TOUCHPOINT GROUP HOLDINGS, INC. The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our unaudited condensed consolidated financial statements for the three and nine months endedSeptember 30, 2022 and 2021 and notes thereto contained elsewhere in this Report, and our annual report on Form 10-K for the twelve months endedDecember 31, 2021 including the consolidated financial statements and notes thereto. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. See "Cautionary Note Concerning Forward-Looking Statements." Overview We are a holding company which, through our operating subsidiaries, is engaged in media and digital technology, primarily in sports entertainment and related technologies that bring fans closer to athletes and celebrities.
Current Structure of the Company
The Company has the following subsidiaries:
SubsidiaryName % Owned ? 123Wish, Inc. (considered dormant) 51 %
?
100 %
?
100 %
? AR Management GmbH (discontinued operations) 100 %
In addition to the subsidiaries listed above, Suzhou Aishuo Network Information
Co., Ltd ("Suzhou Aishuo") is a limited liability company, organized in China
and controlled by us via various contractual arrangements. Suzhou Aishuo is
treated as one of our subsidiaries for financial reporting purposes in
accordance with generally accepted accounting principles in the United States
("GAAP").
Summary Description of Core Business
We are a software developer which supplies a robust fan engagement platform designed to enhance the fan experience and drive commercial aspects of the sport and entertainment business.
We bring users closer to the action by enabling them to engage with clubs, favorite players, peers and relevant brands through features, available through the Touchpoint APP and program, that include live streaming, access to limited edition merchandise, gamification (chance to win unique one-off life experiences), user rewards, third party branded offers, credit cards and associated benefits.
We are based in
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Business update
The Company CEO, Mr. White stated, "We continue to make significant progress
advancing our next generation fan engagement platform. Specifically, we are now
working with numerous fitness brands, celebrities and influencers. The customer
response has been overwhelmingly positive, as our platform is specifically
designed to bring fans closer to celebrities by providing access to proprietary
content, livestream events, as well as exclusive merchandise. To further
enhance the platform and add new revenue streams, we are working towards
integrating new blockchain machine learning capabilities designed for intuitive
analytic feedback, thereby allowing for the creation of highly optimized content
strategies both inside the Touchpoint platform and on social media."
In 2021 and building on our core expertise in fan engagement, we announced last
year the acquisition of Air Race World Championship (Air Race), a race format
developed by Red Bull as the Red Bull Air Race . Since that time, we had been
successful in signing some host-city agreements. Due to the current global
financial and logistical conditions we have made the difficult decision to cease
all activity in Air Race and designate it as discontinued operation. The
management team failed to secure funds from contracted host cities that had
committed to hold Air Race world championship events.
We continue to develop our core software business and are seeking new licensees
for our Touchpoint Connect platform. In addition, we are exploring additional
related applications that we anticipate will add revenue and value to our
business.
For more information, see http://touchpointgh.com/
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Results of Operations
Comparison of three months ended
The following table sets forth key components of our results of operations for the periods.
(All amounts, other than percentages, in thousands of U.S. dollars)
Three Months Ended
September 30, Change
Increase/ Percentage
2022 2021 (decrease) Change
(unaudited)
Revenue $ 2 $ 24 $ (22 ) (92.0 )
Cost of revenue 31 138 (107 ) (77.5 )
Gross deficit (29 ) (114 ) (75 ) (74.6 )
Operating expenses:
General and administrative 387 490 (103 ) (21.0 )
Total operating expenses 387 490 (103 ) (21.0 )
Loss from operations (416 ) (604 ) (188 ) (31.1 )
Other expense (551 ) (87 ) 464 533.3Loss from continuing operations (967 ) (691 ) 276 39.9 Loss from discontinued operations (1,600 ) - (1,600 ) N/A Total net loss attributable to Touchpoint Group Holdings, Inc.$ (2,567 ) $ (691 ) $
276 39.9
17
Revenue: Our revenue for the three months ended September 30, 2022 , decreased
by approximately $22,000 over the same period in 2021. The increase was a result
of an decrease in sales of software licenses during the three months ended
September 30, 2022 .
Gross Deficit: Gross deficit for the three months ended September 30, 2022 , was
approximately $29,000 as compared to a deficit of $114,000 for the three months
ended September 30, 2021 , due primarily to the decrease in the amortizationof software. Operating Expenses: Operating expenses incurred during the three months endedSeptember 30, 2022 , were approximately$387,000 , a decrease of approximately$103,000 when compared to the approximate figure of$490,000 incurred in the three months endedSeptember 30, 2021 .
