NOTES
TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS
February
28, 2018
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 engaged in the business of natural resource development and holdings through value based investments and collaborative
partnerships with companies across the natural resources sector. It is continually evaluating and acquiring assets for holding
and or development. The Company initiated its goals by pursuing investment and partnerships amongst diversified holdings and companies
globally. On December 04, 2017, the Company acquired a wholly owned subsidiary.
These
condensed unaudited 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 $1,253,543 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 financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
The
Company has $6,419 cash on hand as at February 28, 2018. Cash used in operations was $298,011 for the nine-month period ended
February 28, 2018. Therefore, 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.
|
Interim
reporting and significant accounting policies
|
While
the information presented is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present
fairly the financial position, result of operations and cash flows for the interim periods presented in accordance with accounting
principles generally accepted in the United States of America. All adjustments are of a normal recurring nature. These interim
financial statements should be read in conjunction with the Company’s May 31, 2017 annual financial statements. Operating
results for the nine months period ended February 28, 2018 are not necessarily indicative of the results that can be expected
for the year ended May 31, 2018.
Form 10-Q – Q3
|
Sustainable Projects Group Inc.
|
Page
9
|
SUSTAINABLE
PROJECTS GROUP INC.
(Formerly
SUSTAINABLE PETROLEUM GROUP INC.)
(Formerly
known as BLUE SPA INCORPORATED)
NOTES
TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS
February
28, 2018
There
have been no changes in the accounting policies from those disclosed in the notes to the audited financial statements for the
year ended May 31, 2017.
Equity
investments
Investments
where the Company exercises significant influence but does not exercise control over these investments are accounted for using
the equity method of accounting and are initially recorded at cost. The Company’s allocation of the entities’ profits
or losses is recognized in the statements of operations and comprehensive income. Where the Company’s share of losses on
its investments equal or exceed the carrying amount of the investments, the Company would then only recognize further losses if
it incurred obligations or made payments on behalf of the equity investments. The Company’s equity investments are reduced
by any distributions received and may increase for any additional investments made.
Foreign
currency translations
The
Company maintains an office in Naples, Florida. The functional currency of the Company is the U.S. Dollar, which is also its reporting
currency, all figures presented unless otherwise indicated are stated in U.S. Dollar. At the transaction date, each asset, liability,
revenue and expense is translated into U.S. dollars by the use of the exchange rate in effect at that date. At the period end,
monetary assets and liabilities are re-measured by using the exchange rate in effect at that date. The resulting foreign exchange
gains and losses are included in operations.
During
the period the Company entered into a transaction whereby it acquired a lease deposit denominated in Swiss Francs, as denoted
by “CHF” (see Note 7).
4.
|
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 pronouncement not yet effective but recently
issued would, if adopted, have a material effect on the accompanying financial statements.
On
June 28, 2017, the Company entered into a note receivable with a company with a common director of the Company in the amount of
$200,000 with an interest rate of 3.5% per annum that is payable annually. Any unpaid interest shall be added to the principal
of the loan on an annual basis and together will become the new amount used to calculate the amount of interest going forward.
The note receivable, together with any accrued interest outstanding, is due March 15, 2022.
As
of February 28, 2018, the balance and interest owing was $204,698.
Date
|
|
Principal
|
|
Interest
|
|
Total
|
As
at
|
|
|
|
|
|
|
|
|
|
|
|
|
November
30, 2017
|
|
$
|
200,000
|
|
|
$
|
4,698
|
|
|
$
|
204,698
|
|
Form 10-Q – Q3
|
Sustainable Projects Group Inc.
|
Page
10
|
SUSTAINABLE
PROJECTS GROUP INC.
(Formerly
SUSTAINABLE PETROLEUM GROUP INC.)
