The aggregate market value
of the voting common stock held by non-affiliates of the registrant (assuming officers and directors are affiliates) was approximately
US$ $1,670,816 as of June 30, 2017, computed on the basis of the closing price on such date.
PART
I
Corporate
History and Corporate Structure
Technovative
Group, Inc. (the “Company” or “TEHG”) 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 June 4, 2013, the Company filed an amendment
with the State of Wyoming to change the name from “Solar America Corp.” to “Horizon Energy Corp.” On February
26, 2015, the Company changed its name from “Horizon Energy Corp.” to “Technovative Group, Inc.”
On
December 16, 2010, the Company entered into an Agreement for Sale and Purchase of Business (the “Acquisition”) with
the shareholder of Solar N’ Stuff, Inc. (“SNS”), a corporation organized under the laws of the State of Louisiana,
whereby the Company acquired 100% of the issued and outstanding shares of SNS in exchange for consideration in the aggregate amount
of $100,000. As a result of the Acquisition, the business of SNS became our principal business. On July 1, 2013, the Company decided
to terminate the operations of SNS, effective immediately. On November 14, 2014, the Company and Cannon Investments, Inc. (“Cannon”)
entered into an equity sale and settlement agreement (“Equity Sale and Settlement Agreement”), whereby the Company
transferred 100% of the equity interests of SNS to Cannon in exchange for the settlement of the unpaid amount of the promissory
notes owed to Cannon in the aggregate amount of $150,250.
On
April 25, 2014, the Company and Ponta E&P, LLP, a Texas Limited Liability Partnership (“Ponta”) entered into a
Letter Agreement (the “Ponta Agreement”), whereby the Company acquired a 25% working interest in Ponta’s Holmes
Oil Unit #1 in return for a capital infusion of $115,000 (the “Holmes Investment”). Additionally, pursuant to the
terms of the Ponta Agreement, the Company received an additional 25% working interest until such time as the Holmes Investment
has been fully repaid. On November 14, 2014, the Company entered into a Debt Settlement Agreement and Mutual Release (“Debt
Settlement Agreement”) with Tenton Global LLC (“Tenton”), pursuant to which Tenton agreed to settle and cancel
the unpaid amount of the promissory note owed to Tenton by the Company in the aggregate amount of $906,772, in consideration of
assignment by the Company of its rights and interests in a the Ponta Agreement. As a result of the Debt Settlement Agreement,
the Company has no interests and rights in Holmes Investments.
Until
November 14, 2014, the Company has issued an aggregate of 3,745,911 shares of common stock to Tuverga Finance Ltd., a corporation
formed pursuant to the statutes of Republic of Cyprus (“Tuverga”) pursuant to an Equity Investment Agreement (“Equity
Investment Agreement”) entered on April 15, 2014. Under the Equity Investment Agreement, the Company agreed to issue to
Tuverga a number of shares of Common Stock of the Company for up to $2,500,000 (the “Commitment Amount”) upon providing
advance notice to the Company. On November 14, 2014, the Company and Tuverga entered into a termination agreement (“Termination
Agreement”) whereby the Company and Tuverga terminated the Equity Investment Agreement and thus Tuverga has no right to
purchase and the Company has no obligation to sell shares of Common Stock to Tuverga under the Equity Investment Agreement thereafter.
On
November 14, 2014, Salty Pepper Corp. (“SPC”) and Celestial Melody Limited (“CML”), a corporation formed
under the laws of Samoa, entered into a Common Stock Purchase Agreement (the “Common Stock Purchase Agreement”), pursuant
to which SPC sold to CML 30,000,000 shares of Common Stock of the Company for an aggregate of $200,000. On the same day, Tuverga
and Jing Zhang, a citizen of the People’s Republic of China, entered into a Stock Purchase Agreement (the “Tuverga
Stock Purchase Agreement”), pursuant to which Tuverga sold to Ms. Zhang 3,745,911 shares of Common Stock in consideration
of $75,000. As a result of the closing of the two aforementioned transactions, CML and Ms. Jing Zhang own approximately 65.2 %
of the total outstanding shares of the Company’s Common Stock as of the date of this Current Report. After the Reverse Split
takes effect, CML and Ms. Jing Zhang own approximately 0.33 % of the total outstanding shares of the Company’s Common stock
and the rest of our holders of Common Stock owns approximately 0.17 %.
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.
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 “TGL Share Exchange Agreement,” such transaction referred to as the “TGL 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 TGL 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 TGL Share Exchange Transaction. As a result of the TGL 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.
As
a result of the TGL Share Exchange Transaction on October 14, 2014, TGL was incorporated in Samoa, a jurisdiction which permits
the filing of documents and maintenance of accounts by electronic means. TGL is a holding company. TAL is a wholly-owned and operating
subsidiary of TGL. TAL invests into high potential IT projects and is dedicated to marketing the products and services called
“SpeedG Platform” and “Hedu SmartSuite
” respectively.
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.
The
Company entered into a Share Transfer Agreement (the “Hedu Agreement”) on December 27, 2017 (the “Execution
Date”), with Wu Jisun, Tan Hongliang, Su Maoling and Liang Songhai (each a “Hedu Shareholder” and together,
“Hedu Shareholders”), the Hedu Shareholders holding in the aggregate 100% of the equity interest in Guangzhou City
Hedu Information Technology Co., Ltd (or, 广州市合度信息技术有限责任公司),
a PRC incorporate company (the “Hedu”). On even date, the Company entered into a series of contractual arrangements
(the “VIE Agreements”), through its wholly owned foreign entity, Zhike (Shenzhen) Corporate Marketing Co., Ltd (“Zhike”),
with Hedu, and the Hedu Shareholders, which would provide Zhike with control over Hedu’s business affair and economic interest.
The Company, via Zhike, also intended to enter into a Loan Agreement with Wu Jisun (the “Loan Agreement”). Pursuant
to the Hedu Agreement, the Company has agreed to issue to the Hedu Shareholders in the aggregate, up to 41,815,880 shares of the
Company’s common stock, par value $0.001 (the “Common Stock”) (the “Shares”) subject to customary
adjustments, representing up to 40% of the Company’s issued and outstanding Common Stock, valued at $4,181,588 in an aggregate
(the “Share Issuance”), as an inducement for the Hedu Shareholders to enter into the VIE Agreements and the Loan Agreement.
All capitalized terms used but not defined herein shall have the meaning ascribed to such term in
the Hedu Agreement.
Hedu
is a company specialized in financial technology, blockchain and big data analytics technologies. Pursuant to the VIE Agreements
executed on December 27, 2017, and the Loan Agreement on even date, Hedu has become a variable interest entity of the Company via
Zhike as of December 27, 2017. The VIE Agreements include the following agreements, as well as an additional Loan Agreement.
Power
of Attorney.
