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: June 30, 2018

☐ 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	☐	Smaller reporting company	☒
(Do not check if 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 August 13, 2018, the registrant had 90,108,745 shares of common stock, par value $.001 per share, issued and outstanding.

TABLE OF CONTENTS

		Page No.

	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Balance Sheets as of June 30, 2018 (Unaudited) and June 30, 2017	2

	Unaudited Statements of Operations and Comprehensive Income for the Six Months Ended June 30, 2018 and 2017	3

	Unaudited Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017	4

	Notes to Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	17

Item 4.	Controls and Procedures.	17

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	18

Item 1A.	Risk Factors	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

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TECHNOVATIVE GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(Stated in US Dollars)

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	PAGES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS	2

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS	3

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	4

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	5

TECHNOVATIVE GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

	As of
	June 30, 2018			December 31, 2017
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	112,749		$	227,186
Trade receivables		231,599			-
Prepayments, deposits and other receivables		714,732			60,718
Short-term investments		-			176,741
Total current assets		1,059,080			464,645
Property and equipment, net		96,468			138,941
Goodwill		4,033,530			4,033,530
TOTAL ASSETS	$	5,189,078		$	4,637,116

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Trade payables	$	-		$	7,283
Receipt in advance		-			60,414
Loan from a director		256,410			256,410
Due to a director		256,786			257,007
Due to a related party		47,353			-
Acquisition and contingent consideration payables		1,045,397			3,658,889
Other payables and accrued liabilities		145,437			138,040
Total current liabilities		1,751,383			4,378,043
Acquisition and contingent consideration payables		522,699			522,699
Total liabilities		2,274,082			4,900,742

STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value, authorized: 10,000,000 shares, nil share issued and outstanding		-			-
Common stock, $0.001 par value, authorized: 200,000,000 shares, 90,008,745 and 62,723,820 shares respectively issued and outstanding as of June 30, 2018 and December 31, 2017		90,009			62,724
Additional paid-in capital		6,839,610			2,688,402
Accumulated losses		(3,971,431	)		(3,030,707	)
Accumulated other comprehensive income		(43,192	)		15,955
Total stockholders’ equity / (deficit)		2,914,996			(263,626	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	5,189,078		$	4,637,116

See accompanying notes to unaudited condensed consolidated financial statements

TECHNOVATIVE GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Stated in US Dollars)

	For the three months ended June 30,						For the six months ended June 30,
	2018			2017			2018			2017
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues	$	150,650		$	1,256		$	457,163		$	2,112
Costs of revenues		(21,015	)		-			(21,015	)		-
Gross profit		129,635			1,256			436,148			2,112

Share-based compensation		(341,250	)		-			(882,500	)		-
Selling, general and administrative		(305,459	)		(202,867	)		(570,233	)		(461,768	)
Total operating expenses		(646,709	)		(202,867	)		(1,452,733	)		(461,768	)

Loss from operations		(517,074	)		(201,611	)		(1,016,585	)		(459,656	)

Interest income		456			6			1,530			22
Sundry income		74,331			-			74,331			-
Total other income		74,787			6			75,861			22

Loss before income taxes		(442,287	)		(201,605	)		(940,724	)		(459,634	)
Income taxes		-			-			-			-
Net loss	$	(442,287	)	$	(201,605	)	$	(940,724	)	$	(459,634	)

Other comprehensive income
Foreign currency translation adjustments		(68,475	)		4,204			(59,147	)		(2,548	)
Comprehensive loss	$	(510,762	)	$	(197,401	)	$	(999,871	)		(462,182	)

Loss per share

Basic and diluted loss per common share	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)

Basic and diluted weighted average common shares outstanding		90,008,745			62,723,820			87,819,689			60,381,279

See accompanying notes to unaudited condensed consolidated financial statements

TECHNOVATIVE GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

	For the six months ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Cash Flows from Operating Activities:
Net loss	$	(940,724	)	$	(459,634	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		9,507			19,522
Written off of property and equipment		34,519			-
Share-based compensation		882,500			-
Changes in operating assets and liabilities:
Trade receivables		(234,844	)		-
Deposits, prepayments and other receivables		29,026			5,317
Accounts payable		(7,443	)		-
Receipt in advance		(60,586	)		-
Other payables and accrued liabilities		(38,636	)		1,094
Net Cash Used In Operating Activities		(326,681	)		(433,701	)

