UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended: September 30, 2017

 

or

 

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

 

For the transition period from __________________ to __________________

 

Commission File Number:  333-175148

 

Technovative Group, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		38-3825959
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

 

 Unit 701, 7/F, Tower 2, Silvercord,

30 Canton Road, Tsim ShaTsui, KLN, Hong Kong

(Address of Principal Executive Offices)

 

Tel. +852 2162 7529

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

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

 

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

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	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 13(a) of the Exchange Act. ☐

 

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

 

As of November 13, 2017, the registrant had 62,723,820  shares of common stock, par value $.001 per share, issued and outstanding.

 

 

 

TABLE OF CONTENTS

 

		Page No.
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016	2
	Unaudited Statements of Operations and Comprehensive Income for the Nine Months Ended September 30, 2017 and 2016	3
	Unaudited Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016	4
	Notes to Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	16
Item 4.	Controls and Procedures.	16
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings.	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	19
Item 3.	Defaults Upon Senior Securities.	19
Item 4.	Mine Safety Disclosures	19
Item 5.	Other Information	19
Item 6.	Exhibits.	19
Signatures		20
Certifications

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

TECHNOVATIVE GROUP, INC.

 

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

(Stated in US Dollars)

 

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

	PAGES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS	2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS	3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	4
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	5 – 13

 

 

TECHNOVATIVE GROUP, INC.

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

 

		As of
		September 30, 2017				December 31, 2016
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	333,220			$	668,566
Prepayments, deposits and other receivables			23,386				37,015
Total current assets			356,606				705,581
Property and equipment, net			159,691				180,749
TOTAL ASSETS		$	516,297			$	886,330
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Other payables and accrued liabilities		$	86,117			$	399,831
Due to a related company			66,710				62,822
Promissory note – related party			256,410				-
Due to directors			257,317				258,215
Total current liabilities			666,554				720,868
Total liabilities			666,554				720,868
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value, authorized: 10,000,000 shares, nil shares issued and outstanding			-				-
Common stock, $0.001 par value, authorized: 200,000,000 shares, 62,723,820 and 54,723,820 shares respectively issued and outstanding as of September 30, 2017 and December 31, 2016			62,724				54,724
Additional paid-in capital			2,688,402				2,376,402
Accumulated losses			(2,914,733	)			(2,280,671	)
Accumulated other comprehensive income			13,350				15,007
Total stockholders’ equity			(150,257	)			165,462
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	516,297			$	886,330

 

See accompanying notes to unaudited condensed consolidated financial statements

 

 

TECHNOVATIVE GROUP, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Stated in US Dollars)

 

		For the three months ended September 30,								For the nine months ended September 30,
		2017				2016				2017				2016
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenues		$	49			$	-			$	2,161			$	-
Selling, general and administrative			(166,342	)			(165,045	)			(628,110	)			(597,191	)
Loss from operations			(166,293	)			(165,045	)			(625,949	)			(597,191	)
Loss on disposal of fixed assets			(8,141	)			-				(8,141	)			-
Interest income			6				20				28				128
Loss before income taxes			(174,428	)			(165,025	)			(634,062	)			(597,063	)
Income taxes			-				-				-				-
Net loss		$	(174,428	)		$	(165,025	)		$	(634,062	)		$	(597,063	)
Other comprehensive income
Foreign currency translation adjustments			891				764				(1,657	)			1,368
Comprehensive loss		$	(173,537	)		$	(164,261	)		$	(635,719	)			(595,695	)
Earnings per share
Basic and diluted loss per common share		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.01	)
Basic and diluted weighted average common shares outstanding			62,723,820				54,723,820				61,170,706				54,723,820

 

See accompanying notes to unaudited condensed consolidated financial statements

 

 

TECHNOVATIVE GROUP, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

 