Through a series of power of attorney, each Shareholder of our VIE Agreements irrevocably authorizes the Company,
or any person(s) designated by the Company, to act as its attorney-in-fact to exercise all of such Shareholder’s voting
and other rights associated with the Shareholder’s equity interest in our variable interest entity, including but not limited
to, the right to attend shareholder meetings on behalf such Shareholder, the right to appoint legal representatives, directors,
supervisors and chief executive officers and other senior management, and the right to sell, transfer, pledge and dispose of all
or a portion of the shares held by such Shareholder. The power of attorney is irrevocable and remains in force continuously upon
execution.
Equity
Pledge Agreement.
Zhike and the Shareholders of the Target Company have entered into an equity pledge agreement
(the “Equity Pledge Agreement”). Pursuant to these equity pledge agreements, each Shareholder of our variable
interest equities has pledged all of his, her or its respective equity interest in our variable interest entity to Zhike to
guarantee the performance by such Shareholder and our variable interest entity of its respective obligation under the
exclusive business cooperation agreement, the power of attorney, the Loan Agreement, the exclusive option agreement, and any
amendment, supplement or restatement to such agreements. If our variable interest entity or any of its Shareholders breach
any obligations under these agreements, Zhike, as pledgee, will be entitled to dispose of the pledged equity and have
priority to be compensated by the proceeds from the disposal of the pledged equity. Each of the Shareholders of variable
interest entity agrees that before his, her or its obligations under the contractual arrangements are discharged, he, she or
it will not dispose of the pledged equity interests, create or allow any encumbrance on the pledged equity interests, which
may result in the change of the pledged equity that may have adverse effects on the pledgee's rights under these agreements
without the prior written consent of Zhike. These equity pledge agreements will remain effective until our variable interest
entity and the Shareholders discharge all their respective obligations under the contractual arrangements.
Exclusive
Option Agreements.
Zhike, the Shareholders of the Target Company, have entered into an exclusive option agreement (“Exclusive
Option Agreement”) with our variable interest entity, the Target Company. Pursuant to the Exclusive Option Agreement, the
Shareholders of our variable interest entity have irrevocably granted Zhike or any third party designated by Zhike an exclusive
option to purchase all or part of their respective equity interests in our variable interest entity. The purchase price shall
be RMB 10. Without Zhike’s prior written consent, our variable interest entity shall not, among other things, amend their
articles of association, increase or decrease the registered capital, sell, dispose of or set any encumbrance on their assets,
business or revenue, enter into any material contract outside the ordinary course of business, merge with any other persons or
make any investments, distribute dividends, or enter into any transactions which have material adverse effects on their business.
The Shareholders of our variable interest entity also jointly and severally undertake that they will not transfer, gift or otherwise
dispose of their respective equity interests in our variable interest entity to any third party or create or allow any encumbrance
on their equity interests within the term of these agreements. These agreements will remain effective until Zhike and/or any third
party designated by Zhike has acquired all equity interests of our variable interest entity from the Shareholders.
Loan
Agreement.
Pursuant to the Loan Agreement between Zhike, and Wu Jisun, entered into on December 27, 2017, Zhike made an interest-free
loan in the amount of RMB10,000 to Wu Jisun. The term of this loan is ten (10) years from the date of the Loan Agreement. Zhike
and Wu Jisun agree and acknowledge that repayment is at the sole discretion of Zhike and may at Zhike’s option take the
form of Wu Jisun’s transferring the borrower equity Interest in whole to Lender or Lender's designated persons (legal or
natural persons) pursuant to Zhike’s exercise of its right to acquire the borrower equity interest under the Exclusive Option
Agreement.
The
following diagram sets forth the structure of the Company as of the date of this Current Report:
Our web site address is www.technovative.co. Information contained on our web site is not part of this
report on Form 10-K or our other filings with the Securities and Exchange Commission (“SEC”).
OUR
BUSINESS
Overview of Our Business
Technovative through its subsidiaries and
viable interest entity is a technology software development company focused in the financial technology industry by providing blockchain
solutions and big data analytics technologies to financial service institutions (“FSI”) in the Greater China Region
(“GCR”) and the Southeast Asia Region. We are currently developing a suite of smart tools which include Chatbot, Smart
Contracts, Data Analytics, Blockchain and Trading Platform targeted to FSI in GCR.
Technovative principally operates in Hong
Kong, Shenzhen and Guangzhou.
Our Products
Hedu SmartSuite
Hedu SmartSuite is based on four key modules
developed by our Company: 1) Artificial Intelligence; 2) Big Data; 3) Cloud Computing and 4) Distributed Ledger Transaction. These
modular technologies are developed as a series of software as a service to serve its GCR and Southeast Asia Region clients.
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1)
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Artificial Intelligence
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We are developing an artificial intelligence
platform for the consumer market; Hedu SmartBot.
Hedu Smartbot is the easiest way for young
professionals to manage their entire financial life, from monitoring spending, to saving, and sending money, all from the familiar
interface of WeChat platform. Hedu Smartbot uses state of the art machine learning technology to interpret complex data to answer
questions in real time.
Legacy banking software is unable to cater
to the needs of a generation that is used to instant responses and real time interaction. Hedu Smartbot is designed to make it
easy for anyone to understand where their money is going, to easily save, or to send money to friends instantly through a familiar
interface. The app allows people to securely connect all their bank and credit card accounts and share financial insights via WeChat
using natural language to:
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View their spending according to transactions, categories and merchants
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Automatically save money
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Send money to friends without sort codes or logging into a bank
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Find better deals on bills, subscriptions and financial products
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Compare spending habits with those of peers
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Typical users are young professionals and
graduates who are keen to easily understand where their money is going and to start saving. They are used to using world-class
products from Taobao, Baidu and Didi and expect more from their bank.
We developed our own proprietary platform,
SmartAlytics, which are part of the modular for the SmartSuite and will be integrated on our SmartBot platform.
Big
data
and analytics affect
every industry
because
there
is always room for improvement,
especially banking and financial services. Big data analytics like Hedu’s SmartAlytics, Banks no longer simply stores data
but actively use it in order to generate business insights and add value. Hedu is working with data providers such as Unionpay
Advisors and other 3rd parties including government bureaus and e-commerce players, to enable its bank clients to perform for example,
in real time to drive immediate decision-making or to score a lead to generate new credit cards. Common use cases where banks and
financial services firms are finding value in big data analytics include:
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Fraud detection
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Credit Analysis
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New Business including secured and unsecured loans
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Our platform delivers better experience
to FSI clients by engineering data base and analyzing massive amounts of data to get insight of customers for them. We offer intelligent
actions which are consulting, constructing and data analysis that improve customer engagement, increase revenue, and lower costs.
We help to define a big data strategy and select appropriate technologies and vendors based on client’s requirements and
budget. The consultation has a comprehensive view of the many options available and help client evaluates both commercial product
vendors and Open Source options. We design prototypes utilizing big data technologies for clients after consultation. On successful
validation of the prototype, we construct the big data solution to a production-grade implementation. We also deliver cost-effective
maintenance, support, and data analytic service of the solutions.