Cash Flows from Investing Activities:
Redemption of short-term investments		180,633			-
Purchase of property and equipment		-			(12,892	)
Net Cash Provided by (Used In) Investing Activities		180,633			(12,892	)

Cash Flows from Financing Activities:
Advances from a director		817			-
Advances from a related party		46,331			-
Net Cash Provided By Financing Activities		47,148			-

Effect of Exchange Rate Changes on Cash and Cash Equivalents		(15,537	)		(6,163	)

Net Decrease In Cash and Cash Equivalents		(114,437	)		(452,756	)
Cash and Cash Equivalents at Beginning of Period		227,186			668,566
Cash and Cash Equivalents at End of Period	$	112,749		$	215,810

Supplemental Cash Flow Information:
Cash paid for interest expense	$	-		$	-
Cash paid for income tax	$	-		$	-

Supplemental Disclosure of Non-Cash Transactions:
Issuance of shares for acquisition	$	2,613,493		$	320,000
Issuance of shares for services	$	1,565,000		$	-

See accompanying notes to unaudited condensed consolidated financial statements

TECHNOVATIVE GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

1.	Organization and Basis of Presentation

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

Effective on February 26, 2015, the Company amended its Articles of Incorporation to: (i) change the Company’s name from “Horizon Energy Corp.” to “Technovative Group, Inc.” and (ii) implement a 1-for-20 reverse stock split of its issued and outstanding common stock, par value $.001 per share.

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

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

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

On October 26, 2016, the Company acquired 100% of the outstanding common shares of Innorei Group (Samoa) Limited (“IRG Samoa”), a holding company of Innorei Group Sdn. Bhd. (“IRG Malaysia”) IRG Malaysia was a mobile solutions apps development and information technology service provider. The Company issued 8,000,000 common stock to the vendor at February 22, 2017 as consideration. On April 24, 2018, IRG Samoa transferred all the outstanding common shares of IRG Malaysia to TGL, and the Company dissolved IRG Samoa.

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

Basis of presentation

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

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

Use of estimates

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

Goodwill

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

Revenue recognition

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

Income taxes

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

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

Cash and cash equivalents

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

Fair value of financial instruments

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

Plant and equipment

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

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

Comprehensive income

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

Recent accounting pronouncements

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

The Company does not believe other recently issued but not yet effective accounting standards from ASU 2018-11, if currently adopted, would have a material effect of the unaudited condensed consolidated financial position, results of operation and cash flows.

2.	Going Concern

As shown in the unaudited condensed consolidated financial statements, the Company has generated a net loss of $940,724 for the six months ended June 30, 2018 and an accumulated deficit of $3,971,431 as of June 30, 2018. The Company also experienced insufficient cash flows from operations and will be required continuous financial support from the shareholder. The Company will need to raise capital to fund its operations until it is able to generate sufficient revenue to support the future development. Moreover, the Company may be continuously raising capital through the sale of debt and equity securities.

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

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

3.	Short-Term Investments

Short-term investments are highly liquid available-for-sale securities in accounts maintained with commercial banks within the PRC. Interest income earned from the short-term investments for three months ended 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.

4.	Property and Equipment, Net

	As of
	June 30, 2018			December 31, 2017
	(Unaudited)

Furniture, fixtures and equipment	$	141,603		$	146,668
Leasehold improvements		2,828			45,217
Total property and equipment		144,431			191,885
Less: Accumulated depreciation		(47,963	)		(52,944	)
Total property and equipment, net	$	96,468		$	138,941

The depreciation expenses for the three months ended June 30, 2018 and 2017 were $4,839 and $10,047, respectively. The depreciation expenses for the six months ended June 30, 2018 and 2017 were $9,507 and $19,522, respectively.

