UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended:  September 30, 2016

 

or

 

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

 

For the transition period from __________________ to __________________

 

Commission File Number:  333-175148

 

Technovative Group, Inc.

(Exact name of registrant as specified in its charter)

 

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

 

  Unit 701, 7/F, Tower 2, Silvercord,

30 Canton Road, Tsim ShaTsui, KLN, Hong Kong

(Address of Principal Executive Offices)

 

                          Tel. +852 2162 7529                            

(Registrant’s telephone number, including area code)

 

Not Applicable

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

 

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

 

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

 

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

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☒
  Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

As of November 1, 2016, the registrant had 54,723,820 shares of common stock, par value $.001 per share, issued and outstanding.  

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page No.
  PART I – FINANCIAL INFORMATION    
     
Item 1. Financial Statements 1
     
  Balance Sheets as of September 30, 2016 (Unaudited) and December 31, 2015 1
     
  Unaudited Statements of Operations and Comprehensive Income for the Nine Months Ended September 30, 2016 and 2015 2
     
  Unaudited Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015 3
     
  Notes to Financial Statements (unaudited) 4
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 12
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 15
     
Item 4. Controls and Procedures. 15
     
  PART II – OTHER INFORMATION    
     
Item 1. Legal Proceedings. 18
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 18
     
Item 3. Defaults Upon Senior Securities. 18
     
Item 4. Mine Safety Disclosures 18
     
Item 5. Other Information  18
     
Item 6. Exhibits. 18
     
Signatures      19
     
Certifications        

 

 

 

 

Explanatory Note

 

Technovative Group, Inc. (“Technovative Group”) has filed this quarterly report on Form 10-Q which was due on or about November 15, 2016 and is, therefore, delinquent. Technovative Group is filing all past due periodic reports so as to become current in all its periodic filings. Technovative Group ceased filing periodic reports after filing its Form 10-Q on November 16, 2016 for the period ended September 30, 2016. The information regarding its state of incorporation, address and telephone number on the cover page of this Form 10-Q reflects the information as of the date of filing this delinquent Form 10-Q.

 

 

 

  

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

TECHNOVATIVE GROUP, INC.

(a development stage company)

UNAUDITED CONSOLIDATED BALANCE SHEET

 

    As of  
    September 30,
2016 		    December 31, 2015  
    (Unaudited)        
ASSETS            
CURRENT ASSETS                
Cash and cash equivalents   $ 1,075,941     $ 1,628,083  
Prepayments, deposits and other receivables     77,172       94,707  
Total current assets     1,153,113       1,722,790  
Property and equipment, net     19,795       30,305  
TOTAL ASSETS   $ 1,172,908     $ 1,753,095  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES                
Other payables and accrued liabilities   $ 26,269     $ 10,631  
Due to a director     259,211       259,341  
Total current liabilities     285,480       269,972  
Total liabilities     285,480       269,972  
                 
STOCKHOLDERS’ EQUITY                
Preferred stock, $0.001 par value, authorized: 10,000,000 shares, nil shares issued and outstanding     -       -  
Common stock, $0.001 par value, authorized: 200,000,000 shares, 54,723,820 and 54,723,820 shares respectively issued and outstanding as of September 30, 2016 and December 31, 2015 *     54,724       54,724  
Additional paid-in capital *     2,376,402       2,376,402  
Accumulated losses     (1,554,401 )     (957,338 )
Accumulated other comprehensive income     10,703       9,335  
Total stockholders’ equity     887,428       1,483,123  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 1,172,908     $ 1,753,095  

 

* The number of shares of common stock has been retroactively restated to reflect the 1-for-20 reverse stock split effected on March 2, 2015 and 1-for-10 reverse stock split effected on May 11, 2015.

 

See accompanying notes to unaudited condensed consolidated financial statements

 

1

 

 

TECHNOVATIVE GROUP, INC.

(a development stage company)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

 

    For the three months ended
September 30, 		    For the nine months ended
September 30, 		 
    2016     2015     2016     2015  
      (Unaudited)       (Unaudited)       (Unaudited)       (Unaudited)  
                                 
Revenues   $ -     $ -     $ -     $ -  
Costs of revenues     -       -       -       -  
Gross profit     -       -       -       -  
                                 
Selling, general and administrative     (165,045 )     (355,525 )     (597,191 )     (787,546 )
Loss from operations     (165,045 )     (355,525 )     (597,191 )     (787,546 )
                                 
Interest income     20       18       128       42  
Loss before income taxes     (165,025 )     (355,507 )     (597,063 )     (787,504 )
                                 
Income taxes     -       -       -       -  
Net loss   $ (165,025 )   $ (355,507 )   $ (597,063 )   $ (787,504 )
                                 
Other comprehensive income                                
Foreign currency translation adjustments     764       613       1,368       1,482  
Comprehensive loss   $ (164,261 )   $ (354,894 )   $ (595,695 )   $ (786,022 )
                                 
Earnings per share                                
                                 
Basic and diluted loss per common share   $ (0.00 )   $ (0.01 )   $ (0.01 )   $ (0.01 )
                                 
Basic and diluted weighted average common shares outstanding     54,723,820       54,469,215       54,723,820       52,584,094  

 

* The number of shares of common stock has been retroactively restated to reflect the 1-for-20 reverse stock split effected on March 2, 2015 and 1-for-10 reverse stock split effected on May 11, 2015.