All of our technologies are delivered through
Cloud Computing. We will manage and host clients technologies on cloud servers based on the region the Clients are based on.
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4)
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Distributed Ledger Transaction
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We have developed our own Distributed Ledger
Transaction Technology, also commonly known as Blockchain Technology. We provide a series of turnkey solutions to build up, operating
and maintain blockchain related technologies. Existing financial systems require the management of a central account. The balance
of each individual is recorded and controlled from a central ledger, and the user is not in control of his own funds. These systems
require costly and time consuming compliance and settlement procedures which place an increasing burden on the global economy.
SmartCon²
Hedu’s SmartCon²
can be used to help exchange money, shares, or anything of value in a transparent, conflict-free way while avoiding the services
of an intermediary. Industries such as merchant acquirers, credit companies, and data bureaus are beginning to employ smart contracts
for tasks, such as real-time project assessments and rewarding and/or penalizing parties for non-adherence to contract.
SmartTrader & SmartWallet
The SmartTrader is
a tool meant to address present exploding needs in wrapping ICO (initial coin offerings) a process in which projects of major interests
are wrapped in a digital asset and offered to coin purchasers. The idea around an ICO is that Hedu assists its clients to create
a digital coin or token and then offer this coin or token for sale in an initial offering. An ICO is in some ways similar to an
initial public offering. Both are done to raise funds, but instead of stock, the ICO purchase gets the buyer a new type of coin
or token, an asset rather than a security.
The typical use case
of a token issued in an ICO is the creation of an asset that gives Hedu’s clients access to the features of a particular
project. Instead of having cash as the way to pay for goods and services from the offeror, they use their tokens.
The most common place
where once the coin is created is to buy and sell on the trading platform exchanges. Exchanges are places where to trade the crypto,
using fiat. There are multiple measures to judge the reliability and quality of an exchange, such as liquidity, spread, fees, purchase
and withdrawal limits, trading volume, security, insurance, user-friendliness. Hedu provides in this:
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A trading platform to list the digital asset
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A distributed ledger transaction (“DLT”) wallet to buy/sell/transfer
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A Smart Contract to monitor the projects that the ICO is raised for
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A suite of professional services centered around the above
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Revenue Model
Subscription.
The
subscription business model is currently the most common way that bots for work drive their revenue. In this model, the bot provides
an ongoing service that the user subscribes to and pays for. Most of the features provided by Hedu Smartbot are free — the
Company does not charge the user to install the bot for using its core features. The Hedu Smartbot team deliberately do not want
to charge for aspects of the bot that promotes usage, engagement, and virality. They do, however, carve out a set of features that
are important to wealth management, savings and investment, which payment for a premium service is required.
Referral fees.
This
is another major business model on mobile and web that is moving to bots — Hedu Smartbot can help the users decide
what to buy or which service to consume and then refer the users to the right service, rather than actually completing the transaction
itself. FSIs provide wealth management, insurance and micro investment are likely to be the partners of our Company.
Ad serving.
Ad
serving has been the bread and butter of many web and mobile businesses. Bots are in a unique position when it comes to ads as
they can build a personal relationship with the user, as well as collecting a lot of personal information that can contribute to
more personal and fine-tuned ads that lead to better click through rate.
Data - analytics
and market research.
Bots can collect a great deal of data from users. Through engaging in a conversation, bots can learn about
user preferences and interests. Those data will be very valuable to our FSI clients.
Marketing Strategy
Guangdong province and 1st tier cities
as the priority
Regionalism is a strong
force in China. Cities and provinces sniff disdainfully at one another and implement policies to guard their resources from their
neighbors. Every coastal city has to have its own deep water port and every province its own airlines. China is multicultural,
multi-religious, and a multiethnic society, having as many as 55 ethnic groups as diverse and interesting as the geography and
the history of the country they inhabit. However, the 1st tier cities, namely Beijing, Shanghai, Guangzhou and Shenzhen, due to
their long history of connection to the world and enjoying privileged commercial policy from the central government, they have
become the metropolitan cities like New York and London, which have developed an internationally accepted norm in conducting businesses.
Well established business relationship
with FSIs located in Guangdong province
Top executives of Hedu
has established strong relationship with a number of FSIs in the Guangdong province, as they were the IT solutions provider for
those clients in the last 8 years before they founded Hedu.
Putonghua and Cantonese are the first
2 dialects for chatbot development
China is home to a
multitude of languages and dialects, many of which are mutually unintelligible. Spoken Chinese languages are among the most commonly
used in the world. The best known are undoubtedly Putonghua and Cantonese. Putonghua is considered a native language by about two-thirds
of China’s inhabitants, making it the most dominant spoken Chinese dialect, while Cantonese lays claim to approximately 55
million speakers in China alone.
Strong needs from the existing FSI clients
The Chinese FSIs face
enormous challenges of not only sustaining growth of the economy, but also maintaining their own viability when facing severe competition
from the internet giants backed, unconventional financial service providers and the rapidly changing consumers’ behavior.
They opt for generating new financial services and products faster, and more importantly to match the right services and products
to the right clients.
Service focused migrated to product
focused in phases
It is estimated that
Hedu Smartbot will take 18 months to design and develop, in the meantime, Hedu will continue providing big data analytics and blockchain
technologies related services to both of its FSI and non-financial service clients. On one hand, it ensures the Company will have
a healthy cash flow and continuously strengthened relationship with the FSI clients, on the other hand, the current businesses
provide perfect ground for further development of the existing proprietary technologies as follows:
Market Opportunities
China has leapfrogged
ahead to become the undoubted center of global FinTech innovation and adoption thanks to developments across multiple hubs, such
as Shanghai, Hangzhou, Beijing, and Shenzhen. The speed, sophistication, and scale of development of China’s FinTech ecosystem
have been at a level unmatched in more established markets. In recent years, China’s technology leaders are revolutionizing
many aspects of financial services. The scale of unmet needs being addressed by dominant technology leaders, combined with regulatory
facilitation and easy access to capital. Underserved by China’s incumbent banking system, consumers and small-to-medium-sized
enterprises (SMEs) are increasingly turning to alternative providers for access to payments, credit, investments, insurance, and
even other non-financial service offerings.
The willingness of
Chinese consumers to adopt FinTech services is just as striking. Forty percent of consumers in China are using new payment methods
compared to 4% in Singapore. Thirty-five percent are using FinTech to access insurance products compared to 1-2% in many Southeast
Asian markets. There are also significantly higher rates of FinTech participation in wealth management and lending. With high levels
of internet and mobile penetration, China is already the world’s largest and most developed retail e-commerce market, accounting
for 47% of global digital retail sales.
These opportunities
came initially from the under-banked or unbanked populations of small and medium enterprises (“SMEs”) and consumers
with unmet needs. FinTech firms are also targeting the maturing demands of the burgeoning middle class for wealth management, insurance
and private banking. The relationship with Chinese corporates and start-ups is also often very collaborative, helping to fuel the
rapid innovation and expansion. FinTech firms are leveraging big data from e-commerce, messaging, search, social media and other
internet-based services to personalize the customer experience, provide new services, and leverage operational efficiencies.
