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: March 31, 2018

 

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 May 14, 2018 the registrant had 90,008,745 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 March 31, 2018 (Unaudited) and December 31, 2017	2
	Unaudited Statements of Operations and Comprehensive Income for the Three Months Ended March 31, 2018 and 2017	3
	Unaudited Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017	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.	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	17
Item 3.	Defaults Upon Senior Securities.	17
Item 4.	Mine Safety Disclosures.	17
Item 5.	Other Information.	17
Item 6.	Exhibits.	17
Signatures		18
Certifications

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

TECHNOVATIVE GROUP, INC.

 

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017

(Stated in US Dollars)

 

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

	PAGES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS	1
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS	2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	3
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	4 – 13

 

 

TECHNOVATIVE GROUP, INC.

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

 

		As of
		March 31, 2018				December 31, 2017
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	113,533			$	227,186
Trade receivables			245,829				-
Prepayments, deposits and other receivables			1,059,045				60,718
Short-term investments			111,334				176,741
Total current assets			1,529,741				464,645
Property and equipment, net			105,968				138,941
Goodwill			4,033,530				4,033,530
TOTAL ASSETS		$	5,669,239			$	4,637,116
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Trade payables		$	157,458			$	7,283
Receipt in advance			-				60,414
Loan from a director			256,410				256,410
Due to a director			256,322				257,007
Acquisition and contingent consideration payables			1,045,397				3,658,889
Other payables and accrued liabilities			160,870				138,040
Total current liabilities			1,876,457				4,378,043
Acquisition and contingent consideration payables			522,699				522,699
Total liabilities			2,399,156				4,900,742
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value, authorized: 10,000,000 shares, nil share issued and outstanding			-				-
Common stock, $0.001 par value, authorized: 200,000,000 shares, 90,008,745 and 62,723,820 shares respectively issued and outstanding as of March 31, 2018 and December 31, 2017			90,009				62,724
Additional paid-in capital			6,839,610				2,688,402
Accumulated losses			(3,684,819	)			(3,030,707	)
Accumulated other comprehensive income			25,283				15,955
Total stockholders’ equity / (deficit)			3,270,083				(263,626	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	5,669,239			$	4,637,116

 

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 March 31,
		2018				2017
Revenues		$	306,513			$	856
Costs of revenues			(155,675	)			-
Gross profit			150,838				856
Selling, general and administrative			(806,024	)			(258,901	)
Loss from operations			(655,186	)			(258,045	)
Interest income			1,074				16
Loss before income taxes			(654,112	)			(258,029	)
Income taxes			-				-
Net loss		$	(654,112	)		$	(258,029	)
Other comprehensive income (loss)
Foreign currency translation adjustments			9,328				(6,752	)
Comprehensive loss		$	(644,784	)		$	(264,781	)
Earnings per share
Basic and diluted loss per common share		$	(0.01	)		$	(0.00	)
Basic and diluted weighted average common shares outstanding			85,606,311				58,012,709

 

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 three months ended March 31,
		2018				2017
Cash Flows from Operating Activities:
Net loss		$	(654,112	)		$	(258,029	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			4,668				9,475
Written off of property and equipment			34,609				-
Share-based compensation			541,250				-
Changes in operating assets and liabilities:
Trade receivables			(244,671	)			-
Deposits, prepayments and other receivables			26,229				(774	)
Accounts payable			148,224				-
Receipt in advance			(14,668	)			-
Other payables and accrued liabilities			(27,140	)			(6,137	)
Net Cash Used In Operating Activities			(185,611	)			(255,465	)
Cash Flows from Investing Activities:
Redemption of short-term investments			70,761				-
Purchase of property and equipment			-				(6,167	)
Net Cash Provided by (Used In) Investing Activities			70,761				(6,167	)
Cash Flows from Financing Activities:
Advances from a director			446				-
Net Cash Provided By Financing Activities			446				-
Effect of Exchange Rate Changes on Cash and Cash Equivalents			751				(8,027	)
Net Decrease In Cash and Cash Equivalents			(113,653	)			(269,659	)
Cash and Cash Equivalents at Beginning of Period			227,186				668,566
Cash and Cash Equivalents at End of Period		$	113,533			$	398,907
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		$	2,613,493			$	320,000
Issuance of shares for services		$	1,528,000			$	-

 

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 February 26, 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 $.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.

 

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

 

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 at February 22, 2017 as consideration.

