder (the “Final Objection”), then the Company, within five (5) days thereafter, shall register in the initial Shelf Registration Statement referenced in this Section 2(a) the maximum number of Registrable Securities as is permitted by the SEC.

 

(b)       In the event the SEC does not permit the Company to register all of the Registrable Securities in the initial Shelf Registration Statement, the Company shall file subsequent registration statements to register the Registrable Securities that were not registered in the initial Shelf Registration Statement as promptly as practicable and in a manner permitted by the SEC and, in any event, not later than twenty (20) days after the Final Objection (such date, the “Additional Registration Statement Filing Date”). The Company shall use its reasonable commercial efforts to have the registration statement declared effective by the SEC as soon as practicable and, in any event, by the Effectiveness Date. The Company shall keep the registration statement continuously effective and current under the Securities Act during the Effectiveness Period.

 

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(c)       The Company shall prepare and file with the SEC such amendments (including, without limitation, post-effective amendments) and supplements to each registration statement and the prospectus used in connection with each such registration statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep each such registration statement effective at all times during the Effectiveness Period for such registration statement, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company required to be covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition set forth in such registration statement.

 

3. As a condition the Company’s obligation to file the Registration Statement, Wu shall furnish such information regarding himself, the Registrable Securities held by him, and the intended method of disposition of such Registrable Securities as is reasonably required to effect the registration of the Registrable Securities.  

 

4. Whenever required under Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

(a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities, use its commercially reasonable efforts to cause such registration statement to become effective and take all actions necessary in order to keep such registration statement effective and current during the Effectiveness Period;

 

(b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement;

 

(c) Furnish to Wu such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by him (provided that the Company would not be required to print such prospectuses if readily available to Wu from any electronic service, such as on the EDGAR filing database maintained at sec.report);

 

(d) Use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by Wu; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

 

A-3

 

(e) Promptly notify Wu at any time when a prospectus relating thereto is required to be delivered under the Securities Act, within one business day (i) of the effectiveness of such registration statement, or (ii) of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and promptly prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; and

 

(f) Cause all such Registrable Securities registered pursuant hereto to be listed on The Nasdaq Capital Market or nationally recognized quotation system on which similar securities issued by the Company are then listed.

 

5. If any registration statement is not declared effective by the SEC (or otherwise does not become effective) on or prior to its Effectiveness Date (any such failure or breach being referred to as an “Event,” and the date on which such Event occurs being referred to as the “Event Date”), provided that Wu has cooperated in the preparation of such registration statement as set forth in Section 3, then in addition to any other rights available to Wu, for each thirty (30) day period following the Event Date until the applicable Event is cured, the Company shall issue to Wu, as liquidated damages, and not as a penalty, a number of additional shares of Common Stock equal to 3% of the aggregate number of shares of Common Stock included in the Registrable Securities that remain unsold and are not registered on an effective registration statement. Partial liquidated damages pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a thirty (30) day period prior to the cure of an Event. Notwithstanding the foregoing, the maximum issuance to Wu associated with all Events in the aggregate shall not exceed 15.0% of the aggregate number of shares of Common Stock included in the Registrable Securities.

 

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

 

7.  With a view to making available the benefits of certain rules and regulations of the SEC, including Rule 144, that may at any time permit Wu to sell securities of the Company to the public without registration or pursuant to a registration on Form S-1 or Form S-3, until such time as the Registrable Securities may be sold without the volume or manner-of-sale restrictions and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144(c)(1), the Company agrees to:

 

(a) make and keep public information available, as those terms are understood and defined in Rule 144;

 

A-4

 

(b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

 

(c) furnish to Wu forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144 the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing Wu of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to such form.

 

8. (a) To the extent permitted by law, the Company will indemnify and hold harmless Wu, against any Damages, and the Company will pay to Wu any legal fees and other expenses reasonably incurred by him in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that such indemnity shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they are caused by untrue statements or omissions made in reliance upon and in conformity with written information furnished by or on behalf of Wu, expressly for use in connection with such registration.

 

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

 

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

 

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

 

(e) The obligations of the Company and Wu under this Appendix shall survive the completion of any offering of the Registrable Securities in a registration under this Appendix, and otherwise shall survive the termination of this Agreement.

 

A-6

s113407_ex23-1.htm EXHIBIT 23.1


> ENT> EX-23.1 4 s113407_ex23-1.htm EXHIBIT 23.1

 

Exhibit 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We consent to the incorporation by reference in this Registration Statement on Form S-3 of One Horizon Group, Inc. (the “Company”) of our report dated April 2, 2018 related to the consolidated financial statements of the Company as of and for the years ended December 31, 2017 and 2016 which is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, and to the reference to us under the heading “Experts” in this Registration Statement.

 

/s/ Cherry Bekaert LLP   

Tampa, Florida

 

Dated: October 24, 2018

 

 

Additional Files
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0001615774-18-011294.txt   Complete submission text file   359001
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