(Formerly
known as BLUE SPA INCORPORATED)
NOTES
TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS
February
28, 2018
As
of July 6, 2017, the Company entered into a share exchange agreement to acquire 20% ownership of SPG (Europe) AG by purchasing
2,000 shares of SP Group (Europe) AG from a shareholder of SP Group (Europe) AG, in exchange for the issuance of 6,000 common
shares of the Company at a value of $3.50 per share, which was the fair value of the shares at the time of the transaction. In
accordance to the Dividend Agreement signed by the parties, the Company is to receive 20% of the declared dividends. The Company
shares a common director, common management and a majority shareholder with SP Group (Europe) AG. As a result, it was determined
that the Company would ordinarily have significant influence; however, the investee lacks the financial information that the Company,
and any other shareholder, would need to apply the equity method of accounting. The Company has attempted and failed to obtain
that information and accordingly concluded it appropriate to account for the investment using the cost method at this time.
On
January 18, 2018, the Company sold 25% interest of its ownership of SP Group (Europe) AG for $6,000. Therefore, the Company now
holds 15% interest of SPG Group (Europe) AG. The sale from SP Group (Europe) AG created a gain of $750 for the Company. The amount
of $6,000 has not been paid.
The
Company entered into a Share Purchase Agreement dated July 25, 2017 with Flin Ventures AG to purchase all the shares of myfactor.io
AG for $175,500 (EUR 150,000) subject to due diligence, buy back of an outstanding bond issued by myfactor.io AG for $83,496 (EUR
70,000) and other conditions. Effective December 4, 2017, myfactor.io AG became a wholly owned subsidiary of the Company, pending
regulatory approval. Due diligence costs with respect to this Share Purchase Agreement are included in investments.
7.
|
Prepaid
expenses and deposits
|
|
|
February
28, 2018
|
|
May
31, 2017
|
|
|
|
|
|
|
|
Prepaid
legal
|
|
$
|
-
|
|
$
|
6,917
|
|
Prepaid
expenses
|
|
|
187,222
|
|
|
-
|
|
Deposit
on lease (CHF)
|
|
|
600,000
|
|
|
-
|
|
Foreign
exchange on lease deposit
|
|
|
36,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
823,222
|
|
$
|
6,917
|
|
Prepaid
expenses represent advance to Amixca AG of $184,722 and prepaid rent of $2,500. The Company have decided not to acquire Amixca
AG after its due diligence. On January 18, 2018, the Company entered into an agreement with Amixca AG for a period of three years
commencing February 1, 2018 to provide business development services. The prepayment of $190,000 to Amixca AG will serve as consulting
fees over the three year period.
On
June 23, 2017, the Company acquired a lease deposit in the amount of CHF600,000 for the office building located at Falkenstrasse
28, Zurich, Switzerland, 8008, made by an arm’s length party, Daniel Greising, on behalf of SP Group (Europe) AG. As consideration
for an assignment of the lease deposit to the Company, the Company issued Mr. Greising 400,000 restricted shares of common stock.
In addition, the owner of the office building granted a sublease of the office from SP Group (Europe) AG to the Company rent-free
for a term of 10 years commencing July 1, 2017 to be completed and terminated on June 30, 2027. The shares were valued at $3.50
per share, which was the fair value of the shares at the time of the transaction, for a valuation of $1,400,000. The Company has
incurred an $779,278 loss on the acquisition of the deposit.
Form 10-Q – Q3
|
Sustainable Projects Group Inc.
|
Page
11
|
SUSTAINABLE
PROJECTS GROUP INC.
(Formerly
SUSTAINABLE PETROLEUM GROUP INC.)
(Formerly
known as BLUE SPA INCORPORATED)
NOTES
TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS
February
28, 2018
8.
|
Leasehold
Improvements
|
On
July 6, 2017, the Company issued 10,000 restricted common shares at a value of $3.50 per share for leasehold improvements rendered
for a total valuation of $35,000. The fair value of the shares issued was used to measure the value of services received as that
was more reliably measurable.
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold
Improvements
|
|
$
|
35,000
|
|
|
$
|
2,333
|
|
|
$
|
32,667
|
|
On
March 13, 2017, the Company entered into a property purchase agreement to acquire mineral claims located in the Thunder Bay Mining
Division in the townships of Rickaby and Lapierre, Ontario, Canada. The Company paid 1,250,000 restricted common stocks at $3.00
per share, which was the fair value of the shares at the time of the transaction, for a total value of $3,750,000. (See Note 11).