 

On December 27, 2017, the Company has entered into a Share Transfer Agreement with several individuals, who are Shareholders of Guangzhou City Hedu Information Technology Co., Ltd (“Hedu”), a People’s Republic of China (“PRC”) company, in exchange for entering into entering into a loan agreement and a series of contractual agreements (the “VIE Agreements”), through the Company’s wholly owned foreign entity, Zhike (Shenzhen) Marketing Technology Co., Ltd (“Zhike”). Zhike was incorporated by the Company in the PRC on August 15, 2017. Pursuant to the VIE Agreements, Hedu becomes a Variable Interest Entity (the “VIE”) of the Company, via Zhike, and as such, the Company shall control all of Hedu’s business affairs and economic interests through Zhike. Hedu specializes in blockchain and big data analytics technologies.

 

 

Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

 

The unaudited condensed consolidated financial statements include the financial statements of all the subsidiaries. All transactions and balances between the Company and its subsidiaries have been eliminated upon 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.

 

Goodwill

 

The Company allocates goodwill from business combinations to reporting units based on the expectation that the reporting unit is to benefit from the business combination. The Company evaluates its reporting units on an annual basis and, if necessary, reassigns goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. Application of the goodwill impairment test requires judgments, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and the determination of the fair value of each reporting unit. The Company first assesses qualitative factors to determine whether it is more likely than not that goodwill is impaired. If the more likely than not threshold is met, the Company performs a quantitative impairment test.

 

Revenue recognition

 

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. Revenue is recorded on a gross basis, net of surcharges and value added tax (“VAT”).

 

 

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.

 

 

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, fixtures and equipment		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:

 

The Company does not believe other recently issued but not yet effective accounting standards from ASU 2018-05, if currently adopted, would have a material effect of the unaudited condensed consolidated financial position, results of operation and cash flows.

 

 

2.	Going Concern

 

As shown in the unaudited condensed consolidated financial statements, the Company has generated a net loss of $654,112 for the three months ended March 31, 2018 and an accumulated deficit of $3,684,819 as of March 31, 2018. 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.	Short-Term Investments

 

Short-term investments are highly liquid available-for-sale securities in accounts maintained with commercial banks within the PRC. Interest income earned from the short-term investments for three months ended March 31, 2018 and 2017 were $988 and nil, respectively.

 

4.	Property and Equipment, Net

 

			As of
			March 31, 2018				December 31, 2017
	Furniture, fixtures and equipment		$	148,270			$	146,668
	Leasehold improvements			2,977				45,217
	Total property and equipment			151,247				191,885
	Less:  Accumulated depreciation			(45,279	)			(52,944	)
	Total property and equipment, net		$	105,968			$	138,941

 

The depreciation expenses for the three months ended March 31, 2018 and 2017 were $4,668 and $9,475, respectively.

 

 

5.	Deposits, prepayments and other receivables

 

			As of
			March 31, 2018				December 31, 2017
	Prepaid share-based compensation expenses		$	1,023,567			$	-
	Other receivables			35,478				60,718
	Total deposits, prepayments and other receivables		$	1,059,045			$	60,718

 

6.	Common Stock

 

On January 12, 2018, the Company issued 26,134,925 common stock to the vendor as consideration of the acquisition of Hedu.

 

From January 2018 to March 2018, the Company issued 1,150,000 common stock to four third parties as consideration of certain professional and investor relation services.

 

On January 18, 2018, the Company granted 100,000 shares of the Company’s common stock to a consultant, in exchange for its investor relation services to the Company for the year 2018.

 

On March 15, 2018, the Company granted 1,050,000 shares of the Company’s common stock to three consultants, in exchange for its professional services to the Company for the year 2018.

 

As of March 31, 2018, there were 90,008,745 shares of Common Stock and no shares of preferred stock issued and outstanding.

 

7.	Earnings Per Share

 

			For the three months ended March 31,
			2018				2017
	Net loss attributable to common shareholders for computing basic net loss per common share		$	(654,112	)		$	(258,029	)
	Weighted average number of common shares outstanding – Basic and diluted			85,606,311				58,012,709
	Basic and diluted loss per common share		$	(0.01	)		$	(0.00	)

 

 

8.	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. Federal Corporate rate reduced to 21% (from brackets with a maximum tax rate of 35%) as from January 1, 2018. 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 and IRG Samoa, 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 ended March 31, 2018 and 2017, and therefore, TAL HK was not subject to Hong Kong profits tax.