Global venture investment
in FinTech grew by 11% to $17.4 billion in 2016 according to data provided by PitchBook. It is the first time China with $7.7 billion
of investment outpaced the US with $6.2 billion. Three out of four financial institutions surveyed view chatbots as a lucrative
investment opportunity which should be pursued within the next 1-2 years. As a result, the share of transactions handled by AI
agents is expected to grow substantially in the coming years. In the sphere of personal finance, robo advisors are expected to
manage about $8 trillion by 2020.
Chinese consumers are
more than ready to embrace FinTech offerings, creating opportunities for both incumbent and new financial services providers. Key
markets are the under-banked or unbanked populations, and the maturing demands of the burgeoning middle class for wealth management,
private banking and custodian businesses.
Amidst the growing
Chinese middle class is a disproportionately large presence of a new segment of digital savvy consumers – the Gen-Y and millennials–
who account for 45% of consumption. These ‘digital natives’ are more open to new technologies. They not only exhibit
a higher tolerance towards financial risks and greater propensity to spend than the older generations, but also demonstrate more
individualized preferences, and demand real-time, hyper-connected, client-centric offerings. Moreover, digital natives are not
easily impressed or influenced by the brand, heritage or longevity of traditional banks. Chinese consumers now have higher expectations
of the customer experience. They will not hesitate to migrate away from banks to engage with digital disruptors that can better
deliver to their financial needs with higher interest rates and fast, convenient services.
Chinese consumers are
open to sharing personal information online, store payment information in their smart devices and experiment with other forms of
non-cash payments. This will be the social foundation for conversational digital banking success
Competition
The market for companies that provide FinTech
is competitive. Our competitors include i) Ant Financial (Alibaba); ii) Li Cai Tong (Tencent) and iii) Baifa (Baidu) among others.
However, we believe that our strengths could put us in an advantageous position against our competitors. Unlike our competitors,
we do not simply provide clients with an opportunity to invest through a wealth management platform; instead we also offer our
clients a suite of tools which provide the clients with intelligent finance assistance through the Hedu SmartSuite and an interactive
communication interface with their customers through the Hedu Smartbot. Our Hedu SmartSuite entirely stands out from other online
investment platform because it provides clients with the integration of AI, Big Data, Cloud Computing and Distributed Ledger Transaction
to manage ‘Low Cost Centers’ using AI to increase Straight Through Processing (STP) to 100% thus removing cost, increasing
customer satisfaction and reducing liabilities when collecting payments internally for the customer. It is one of the examples
that Hedu SmartSuite can do with its tools and apps.
Additionally, we believe we have an advantage
in terms of our location and the market we are targeting. When the industry is growing quickly, the competition between the players
are less severe. The AI-powered financial assistant market is still a vacuum in China at the moment. Our direct competitors such
as Cleo, Abe.ai or Mindlayer have no market share in China. Therefore, we believe there is an opportunity for us to expand and
penetrating the market. More importantly, China is multicultural, multi-religious, and a multiethnic society, having as many as
55 ethnic groups as diverse and interesting as the geography and the history of the country they inhabit. China is home to a multitude
of languages and dialects, many of which are mutually unintelligible. Our system is specialized in Cantonese and Mandarin, which
makes it easier for us to expand the business.
We are also well acquainted with the Chinese
culture and are familiar with doing business in China. Top executives of Hedu has established strong relationship with several
FSIs in the Guangdong province, as they were the IT solutions provider for those clients in the last 8 years before they founded
Hedu. In conclusion, it is not entirely open for new entrants. To compete within this industry, firms need to compete on quality.
To achieve this quality, firms need to establish relationships with FSI clients and establish processes to create customization
for users. Therefore, it would take a long time for our competitors to gain recognition and a long time to build a strong user
base in the China market.
Intellectual
Property
Trademarks
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Mark
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Country
of Registration
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Application
Number
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Class
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Description
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Current
Owner
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Application
Status
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Hong
Kong
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303338172
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35,
42
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Class
35
Advertising; business management; business administration; office functions.
Class 42
Scientific and technological services and research and design relating thereto; industrial analysis and research services;
design and development of computer hardware and software.
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TAL
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Approved
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SpeedG
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Hong Kong
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303338163
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35, 42
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Class 35
Advertising; business management; business administration; office functions.
Class 42
Scientific and technological services and research and design relating thereto; industrial analysis and research services; design and development of computer hardware and software.
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TAL
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Approved
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快速聚
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Hong Kong
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303338154
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35, 42
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Class 35
Advertising; business management; business administration; office functions.
Class 42
Scientific and technological services and research and design relating thereto; industrial analysis and research services; design and development of computer hardware and software.
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TAL
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Approved
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Employees
We
currently have 25 employees. We have 13 employees on product team, 2 employees on the research and development team, 4 people
on the marketing and sales team and 6 people in the administrative department and rest of the departments.
Risk
Factors related to the Business
If
we are not able to develop enhancements to our products and services that achieve market acceptance and that keep pace with technological
developments, our business will be harmed.
Our
ability to attract new clients depends in large part on our ability to enhance and improve our products and services and to introduce
new products and services. In order to grow our business, we must develop products and services that reflect the changing nature
of the market needs. The success of any enhancement to our products and services depends on several factors, including timely
completion, adequate quality testing, and market acceptance. Any new product or service that we develop may not be introduced
in a timely or cost-effective manner, may contain defects, or may not achieve the market acceptance necessary to generate sufficient
revenue. If we are unable to successfully develop new products or services, enhance our existing products and services to meet
customer requirements or otherwise gain market acceptance, our business and operating results will be harmed.
We
need to continuously modify and enhance our products and services to keep pace with changes in hardware, software, communications,
and database technologies and standards. If we are unable to respond in a timely and cost-effective manner to these rapid technological
developments and changes in standards, our products and services may become less marketable, less competitive, or obsolete, and
our operating results will be harmed.
We
have a limited operating history, which makes it difficult to evaluate our prospects and future operating results.
We
incorporated and first launched our products and services in 2014. As a result of our limited operating history, our ability to
forecast our future operating results is limited and subject to a number of uncertainties, including our ability to plan for and
model future growth. Further, in future periods, our revenue could decline for a number of reasons, including any reduction in
demand for our products and services, increased competition, contraction of our overall market, or our failure, for any reason,
to capitalize on growth opportunities. We have encountered and will encounter risks and uncertainties frequently experienced by
growing companies in rapidly changing industries, such as the risks and uncertainties described herein. If our assumptions regarding
these risks and uncertainties, which we use to plan our business, are incorrect or change, or if we do not address these risks
successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.
If
we do not develop and market products that respond to needs of our clients, our business and operating results will be affected.