 

See accompanying notes to unaudited condensed consolidated financial statements

 

2

 

 

TECHNOVATIVE GROUP, INC.

(a development stage company)

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    For the nine months ended
September 30, 		 
    2016     2015  
    (Unaudited)     (Unaudited)  
Cash Flows from Operating Activities:            
Net loss   $ (597,063 )   $ (787,504 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation     13,312       8,698  
Changes in operating assets and liabilities:                
Deposits, prepayments and other receivables     17,258       (99,255 )
Other payables and accrued liabilities     17,548       (69,462 )
Net Cash Used In Operating Activities     (548,945 )     (947,523 )
                 
Cash Flows from Investing Activities:                
Purchase of property and equipment     (2,831 )     (40,812 )
Net Cash Used In Investing Activities     (2,831 )     (40,812 )
                 
Cash Flows from Financing Activities:                
Proceeds from the issuance of common shares     -       2,412,621  
Advances from a director     -       258,124  
Net Cash Provided by Financing Activities     -       2,670,745  
                 
Effect of Exchange Rate Changes on Cash and Cash Equivalents     (366 )     1,694  
                 
Net (Decrease) Increase In Cash and Cash Equivalents     (552,142 )     1,684,104  
Cash and Cash Equivalents at Beginning of Period     1,628,083       -  
Cash and Cash Equivalents at End of Period   $ 1,075,941     $ 1,684,104  
                 
Supplemental Cash Flow Information:                
Cash paid for interest expense   $ -     $ -  
Cash paid for income tax   $ -     $ -  

 

See accompanying notes to unaudited condensed consolidated financial statements

  

3

 

 

TECHNOVATIVE GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Organization and Basis of Presentation

  

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

  

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

  

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

  

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

 

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

 

4

 

 

Principles of consolidation

  

The unaudited condensed consolidated financial statements at September 30, 2016 include the amount of TEHG and TGL, a direct wholly owned subsidiary of the Company and TAL, an indirect wholly-owned subsidiary of the Company. All significant inter-company transactions and balances have been eliminated in consolidation.

  

Use of estimates

  

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

  

Income taxes  

  

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

  

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

 

5

 

 

Cash and cash equivalents

 

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

 

Fair value of financial instruments

 

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

  

Earnings per share

 

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

 

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

 

Plant and equipment

 

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

  

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

 

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.

 

6

 

 

Recent accounting pronouncements

 

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

 

2. Going Concern

 

As shown in the unaudited condensed consolidated financial statements, the Company has generated a net loss of $597,063 for the nine months ended September 30, 2016 and an accumulated deficit of $1,554,401 as of September 30, 2016. The Company also experienced insufficient cash flows from operations and will be required continuous financial support from the shareholder. The Company will need to raise capital to fund its operations until it is able to generate sufficient revenue to support the future development. Moreover, the Company may be continuously raising capital through the sale of debt and equity securities.

 

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

 

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

 

3. Property and Equipment, Net

 

      As of  
      September 30,
2016 		    December 31,
2015 		 
      (Unaudited)        
               
  Furniture, fixtures and equipment   $ 17,079     $ 14,252  
  Leasehold improvements     29,090       29,105  
  Total property and equipment     46,169       43,357  
  Less:  Accumulated depreciation     (26,374 )     (13,052 )
  Total property and equipment, net   $ 19,795     $ 30,305  

 

The depreciation expenses for the three months ended September 30, 2016 and 2015 were $4,489 and $4,476, respectively. The depreciation expenses for the nine months ended September 30, 2016 and 2015 were $13,312 and $8,698, respectively.

 

7

 

 

4. Common Stock

 

On April 21, 2015, the Company entered into subscription agreements (“Subscription Agreements”) with 13 investors (the “Investors”) (the “Transaction”). The Transaction was closed on June 25, 2015. Pursuant to the Subscription Agreements, on June 25, 2015, the Company issued 1,976,474 shares of common stock of the Company to the 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.

 

As of September 30, 2016, there were 54,723,820 shares of Common Stock and no shares of preferred stock issued and outstanding.

