NOTES
TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
SEPTEMBER
30, 2022
1.
Organization and Nature of Operations
Sustainable
Projects Group Inc. (“the Company”) was incorporated in the State of Nevada, USA on September 4, 2009 as Blue Spa Incorporated
which was engaged in the development of an internet based retailer of a multi-channel concept combining a wholesale distribution with
a retail strategy relating to the quality personal care products, fitness apparel and related accessories. On December 19, 2016, the
Company amended its name from “Blue Spa Incorporated” to “Sustainable Petroleum Group Inc.” On September 6, 2017,
the Company obtained a majority vote from its shareholders to amend the Company’s name from “Sustainable Petroleum Group
Inc.” to “Sustainable Projects Group Inc.” to better reflect the business it has undertaken. The name change was effective
on October 20, 2017.
The
Company is a multinational business development company that pursue investments and partnerships with companies across sustainable sectors.
It is continually evaluating and acquiring assets for holding and/or for development. The Company is involved in consulting services
and collaborative partnerships.
The
Company’s year-end is December 31.
2.
Going Concern
These
condensed consolidated interim financial statements have been prepared in conformity with generally accepted accounting principles in
the United States or “GAAP”, which contemplate continuation of the Company as a going concern. However, the Company has limited
operations and has sustained operating losses resulting in a deficit. In view of these matters, realization of a major portion of the
assets in the accompanying balance sheet is dependent upon the continued operations of the Company, which in turn is dependent upon the
Company’s ability to meet its financing requirements, and the success of its future operations.
The
Company has accumulated a deficit of $3,310,151 since inception and has yet to achieve profitable operations and further losses are anticipated
in the development of its business. The Company’s ability to continue as a going concern is in substantial doubt and is dependent
upon obtaining additional financing and/or achieving a sustainable profitable level of operations. The consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
The
Company has $21,675 cash on hand as at September 30, 2022. The Company will need to raise additional cash in order to fund ongoing operations
over the next 12 month period. The Company may seek additional equity as necessary and it expects to raise funds through private or public
equity investment in order to support existing operations and expand the range of its business. There is no assurance that such additional
funds will be available for the Company on acceptable terms, if at all.
3.
Summary of accounting policies
Basis
of presentation
While
the information presented is unaudited, it includes all adjustments, which are, in our opinion of management, necessary to present fairly
the financial position, result of operations and cashflows for the interim period presented in accordance with accounting principles
generally accepted in the United States of America. All adjustments are of a normal recurring nature. These consolidated interim financial
statements should be read in conjunction with the Company’s December 31, 2021 annual financial statements. Operating results for
the nine months ended September 30, 2022 are not necessarily indicative of the results that can be expected for the year ended December
31, 2022.
The
accompanying condensed consolidated unaudited interim financial statements include the accounts of the Company, it’s wholly subsidiary
YER Brands Inc., and its joint venture, Hero Wellness Systems Inc. (formerly Vitalizer Americas Inc.) The Company controls 55% of Hero
Wellness Systems Inc. Pursuant to Accounting Standards Codification Topic 810, the joint venture company is considered as a variable
interest entity that requires the Company to consolidate its account. All intercompany balances and transactions have been eliminated
in the consolidation. The operating results of the joint venture have been included in the Company’s consolidated financial statements
and the non-controlling interest that were not attributable to the Company have been reported separately. At September 30, 2022, Hero
Wellness Systems’ assets were impaired and the Company impaired its investment and eliminated Hero Wellness System’s accounts
from the condensed consolidated financial statements.
Form 10-Q | Sustainable Projects Group Inc. | Page F-6 |
Significant
Accounting Policies
There
have been no material changes in the Company’s significant accounting policies to those previously disclosed in the December 31,
2021 annual report.
Use
of estimates
The
preparation of the consolidated interim 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 disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management
makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial
statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically
in the period when new information becomes available to management. Actual results could differ from those estimates.
Segment
Reporting
The
Company reports segment information based on the “management” approach. The management approach designates the internal reporting
used by management for making decisions and assessing performance of its corporation wide basis in comparison to its various businesses.