The
Company has an interest in 13 mineral claims. All the mineral claims are contiguous. Nine (9) of the mineral claims are freehold
patented mineral claims and the other four (4) mineral claims are unpatented Crown Land claims. The combined claims make up an
area of 336 hectares which is equivalent to approximately 810 acres.
10.
|
Accounts
payable and accrued liabilities
|
Accounts
payable and accrued liabilities as of February 28, 2018 are summarized as follows:
|
|
February
28, 2018
|
|
|
May
31, 2017
|
|
|
|
|
|
|
|
|
Accrued
audit fees
|
|
$
|
21,157
|
|
|
$
|
9,000
|
|
Accrued
accounting fees
|
|
|
1,500
|
|
|
|
1,126
|
|
Accrued
legal fees
|
|
|
7,814
|
|
|
|
22,756
|
|
Accrued
office expenses
|
|
|
7,134
|
|
|
|
5,190
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
37,605
|
|
|
$
|
38,072
|
|
Form 10-Q – Q3
|
Sustainable Projects Group Inc.
|
Page
12
|
SUSTAINABLE
PROJECTS GROUP INC.
(Formerly
SUSTAINABLE PETROLEUM GROUP INC.)
(Formerly
known as BLUE SPA INCORPORATED)
NOTES
TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS
February
28, 2018
|
Share
issuances during the nine months ended February 28, 2018:
|
|
|
|
|
a)
|
Issued
400,000 restricted shares of common stock for the deposit for the office lease. The stocks issued were valued at $3.50 per
share, which was the fair value of the shares at the time of the transaction, for a total value of $1,400,000. The Company
recorded a $779,278 loss on the exchange.
|
|
|
|
|
b)
|
Issued
6,000 shares of common to acquire 20% of SP Group (Europe) AG. The shares were valued at $3.50 per share, which was the fair
value of the shares at the time of the transaction, which was determined based on previous issuances in the current fiscal
year.
|
|
|
|
|
c)
|
Sold
31,128 shares of common stock for cash at $3.50 per share.
|
|
|
|
|
d)
|
Issued
10,000 shares of common stock at $3.50 per share for leasehold improvements.
|
|
|
|
|
e)
|
Sold
78,671 shares of common stock for cash at $3.50 per share.
|
|
|
|
|
f)
|
Issued
101,778 shares of common stock at $3.00 per share, which was the fair value of the shares at the time of the transaction,
for debt of $305,334 which consisted of $253,901 in principal loan and $51,433 in interest.
|
|
|
|
|
g)
|
Issued
16,000 shares of common stock at $3.50 per share for services rendered by a director of the Company in lieu of cash payment.
|
|
|
|
|
h)
|
Sold
40,609 shares of common stock for cash at $3.50 per share.
|
|
|
|
|
i)
|
Sold
1,000 shares of common stock for cash at $3.50 per share.
|
|
|
|
|
j)
|
Sold
5,000 shares of common stock for cash at $4.00 per share.
|
|
|
|
|
k)
|
Issued
10,000 shares of common stock at $4.20 per share for the purchase of 10% holdings of Falcon Projects AG.
|
|
|
|
|
Share
issuances during the year ended May 31, 2017
:
|
|
|
|
|
a)
|
Sold
13,332 shares of common stock at $3.00 per share.
|
|
|
|
|
b)
|
Issued
1,250,000 shares of common stock for the acquisition of 2 mineral properties. The shares were valued at $3.00 per share.
|
At
November 30, 2017, the Company had 8,947,518 common shares outstanding (May 31, 2017 – 8,263,332).
There
were no warrants or stock options outstanding as of November 30, 2017 and November 30, 2016.
Share
Subscriptions
At
February 28, 2018, the Company received 1,500 common shares subscriptions at a price of $4.00 per share for a value of $6,000
(see Note 13) which have not yet been issued.
The
Company settled a debt with Workplan Holding AG of CHF 100,000 by providing 25,000 restricted shares valued at $4.00 per share
(see Note 13). The shares have not yet been issued.
Form 10-Q – Q3
|
Sustainable Projects Group Inc.
|
Page
13
|
SUSTAINABLE
PROJECTS GROUP INC.