Fintech
business is a highly competitive industry with low barriers of entry. If we do not develop our products in a direction that will
attract customers in accordance to the needs of our clients, we will lose our customer base. This will also affect our ability
to attract new clients. In addition, our new products could also fail to attract meaningful market acceptance for many reasons.
We
are exposed to risk of system failures.
Our
business largely depends on the stability of our server. We may face system failures and outages that will disrupt the operation
of our website and the products and services. System failure could result in several scenarios: damage from fire, power loss,
telecommunication failures, computer viruses, physical and electronic break-ins and similar events. If such events occur, it will
affect our reputation and the ability to attract and retain clients, which will adversely affect our operating results.
We
rely on our marketing efforts and channels to promote our brand and acquire new clients. These efforts may require significant
expense and may not be successful.
We
will employ various marketing tactics and use a variety of marketing channels to promote our brand, including sponsorships, advertisement,
email and social media marketing. If we lose access to one or more of these channels for any reason, we will not be able to promote
our brand effectively which could limit our ability to grow. Further, if the marketing activities fail to attract new clients
or lead new and renewal sales of our products, our business and operating results could be affected. There is no assurance the
result of the marketing efforts. If customer acquisition cost increases, the operating results could also be affected.
If
the rate of growth for small and medium FSI businesses and ventures declines it will affect our results adversely.
Our
expectations for future revenue growth are based on targeting small and medium FSI businesses or ventures. If there is a decline
in the establishment of small and medium FSI businesses and ventures due to market conditions or other factors, this could affect
our performance and target market size which could affect our operating results.
Our
ability to enhance our products may be harmed if we are unable to attract and retain sufficient research and development staff.
In
order to be competitive, we must continue to develop new solutions and modules to add on our existing products and services.
As we are still growing, there are larger companies hiring similar research and development staffs to our company, who offer
more favorable compensation and incentive packages than us. If we cannot attract or retain sufficiently skilled employees,
our business and results of operations could be affected.
The
success of our products depends heavily on the importance for retailers of having an online presence.
The
success of our products is predicated on the assumption that an online presence is, and will continue to be, an important factor
in our clients’ abilities to establish, expand and manage their businesses quickly, easily and affordably online. If we
are incorrect in this assumption or if the importance of an online presences becomes irrelevant, for example due to the introduction
of a new technology or industry standard that supersedes the importance of an online presence or renders our existing or future
products obsolete, then our ability to retain existing clients and attract new clients could be adversely affected, which could
harm our ability to generate revenue and meet our targets.
If
our network or computer systems are breached or unauthorized access to customer data is otherwise obtained, our products and services
may be perceived as insecure, we may fail to attract new customers, and we may incur significant liabilities.
Use
of our products and services involves the storage, transmission, and processing of our clients’ proprietary data,
including personal or identifying information regarding their customers or employees. Unauthorized access to or security
breaches of our products and services could result in the loss of data, loss of intellectual property or trade secrets, loss
of business, severe reputational damage, which will adversely affect client confidence. It will also cause regulatory
investigations and orders, litigation, indemnity obligations, damages for contract breach, penalties for violation of
applicable laws, regulations, or contractual obligations, and significant costs for remediation that may include liability
for stolen assets or information and repair of system damage that may have been caused, incentives offered to clients or
other business partners in an effort to maintain business relationships after a breach, and other liabilities. Notifications
related to a security breach regarding or pertaining to any of such service providers could impact our reputation, harm
customer confidence, or hurt our sales and expansion into new markets.
Because
the techniques used and vulnerabilities exploited to obtain unauthorized access or to sabotage systems change frequently and generally
are not identified until they are launched against a target, we may be unable to anticipate these techniques or vulnerabilities
or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended
period.
Real
or perceived errors, failures, or bugs in our products and services could adversely affect our operating results and growth prospects.
Because
our products and services is complex, undetected errors, failures, vulnerabilities, or bugs may occur, especially when updates
are deployed. Our products and services are often used in connection with large-scale computing environments with different operating
systems, system management software, equipment, and networking configurations, which may cause errors or failures of our products
and services, or other aspects of the computing environment into which they are deployed. In addition, deployment of our products
and services into complicated, large-scale computing environments may expose undetected errors, failures, vulnerabilities, or
bugs in our products and services. Real or perceived errors, failures, vulnerabilities, or bugs in our products and services could
result in negative publicity, loss of or delay in market acceptance of our products and services, loss of competitive position,
or claims by clients for losses sustained by them. The loss due to our errors and omissions may not be covered by any insurance
and we may not be able to afford to bear the cost of liabilities arising in connection with security and privacy damages.
We
depend on our executive officers and the loss of one or more of these executives or an inability to attract and retain highly
skilled employees could adversely affect our business.
Our
success depends largely upon the continued services of our executive officers and other key employees. We rely on our leadership
team in the areas of research and development, operations, security, marketing, sales, support, general and administrative functions,
and on individual contributors in our research and development and operations. From time to time, there may be changes in our
executive management team resulting from the hiring or departure of executives, which could disrupt our business. We do not have
employment agreements with our executive officers or other key personnel that require them to continue to work for us for any
specified period and, therefore, they could terminate their employment with us at any time. The loss of one or more of our executive
officers, especially our Chief Executive Officer, or key employees could have an adverse effect on our business.
We
are highly dependent upon free trials of our products and services and other strategies to drive our sales and revenue. If these
strategies fail to continue to generate sales opportunities or do not convert into paying customers, our business and results
of operations will be harmed.
We
are highly dependent upon our marketing strategy of offering free trials of our products and services to generate sales opportunities.
This strategy may not be successful in continuing to generate sufficient sales opportunities necessary to increase our revenue.
Many early users never convert from the trial version to a paid version of our products and services. Further, we often depend
on individuals within an organization who initiate the trial versions of our products and services and live chat software being
able to convince decision makers within their organization to convert to a paid version. Many of these organizations have complex
and multi-layered purchasing requirements. To the extent that these users do not become, or are unable to convince others to become,
paying customers, we will not realize the intended benefits of this marketing strategy and our ability to grow our revenue will
be adversely affected.
Our
business is exposed to risks associated with credit card and other online payments, which risks if realized could adversely affect
our business.
A
majority of our client fees are processed through credit cards and other online payment gateway partners. Payments made online
are subject to inherent risks related to credit card fraud and we cannot guarantee that credit card and other payments processed
through our secured payment gateway partners now and in the future will be free of such fraud. Our failure to limit fraudulent
transactions conducted through our websites use of a third party payment gateway could hurt our business and harm our reputation.
Risk
Factors Related to Our Common Stock
The
Common Stock is subject to risks arising from restrictions on reliance on Rule 144 by shell companies or former shell companies.