		For the nine months ended September 30,
		2017				2016
		(Unaudited)				(Unaudited)
Cash Flows from Operating Activities:
Net loss		$	(634,062	)		$	(597,063	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			28,475				13,312
Loss on disposal of property and equipment			8,141				-
Written-off of receivables			920				-
Changes in operating assets and liabilities:
Deposits, prepayments and other receivables			13,738				17,258
Other payables and accrued liabilities			1,237				17,548
Net Cash Used In Operating Activities			(581,551	)			(548,945	)
Cash Flows from Investing Activities:
Proceed from sale of property and equipment			7,733				-
Purchase of property and equipment			(13,023	)			(2,831	)
Net Cash Used In Investing Activities			(5,290	)			(2,831	)
Cash Flows from Financing Activities:
Proceeds from promissory note – related party			256,410				-
Net Cash Provided By Financing Activities			256,410				-
Effect of Exchange Rate Changes on Cash and Cash Equivalents			(4,915	)			(366	)
Net Decrease In Cash and Cash Equivalents			(335,346	)			(552,142	)
Cash and Cash Equivalents at Beginning of Period			668,566				1,628,083
Cash and Cash Equivalents at End of Period		$	333,220			$	1,075,941
Supplemental Cash Flow Information:
Cash paid for interest expense		$	-			$	-
Cash paid for income tax		$	-			$	-
Supplemental Disclosure of Non-Cash Transactions:
Issuance of shares for acquisition		$	320,000			$	-

 

See accompanying notes to unaudited condensed consolidated financial statements

 

 

TECHNOVATIVE GROUP, INC.

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

1.

Organization and Basis of Presentation

 

Technovative Group, Inc. (the “Company,” or “TEHG,” formerly Horizon Energy Corp.) was incorporated in the state of Wyoming on August 12, 2010 under the name “Glacier Point Corp.” On December 6, 2010, the Company filed an amendment with the State of Wyoming to change the name from “Glacier Point Corp.” to “Solar America Corp.” On September 4, 2013, the Company filed an amendment with the State of Wyoming to change the name from “Solar America Corp.” to “Horizon Energy Corp.”

 

Effective on March 2, 2015, the Company amended its Articles of Incorporation to: (i) change the Company’s name from “Horizon Energy Corp.” to “Technovative Group, Inc.” and (ii) implement a 1-for-20 reverse stock split of its issued and outstanding common stock, par value $0.001 per share.

 

On April 24, 2015, TEHG, Technovative Group Limited (“TGL”) and the sole stockholder of TGL who owns 100% of the equity interests of TGL (the “TGL Stockholder”) entered into and consummated transactions pursuant to a Share Exchange Agreement (the “Share Exchange Agreement,” such transaction referred to as the “Share Exchange Transaction”), whereby the Company issued to the TGL Stockholder an aggregate of 100,000 shares of its Series A Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”), in exchange for 100% of the TGL equity interest held by the TGL Stockholder. Pursuant to the Share Exchange Agreement, the 100,000 shares of Series A Preferred Stock will automatically convert into 51,500,000 shares of common stock, par value $0.001 per share (“Common Stock”) upon the effectiveness of a 1-for-10 reverse stock split to be conducted by TEHG after the Share Exchange Transaction. As a result of the Share Exchange Transaction, TGL became our direct wholly-owned subsidiary and TGL’s subsidiary, Technovative Asia Limited (“TAL”) became our indirect subsidiary.

 

TGL is a Samoa company incorporated on October 14, 2014. TAL is a Hong Kong company incorporated on November 21, 2014.

 

On October 26, 2016, the Company acquired 100% of the outstanding common shares of Innorei Group (Samoa) Limited (“IRG Samoa”), a holding company of Innorei Group Sdn. Bhd. (“IRG Malaysia”). IRG Malaysia was a mobile solutions apps development and information technology service provider. The Company issued 8,000,000 common stock to the vendor and two vendor’s nominees at February 22, 2017 as consideration.

 

The Company is a website creation and e-commerce enablement provider for the online presence needs of small to mid-size business retailers.

 

 

Principles of consolidation

 

The unaudited condensed consolidated financial statements at September 30, 2017 include the amount of TEHG and TGL, a direct wholly owned subsidiary of the Company and TAL, an indirect wholly-owned subsidiary of the Company. All significant inter-company transactions and balances have been eliminated in consolidation.

 

Use of estimates

 

The preparation of the unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Income taxes 

 

The Company utilizes FASB Accounting Standard Codification Topic 740 (“ASC 740”) “Income taxes” (formerly known as SFAS No. 109, "Accounting for Income Taxes"), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

ASC 740 “Income taxes” (formerly known as Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of Statement of Financial Accounting Standards No. 109 (“FIN 48”)) clarifies the accounting for uncertainty in tax positions. This interpretation requires that an entity recognizes in the unaudited condensed consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the statements of operations. The adoption of ASC 740 did not have a significant effect on the unaudited condensed consolidated financial statements. 