The Company has three reportable segments. The business operations consist of YER Brands and Sustainable Projects Group. The segment
for Hero Wellness Systems Inc. has been extinguished at September 30, 2022. The segments are determined based on several factors including
the nature of products and services, nature of production processes and delivery channels and consultancy services. The operating segment’s
performance is evaluated based on its segment income. Segment income is defined as the gross sales and miscellaneous income. At September
30, 2022, revenues were reported as follows:
Schedule of Segment Reporting
| |
For the nine | | |
For the nine | | |
For the twelve | |
| |
months ended | | |
Months ended | | |
months ended | |
| |
September 30,
2022 | | |
September 30, 2021 | | |
December 31, 2021 | |
| |
| | |
| | |
| |
Sales | |
| | | |
| | | |
| | |
Sustainable Projects Group | |
$ | - | | |
$ | - | | |
$ | - | |
YER Brands | |
| - | | |
| 233 | | |
| 233 | |
Hero Wellness Systems (discontinued operation) | |
| - | | |
| 5,120 | | |
| 5,120 | |
Total Sales | |
$ | - | | |
$ | 5,353 | | |
$ | 5,353 | |
| |
| | | |
| | | |
| | |
Total Assets | |
| | | |
| | | |
| | |
Sustainable Projects Group | |
$ | 23,409 | | |
| 79,081 | | |
$ | 59,806 | |
YER Brands | |
| 233,503 | | |
| 262,275 | | |
| 255,108 | |
Hero Wellness Systems (discontinued operation) | |
| - | | |
| 53,086 | | |
| 53,028 | |
Total Assets | |
$ | 256,912 | | |
$ | 394,442 | | |
$ | 367,942 | |
Form 10-Q | Sustainable Projects Group Inc. | Page F-7 |
Recently
issued accounting pronouncements
The
Company adopts new pronouncements relating to generally accepted accounting principles applicable to the Company as they are issued,
which may be in advance of their effective date. Management does not believe that any pronouncements not included above will have a material
effect on the accompanying financial statements.
4.
Inventory
Schedule of Inventory
| |
Sep 30, 2022 | | |
Dec 31, 2021 | |
| |
| | |
| |
YER Brands (Materials) | |
$ | 3,939 | | |
$ | 3,939 | |
Total | |
$ | 3,939 | | |
$ | 3,939 | |
5.
Office furniture and equipment
Schedule of Office Furniture and Equipment
| |
Sep 30, 2022 | | |
Dec 31, 2021 | |
| |
| | |
| |
Cost – YER Brands | |
$ | 9,789 | | |
$ | 9,789 | |
Accumulated depreciation | |
| (8,747 | ) | |
| (7,497 | ) |
Total | |
$ | 1,042 | | |
$ | 2,292 | |
| |
| | | |
| | |
Depreciation
for the nine months ended September 30, 2022 was $1,250 (2021 year - $2,881).
6.
Asset purchase and goodwill:
On
May 8 2020, the Company entered into a Letter of Intent with Sawyer & Samantha Sparks to purchase all marketing rights, production
know-how and limited existing inventory and equipment (the “Assets”) of Soy-yer Dough. Soy-yer Dough is a gluten free modeling
clay. As part of the agreement, the Company issued 105,264 common shares to Sawyer & Samantha Sparks for meeting certain milestones
which were at $2.85 per share that was valued at $300,002.
Goodwill
has been recorded on the Soy Yer Dough purchase as the amount of the investment was greater than the identifiable net assets purchased.
The amount is not amortized but rather is tested for impairment at least annually. The identifiable assets and goodwill was calculated
as follows:
Schedule of Identifiable Assets and goodwill
| |
| | |
Purchase Price | |
$ | 300,002 | |
| |
| | |
Allocated to - License | |
| 135,000 | |
Equipment | |
| 5,000 | |
Inventory | |
| 3,250 | |
Identifiable net assets | |
| 143,250 | |
| |
| | |
Allocated to Goodwill | |
$ | 156,752 | |
Form 10-Q | Sustainable Projects Group Inc. | Page F-8 |
7.
Intangible Assets
The
intellectual property and trademarks acquired on the Soy-yer Dough purchase (See Note 6 Asset purchase and goodwill) were identified
as intangible assets with finite useful lives and are amortized on a straight-line basis over their useful lives of five years. Amortization
commences when the assets are available for use. Intellectual properties consist of production process, know-how, product recipe, marketing,
and branding.
Summary of Intangible Assets
| |
| | |
September 30,
2022 | | |
December 31, 2021 | |
| |
Cost | | |
Depreciation | | |
Net | | |
Net | |
Intellectual properties | |
$ | 135,000 | | |
$ | 64,125 | | |
$ | 70,875 | | |
$ | 91,125 | |
Trademark, patent | |
| 593 | | |
| - | | |
| 593 | | |
| 593 | |
| |
$ | 135,593 | | |
$ | 64,125 | | |
$ | 71,468 | | |
$ | 91,718 | |
Amortization
for the nine months ended September 30, 2022 was $20,250 (2021 year - $27,000).