Under
a regulation of the SEC known as “Rule 144,” a person who beneficially owns restricted securities of an issuer and
who is not an affiliate of that issuer may sell them without registration under the Securities Act provided that certain conditions
have been met. One of these conditions is that such person has held the restricted securities for a prescribed period, which will
be 6 months for the Common Stock. However, Rule 144 is unavailable for the resale of securities issued by an issuer that is a
shell company (other than a business combination related shell company) or, unless certain conditions are met, that has been at
any time previously a shell company. The SEC defines a shell company as a company that has (a) no or nominal operations and (b)
either (i) no or nominal assets, (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any
amount of cash and cash equivalents and nominal other assets. Until the Share Exchange Transaction, the Company was a shell company
and, while we believe that a result of the reverse acquisition, the Company ceased to be a shell company, the SEC and others whose
approval is required in order for shares to be sold under Rule 144 might take a different view.
Rule
144 is available for the resale of securities of former shell companies if and for as long as the following conditions are met:
(i)
the issuer of the securities that was formerly a shell company has ceased to be a shell company,
(ii)
the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act,
(iii)
the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding
12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports
on Form 8-K; and
(iv)
at least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its
status as an entity that is not a shell company known as “Form 10 Information.”
Our
shares of common stock are subject to penny stock regulations. Because our common stock is a penny stock, holders of our common
stock may find it difficult or may be unable to sell their shares.
The
SEC has adopted rules that regulate broker/dealer practices in connection with transactions in penny stocks. Penny stocks generally
are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges
or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities
is provided by the exchange system). The penny stock rules require a broker/dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information
about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer also must provide the customer
with bid and offer quotations for the penny stock, the compensation of the broker/dealer, and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition,
the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker/dealer
must make a special written determination that a penny stock is a suitable investment for the purchaser and receive the purchaser’s
written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity
in any secondary market for a stock that becomes subject to the penny stock rules, and accordingly, holders of our common stock
may find it difficult or may be unable to sell their shares.
Our
stock price may be volatile and you may not be able to resell your shares at or above the price you paid. In addition, volatility
in the price of our common stock may subject us to securities litigation resulting in substantial costs and liabilities and diverting
management’s attention and resources.
The
market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors,
many of which are beyond our control, including the following:
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our ability to execute our business plan;
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changes in our industry;
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competitive pricing pressures;
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our ability to obtain working capital financing;
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additions or departures of key personnel;
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limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;
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sales of our common stock (particularly following effectiveness of the registration statement of which this prospectus is a part);
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operating results that fall below expectations;
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regulatory developments;
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economic and other external factors;
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period-to-period fluctuations in our financial results;
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our inability to develop or acquire new or needed technologies;
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the public’s response to press releases or other public announcements by us or third parties, including filings with the SEC;
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changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;
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the development and sustainability of an active trading market for our common stock; and
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any future sales of our common stock by our officers, directors and significant stockholders.
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FINRA
sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In
addition to the “penny stock” rules described above, FINRA has adopted Rule 2111 that requires a broker-dealer
to have reasonable grounds for believing that an investment is suitable for a customer before recommending the investment.
Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low
priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for
broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock
and have an adverse effect on the market for our shares.
Because
we are a small company with limited operating history, stockholders may find it difficult to sell our common stock in the public
markets.
Our
common stock is currently traded on Over-the-Counter (“OTC”) Market under the symbol “TEHG.” The number
of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small. This situation
is attributable to a number of factors, including the fact that we are a small company which is still relatively unknown to stock
analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume,
and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven
company such as ours or purchase or recommend the purchase of our common stock until such time as we became more viable. Additionally,
many brokerage firms may not be willing to effect transactions in our securities. As a consequence, there may be periods of several
days or more when trading activity in our common stock is minimal or non-existent, as compared to a seasoned issuer which has
a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on the stock
price. We cannot give you any assurance that an active public trading market for our common stock will ever develop or be sustained,
or that trading levels will be sustained.
Future
issuances of our preferred stock could dilute the voting and other rights of holders of our common stock.
Our
board of directors has the authority to issue shares of preferred stock in any series and may establish, from time to time, various
designations, powers, preferences and rights of the shares of each such series of preferred stock. Any issuances of preferred
stock may have priority over the common stock with respect to dividend or liquidation rights. Any future issuance of preferred
stock may have the effect of delaying, deferring or preventing a change in control of our company and may adversely affect the
voting and other rights of the holders of our Common Stock.
If
we are unable to comply with the financial reporting requirements mandated by the SEC’s regulations, investors may lose
confidence in our financial reporting and the price of our common stock could decline.
If
we fail to maintain effective internal controls over financial reporting, our ability to produce timely, accurate and reliable
periodic financial statements could be impaired. If we do not maintain adequate internal control over financial reporting, investors
could lose confidence in the accuracy of our periodic reports filed under the Exchange Act. Additionally, our ability to obtain
additional financing could be impaired or a lack of investor confidence in the reliability and accuracy of our public reporting
could cause our stock price to decline.
If
securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations
regarding our common stock, or if our operating results do not meet their expectations, our stock price and trading volume could
decline.
The
trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish
about us or our business. We do not currently have, and may never obtain, research coverage by securities analysts. We do not
have any control over these reports or analysts. If any of the analysts who cover our company downgrades our stock, or if our
operating results do not meet the analysts’ expectations, our stock price could decline. Moreover, if any of these analysts
ceases coverage of our company or fails to publish regular reports on our business, we could lose visibility in the financial
markets, which in turn could cause our stock price and trading volume to decline.
We
do not know whether an active, liquid and orderly trading market will develop for our securities or what the market price of our
securities will be and as a result it may be difficult for you to sell your shares of common stock.
There
is currently an illiquid market for our securities and an active trading market for our securities may never develop or be sustained.
As a result of these and other factors, should you purchase shares of our common stock from current shareholders, you may be unable
to resell our common stock. The lack of an active market may impair your ability to sell those securities at the time you wish
to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of
your securities. Further, an inactive market may also impair our ability to raise capital by selling securities and may impair
our ability to enter into collaborations or acquire companies or products by using our securities as consideration.
If
we do not meet the listing standards of a national securities exchange our investors’ ability to make transactions in our
securities will be limited and we will be subject us to additional trading restrictions.
Our
securities currently are traded over-the-counter on the OTC Pink market and are not qualified to be listed on a national securities
exchange, such as NASDAQ. Accordingly, we face significant material adverse consequences, including:
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a limited availability of market quotations for our
securities;
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reduced liquidity with respect to our securities;
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our shares of common stock are currently classified
as “penny stock” which requires brokers trading in our shares of common stock to adhere to more stringent rules, resulting
in a reduced level of trading activity in the secondary trading market for our shares of common stock;
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a limited amount of news and analyst coverage for
our company; and
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a decreased ability
to issue additional securities or obtain additional financing in the future.
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The
National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating
the sale of certain securities, which are referred to as “covered securities.” Since our common stock is traded on
the OTC Pink, our common stock is a covered security. Although the states are preempted from regulating the sale of our securities,
the federal statute allows the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of
fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were
no longer traded over-the-counter, our common stock would not be a covered security and we would be subject to regulation in each
state in which we offer our securities.