 

 

Cash and cash equivalents

 

The Company considers all short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less to be cash equivalents.

 

Fair value of financial instruments

 

The carrying values of the Company’s financial instruments, including cash and cash equivalents, deposits, prepayments and other receivables, accounts payable and due to a director approximate their fair values due to the short-term maturity of such instruments. The carrying amounts of borrowings approximate their fair values because the applicable interest rates approximate current market rates.

 

Earnings per share

 

Basic earnings per share is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per share.  The average market price during the three months is used to compute equivalent shares.

 

FASB Accounting Standard Codification Topic 260 (“ASC 260”), “Earnings Per Share,” requires that employee equity share options, non-vested shares and similar equity instruments granted to employees be treated as potential common shares in computing diluted earnings per share. Diluted earnings per share should be based on the actual number of options or shares granted and not yet forfeited, unless doing so would be anti-dilutive. The Company uses the “treasury stock” method for equity instruments granted in share-based payment transactions provided in ASC 260 to determine diluted earnings per share.

 

Plant and equipment

 

Plant and equipment are recorded at cost. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives as follows:

 

	Furniture and fixtures		5 years
	Leasehold improvements		Shorter of estimated useful life or term of lease
	Motor vehicle		4 years

 

 

Comprehensive income

 

The Company has adopted FASB Accounting Standard Codification Topic 220 (“ASC 220”) “Comprehensive income” (formerly known as SFAS No. 130, “Reporting Comprehensive Income”), which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Accumulated other comprehensive income represents the accumulated balance of foreign currency translation adjustments of the Company.

 

Recent accounting pronouncements

 

Recent accounting pronouncements that the Company has adopted or may be required to adopt in the future are summarized below:

 

In January 2017, the FASB issued ASU No. 2017-1 “Topic 805, Business Combinations: Clarifying the Definition of a Business”. The amendments in this update provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. The amendments in this update affect all reporting entities that must determine whether they have acquired or sold a business. Public business entities should apply the amendments in this update to annual periods beginning after December 15, 2017, including interim periods within those periods. All other entities should apply the amendments to annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. We do not expect the adoption of ASU 2017-1 to have a material impact on our consolidated financial statements.

 

 

2.	Going Concern

 

As shown in the unaudited condensed consolidated financial statements, the Company has generated a net loss of $634,062 for the nine months ended September 30, 2017 and an accumulated deficit of $2,914,733 as of September 30, 2017. The Company also experienced insufficient cash flows from operations and will be required continuous financial support from the shareholder. The Company will need to raise capital to fund its operations until it is able to generate sufficient revenue to support the future development. Moreover, the Company may be continuously raising capital through the sale of debt and equity securities.

 

The Company’s ability to achieve these objectives cannot be determined at this stage. If the Company is unsuccessful in its endeavors, it may be forced to cease operations. These unaudited condensed consolidated financial statements do not include any adjustments that might result from this uncertainty which may include adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

These factors have raised substantial doubt about the Company’s ability to continue as a going concern. There can be no assurances that the Company will be able to obtain adequate financing or achieve profitability. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

3.

Property and Equipment, Net

 

			As of
			September 30, 2017				December 31, 2016
			(Unaudited)
	Furniture and fixtures		$	127,974			$	132,411
	Leasehold improvements			40,725				33,944
	Motor vehicle			47,365				44,605
	Total property and equipment			216,064				210,960
	Less:  Accumulated depreciation			(56,373	)			(30,211	)
	Total property and equipment, net		$	159,691			$	180,749

 

The depreciation expenses for the three months ended September 30, 2017 and 2016 were $8,929 and $4,489, respectively. The depreciation expenses for the nine months ended September 30, 2017 and 2016 were $28,475 and $13,312, respectively.

 

 

4.

Common Stock

 

As of December 31, 2014, the authorized capital stock of the Company consisted of 200,000,000 shares of Common Stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001, and there were 48,000,000 shares of common stock issued and outstanding.