5.	Deposits, prepayments and other receivables

	As of
	June 30, 2018		December 31, 2017
	(Unaudited)

Prepaid share-based compensation expenses	$	682,500	$	-
Other receivables		32,232		60,718
Total deposits, prepayments and other receivables	$	714,732	$	60,718

6.	Common Stock

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

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

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

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

As of June 30 2018, there were 90,008,745 shares of Common Stock and no shares of preferred stock issued and outstanding.

7.	Loss Per Share

	For the three months ended June 30,						For the six months ended June 30,
	2018			2017			2018			2017
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Net loss attributable to common shareholders for computing basic net loss per common share	$	(442,287	)	$	(201,605	)	$	(940,724	)	$	(459,634	)

Weighted average number of common shares outstanding – Basic and diluted		90,008,745			62,723,820			87,819,689			60,381,279

Basic and diluted loss per common share	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)

8.	Income Taxes

The Company and its subsidiaries file separate income tax returns.

The United States of America

The Company is incorporated in the State of Wyoming in the U.S. and is subject to a gradual U.S. federal corporate income tax. Federal Corporate rate reduced to 21% (from brackets with a maximum tax rate of 35%) as from January 1, 2018. The State of Wyoming does not impose any corporate state income tax.

Samoa

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

Hong Kong

TAL is incorporated in Hong Kong and Hong Kong’s profits tax rate is 16.5%. TAL HK did not earn any income that was derived in Hong Kong for the three and six months ended June 30, 2018 and 2017, and therefore, TAL HK was not subject to Hong Kong profits tax.

Malaysia

IRG Malaysia is incorporated in Malaysia and Malaysia’s corporate tax standard rate is 24%. The Company did not generate any income during the six months ended June 30, 2018 and 2017, and therefore not subject to any corporate tax in Malaysia.

PRC

Hedu and Zhike are incorporated in the PRC, are governed by the income tax law of the PRC and is subject to PRC enterprise income tax (“EIT”). The EIT rate of PRC is 25%. Effective from January 1, 2008, the PRC’s statutory income tax rate is 25%. Hedu and Zhike did not generate taxable income in the PRC for the three 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 and six months ended June 30, 2018 and 2017, the Company incurred losses, resulting from operating activities, which result in deferred tax assets at the effective statutory rates. The deferred tax asset has been off-set by an equal valuation allowance.

	For the three months ended June 30,						For the six months ended June 30,
	2018			2017			2018			2017
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Loss before income taxes	$	(442,287	)	$	(201,605	)	$	(940,724	)	$	(459,634	)

Tax at the income tax rate 25% (2017: 34%)		(110,572	)		(68,546	)		(235,181	)		(156,276	)
Valuation allowance		110,572			68,546			235,181			156,276
Income taxes	$	-		$	-		$	-		$	-

9.	Related Parties Transactions

Nature of relationships with related parties

	Name		Relationships with the Company
	Miss Liang Meihua (Miss Liang)		A director of the Company
	Mr Leung Kam Tim (Mr Leung)		A director of TAL
	Miss Kung Wai Fan Candy (Miss Kung)		Former director of TAL
	Mr Huang, Kewie (Mr Huang)		Chief Technology Officer of the Company
	Spider Comm Sdn Bhd		Former common director of IRG Malaysia

Related party balances and transactions

On August 2, 2017, the Company entered into a promissory note (the “Note”) with Liang Meihua, the director of the Company since October 21, 2016, in the principal amount of $256,410. The Note shall be due and payable within 12 months (as extended by the holder from time to time) from the issuance date of the Note, and shall be interest free and shall not accrue any interest and bearing interest of 5% if an event of default occurred. On the date when the Company consummates the sale for cash by the Company of any equity or convertible securities generating aggregate gross proceeds of at least $10,000,000, the Note shall automatically convert into fully paid and non-assessable shares of the Company’s $0.001 par value per share common stock at a conversion price equal to the per share price of the sale for cash by the Company of any equity or convertible securities generating aggregate gross proceeds of at least $10,000,000. If no sale for cash by the Company of any equity or convertible securities generating aggregate gross proceeds of at least $10,000,000 is consummated prior to the maturity date, the holder of the Note shall have the right to convert all or any portion of the outstanding and unpaid principal and interest of this Note into conversion shares at a conversion price of $0.10 per Share. On December 18, 2017, Miss Liang forewent the right of conversion of the Note. As of June 30 2018 and December 31, 2017, the loan 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 six months ended June 30, 2018 and 2017, the Company owed advances of $46,331 for disbursements from Mr Huang. As of June 30, 2018 and December 31, 2017, the loan payable balance, without interest and due on demand, to Mr Huang was $47,353 and nil, respectively.