If
we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately
report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and,
as a result, the value of our securities.
The
Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure
controls and procedures. In our annual reports on Form 10-K, we are required, under Section 404(a) of the Sarbanes-Oxley Act,
to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.
This assessment needed to include disclosure of any material weaknesses identified by our management in our internal control over
financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting
that results in more than a reasonable possibility that a material misstatement of annual or interim financial statements will
not be prevented or detected on a timely basis. Section 404(b) of the Sarbanes-Oxley Act also generally requires an attestation
from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.
However, for as long as we remain a non-accelerated filer we intend to take advantage of the exemption permitting us not to comply
with the independent registered public accounting firm attestation requirement.
Our
compliance with Section 404 of the Sarbanes-Oxley Act requires that we incur substantial accounting expense and expend significant
management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial
staff with appropriate public company experience and technical accounting knowledge, and compile the system and process documentation
necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing
and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material
weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial
reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal
control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely
inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude
that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines
we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor
confidence in the accuracy and completeness of our financial reports, the market price of our securities could decline, and we
could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness
in our internal control over financial reporting, or to implement or maintain other effective control systems required of public
companies, could also restrict our future access to the capital markets.
Our
disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Our
disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports
we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or
internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met.
These
inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. Additionally, controls can be circumvented by the Individual acts of some persons, by
collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent
limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be
detected.
Because
we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will
be your sole source of gain.
We
have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if
any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude
us from paying dividends. As a result, capital appreciation, if any, of our securities will be your sole source of gain for the
foreseeable future.
Future
sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans,
will result in additional dilution of the percentage ownership of our stockholders and could cause our trading price to fall.
We
expect that significant additional capital will be needed in the future to continue our planned operations. To raise capital,
we may sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. These future
issuances of equity or equity-linked securities, together with the exercise of stock options and warrants granted in the future
and any additional shares issued in connection with acquisitions, if any, may result in material dilution to our investors. Such
sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and
privileges senior to those of holders of our common stock.
Our
Board of Directors and stockholders also expects to adopt a stock option plan to reward employees and consultants with grants
of our common stock. Future equity incentive grants and issuances of common stock under our potential future equity incentive
plans may have an adverse effect on the market price of our securities.
If
there is significant downward pressure on the price of our common stock, it may encourage shareholders to sell shares by means
of short sales or otherwise. Short sales involve the sale, usually with a future delivery date, of common stock the seller does
not own. Covered short sales are sales made in an amount not greater than the number of shares subject to the short seller’s
right to acquire common stock, such as upon exercise of warrants. A holder of warrants may close out any covered short position
by exercising all, or a portion, of its warrants, or by purchasing shares in the open market. In determining the source of shares
to close out the covered short position, a holder of warrants will likely consider, among other things, the price of common stock
available for purchase in the open market as compared to the exercise price of the warrants. The existence of a significant number
of short sales generally causes the price of common stock to decline, in part because it indicates that a number of market participants
are taking a position that will be profitable only if the price of the common stock declines.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS
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None.
Our headquarters is
located in Hong Kong and operating office is located in the PRC. The headquarter office is rented at a monthly rate of HKD40,600 (approximately
$5205.13) and the operating office is rented at a monthly rate of RMB20,000 (approximately $2,941.2). Location of headquarter at
Unit 701, 7/F, Tower 2, Silvercord, 30 Canton Rd., Tsim Sha Tsui, Kowloon, Hong Kong and location of operating office at 7B05,
AnLian Building, JinTian Road, FuTian District, ShenZhen City, China.
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ITEM 3.
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LEGAL
PROCEEDINGS
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From time to time, we may become involved in various lawsuits
and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse
result in these or other matters may arise from time to time that may harm our business. There are currently no legal proceedings
or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
PART
II
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ITEM 4.
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MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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There is limited public trading market
for our Common Stock; our Common Stock is quoted on the OTC Markets OTC Pink Market under the symbol “TEHG.”
The market price of our
Common Stock is subject to significant fluctuations in response to variations in our quarterly operating results, general trends
in the market and other factors, over many of which we have little or no control. In addition, broad market fluctuations, as well
as general economic, business and political conditions, may adversely affect the market for our Common Stock, regardless of our
actual or projected performance. Trading in stocks quoted on the OTCPink is often thin and is characterized by wide fluctuations
in trading prices due to many factors that may have little to do with a company’s operations or business prospects. We cannot
assure you that there will be a market for our common stock in the future.
The
following table sets forth the quarterly high and low sales price per share of our common stock for the periods indicated. The
prices represent inter-dealer quotations, which do not include retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
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FISCAL YEAR 2016
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HIGH
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LOW
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First Quarter
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$
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0.52
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$
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0.52
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Second Quarter
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0.05
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0.05
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Third Quarter
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0.15
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0.5
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Fourth Quarter
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0.51
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0.51
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FISCAL YEAR 2017
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HIGH
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LOW
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First Quarter
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$
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0.2
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$
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0.2
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Second Quarter
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0.51
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0.51
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Third Quarter
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0.2647
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0. 2647
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Fourth Quarter
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2.2
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2
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As of March 29, 2018,
the last sale price reported on the OTCPink for the Company’s Common Stock was approximately $1.25 per share.
Dividend Policy
We have not paid any dividends on our common stock and do not
intend to pay any dividends in the foreseeable future.
Holders
At December 31, 2017, we had 62,723,820 shares of our common
stock par value, $.0001 issued and outstanding, as of today’s date this number is 88,958,745 shares. There are approximately
40 beneficiary owners of our stock as of March 21, 2018
Transfer Agent
The transfer agent for our capital stock is VStock Transfer,
LLC, located at 18 Lafayette Place Woodmere, NY 11598. Their telephone number is (212) 828-8436.
Equity Compensation Plan Information
Currently, there is no equity compensation plan in place for
the Company.
ISSUANCES
OF UNREGISTERED SECURITIES
Technovative
Group, Inc. (“Technovative Group”), entered into a Share Sales Agreement (the “Share Sales Agreement”)
dated October 26, 2016, with Foo Khee Long, the sole shareholder of Innorei Group (Samoa) Limited (“IRG Samoa”), a
holding company of Innorei Group Sdn. Bhd. (“IRG Malaysia”). IRG Malaysia is a mobile solutions apps development and
information technology service provider. Under the terms of the Agreement, Technovative Group agreed to issue 8,000,000 shares
of its common stock to Foo Khee Long subject to completion of certain pre-conditions by both parties, including due diligence
by Innorei Samoa.
In
accordance with the Share Sales Agreement, and upon satisfaction of the conditions precedent to the issuance of the 8,000,000
shares of Technovative Group, on February 22, 2017, Technovative Group issued 4,000,000 restricted shares of its common stock
to Foo Khee Long, 3,000,000 restricted shares of its common stock to Lim Kian Seong and 1,000,000 restricted shares of its common
stock to Soo Soon Kid.