 

Issuance of shares

 

On April 15, 2014, the Company and Tuverga Finance Ltd., a corporation formed pursuant to the statutes of Republic of Cyprus (“Tuverga”) entered into an Equity Investment Agreement (“Equity Investment Agreement”), whereby the Company agreed to issue to Tuverga a number of shares of common stock of the Company, par value $.001 per share (“Common Stock”) for up to $2,500,000 (the “Commitment Amount”) upon providing advance notice (the “Advance Notice”) to the Company. As of November 14, 2014, Tuverga has provided four Advance Notices in the total amount of $850,000 and the Company has issued an aggregate of 3,745,911 shares of common stock to Tuverga.

 

On April 21, 2015, the Company entered into subscription agreements (“Subscription Agreements”) with 13 investors (the “Investors”)(the “Transaction”). The Transaction was closed on June 25, 2015. Pursuant to the Subscription Agreements, on June 25, 2015, the Company issued 1,976,474 shares of common stock of the Company to investors at the purchase price of $0.85 per share for proceeds of $1,675,005 net of issuance costs.

 

In July and August, 2015, the Company issued 929,415 shares of common stock, par value $0.001 per share of the Company to investors at the purchase price of $0.85 per share for total proceeds of $837,224 net of issuance costs.

 

On February 22, 2017, the Company issued 8,000,000 shares of common stock to the vendor and two vendor’s nominees as consideration of the acquisition of IRG Samoa.

 

As of September 30, 2017, there were 62,723,820 shares of common stock and no shares of preferred stock issued and outstanding.

 

Stock reverse split

 

On February 26, 2015, the Company implement a 1-for-20 reverse stock split of its issued and outstanding common stock, par value $.001 per share.

 

On April 24, 2015, TEHG, TGL and the TGL Stockholder entered into and consummated transactions pursuant to a Share Exchange Agreement, whereby the Company issued to the TGL Stockholder an aggregate of 100,000 shares of its Series A Preferred Stock, in exchange for 100% of the TGL equity interest held by the TGL Stockholder. The 100,000 shares of Series A Preferred Stock will automatically convert into 51,500,000 shares Common Stock upon the effectiveness of a 1-for-10 reverse stock split to be conducted by TEHG after the Share Exchange Transaction. As a result of the Share Exchange Transaction, TGL became direct wholly-owned subsidiary and TAL became indirect subsidiary.

 

On May 11, 2015, the Company effectuated a 1-for-10 reverse stock split, resulting 10 shares of the Company’s Common Stock becoming 1 share of the Company’s Common Stock, without changing the par value of the Common Stock. Pursuant to the Articles of Amendment filed on April 17, 2015, 100,000 shares of Series A Preferred Stock automatically held by the TGL Stockholder converted to 51,500,000 shares of Common Stock of the Company. Thus, the shares of Common Stock held by the TGL Stockholder constituted approximately 99.5% of our issued and outstanding Common Stock.

 

5.

Losses Per Share

 

			For the three months ended September 30,								For the nine months ended September 30,
			2017				2016				2017				2016
			(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
	Net losses attributable to common shareholders for computing basic net loss per common share		$	(174,428	)		$	(165,025	)		$	(634,062	)		$	(597,063	)
	Weighted average number of common shares outstanding – Basic and diluted			62,723,820				54,723,820				61,170,706				54,723,820
	Basic and diluted losses per common share		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.01	)

 

 

6.

Income Taxes

 

The Company and its subsidiaries file separate income tax returns.

 

The United States of America

 

The Company is incorporated in the State of Wyoming in the U.S., and is subject to a gradual U.S. federal corporate income tax of 15% to 35%. The State of Wyoming does not impose any corporate state income tax.

 

Samoa

 

TGL and IRG Samoa are incorporated in the Samoa. Under the current laws of the Samoa, TGL and IRG Samoa are not subject to tax on income or capital gains. In addition, upon payments of dividends by TGL, no Samoa withholding tax is imposed.

 

Hong Kong

 

TAL is incorporated in Hong Kong and Hong Kong’s profits tax rate is 16.5%. TAL HK did not earn any income that was derived in Hong Kong for the three months and nine months ended September 30, 2017 and 2016, and therefore, TAL HK was not subject to Hong Kong profits tax.

 

Malaysia

 

In the opinion of the management, IRG Malaysia will not generate any taxable income in the future.