 

5. Earnings Per Share

 

      For the three months ended
September 30, 		    For the nine months ended
September 30, 		 
      2016     2015     2016     2015  
      (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
                           
  Net loss attributable to common shareholders for computing basic net loss per common share   $ (165,025 )   $ (355,507 )   $ (597,063 )   $ (787,504 )
                                   
  Weighted average number of common shares outstanding – Basic and diluted     54,723,820       54,469,215       54,723,820       52,584,094  
                                   
  Basic and diluted loss per common share   $ (0.00 )   $ (0.01 )   $ (0.01 )   $ (0.01 )

 

8

 

 

6. Income Taxes

 

The Company and its subsidiaries file separate income tax returns.

 

The United States of America

 

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

 

Samoa

 

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

 

Hong Kong

 

TAL is incorporated in Hong Kong and Hong Kong’s profits tax rate is 16.5%. TAL HK did not earn any income that was derived in Hong Kong for the three months and nine months ended September 30, 2016 and 2015, and therefore, TAL HK was not subject to Hong Kong profits tax.

 

The Company has not recognized an income tax benefit for its operating losses generated based on uncertainties concerning its ability to generate taxable income in future periods. The tax benefit for the periods presented is offset by a valuation allowance established against deferred tax assets arising from the net operating losses and other temporary differences, the realization of which could not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not. For the three months and nine months ended September 30, 2016 and 2015, the Company incurred losses, resulting from operating activities, which result in deferred tax assets at the effective statutory rates. The deferred tax asset has been off-set by an equal valuation allowance.

 

      For the three months ended
September 30, 		    For the nine months ended
September 30, 		 
      2016     2015     2016     2015  
      (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
                           
  Loss before income taxes
  $ (165,025 )   $ (355,507 )   $ (597,063 )   $ (787,504 )
                                   
  Tax at the income tax rate 34%     (56,109 )     (120,872 )     (203,001 )     (267,751 )
  Valuation allowance     56,109       120,872       203,001       267,751  
  Income taxes   $ -     $ -     $ -     $ -  

 

9

 

 

7. Related Parties Transactions

 

Nature of relationships with related parties

   

  Name   Relationships with the Company
  Miss Kung Wai Fan Candy (Miss Kung)   A director of the Company

 

Related party balances and transactions

 

During the nine months ended September 30, 2016 and 2015, the Company received advances from Miss Kung in aggregate of $nil and $258,145 (HKD 2,000,000), respectively without interest and due on demand. As of September 30, 2016 and December 31, 2015, the loan payable balance to Miss Kung was $259,211 and $259,341 respectively.

 

8. Commitments and Contingencies

 

Operating Lease

 

The Company leases a number of properties under operating leases. Rental expenses under operating leases for the three months ended September 30, 2016 and 2015 were $32,980 and $32,997 respectively. Rental expenses under operating leases for the nine months ended September 30, 2016 and 2015 were $98,844 and $75,244 respectively.

 

As of September 30, 2016, the Company was obligated under non-cancellable operating leases minimum rentals as follows:

 

  Twelve months ended September 30, 2016,      
  2017   $ 56,725  
  2018     -  
  Thereafter     -  
  Total minimum lease payments   $ 56,725  

  

10

 

 

Legal Proceeding

 

There has been no legal proceeding in which the Company is a party for the nine months ended September 30, 2016.

 

9. Subsequent Events

 

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 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.

 

11

 

 

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”), and (iii) Technovative Asia Limited, a company incorporated under the laws of Hong Kong and a wholly-owned subsidiary of TGL (“TAL”).

 

Overview   

 

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

 

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

 

As of September 30, 2016 and December 31, 2015, our total accumulated deficits, including accumulated deficit during development stage, were $1,554,401 and $957,338, respectively. Our stockholders’ equity was $887,428 and $1,483,123, respectively.

 

Results of Operations

  

For the three months ended September 30, 2016 compared with the three months ended September 30, 2015

 

Gross Revenues

 

The Company received sales revenues of nil in the three months ended September 30, 2016 and September 30, 2015.

 

Operating Expenses

 

Operating expenses for the three months ended September 30, 2016 and September 30, 2015 were $165,045 and $355,525, respectively. The expenses consisted of filing fees, professional fees, payroll and benefits, and other general expenses.

 

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

 

Net Profit (Loss)

 

Net (losses) for the three months ended September 30, 2016 and September 30, 2015, were ($165,025) and ($355,507), respectively. Basic and diluted net (loss) per share from continuing operations amounted ($0.00) and ($0.01) respectively for the three months ended September 30, 2016 and September 30, 2015 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 $190,482 decrease in net (loss) for the three months ended September 30, 2016 comparing with three months ended September 30, 2015 was due to a decrease in general and administrative expenses with continuous financial resources input.   