(Formerly
SUSTAINABLE PETROLEUM GROUP INC.)
(Formerly
known as BLUE SPA INCORPORATED)
NOTES
TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS
February
28, 2018
On
July 31, 2017, all the notes below were repaid in full. The Company issued 101,778 common shares by converting the debt at $3.00
per share.
Related
Parties:
There
were six (6) unsecured promissory notes bearing interest at 8% per annum which were due on demand to a shareholder of the Company.
These promissory notes were repaid in full by converting into common shares of the Company at $3.00 per share.
Date
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
October
6, 2010
|
|
$
|
3,000
|
|
|
$
|
1,638
|
|
|
$
|
4,638
|
|
February 22,
2011
|
|
|
1,500
|
|
|
|
773
|
|
|
|
2,273
|
|
May 17, 2011
|
|
|
7,500
|
|
|
|
3,727
|
|
|
|
11,227
|
|
September
16, 2011
|
|
|
5,000
|
|
|
|
2,351
|
|
|
|
7,351
|
|
November 4,
2011
|
|
|
5,000
|
|
|
|
2,297
|
|
|
|
7,297
|
|
December 14,
2012
|
|
|
13,000
|
|
|
|
4,647
|
|
|
|
17,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
35,000
|
|
|
$
|
15,433
|
|
|
$
|
50,433
|
|
There
were six (6) unsecured promissory notes bearing interest at 4% per annum which were due on demand due to shareholders of the Company.
These promissory notes were repaid in full by converting into common shares of the Company at $3.00 per share.
Date
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
July
4, 2016
|
|
$
|
1,000
|
|
|
$
|
43
|
|
|
$
|
1,043
|
|
July 12, 2016
|
|
|
25,000
|
|
|
|
1,052
|
|
|
|
26,052
|
|
September
15, 2016
|
|
|
20,000
|
|
|
|
699
|
|
|
|
20,699
|
|
December 22,
2016
|
|
|
13,901
|
|
|
|
337
|
|
|
|
14,238
|
|
January 13,
2017
|
|
|
10,000
|
|
|
|
218
|
|
|
|
10,218
|
|
March 08,
2017
|
|
|
30,000
|
|
|
|
477
|
|
|
|
30,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
99,901
|
|
|
$
|
2,826
|
|
|
$
|
102,727
|
|
There
was one (1) unsecured promissory note bearing interest at 8% per annum which was due on demand, and convertible at a conversion
price of US$0.005 per share at the lender’s option. The convertible note was at the same interest rate as promissory notes
that have no conversion feature. The promissory note was repaid in full by converting into common shares of the Company
at $3.00 per share.
Form 10-Q – Q3
|
Sustainable Projects Group Inc.
|
Page
14
|
SUSTAINABLE
PROJECTS GROUP INC.
(Formerly
SUSTAINABLE PETROLEUM GROUP INC.)
(Formerly
known as BLUE SPA INCORPORATED)
NOTES
TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS
February
28, 2018
Date
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
04, 2013
|
|
$
|
30,000
|
|
|
$
|
9,376
|
|
|
$
|
39,376
|
|
Unrelated
Parties:
There
was one (1) unsecured promissory note bearing interest at 8% per annum which was due on demand. The promissory note was repaid
in full by converting into common shares of the Company at $3.00 per share.
Date
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
15, 2012
|
|
$
|
10,000
|
|
|
$
|
4,305
|
|
|
$
|
14,305
|
|
There
were five (5) unsecured promissory notes bearing interest at 8% per annum which were due on demand, and convertible at a conversion
price of US$0.005 per share at the lender’s option. The convertible notes were at the same interest rate as promissory notes
that have no conversion feature. These promissory were repaid in full by converting into common shares of the Company at $3.00
per share.