 

The Company has not recognized an income tax benefit for its operating losses generated based on uncertainties concerning its ability to generate taxable income in future periods. The tax benefit for the periods presented is offset by a valuation allowance established against deferred tax assets arising from the net operating losses and other temporary differences, the realization of which could not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not. For the three months and nine months ended September 30, 2017 and 2016, the Company incurred losses, resulting from operating activities, which result in deferred tax assets at the effective statutory rates. The deferred tax asset has been off-set by an equal valuation allowance.

 

			For the three months ended September 30,								For the nine months ended September 30,
			2017				2016				2017				2016
			(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
	Loss before income taxes		$	(174,428	)		$	(165,025	)		$	(634,062	)		$	(597,063	)
	Tax at the income tax rate 34%			(59,306	)			(56,109	)			(215,581	)			(203,001	)
	Valuation allowance			59,306				56,109				215,581				203,001
	Income taxes		$	-			$	-			$	-			$	-

 

 

7.

Related Parties Transactions

 

Nature of relationships with related parties

 

	Name		Relationships with the Company
	Miss Liang Meihua (Miss Liang)		A director of the TEHG
	Miss Kung Wai Fan Candy (Miss Kung)		A director of the TAL
	Spider Comm Sdn Bhd		Former officer of IRG Malaysia

 

Related party balances and transactions

 

On August 2, 2017, The Company entered into a promissory note (the “Note”) with Liang Meihua, the director of the Company since October 21, 2016, in the principal amount of $256,410. The Note shall be due and payable within 12 months (as extended by the holder from time to time) from the issuance date of the Note, and shall be interest free and shall not accrue any interest and bearing interest of 5% if an event of default occurred. On the date when the Company consummates the sale for cash by the Company of any equity or convertible securities generating aggregate gross proceeds of at least $10,000,000, the Note shall automatically convert into fully paid and non-assessable shares of the Company’s $0.001 par value per share common stock at a conversion price equal to the per share price of the sale for cash by the Company of any equity or convertible securities generating aggregate gross proceeds of at least $10,000,000. If no sale for cash by the Company of any equity or convertible securities generating aggregate gross proceeds of at least $10,000,000 is consummated prior to the maturity date, the holder of the Note shall have the right to convert all or any portion of the outstanding and unpaid principal and interest of this Note into conversion shares at a conversion price of $0.10 per Share. As of September 30, 2017 and December 31, 2016, the promissory note payable to Miss Liang was $256,410 and nil respectively.

 

During the three months and nine months ended September 30, 2017 and 2016, the Company did not receive any advances from Miss Kung. As of September 30, 2017 and December 31, 2016, the loan payable balance to Miss Kung was $257,317 and $258,215 respectively, without interest and due on demand.

 

Spider Comm Sdn Bhd

 

On October 26, 2016, the Company acquired Innorei Group (Samoa) with an amount due to Spider Comm Sdn Bhd of $67,509.

 

During the three months ended September 30, 2017 and 2016, the Company incurred rental expenses of $5,050 and $nil respectively to Spider Comm Sdn Bhd. During the nine months ended September 30, 2017 and 2016, the Company incurred rental expenses of $14,496 and $nil respectively to Spider Comm Sdn Bhd. As of September 30, 2017 and December 31, 2016, the loan payable balance to Spider Comm Sdn Bhd was $66,710 and $62,822, respectively.

 

 

8.

Commitments and Contingencies

 

Operating Lease

 

The Company leases a number of properties under operating leases. Rental expenses under operating leases for the three months ended September 30, 2017 and 2016 were $5,050 and $32,980 respectively. Rental expenses under operating leases for the nine months ended September 30, 2017 and 2016 were $38,211 and $98,844 respectively.

 

As of September 30, 2017, the Company was obligated under non-cancellable operating leases minimum rentals as follows:

 

	Twelve months ended September 30, 2017,
	2018		$	19,893
	2019			4,973
	Thereafter			-
	Total minimum lease payments		$	24,866

 

Legal Proceeding

 

There has been no legal proceeding in which the Company is a party for the nine months ended September 30, 2017.

 

9.

Subsequent Events

 

There were no events or transactions that would require recognition or disclosure in our unaudited condensed consolidated financial statements for the nine months ended September 30, 2017.

 

 

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report.

 

Certain statements in this Report constitute forward-looking statements. These forward-looking statements include statements, which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plan,” “potential,” “project,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or the negative of these words or other variations on these words or comparable terminology. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.

 

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.