Spider Comm Sdn Bhd

During the three months ended June 30, 2018 and 2017, the Company incurred rental expenses of $5,321 and $4,723 respectively to Spider Comm Sdn Bhd. During the six months ended June 30, 2018 and 2017, the Company incurred rental expenses of $10,670 and $9,446 respectively to Spider Comm Sdn Bhd.

10.

Share-Based Compensation Expenses

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

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

11.

Commitments and Contingencies

Operating lease

The Company leases a number of properties under operating leases. Rental expenses under operating leases for the three months ended June 30, 2018 and 2017 were $5,321 and $5,883 respectively. Rental expenses under operating leases for the six months ended June 30, 2018 and 2017 were $24,148 and $33,161, respectively.

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

Twelve months ended June 30, 2018,
2019	$	82,918
2020		29,699
Thereafter		-
Total minimum lease payments	$	112,617

Legal proceeding

There has been no legal proceeding in which the Company is a party for the six months ended June 30, 2018.

12.

Subsequent Events

There were no events or transactions that would require recognition or disclosure in our unaudited condensed consolidated financial statements for the six months ended June 30, 2018.

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

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

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

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

The “Company,” “we,” “us,” or “our,” are references to the combined business of (i) Technovative Group, Inc., a Delaware corporation (“TEHG”), (ii) Technovative Group Limited, a company incorporated under the laws of Samoa and a wholly-owned subsidiary of TEHG (“TGL”), (iii) Technovative Asia Limited, a company incorporated under the laws of Hong Kong and a wholly-owned subsidiary of TGL (“TAL”), (iv) Innorei Group (Samoa) Limited, a company incorporated under the laws of Samoa and a wholly-owned subsidiary of TEHG (“IRG Samoa”), (v) Innorei Group Sdn Bhd, a company incorporated under the laws of Malaysia and a wholly owned subsidiary of IRG Samoa (“IRG”), (vi) Zhike (Shenzhen) Corporate Marketing Co., Ltd, a company incorporated under the laws of PRC and a wholly-owned subsidiary of TAL (“Zhike”), and (vii) Guangzhou City Hedu Information Technology Co., Ltd, contractually controlled affiliate of Zhike formed under the laws of the PRC (“Hedu”).

Overview

Technovative Group Inc. (“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.

Hedu.ai charges a service fee on its enterprise clients based upon the complexity of the projects and solutions, as well as number of users and volume of resources consumed.

Providing customized technology development solutions to enterprise clients also enables Hedu.ai to further develop its existing proprietary technologies such as Hedu SmartSuite™ and its core product for the consumer market, an Artificial Intelligence Chatbot. The Chatbot enables users to manage their entire financial life, from monitoring spending to saving and sending money, all from the familiar interface of instant messenger platform. Our proprietary Chatbot uses state of the art machine learning technology to interpret complex data to answer questions in real time. The revenue streams of the Chatbot are divided as: 1) subscription; 2) referral fees; 3) ad serving; and, 4) data analytics and market research.