Amortization
for over the remaining 4 years will be as follows:
Schedule of Intangible Asset Amortization
Year ended December 31 | |
| |
2022 | |
$ | 6,750 | |
2023 | |
$ | 27,000 | |
2024 | |
$ | 27,000 | |
2025 | |
$ | 10,125 | |
Total | |
$ | 70,875 | |
8.
Accounts payable and accrued liabilities
Accounts
payable and accrued liabilities as of September 30, 2022 are summarized as follows:
Schedule of Accounts Payable and Accrued Liabilities
| |
Sep 30, 2022 | | |
Dec 31, 2021 | |
| |
| | |
| |
Accounts payable | |
$ | 138,471 | | |
$ | 162,067 | |
Accrued liabilities | |
| 5,200 | | |
| 11,500 | |
Total | |
$ | 143,671 | | |
$ | 173,567 | |
9.
Note payable, Convertible notes payable and Obligation to issue shares
On
March 1, 2019, the Company entered into an unsecured loan agreement for $50,000 with an interest rate of 3.5% per annum. The loan was
due on or before April 15, 2022, but on March 28, 2022, the loan agreement was extended to April 15, 2024. At September 30, 2022, there
was $6,281 in accrued interest (December 31, 2021- $4,972).
On
July 12, 2019, the Company entered into an unsecured convertible loan agreement with a relative of the CEO for $20,000 with an interest
rate of 3.0% per annum. The loan is due on or before July 12, 2022. The lender has the option to convert the whole loan and the accrued
interest into shares of the Company at the price of $1.45 per share. On May 10, 2021, the Company agreed to a debt settlement arrangement
whereby it would issue 640,000 common shares for principal amount of $20,000 plus accrued interest and fees valued at $1,098. The transaction
value was calculated to be $0.033 per share. The shares were issued during the period ended March 31, 2022.
On
July 23, 2021, the Company received $100,000 pursuant to a two-year unsecured convertible promissory note payable, bearing an interest
at 10% per annum. The loan may be renewed at the option of the Lender and is secured via a security agreement supported by Company’s
present and future assets. The outstanding principal and unpaid accrued interest will automatically convert into shares of the Company
on or before the maturity date upon the closing of a “Qualified Transaction” to an amount equal to 25% of the fully diluted
capitalization of the Company on a post-money basis. If the event that the Qualified Transaction is not consummated on or prior to the
maturity date, the Lender has the right to convert the principal and unpaid accrued interest of the note into shares of the Company to
an amount equal to 25% of the fully diluted capitalization of the Company. A Qualified Transaction is defined as the reverse merger of
the Company with a target company. On June 22, 2022, the Company received an additional $25,000. The outstanding principal and unpaid
accrued interest may be converted to an amount equal to 5% of the fully diluted capitalization of the Company on a post-money basis.
At September 30, 2022, the accrued unpaid interest was $12,424 (December 31, 2021 - $4,301).
The
total interest payable on the loans at September 30, 2022 was $18,705 (2021 year - $9,273).
Form 10-Q | Sustainable Projects Group Inc. | Page F-9 |
10.
Common stock
The
following stock transaction occurred in the Company during the nine-month period ended September 30, 2022:
|
a) |
The
Company issued 640,000 common shares for a debt settlement for a convertible note payable of $20,000 and accrued interest of $1,098. |
The
following transactions occurred during the year ended December 31, 2021:
|
a) |
The
Company reached a debt settlement arrange to issue 640,000 shares of common stock for a convertible note payable of $20,000 and accrued
interest of $1,098, a $0.033 per share value .. |
(See
Note (Note payable, Convertible note payable and Obligation to issue shares).
|
b) |
300,000
shares of common stock were issued for consulting services of $10,500, a $0.035 per share value. |
11.
Equity in joint venture, non-controlling interest
Hero
Wellness Systems Inc.