Net Loss: Net loss from continuing operations for the three months ended
Comparison of nine months ended
The following table sets forth key components of our results of operations for the periods indicated.
(All amounts, other than percentages, in thousands of U.S. dollars)
Nine Months Ended
September 30, Change
Increase/ Percentage
2022 2021 (decrease) Change
Revenue $ 33 $ 90 $ (57 ) (63.3 )
Cost of revenue 93 417 (324 ) (77.7 )
Gross deficit (60 ) (327 ) (267 ) (81.7 )
Operating expenses:
General and administrative 1,466 2,222 (756 ) (34.0 )
Total operating expenses 1,466 2,222 (756 ) (34.0 )
Loss from operations (1,526 ) (2,549 ) (1,023 ) (40.1 )
Other expense (1,490 ) (564 ) 926 164.2Loss from continuing operations (3,016 ) (3,113 ) (97 ) (3.1 ) Loss from discontinued operations (2,070 ) - (2,070 ) N/A Total net loss attributable to Touchpoint Group Holdings, Inc. (5,086 ) (3,113 )
2,167 69.6 Revenue: Our revenue for the nine months endedSeptember 30, 2022 , was approximately$33,000 as compared to approximately$90,000 for the nine months endedSeptember 30, 2021 , a decrease of approximately$57,000 . The decrease was due to the decrease in license sales in the second quarter. Cost of Revenue: Cost of revenue was approximately$93,000 for the nine months endingSeptember 30, 2022 , as compared to$417,000 for the nine months endedSeptember 30, 2021 , a decrease of$324,000 . 18
Gross Deficit: Gross deficit for the nine months endedSeptember 30, 2022 , was approximately$60,000 as compared to a gross deficit of$327,000 for the nine months endedSeptember 30, 2021 , a decrease in the deficit of approximately$267,000 . The decrease was mainly due to the reduction in the amortization costs related to application software. Operating Expenses: Operating expenses, including general and administrative expenses, depreciation and acquisition costs for the nine months endedSeptember 30, 2022 , were approximately$1,466,000 representing an decrease of approximately$756 ,000over the charge for the same period of approximately$2,222,000 in 2021. The increase was mainly due to the charge for the issuance of warrants.
Net Loss: Net loss for continuing operations for the nine months ended
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Liquidity and Capital Resources
Nine Months Ended
The following table sets forth a summary of our net cash flows for the periods
indicated:
For the Nine Months
Ended
September 30
(in thousands)
2022 2021
Net cash flows from operations (1,179 ) (1,043 )
Net cash flows from investing activities (201 ) (78 ) Net cash flows from financing activities 1,261 1,029
Net cash used by operating activities of continuing operations increased to
Net cash used from investing activities was approximately$201,000 in the nine months endedSeptember 30, 2022 , as compared to net cash used of$78,000 in
the comparative period in 2021.
Net cash generated in financing activities was approximately$1,261,000 for the nine months endedSeptember 30, 2022 , as compared to$1,029,000 for the nine months endedSeptember 30, 2021 . The cash generated from financing activities in the nine months endedSeptember 30, 2022 , was primarily from convertible loans raised from US funds, less repayment of a loan raised in 2021.
At
Critical Accounting Policies Our discussion and analysis of our financial condition and results of operations are based upon our unaudited consolidated financial statements, which have been prepared in accordance with GAAP. Our significant accounting policies are described in notes accompanying the unaudited consolidated financial statements. The preparation of the unaudited consolidated financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. Estimates are based on information available as of the date of the unaudited financial statements, and accordingly, actual results in future periods could differ from these estimates. Significant judgments and estimates used in the preparation of the unaudited consolidated financial statements apply significant accounting policies described in the notes to our consolidated financial statements. We consider our recognition of revenues, accounting for the consolidation of operations, accounting for intangible assets and related impairment analyses, the allowance for doubtful accounts and accounting for equity transactions, to be most critical in understanding the judgments that are involved in the preparation of our unaudited consolidated financial statements.
Recent Accounting Pronouncements
See Note 2 to our unaudited condensed financial statements, included in Part I, Item 1., Financial Information of this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
As ofSeptember 30, 2022 , we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support
for
such assets.
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