Date
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
2, 2013
|
|
$
|
14,000
|
|
|
$
|
4,851
|
|
|
$
|
18,851
|
|
October
15, 2013
|
|
|
15,000
|
|
|
|
4,554
|
|
|
|
19,554
|
|
January
8, 2014
|
|
|
10,000
|
|
|
|
2,849
|
|
|
|
12,849
|
|
December
3, 2014
|
|
|
20,000
|
|
|
|
4,261
|
|
|
|
24,261
|
|
September
22, 2015
|
|
|
20,000
|
|
|
|
2,976
|
|
|
|
22,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
79,000
|
|
|
$
|
19,491
|
|
|
$
|
98,491
|
|
Form 10-Q – Q3
|
Sustainable Projects Group Inc.
|
Page
15
|
SUSTAINABLE
PROJECTS GROUP INC.
(Formerly
SUSTAINABLE PETROLEUM GROUP INC.)
(Formerly
known as BLUE SPA INCORPORATED)
NOTES
TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS
February
28, 2018
13.
|
Related
Party Transactions
|
During
the period ended February 28, 2018, the Company incurred management fees from two directors totaling an aggregate of $78,700 (2017
– nil). As at February 28, 2018, $8,600 (2017 - $1,293) was owing to directors for management fees and $9,833 (2017 - $9,833)
was owing to two shareholders for expenses paid on behalf of the Company.
One
director participated in the subscription of 1,000 shares of the Company valued at $3,500 (see Note 11).
During
the period ended February 28, 2018, the Company paid $2,500 (2017 - $1,000) to a company with a director in common for rent for
its office in Naples, Florida and $ Nil (2017 - $10,500) for advertising and website design.
Transactions
with a Majority Shareholder
Workplan
Holdings Inc.
During
the year ended May 31, 2017, Workplan Holdings Inc., a company controlled by a sole shareholder, purchased 4,000,000 restricted
common shares from the former sole officer and director of the Company.
The
Company entered into a property purchase agreement with Workplan Holdings Inc. and issued 1,250,000 restricted common stocks at
$3.00 per share and acquired two mineral properties. (see Note 9)
The
shareholder paid expenses on behalf of the Company in the amount of $500. As at February 28, 2018, this amount was owing.
The
Company entered into a $30,000 demand notes payable with Workplan Holding AG, a company controlled by Workplan Holdings Inc.,
at an interest rate of 4% per annum. As at February 28, 2018, the total principal and interest outstanding on the note was repaid
in full by converting the principal loan and interest at $3.00 per share. The Company issued 10,159 common shares.
The
Company settled a CHF 100,000 debt with Workplan Holding AG by entering into an agreement to issue 25,000 restricted shares valued
at $4.00 per share. The CHF 100,000 was a loan from Workplan Holding AG to pay Flin Ventures to complete the Share Purchase Agreement
for myfactor.io. The Company have not yet issued the shares.
SP
Group (Europe) AG
SP
Group (Europe) AG and the Company share a common majority shareholder. The Company entered into a 3 year consulting agreement
with SP Group (Europe) AG whereby the Company will provide advisory and consulting services commencing May 1, 2017. The agreement
provides that SP Group (Europe) AG pays the Company as follows:
|
a.
|
$5,000
per month for the first year
|
|
b.
|
$10,000
per month for the second year
|
|
c.
|
$15,000
per month for the third year
|
The
Company received a lump sum payment which have been allocated to deferred revenues. As of February 28, 2018, there was $15,000
remaining in deferred revenues (May 31, 2017 - $30,000).
On
July 6, 2017, the Company entered into an agreement with SP Group (Europe) AG to acquire 20% ownership of SP Group (Europe) AG
by issuing 6,000 restricted common stock of the Company at $3.50 per share for a total value of $21,000. SP Group (Europe) AG
has a portfolio of approximately 20 different projects in the natural resources sector which it develops and finances. SP Group
(Europe) AG and Workplan Holdings Inc. have a common shareholder and director. (See Note 6)
The
Company sold 25% interest of its ownership of SP Group (Europe) AG for $6,000. Therefore, the Company now holds 15% interest of
SPG Group (Europe) AG. The sale from SP Group (Europe) AG created a gain of $750 for the Company. (see Note 6). The $6,000 was
paid by the buyer subsequent to the period ended February 28, 2018.
Subsequent
to February 28, 2018, the Company received $6,000 from the sale of 25% interest of its ownership of SP Group (Europe) AG.
Form 10-Q – Q3
|
Sustainable Projects Group Inc.
|
Page
16
|