The
Company had a controlling interest of 55% in a joint venture of Hero Wellness Systems Inc. (“Hero”)(formerly Vitalizer Americas
Inc.) (See Note 13). Hero is in the business of importing, marketing, distribution and sale of luxury massage therapeutic chairs. Hero
is still in its early stages of development. The company participated in several conferences to showcase and introduce its products in
the market. The company has ordered and received inventory for sale. The following summary information on the joint venture amounts are
based on contributions received from activities since inception through to September 30, 2022 and December 31, 2021 with intercompany
transactions eliminated. Effective September 30, 2022, the assets, liabilities and non-controlling interest of Hero Wellness Systems
that were consolidated on the balance sheet were eliminated.
Schedule of Equity in Joint Venture, Non-Controlling Interest
| |
Sep 30, 2022 | | |
Dec 31, 2021 | |
Assets | |
$ | - | | |
$ | 53,028 | |
Liabilities | |
| (8,838 | ) | |
| (9,643 | ) |
Net Assets (liabilities) | |
$ | (8,838 | ) | |
$ | 43,385 | |
| |
| | | |
| | |
Revenues | |
$ | 4,280 | | |
$ | 5,120 | |
Expenses | |
| (61,416 | ) | |
| (21,371 | ) |
Net Income | |
$ | (57,136 | ) | |
$ | (16,251 | ) |
| |
| | | |
| | |
Company’s joint venture interest portion on net loss | |
$ | (31,425 | ) | |
$ | (8,938 | ) |
| |
| | | |
| | |
Non-controlling joint venture interest on net loss | |
$ | (25,711 | ) | |
$ | (7,313 | ) |
| |
| | | |
| | |
Company’s Capital contribution to joint venture | |
$ | 286,825 | | |
$ | 286,825 | |
| |
| | | |
| | |
Company’s joint venture interest portion in net assets (liabilities) | |
$ | (4,861 | ) | |
$ | 23,862 | |
| |
| | | |
| | |
Total Equity of Joint Venture | |
$ | 443,275 | | |
$ | 443,275 | |
Company’s portion of the Joint Venture | |
| 286,825 | | |
| 286,825 | |
Non-controlling interest portion in equity | |
| 156,450 | | |
| 156,450 | |
| |
| | | |
| | |
Reduced by losses to date | |
| | | |
| | |
Prior years | |
| (89,471 | ) | |
| (82,158 | ) |
Current period | |
| (25,711 | ) | |
| (7,313 | ) |
Net non-controlling interest portion in equity, adjusted for losses to date, before deconsolidation | |
$ | 41,268 | | |
$ | 66,979 | |
Form 10-Q | Sustainable Projects Group Inc. | Page F-10 |
12.
Discontinued Operations
Effective
September 30, 2022, the Company impaired its investment in Hero Wellness Systems, Inc. and eliminated that company’s accounts from
the condensed consolidated financial statements through deconsolidation. All expenses incurred by Hero Wellness Systems, Inc. up to September
30, 2022 have been disclosed as discontinued operations. An analysis of the financial results of the discontinued operations are as follows.
Schedule of Discontinued Operations
Revenues | |
| |
Sales | |
$ | 4,280 | |
Cost of sales | |
| (5,472 | ) |
Net margin (loss) | |
| (1,192 | ) |
Expenses | |
| | |
General and administrative | |
| 5,888 | |
Professional; fees | |
| 2,500 | |
Inventory write down | |
| 47,556 | |
Operating expense | |
| (55,944 | ) |
Net loss from discontinued operations | |
$ | (57,136 | ) |
| |
| | |
Upon consolidation, the Company recorded the following gain | |
| | |
Net assets (liabilities) eliminated on deconsolidation | |
$ | (8,838 | ) |
Elimination of non-controlling interest | |
| (41,268 | ) |
Gain on deconsolidation | |
$ | 50,106 | |
13.
Related party transactions
During
the nine months ended September 30, 2022, the Company incurred management fees from a director/officer totaling an aggregate of $18,000
(2021 year - $24,000).
At September 30, 2022, $60,250
was owing to the director/officer for management fees, current and past due, and $2,020
for out of pocket expenses. During the nine months ended September 30, 2022, the Company incurred management fees from an officer
totaling $9,000
(2021 year - $12,000).
At September 30, 2022, $12,766
was owing to that officer for past due salaries and $21,000
for management fees.
At
September 30, 2022, the Company owes a company controlled by the above two related parties of $20,647 for office expenses.
See
Note 9, Notes payable, Convertible notes payable and Obligation to issue shares, for a loan transaction with the relative of the
CEO.
14.
Subsequent Events
There
were no subsequent events
Form 10-Q | Sustainable Projects Group Inc. | Page F-11 |