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: SeptemberJune 30, 20172018

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)

 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.

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 NovemberAugust 13, 2017,2018, the registrant had 62,723,82090,108,745 shares of common stock, par value $.001 per share, issued and outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TECHNOVATIVE GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20172018 AND 20162017

(Stated in US Dollars)

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TECHNOVATIVE GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

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)

See accompanying notes to unaudited condensed consolidated financial statements

TECHNOVATIVE GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

See accompanying notes to unaudited condensed consolidated financial statements

TECHNOVATIVE GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

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,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 $0.001$.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 and two vendor’s nominees at February 22, 2017 as consideration. On April 24, 2018, IRG Samoa transferred all the outstanding common shares of IRG Malaysia to TGL, and the Company dissolved IRG Samoa.

The

On December 27, 2017, the Company isentered into a website creationShare 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 a loan agreement and e-commerce enablement provider fora series of contractual agreements (the “VIE Agreements”), through the online presence needsCompany’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 became a Variable Interest Entity (the “VIE”) of small to mid-sizethe Company, via Zhike, and as such, the Company shall control all of Hedu’s business retailers.affairs and economic interests through Zhike. Hedu specializes in blockchain and big data analytics technologies.

PrinciplesBasis of consolidationpresentation

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 at September 30, 2017 include the amountfinancial statements of TEHGall the subsidiaries. All transactions and TGL, a direct wholly owned subsidiary ofbalances between the Company and TAL, an indirect wholly-owned subsidiary of the Company. All significant inter-company transactions and balancesits subsidiaries have been eliminated inupon 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 threesix 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.

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:

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 FASBThe Company does not believe other recently issued but not yet effective accounting standards from 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 to2018-11, if currently adopted, would have a material impact on oureffect of the unaudited condensed consolidated financial statements.position, results of operation and cash flows.

As shown in the unaudited condensed consolidated financial statements, the Company has generated a net loss of $634,062$940,724 for the ninesix months ended SeptemberJune 30, 20172018 and an accumulated deficit of $2,914,733$3,971,431 as of SeptemberJune 30, 2017.2018. 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.

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 June 30, 2018 and 2017 were $536 and nil, respectively. Interest income earned from the short-term investments for six months ended June 30, 2018 and 2017 were $1,524 and nil, respectively. As of June 30, 2018, the Company did not have any short-term investments.

The depreciation expenses for the three months ended SeptemberJune 30, 2018 and 2017 were $4,839 and 2016 were $8,929 and $4,489,$10,047, respectively. The depreciation expenses for the ninesix months ended SeptemberJune 30, 2018 and 2017 were $9,507 and 2016 were $28,475 and $13,312,$19,522, respectively.

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,January 12, 2018, 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 of26,134,925 common stock to the vendor and two vendor’s nominees as consideration of the acquisition of IRG Samoa.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 SeptemberJune 30 2017,2018, there were 62,723,82090,008,745 shares of common stockCommon 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.

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 15% to 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 and ninesix months ended SeptemberJune 30, 20172018 and 2016,2017, 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 six months ended June 30, 2018 and 2017, and therefore not subject to any corporate tax in Malaysia.

InPRC

Hedu and Zhike are incorporated in the opinionPRC, are governed by the income tax law of the management, IRG Malaysia willPRC 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 any taxable income in the future.PRC for the three and six months ended June 30, 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 and ninesix months ended SeptemberJune 30, 20172018 and 2016,2017, 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.

Nature of relationships with related parties

Related party balances and transactions

On August 2, 2017, Thethe 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 SeptemberJune 30 20172018 and December 31, 2016,2017, the promissory noteloan payable to Miss Liang was $256,410 and $256,410, respectively.

During the six months ended June 30, 2018 and 2017, the Company did not receive 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 June 30, 2018 and December 31, 2017, the loan payable balance, without interest and due on demand, to Mr Leung was $256,786 and nil, respectively.

During the three months and ninesix months ended SeptemberJune 30, 20172018 and 2016,2017, the Company did not receive anyowed advances of $46,331 for disbursements from Miss Kung.Mr Huang. As of SeptemberJune 30, 20172018 and December 31, 2016,2017, the loan payable balance, to Miss Kung was $257,317 and $258,215 respectively, without interest and due on demand.demand, to Mr Huang was $47,353 and nil, respectively.

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 SeptemberJune 30, 20172018 and 2016,2017, the Company incurred rental expenses of $5,050$5,321 and $nil$4,723 respectively to Spider Comm Sdn Bhd. During the ninesix months ended SeptemberJune 30, 20172018 and 2016,2017, the Company incurred rental expenses of $14,496$10,670 and $nil$9,446 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.