 

Malaysia

IRG Malaysia is incorporated in Malaysia and Malaysia’s corporate tax standard rate is 24%. The Company did not generate any income during the year, and therefore not subject to any corporate tax in Malaysia.

 

PRC

Hedu and Zhike are incorporated in the PRC, are governed by the income tax law of the PRC and is subject to PRC enterprise income tax (“EIT”). The EIT rate of PRC is 25%. Effective from January 1, 2008, the PRC’s statutory income tax rate is 25%. Hedu and Zhike did not generate taxable income in the PRC for the three months ended March 31, 2018 and 2017.

 

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 ended March 31, 2018 and 2017, 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 March 31,
			2018				2017
	Loss before income taxes		$	(654,112	)		$	(258,029	)
	Tax at the income tax rate			(137,364	)			(87,730	)
	Valuation allowance			137,364				87,730
	Income taxes		$	-			$	-

 

 

9.	Related Parties Transactions

 

Nature of relationships with related parties

 

	Name		Relationships with the Company
	Miss Liang Meihua (Miss Liang)		A director of the Company
	Mr Leung Kam Tim (Mr Leung)		A director of TAL
	Miss Kung Wai Fan Candy (Miss Kung)		Former director of TAL
	Spider Comm Sdn Bhd		Former common director 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. On December 18, 2017, Miss Liang forewent the right of conversion of the Note. As of March 31 2018 and December 31, 2017, the loan payable to Miss Liang was $256,410 and $256,410 respectively.

 

During the three months ended March 31, 2018 and 2017, the Company did not received advances from Miss Kung. On January 2, 2018, Miss Kung transferred and assigned all her loan receivable of $254,810 from TAL to Mr Leung. As of March 31, 2018 and December 31, 2017, the loan payable balance, without interest and due on demand, to Mr Leung was $256,322 and nil, respectively.

 

Spider Comm Sdn Bhd

 

During the three months ended March 31, 2018 and 2017, the Company incurred rental expenses of $5,349 and $4,723 respectively to Spider Comm Sdn Bhd.

 

 

10.	Share-Based Compensation Expenses

 

On January 18, 2018, the Company granted 100,000 shares of the Company’s common stock to a consultant, in exchange for its investor relation services to the Company for the year 2018. These shares were valued at $2.00 per share, the closing bid price of the Company’s common stock on the date of grant. This compensation expense of $200,000 was recognized in the first quarter of 2018.

 

On March 15, 2018, the Company granted 1,050,000 shares of the Company’s common stock to three consultants, in exchange for its professional services to the Company for the year 2018. These shares were valued at $1.30 per share, the closing bid price of the Company’s common stock on the date of grant. This compensation expense of $341,250 was recognized in the first quarter of 2018.

 

Total share compensation expenses recognized in the general and administrative expenses of the unaudited condensed consolidated statements of operations for the three months ended March 31, 2018 and 2017 was $541,250 and nil respectively.

 

11.	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 March 31, 2018 and 2017 were $30,115 and $27,278 respectively.

 

As of March 31, 2018, the Company was obligated under non-cancellable operating leases minimum rentals as follows:

 

	Twelve months ended March 31, 2018,
	2019		$	115,210
	2020			68,316
	Thereafter			15,725
	Total minimum lease payments		$	199,251

 

Legal proceeding

 

There has been no legal proceeding in which the Company is a party for the three months ended March 31, 2018.

 

12.	Subsequent Events

 

There were no events or transactions that would require recognition or disclosure in our unaudited condensed consolidated financial statements for the three months ended March 31, 2018.

 

 

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, a company incorporated under the laws of Samoa and a wholly-owned subsidiary of TEHG (“IRG Samoa”), (v) Innorei Group Sdn Bhd, a company incorporated under the laws of Malaysia and a wholly owned subsidiary of IRG Samoa (“IRG”), (vi) Zhike (Shenzhen) Corporate Marketing Co., Ltd, a company incorporated under the laws of PRC and a wholly-owned subsidiary of TAL (“Zhike”), and (vii) Guangzhou City Hedu Information Technology Co., Ltd, contractually controlled affiliate of Zhike formed under the laws of the PRC (“Hedu”).