 

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For the nine months ended September 30, 2016 compared with the nine months ended September 30, 2015

 

Gross Revenues

 

The Company received sales revenues of nil in the nine months ended September 30, 2016 and September 30, 2015.

 

Operating Expenses

 

Operating expenses for the nine months ended September 30, 2016 and September 30, 2015 were $597,191 and $787,546, respectively. The expenses consisted of filing fees, professional fees, payroll and benefits, and other general expenses.

 

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

 

Net Profit (Loss)

 

Net (losses) for the nine months ended September 30, 2016 and September 30, 2015, were ($597,063) and ($787,504), respectively. Basic and diluted net (loss) per share from continuing operations amounted ($0.01) and ($0.01) respectively for the nine months ended September 30, 2016 and September 30, 2015 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 $190,441 decrease in net (loss) for the nine months ended September 30, 2016 comparing with nine months ended September 30, 2015 was due to a decrease in general and administrative expenses with continuous financial resources input.

   

Liquidity and Capital Resources

 

At September 30, 2016 we had a working capital surplus of $867,633 consisting of cash on hand of $1,075,941 as compared to a working capital surplus of $1,452,818 and cash on hand of $1,628,083 as of December 31, 2015.

 

Net cash provided by (used in) operating activities for the nine months ended September 30, 2016 was ($548,945) as compared to net cash used in operating activities of ($947,523) for the nine months ended September 30, 2015. The cash used in operating activities are mainly for filing fees, professional fees, payroll and benefits and general expenses.

 

Net cash provided by (used in) investing activities for the nine months ended September 30, 2016 was ($2,831) as compared to ($40,812) for the nine months ended September 30, 2015. The different was derived from investing activities on fixed assets.

 

Net cash provided by financing activities for the nine months ended September 30, 2016 was nil as compared to $2,670,745 for the nine months ended September 30, 2015 derived from issuance of common stock and advances from directors.

  

Critical Accounting Policies and Estimates

 

Use of Estimates

 

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

 

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Recently Issued Accounting Pronouncements

 

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

 

Off-Balance Sheet Arrangements

 

As of September 30, 2016, we did not have any off-balance sheet arrangements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

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

  

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosures Control and Procedures

 

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

 

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

 

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

 

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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, 2016, our CEO evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Disclosure controls and procedure include, without limitations, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure. Our Management is responsible for monitoring the process pursuant to which information is gathered and analyze such information to determine the extent to which such information requires disclosure in the reports filed with the Securities and Exchange Commission. Based on such evaluation, our CEO has concluded that as of September 30, 2016, the Company’s disclosure controls and procedures were not effective. The Company does not have any documented disclosure control and procedures and its management lacks sufficient familiarity with SEC reporting rules. As a result, the Company failed to file a Current Report on Form 8-K to report a private placement of 988,239 shares of Common Stock on September 2, 2015 as set forth in Item 5 of “Part II Other Information” below. 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, 2016, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in by the Committee of Sponsoring Organizations of the Treadway Commission’s 2013 Internal Control - Integrated Framework and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of September 30, 2016.

 

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.

 

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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 2015. Additionally, we plan to test our updated controls and remediate our deficiencies in year 2015.

 

Changes in internal controls over financial reporting

 

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

 

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

 

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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. [WAS THERE A PURCHASE BY FOO KHEE LONG DURING THIS PERIOD OR ONLY IN 2017?]

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6.  EXHIBITS.

 

10.1 Form of Subscription Agreement dated September 2, 2015 (incorporated by reference herein to Exhibit 10.1 to the Company’s 10-Q filed November 16, 2015)
   
10.2 Share Sales Agreement dated October 26, 2016 between Technovative Group, Inc. and Foo Khee Long (incorporated by  reference herein to Exhibit 10.1 to the Company’s Form 8-K filed October 19, 2017)
   
10.3 Promissory Note dated August 2, 2017 Issued by Technovative Group, Inc. to Liang Meihua (incorporated by reference herein to Exhibit 10.1 to the Company’s Form 8-K filed October 2, 2017)
   
31.1 Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer
   
31.2 Rule 13a-14(a)/15d-14(a) Certification of principal financial officer
   
32.1 Section 1350 Certification of principal executive officer and principal financial and accounting officer
   
101 XBRL data files of Financial Statements and Notes contained in this Quarterly Report on Form 10-Q.

 

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

 

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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: October 24, 2017 By: /s/ Lin Kuan Liang Nicolas
  Name: Lin Kuan Liang Nicolas
  Title: Chief Executive Officer, President, Treasurer, Secretary, Director
    (Principal Executive and Financial Officer)

 

 

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