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. Compensation expense of $682,500 was recognized in the first half year 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 June 30, 2018 and 2017 was $341,250 and nil, respectively, and for the six months ended June 30, 2018 and 2017 was $882,500 and nil, respectively.

Operating Leaselease

The Company leases a number of properties under operating leases. Rental expenses under operating leases for the three months ended SeptemberJune 30, 2018 and 2017 were $5,321 and 2016 were $5,050 and $32,980$5,883 respectively. Rental expenses under operating leases for the ninesix months ended SeptemberJune 30, 2018 and 2017 were $24,148 and 2016 were $38,211 and $98,844$33,161, respectively.

As of SeptemberJune 30 2017,2018, the Company was obligated under non-cancellable operating leases minimum rentals as follows:

Legal Proceedingproceeding

There has been no legal proceeding in which the Company is a party for the ninesix months ended SeptemberJune 30, 2017.2018.

There were no events or transactions that would require recognition or disclosure in our unaudited condensed consolidated financial statements for the ninesix months ended SeptemberJune 30, 2017.2018.

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, (“IRG Samoa”), , a company incorporated under the laws of Samoa and a wholly ownedwholly-owned subsidiary of TGL, and (v)TEHG (“IRG Malaysia”Samoa”), (v) Innorei Group Sdn Bhd, a Malaysian company incorporated under the laws of Malaysia and a wholly owned subsidiary of [IRG Samoa]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

Overview

Technovative Group Inc. (“TEHG”) is a holding company that is a technology software development company through its subsidiaries and consolidated variable interest entity. TEHG’s operating entity, Hedu.ai, provides Distributed Ledger Transaction solutions and Big Data analytics services in the Greater China Region (“GCR”) and the Southeast Asia Region to various enterprise clients with a focus on financial service institutions (“FSI”). Additional services that Hedu.ai provides include Artificial Intelligence and Cloud Computing solutions.

The Company isHedu.ai charges a website creationservice fee on its enterprise clients based upon the complexity of the projects 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 ournumber of users and volume of resources consumed.

Providing customized technology development solutions to enterprise clients also enables Hedu.ai to promotefurther develop its existing proprietary technologies such as Hedu SmartSuite™ and its core product for the consumer 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 utilizean Artificial Intelligence Chatbot. The Chatbot enables users to manage their websitesentire financial life, from monitoring spending to saving and e-commerce stores, as well as keep tracksending money, all from the familiar interface of userinstant messenger platform. Our proprietary Chatbot uses state of the art machine learning technology to interpret complex data such as daily viewsto answer questions in real time. The revenue streams of the Chatbot are divided as: 1) subscription; 2) referral fees; 3) ad serving; 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 survive4) data analytics 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.market research.

As of SeptemberJune 30, 20172018 and December 31, 2016,2017, our total accumulated deficits, including accumulated deficit during development stage, were $2,914,733($3,971,431) and $2,280,671,($3,030,707), respectively. Our stockholders’ equity was ($150,257)$2,914,996 and $165,462,($263,626), respectively. The Company also experienced insufficient cash flows from operations and will be required to obtain continuous financial support from the shareholders. 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 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. The financial statements included elsewhere in this Report do not include any adjustments that might result from the outcome of this uncertainty.

Results of Operations

For the three months ended SeptemberJune 30, 20172018 compared with the three months ended SeptemberJune 30, 20162017

Gross Revenues

The Company received sales revenues of $49$150,650 in the three months ended SeptemberJune 30, 20172018 and compared to nil$1,256 in the three months ended SeptemberJune 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.2017.

Operating Expenses

Operating expenses for the three months ended June 30, 2018 and June 30, 2017 were $646,709 and $202,867, respectively. The expenses consisted of sales and marketing, research and development, payroll and benefits, filing fees, professional fees, payroll and benefits, and other general expenses which the share-based compensation amounted $341,250 is the most significant expense.

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 SeptemberJune 30, 2018 and June 30, 2017, were ($442,287) and September 30, 2016, were $174,428 and $165,025,($201,605), respectively. Basic and diluted net loss per share from continuing operations amounted $0.00(0.00) and $0.00(0.00) respectively for the three months ended SeptemberJune 30, 20172018 and SeptemberJune 30, 20162017 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$240,682 increase in net loss for the three months ended SeptemberJune 30, 20172018 compared withto the three months ended SeptemberJune 30, 20162017 was due to an increase in selling, general and administrative expenses with continuous financial resources input.

input and where the share-based compensation that amounted to $341,250 was the most significant expense.