As of June 30, 2018 and December 31, 2017, our total accumulated deficits, including accumulated deficit during development stage, were ($3,971,431) and ($3,030,707), respectively. Our stockholders’ equity was $2,914,996 and ($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 June 30, 2018 compared with the three months ended June 30, 2017

Gross Revenues

The Company received sales revenues of $150,650 in the three months ended June 30, 2018 and compared to $1,256 in the three months ended June 30, 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 June 30, 2018 and June 30, 2017, were ($442,287) and ($201,605), respectively. Basic and diluted net loss per share from continuing operations amounted (0.00) and (0.00) respectively for the three months ended June 30, 2018 and June 30, 2017 after taking into consideration and retroactively restating to reflect the 1-for-20 reverse stock split effected on March 2, 2015 and the 1-for-10 reverse stock split effected on May 11, 2015.

The $240,682 increase in net loss for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 was due to an increase in selling, general and administrative expenses with continuous financial resources input and where the share-based compensation that amounted to $341,250 was the most significant expense.

For the six months ended June 30, 2018 compared with the six months ended June 30, 2017

Gross Revenues

The Company received sales revenues of $457,163 in the six months ended June 30, 2018 and compared to $2,112 in the six months ended June 30, 2017.

Operating Expenses

Operating expenses for the six months ended June 30, 2018 and June 30, 2017 were $1,452,733 and $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 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 six months ended June 30, 2018 and June 30, 2017, were ($940,724) and ($459,634), respectively. Basic and diluted net loss per share from continuing operations amounted (0.01) and (0.01) respectively for the six months ended June 30, 2018 and June 30, 2017 after taking into consideration and retroactively restating to reflect the 1-for-20 reverse stock split effected on March 2, 2015 and the 1-for-10 reverse stock split effected on May 11, 2015.

The $481,090 increase in net loss for the six months ended June 30, 2018 compared with the six months ended June 30, 2017 was due to an increase in selling, general and administrative expenses with continuous financial resources input and which the share-based compensation amounted $882,500 is the most significant expense.

Liquidity and Capital Resources

As of June 30, 2018, we had a working capital deficit of $692,303, consisting of cash on hand of $112,749 as compared to a working capital deficit of $3,913,398 and cash on hand of $227,186 as of December 31, 2017.

Net cash used in operating activities for the six months ended June 30, 2018 was $326,681 as compared to net cash used in operating activities of $433,701 for the six months ended June 30, 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, and general expenses.

Net cash provided by investing activities for the six months ended June 30, 2018 was $180,633 as compared to net cash used in investing activities of $12,892 for the six months ended June 30, 2017. The difference was derived from investing activities on redemption of short-term investments and purchase of property and equipment.

Net cash provided by financing activities for the six months ended June 30, 2018 was $47,148 as compared to nil for the six months ended June 30, 2017 derived from advances from 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 June 30, 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

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

We performed an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based on this evaluation, our CEO and CFO have concluded that, as of June 30, 2018, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported properly within the time periods specified by the SEC, and did not provide reasonable assurance that information required to be disclosed by the Company in such reports would be accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Such conclusion was based solely on the fact that the Company’s did not have effective internal control over financial reporting as of June 30, 2018, due to certain factors, including but not limited to, the lack of segregation of duties as the CEO and CFO roles are served by the same person, and the Company does not have a Chief Financial Officer that is familiar with the accounting and reporting requirements of a U.S. publicly-listed company, nor does it have a financial staff with accounting and financial expertise in U.S. generally accepted accounting principles (“US GAAP”) reporting. The Company is actively searching for a Chief Financial Officer with significant experience in public reporting company and a financial staff with expertise in US GAAP reporting.

Changes in internal controls over financial reporting

There have been no changes in our internal controls over financial reporting during the three 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.

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.

31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002;**

31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002;**

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002***

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002***

101.INS		XBRL Instance*

101.SCH		XBRL Schema*

101.CAL		XBRL Calculation*

101.DEF		XBRL Definition*

101.LAB		XBRL Label*

101.PRE		XBRL Presentation*

***

Filed herewith

Furnished herewith

SIGNATURES

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

	Technovative Group, Inc.

Date: August 14, 2018	By:	/s/ Lin Kuan Liang Nicolas
	Name:	Lin Kuan Liang Nicolas
	Title:	Chief Executive Officer, President, Treasurer, Secretary, Director
		(Principal Executive and Financial Officer)

Technovative Group, Inc. 10-Q