 

The “Company,” “we,” “us,” or “our,” are references to the combined business of (i) Technovative Group, Inc., a Delaware corporation (“TEHG”), (ii) Technovative Group Limited, a company incorporated under the laws of Samoa and a wholly-owned subsidiary of TEHG (“TGL”), (iii) Technovative Asia Limited, a company incorporated under the laws of Hong Kong and a wholly-owned subsidiary of TGL (“TAL”), (iv) Innorei Group (Samoa) Limited (“IRG Samoa”), , a company incorporated under the laws of Samoa and a wholly owned subsidiary of TGL , and (v) (“IRG Malaysia”), a Malaysian company and a wholly owned subsidiary of [IRG Samoa] .

 

Overview

  

The Company is a website creation and e-commerce enablement provider for the online presence needs of small to mid-size business retailers. Our Company is currently in the development stage. Our mission is to assist small to mid-size businesses to easily launch fully operational websites with e-commerce features without employing a team of Information Technology (“IT”) staff or website designers. We strive to provide both the technology and support that our clients need.

 

We have developed a platform branded as “SpeedG,” which was launched in January of 2015. Our website can be viewed at http://www.speedg.com. We believe that the SpeedG platform is a combination of easy to use products that provide solutions for our clients to establish and maintain their online presence as well as allows our clients to promote and market their businesses effectively. In addition to creating and publishing a website utilizing the SpeedG platform, the SpeedG platform also includes a dashboard feature (the “SpeedG Dashboard”) which our clients can utilize to manage their websites and e-commerce stores, as well as keep track of user data, such as daily views and recurring views. We have also designed a mobile application (“app”) builder for our clients to create their own mobile apps. We plan to launch a mobile app store where our clients will be able to place their apps for their customers to download. We believe that we can assist our clients to establish their digital identities which enable their businesses to survive and thrive. In addition to website creation services, we also plan to provide marketing and promotional services to help the businesses of less tech-savvy retailers grow and enhance the visibility of their products.

 

As of September 30, 2017 and December 31, 2016, our total accumulated deficits, including accumulated deficit during development stage, were $2,914,733 and $2,280,671, respectively. Our stockholders’ equity was ($150,257) and $165,462, respectively.

 

Results of Operations

 

For the three months ended September 30, 2017 compared with the three months ended September 30, 2016

 

Gross Revenues

 

The Company received sales revenues of $49 in the three months ended September 30, 2017 and compared to nil in the three months ended September 30, 2016.

 

Operating Expenses

 

Operating expenses for the three months ended September 30, 2017 and September 30, 2016 were $166,342 and $165,045, respectively. The expenses consisted of filing fees, professional fees, payroll and benefits, and other general expenses.

 

 

We expect that our general and administrative expenses will continue to increase as we will incur additional costs to support the growth of our business.

 

Net Profit (Loss)

 

Net losses for the three months ended September 30, 2017 and September 30, 2016, were $174,428 and $165,025, respectively. Basic and diluted net loss per share from continuing operations amounted $0.00 and $0.00 respectively for the three months ended September 30, 2017 and September 30, 2016 after taking into consideration and retroactively restating to reflect the 1-for-20 reverse stock split effected on March 2, 2015 and the 1-for-10 reverse stock split effected on May 11, 2015.

 

The $9,403 increase in net loss for the three months ended September 30, 2017 compared with three months ended September 30, 2016 was due to an increase in general and administrative expenses with continuous financial resources input.

 

For the nine months ended September 30, 2017 compared with the nine months ended September 30, 2016

 

Gross Revenues

 

The Company received sales revenues of $2,161 in the nine months ended September 30, 2017 and compared to nil in the nine months ended September 30, 2016.

 

Operating Expenses

 

Operating expenses for the nine months ended September 30, 2017 and September 30, 2016 were $628,110 and $597,191, respectively. The expenses consisted of filing fees, professional fees, payroll and benefits, and other general expenses.

 

We expect that our general and administrative expenses will continue to increase as we will incur additional costs to support the growth of our business.

 

Net Profit (Loss)

 

Net losses for the nine months ended September 30, 2017 and September 30, 2016, were $634,062 and $597,063, respectively. Basic and diluted net loss per share from continuing operations amounted $0.01 and $0.01 respectively for the nine months ended September 30, 2017 and September 30, 2016 after taking into consideration and retroactively restating to reflect the 1-for-20 reverse stock split effected on March 2, 2015 and the 1-for-10 reverse stock split effected on May 11, 2015.