For the ninesix months ended SeptemberJune 30, 20172018 compared with the ninesix months ended SeptemberJune 30, 20162017

Gross Revenues

The Company received sales revenues of $2,161$457,163 in the ninesix months ended SeptemberJune 30, 20172018 and compared to nil$2,112 in the ninesix months ended SeptemberJune 30, 2016.2017.

Operating Expenses

Operating expenses for the ninesix months ended SeptemberJune 30, 2018 and June 30, 2017 were $1,452,733 and September 30, 2016 were $628,110 and $597,191,$461,768, respectively. The expenses consisted of sales and marketing, research and development, payroll and benefits, filing fees, professional fees, payroll and benefits, and other general expenses.expenses where the share-based compensation that amounted to $882,500 was the most significant expense.

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 ninesix months ended SeptemberJune 30, 2018 and June 30, 2017, were ($940,724) and September 30, 2016, were $634,062 and $597,063,($459,634), respectively. Basic and diluted net loss per share from continuing operations amounted $0.01(0.01) and $0.01(0.01) respectively for the ninesix months ended SeptemberJune 30, 20172018 and SeptemberJune 30, 20162017 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$481,090 increase in net loss for the ninesix months ended SeptemberJune 30, 2017 comparing2018 compared with ninethe six months ended SeptemberJune 30, 20162017 was due to an increase in selling, general and administrative expenses with continuous financial resources input.input and which the share-based compensation amounted $882,500 is the most significant expense.  

Liquidity and Capital Resources

At SeptemberAs of June 30, 20172018, we had a working capital deficitsdeficit of $309,948$692,303, consisting of cash on hand of $333,220$112,749 as compared to a working capital deficitsdeficit of $15,287$3,913,398 and cash on hand of $668,566$227,186 as of December 31, 2016.2017.

Net cash used in operating activities for the ninesix months ended SeptemberJune 30, 20172018 was $581,551$326,681 as compared to net cash used in operating activities of $548,945$433,701 for the ninesix months ended SeptemberJune 30, 2016.2017. The cash used in operating activities are mainly for sales and marketing, R & D, payroll and benefits, depreciation, written off of property and equipment, filing fees, professional fees, payroll and benefits and general expenses.

Net cash provided by (used in) investing activities for the ninesix months ended SeptemberJune 30, 20172018 was ($5,290)$180,633 as compared to ($2,831)net cash used in investing activities of $12,892 for the ninesix months ended SeptemberJune 30, 2016.2017. The differentdifference was derived from investing activities on fixed assets.redemption of short-term investments and purchase of property and equipment.

Net cash provided by (used in) financing activities for the ninesix months ended SeptemberJune 30, 20172018 was 256,410$47,148 as compared to nil for the ninesix months ended SeptemberJune 30, 20162017 derived from issuance of common stock and advances from directors.a director and a related party.

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 SeptemberJune 30, 2017,2018, 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

Disclosures Control and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is definedDisclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in Rule 13a-15(f) or 15d-15(f) promulgatedour reports filed under the Exchange Act, such as a processthis 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 by, orwith 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.

We performed an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, 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:

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 effectivenessand operation 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 controlsBased on this evaluation, our CEO and procedure include, without limitations,CFO have concluded that, as of June 30, 2018, our disclosure controls and procedures designedwere 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 thesuch reports that it files or submits under the Exchange Act iswould be accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Our Management is responsible for monitoringSuch conclusion was based solely on 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 concludedfact that as of September 30, 2017, the Company’s disclosure controls and procedures weredid 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 Committeeas 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 wasJune 30, 2018, due to deficiencies that existed incertain factors, including but not limited to, 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 consistentas 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 control objectives; and (3) ineffective controls over period end financial disclosurethe accounting and reporting processes.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 aforementioned material weaknesses were identified by ourCompany is actively searching for a Chief ExecutiveFinancial Officer with significant experience in connectionpublic reporting company and a financial staff with the review of our financial statements as of September 30, 2017.expertise in US GAAP reporting.

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 washave been no changechanges in our internal controls over financial reporting that occurred during the period covered by this Report, which hasthree months ended June 30, 2018, that have 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.

On July 12, 2018, the Company issued 100,000 shares of the Company’s common stock to TraDigital Marketing Group, Inc., a service provider of the Company, equivalent to $100,000 worth of services provided from January to June 2018. All of the securities referenced above are offered and issued in reliance upon the exemption from registration pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D promulgated thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6.  EXHIBITS.

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.

2019