Legal proceedings

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Legal proceedings

Note 10. Legal proceedings

On May 30, 2018, Zhanming Wu (“Wu”), the record owner of 15,000,000 shares of common stock of One Horizon Group, Inc. (the “Company”), commenced an action in the Court of Chancery of the State of Delaware [Case No.2018-0387-JRS] against the Company and its directors and officers (collectively, the “Director Defendants”):

(i) alleging Breach of Contract on the basis that Wu believes that pursuant to an ‘Approval Right Side Letter’ between Dachao Asset Management (Shanghai) Co., Ltd. (“Dachao”) and the Company and Wu’s agreement not to demand repayment of a Convertible Debenture in place on or prior to October 1, 2017, Wu would have the right to pre-approve certain actions to be taken by the Company for so long as Dachao beneficially owned more than thirty percent (30%) of the outstanding shares of the Company; (ii) seeking Specific Performance and/or Rescission against the Company to affirm his alleged right to compel the Company to submit the recent acquisition of fifty-one percent (51%) of Banana Whale Studios Pte. Ltd. (“Banana Whale”) and the related stock issuance to him for approval or an order rescinding the Banana Whale transaction and awarding him damages;

(ii) seeking Promissory Estoppel against the Company with respect to the Approval Right Side Letter in so far as Wu alleges that he relied on purported promises of the Company that such Letter and related agreements would be retitled in the name of Wu rather than Dachao in exchange for Dachao’s agreement not to demand repayment of the Convertible Debenture on or prior to October 1, 2017;

(iii) alleging Breach of Contract and seeking Specific Performance against the Company on the basis that Wu asserts pursuant to the debt conversion/exchange agreement that the Company agreed to first give Dachao, then ultimately Wu, the right to appoint four (4) directors to the Company Board so long as Dachao, then Wu, beneficially owned more than thirty percent (30%) of the outstanding shares of the Company;

(iv) alleging Breach of the Implied Covenant of Good Faith and Fair Dealing against the Company insofar as Wu asserts that the Company owes Wu a duty of good faith and fair dealing implied in all contracts and Wu believes that the Company has taken steps to attempt to dilute his holdings of Company common stock below the thirty percent (30%) ownership threshold in order to enter into transactions without Wu’s prior approval; and

(v) alleging Breach of Fiduciary Duty against the Director Defendants by: (a) purportedly making false representations, misleading statements and omitting material information when communicating with Wu regarding the Company’s intent to close the Banana Whale transaction; (b) disseminating false representations, misleading statements, and omitting material information in the 8-K filed by the Company on May 18, 2018, with respect to the Banana Whale transaction insofar as Section 3.02 of the 8-K states that there are no agreements to which the Company is a party, or has knowledge of, that conflict with the debt exchange/conversion agreement or would prohibit its consummation, to the extent Wu asserts that he had a right of prior approval based on the Approval Right Side Letter, which he asserts pertains to his holdings of Company common stock, which Letter he filed as an exhibit to his Schedule 13D filing with the SEC on April 10, 2018; (c) alleging that the Director Defendants breached their fiduciary duties to Wu and Company stockholders by issuing 7,383,000 shares of Company common stock to Banana Whale to the extent possession of these shares grant full voting and economic rights to the stockholders of Banana Whale while there is also a twenty-four (24) month earn-out structure as part of the definitive transaction agreements between the Company and Banana Whale; and (d) asserting that the Director Defendants breached their fiduciary duties to Wu and Company stockholders by entering into transactions including Banana Whale that Wu alleges were designed to preclude Wu from appointing four (4) additional directors to the Company Board by diluting his ownership below the thirty percent (30%) mark.