Pursuant to the Hedu Agreement,
the Company issued to the Hedu Shareholders in the aggregate, up to 41,815,880 shares of Common Stock subject to customary adjustments,
representing up to 40% of the Company’s issued and outstanding Common Stock, valued at $4,181,588 in an aggregate (the “Share
Issuance”), as an inducement for the Hedu Shareholders to enter into the VIE Agreements and the Loan Agreement. Each of
the Hedu Shareholders, Wu Jisun, Tan Hongliang, Su Maoling and Liang Songhai, received the first installment of Common Stock of
16,606,131, 4,139,772, 2,775,529 and 2,613,493 shares respectively.
|
ITEM 5.
|
SELECTED
FINANCIAL DATA
|
Not
Applicable.
|
ITEM
6.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
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”); (iv) Innorei Group (Samoa) Limited, a company incorporated
under the laws of Samoa and a wholly-owned subsidiary of TEHG (“IRG Samoa”), and; (v) Innorei Group Sdn Bhd, a company
incorporated under the laws of Malaysia and a wholly owned subsidiary of IRG Samoa (“IRG”) and; (vi) Zhike (Shenzhen)
Corporate Marketing Co., Ltd, a company incorporated under the laws of PRC and a wholly-owned subsidiary of TAL (“Zhike”)
and; (vii) Guangzhou City Hedu Information Technology Co., Ltd, contractually controlled affiliate of Zhike formed under the laws
of the PRC (“Hedu”).
Overview
Technovative
Group Inc. is a technology holding company. The Company has entered into the FinTech (financial technology) Segment after the
acquisition of Hedu. Through its subsidiaries and consolidated variable interest entity, the Company is engaged in delivering
financial technology blockchain solutions and big data analytics technologies to financial service institutions (“FSI”)
in the Greater China Region (“GCR”) and the Southeast Asia Region. We are currently developing a suite of smart tools
which include Chatbot, Smart Contracts, Data Analytics, Blockchain and Trading Platform targeted to FSI in GCR.
As
of December 31, 2017 and 2016, our total accumulated deficits, including accumulated deficit during development stage, were ($3,030,707)
and ($2,280,671), respectively. Our stockholders’ equity was ($263,626) and $165,462, respectively.
Results
of Operations
For
the year ended December 31, 2017 compared with the year ended December 31, 2016
Gross
Revenues
The
Company received sales revenues of $2,184 in the year ended December 31, 2017 and nil in the year ended December 31, 2016.
Operating
Expenses
Operating
expenses for the year ended December 31, 2017 and December 31, 2016 were $817,769 and $1,330,714, respectively. The expenses consisted
of sales and marketing, R & D, payroll and benefits, professional fees, filing fees 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
(loss) for the year ended December 31, 2017 and 2016, were ($750,036) and ($1,323,333), respectively. Basic and diluted net (loss)
per share from continuing operations amounted to ($0.01) and ($0.02) respectively for the year ended December 31, 2017 and December
31, 2016 after taking into consideration and retroactively restating to reflect the 1-for-20 reverse stock split effected on March
2, 2015 and the 1-for-10 reverse stock split effected on May 11, 2015.
The
$573,297 decrease in net (loss) for the year ended December 31, 2017 and December 31, 2016 was due to a decrease in selling, general
and administrative expenses.
Liquidity
and Capital Resources
At
December 31, 2017 we had a working capital deficits of ($3,913,398) consisting of cash on hand of $227,186 as compared to a working
capital deficits of ($15,287) and cash on hand of $668,566 as of December 31, 2016.
Net
cash provided by (used in) operating activities for the year ended December 31, 2017 was ($765,545) as compared to net cash used
in operating activities of ($1,064,710) for the year ended December 31, 2016. The cash used in operating activities are mainly
for sales and marketing, R & D, payroll and benefits, professional fees, filing fees and other general expenses.
Net
cash provided by investing activities for the year ended December 31, 2017 was $75,485 as compared to 106,470 for the year ended
December 31, 2016. The different was derived from investing activities on fixed assets and an acquisition of a subsidiary.
Net
cash provided by financing activities for the year ended December 31, 2017 was $257,108 as compared to nil for the year ended
December 31, 2016. The increase was derived from advances from directors.
Critical
Accounting Policies and Estimates
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods.
Actual results could differ from these estimates. Our significant estimates and assumptions include depreciation and the fair
value of our stock, stock-based compensation, debt discount and the valuation allowance relating to the Company’s deferred
tax assets.
Recently
Issued Accounting Pronouncements
Reference
is made to the “Recent Accounting Pronouncements” in Note 2 to the Financial Statements included in this Report for
information related to new accounting pronouncement, none of which had a material impact on our consolidated financial statements,
and the future adoption of recently issued accounting pronouncements, which we do not expect will have a material impact on our
consolidated financial statements.
Off-Balance
Sheet Arrangements
As
of December 31, 2017, we did not have any off-balance sheet arrangements.
|
ITEM 6A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Not
Applicable.
|
ITEM 7.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
The
consolidated financial statements and supplementary data required with respect to this Item 7, and as identified in Item 14 of
this annual report, are included in this annual report.
|
ITEM 8.
|
CHANGES
OF INDEPENDENT CERTIFYING ACCOUNTANT
|
None.
|
ITEM
8A.
|
CONTROLS
AND PROCEDURES
|
Disclosure
Controls and Procedures
The information contained
in this section covers management’s evaluation of our disclosure controls and procedures and our assessment of our internal
control over financial reporting for the fiscal year ended December 31, 2017.
Based on the evaluation
as of December 31, 2017, as of the end of the period covered by this Annual Report, our management,
conducted an evaluation of our disclosure controls and procedures. Based on this evaluation, the management has concluded that
our disclosure controls and procedures were not effective to ensure that material information is recorded, processed, summarized
and reported by our management on a timely basis in order to comply with our disclosure obligations under the Exchange Act and
the rules and regulations promulgated thereunder, due to certain factors, including but not limited to, 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.
Management’s
Annual Report on Internal Control over Financial Reporting
Based
on its evaluation under the framework in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission as of December 31, 2017, our management, with the participation of our
Chief Executive Officer and Chief Financial Officer, concluded that its internal control over financial reporting were not
effective as of December 31, 2017.
This
annual report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant
to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permanently exempts non-accelerated filers from complying
with Section 404(b) of the Sarbanes-Oxley Act of 2002.
Changes
in Internal Control over Financial Reporting
There have been no changes
in our internal control over financial reporting during the year ended December 31, 2017, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Inherent
Limitations on Effectiveness of Controls
Our
management, including the CEO, does not expect that the Disclosure Controls or our internal control over financial reporting will
prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because
of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements
due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected.
These
inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of
two or more people, or by management override of the controls. The design of any system of controls is based in part on
certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to
future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions of
deterioration in the degree of compliance with policies or procedures.
|
ITEM
8B.
|
OTHER
INFORMATION
|
None