 

Overview

  

Technovative Group Inc. is a technology holding company. The Company has entered into the FinTech (financial technology) Segment after the acquisition of Hedu. Through its subsidiaries and consolidated variable interest entity, the Company is engaged in delivering financial technology blockchain solutions and big data analytics technologies to financial service institutions in the Greater China Region (GCR) and the Southeast Asia Region. We are currently developing a suite of smart tools which include Chatbot, Smart Contracts, Data Analytics, Blockchain and Trading Platform targeted to Finical Service Institutions (FSI) in GCR.

 

As of March 31, 2018 and December 31, 2017, our total accumulated deficits, including accumulated deficit during development stage, were (3,684,819) and ($3,030,707), respectively. Our stockholders’ equity deficit was $3,270,083 and ($263,626), respectively.

 

Results of Operations

 

For the three months ended March 31, 2018 compared with the three months ended March 31, 2017.

 

Gross Revenues

 

The Company received sales revenues of $306,513 in the three months ended March 31, 2018 compared to $856 being generated in the three months ended March 31, 2017. The increase in revenues is engaged in delivering financial technology blockchain solutions and big data analytics technologies to financial service institutions.

 

Operating Expenses

 

Operating expenses for the three months ended March 31, 2018 and March 31, 2017 were $806,024 and $258,901 respectively. The expenses consisted of sales and marketing, R & D, payroll and benefits, filing fees, professional fees, and other general expenses, which the share-based compensation amounted $541,250 is the most significant 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 March 31, 2018 and March 31, 2017, were ($654,112) and ($258,029), respectively. Basic and diluted net loss per share from continuing operations amounted ($0.01) and ($0.00) respectively for the three months ended March 31, 2018 and March 31, 2017 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 $396,083 an increase in net loss for the three months ended March 31, 2018 comparing with three months ended March 31, 2017 was due to an increase in selling, general and administrative expenses, which the share-based compensation amounted $541,250 is the most significant expenses.

 

Liquidity and Capital Resources

 

At March 31, 2018 we had a working capital deficit of ($346,716) consisting of cash on hand of $113,533 as compared to a working capital deficit of ($3,913,398) and cash on hand of $227,186 as of December 31, 2017.

 

Net cash used in operating activities for the three months ended March 31, 2018 was ($185,611) as compared to net cash used in operating activities of ($255,465) for the three months ended March 31, 2017. The cash used in operating activities are for sales and marketing, R & D, payroll and benefits, depreciation, written off of property and equipment, filing fees, professional fees, and general expenses.

 

Net cash provided by (used in) investing activities for the three months ended March 31, 2018 was $70,761 as compared to ($6,167) for the three months ended March 31, 2017. The different was derived from investing activities on the redemption of short term investments.

 

Net cash provided by financing activities for the three months ended March 31, 2018 was $446 as compared to nil for the three months ended March 31, 2017 derived from advances from a director.

  

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 2 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 March 31, 2018, 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

 

Evaluation of Disclosure Control and Procedures.

 

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Form 10-Q, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate to allow timely decisions regarding required disclosure.

 

During the quarter ended March 31, 2018, procedures have been established to ensure that all significant, non-routine events and pending transactions must be evaluated by our CEO and CFO for disclosures in our consolidated financial statements and public filings.

 

We performed an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based on this evaluation, our CEO and CFO have concluded that, as of March 31, 2018, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported properly within the time periods specified by the SEC, and did not provide reasonable assurance that information required to be disclosed by the Company in such reports would be accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Such conclusion was based solely on the fact that the Company’s did not have effective internal control over financial reporting as of March 31, 2018, due to certain factors, including but not limited to, the lack of segregation of duties as the CEO and CFO roles are served by the same person, and the Company does not have a Chief Financial Officer that is familiar with the accounting and reporting requirements of a U.S. publicly-listed company, nor does it have a financial staff with accounting and financial expertise in U.S. generally accepted accounting principles (“US GAAP”) reporting. The Company is actively searching for a Chief Financial Officer with significant experience in public reporting company and a financial staff with expertise in US GAAP reporting.  

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting during the three months ended March 31, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

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 Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002;**
31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002;**
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. 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. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS		XBRL Instance*
101.SCH		XBRL Schema*
101.CAL		XBRL Calculation*
101.DEF		XBRL Definition*
101.LAB		XBRL Label*
101.PRE		XBRL Presentation*

 

*	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.”
**	Filed herewith

 

 

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: May 15. 2018	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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