 

The $36,999 increase in net loss for the nine months ended September 30, 2017 comparing with nine months ended September 30, 2016 was due to an increase in general and administrative expenses with continuous financial resources input.

 

Liquidity and Capital Resources

 

At September 30, 2017 we had a working capital deficits of $309,948 consisting of cash on hand of $333,220 as compared to a working capital deficits of $15,287 and cash on hand of $668,566 as of December 31, 2016.

 

Net cash used in operating activities for the nine months ended September 30, 2017 was $581,551 as compared to net cash used in operating activities of $548,945 for the nine months ended September 30, 2016. The cash used in operating activities are mainly for filing fees, professional fees, payroll and benefits and general expenses.

 

Net cash provided by (used in) investing activities for the nine months ended September 30, 2017 was ($5,290) as compared to ($2,831) for the nine months ended September 30, 2016. The different was derived from investing activities on fixed assets.

 

Net cash provided by (used in) financing activities for the nine months ended September 30, 2017 was 256,410 as compared to nil for the nine months ended September 30, 2016 derived from issuance of common stock and advances from directors.

  

Critical Accounting Policies and Estimates

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods. Actual results could differ from these estimates. Our significant estimates and assumptions include depreciation and the fair value of our stock, stock-based compensation, debt discount and the valuation allowance relating to the Company’s deferred tax assets.

 

 

Recently Issued Accounting Pronouncements

 

Reference is made to the “Recent Accounting Pronouncements” in Note 1 to the Financial Statements included in this Report for information related to new accounting pronouncement, none of which had a material impact on our consolidated financial statements, and the future adoption of recently issued accounting pronouncements, which we do not expect will have a material impact on our consolidated financial statements.

 

Off-Balance Sheet Arrangements

 

As of September 30, 2017, we did not have any off-balance sheet arrangements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1). 

  

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosures Control and Procedures

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

 

	●	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
	●	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

 

●

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

 

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

 

As of September 30, 2017, our CEO evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Disclosure controls and procedure include, without limitations, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure. Our Management is responsible for monitoring the process pursuant to which information is gathered and analyze such information to determine the extent to which such information requires disclosure in the reports filed with the Securities and Exchange Commission. Based on such evaluation, our CEO has concluded that as of September 30, 2017, the Company’s disclosure controls and procedures were not effective. The Company does not have any documented disclosure control and procedures and its management lacks sufficient familiarity with SEC reporting rules. As a result, the Company failed to file a Current Report on Form 8-K to report a private placement of 988,239 shares of Common Stock on September 2, 2015, which was then reported in a Form 10-Q filed on November 16, 2015, for the period ended September 30, 2015. Management intends to work with outside counsel to adopt formal written disclosure controls and procedures and educate the Company’s officers and directors as to the Company’s responsibilities.

 

As of September 30, 2017, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in by the Committee of Sponsoring Organizations of the Treadway Commission’s 2013 Internal Control - Integrated Framework and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of September 30, 2017.

 

Management believes that the material weaknesses set forth in items (1), (2) and (3) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

 

Management’s Remediation Initiatives

 

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

 

We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. We also plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us. 

 

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.

 

We anticipate that these initiatives will be at least partially, if not fully, implemented by the end of fiscal year 2017. Additionally, we plan to test our updated controls and remediate our deficiencies in year 2017.

 

Changes in internal controls over financial reporting

 

There was no change in our internal controls over financial reporting that occurred during the period covered by this Report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

This quarterly report does not include an attestation report of the Company’s registered independent public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered independent public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this quarter report on Form 10-Q.

 

 

PART II – OTHER INFORMATION

 

ITEM 1.  LEGAL PROCEEDINGS.

 

None.

 

ITEM 1A. RISK FACTORS.

 

Not applicable to a smaller reporting company.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6.  EXHIBITS.

 

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	XBRL data files of Financial Statements and Notes contained in this Quarterly Report on Form 10-Q.

 

*	In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	Technovative Group, Inc.
Date: November 14, 2017	By:	/s/ Lin Kuan Liang Nicolas
	Name:	Lin Kuan Liang Nicolas
	Title:	Chief Executive Officer, President, Treasurer, Secretary, Director
		(Principal Executive and Financial Officer)

 

 

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