NOTES
TO THE CONDENSED CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS
March
31, 2020
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 mineral
exploration, consulting services and collaborative partnerships.
The
Company has changed its year end to December 31.
2.
Going Concern
These
condensed consolidated 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 $2,740,747 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 unaudited interim financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
The
Company has $73,165 cash on hand as at March 31, 2020. Cash provided by operations was $4,173 for the three months ended March
31, 2020. The Company will need to raise additional cash in order to fund ongoing operations over the next 12 months 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.
Form 10-Q – Q1
|
Sustainable Projects Group Inc.
|
F-6
|
3. Summary
of principal 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, 2019 annual financial statements.
Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that can be expected
for the period ended December 31, 2020.
The
accompanying condensed consolidated unaudited interim financial statements include the accounts of the Company and its joint ventures,
Hero Wellness Systems Inc. (formerly Vitalizer Americas Inc.) and Cormo USA Inc. The Company controls 55% of Hero Wellness Systems
Inc. and 35% of Cormo USA Inc. Pursuant to Accounting Standards Codification Topic 810, both of these companies are considered
variable interest entities that requires the Company to consolidate. All intercompany balances and transactions have been eliminated
in the consolidation. The operating results of the joint ventures have been included in the Company’s consolidated financial
statements. The non-controlling interest that were not attributable to the Company have been reported separately. (See Note 12,
Note 13).
Significant
Accounting Policies
There
have been no material changes in the Company’s significant accounting policies to those previously disclosed in the December
31, 2019 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.
Foreign
currency translations
The
Company maintains an office in Naples, Florida. The functional currency of the Company is the 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.
Deferred
revenue
Deferred
revenue is a short-term liability that represents revenues received but not earned. When the Company recognizes its revenue, the
deferred revenue liability will be eliminated. As at March 31, 2020, the Company’s joint venture received $Nil in deferred
revenue (March 31, 2019 - $7,999).
Form 10-Q – Q1
|
Sustainable Projects Group Inc.
|
F-7
|
Revenue
Recognition
In
May 2014, the FASB issued guidance on the recognition of Revenue from Contracts with Customers. The core principle of the guidance
is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration which the company expects to receive in exchange for those goods or services. To achieve this core
principle, the guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The guidance
addresses several areas including transfer of control, contracts with multiple performance obligations, and costs to obtain and
fulfill contracts. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue
and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized
from costs incurred to obtain or fulfill a contract.
The
Company adopted the ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), from June 01, 2018 using the
modified retrospective method. Revenues for the year ended December 31, 2018 were not adjusted. The adoption of Topic 606 did
not have a material impact to the Company’s financial statements. The Company recognizes revenue when the Company transfers
promised services to the customer. The performance obligation is the monthly services rendered. The Company has one main revenue
source which is providing consulting services. Accordingly, the Company recognizes revenue from consulting services when the Company’s
performance obligation is complete. Where there is a contract for services, the Company perform the obligations and bills monthly
for its services as rendered. Where there is no contract, the Company performs the obligation and/or service and recognize revenues
as provided. Even though the Company entered into contract with the customer, the contract could be terminated at any time with
notice. The Company may receive payments from customers in advance of the satisfaction of performance obligations for services.
These advance payments are recognized as deferred revenue until the performance obligations are completed and then, recognized
as revenues. The Company has one contract with one related party customer with a time period requirement for notice of termination.
Termination penalties are non-substantive and can be performed by either party. As at March 31, 2020, there was no revenue to
report.
Accounts
receivables
Trade
accounts receivable are stated at the amount the Company expects to collect. Management considers the following factors when determining
the collectability of specific customer accounts: customer credit worthiness, past transaction history, current economic industry
trends and changes in customer payment terms. Past due balances over 90 days and other higher risk amounts are reviewed individually
for collectability. Based on the management’s assessment, the Company provides for estimated uncollectible amounts through
a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable
collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.
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 operating ventures consist of Hero Wellness Systems,
Cormo USA and Sustainable Projects Group. 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 net sales less cost of sales, general and administrative
expenses and does not include amortization of any sorts, stock-based compensation or any other charges (income), and interest.
As at March 31, 2020, there were no revenues to report.
|
|
For the three
months ended
|
|
|
For the three
months ended
|
|
|
For the twelve
months ended
|
|
|
|
Mar 31, 2020
|
|
|
Mar 31, 2019
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Sustainable Projects Group
|
|
$
|
-
|
|
|
$
|
95,000
|
|
|
$
|
95,986
|
|
Hero Wellness Systems
|
|
|
-
|
|
|
|
-
|
|
|
|
6,080
|
|
Cormo USA
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total Sales
|
|
$
|
-
|
|
|
$
|
95,000
|
|
|
$
|
103,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Sustainable Projects Group
|
|
$
|
285,158
|
|
|
$
|
899,380
|
|
|
$
|
423,984
|
|
Hero Wellness Systems
|
|
|
62,958
|
|
|
|
168,876
|
|
|
|
66,686
|
|
Cormo USA
|
|
|
651,452
|
|
|
|
1,019,736
|
|
|
|
684,635
|
|
Total Assets
|
|
$
|
999,568
|
|
|
$
|
2,087,992
|
|
|
$
|
1,175,305
|
|
Form 10-Q – Q1
|
Sustainable Projects Group Inc.
|
F-8
|
Recently
issued accounting pronouncements
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses”. The ASU sets forth a “current
expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments
held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces
the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized
cost and applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15,
2019, including interim periods within those fiscal years, with early adoption permitted. Recently, the FASB issued the final
ASU to delay adoption for smaller reporting companies to calendar year 2023. The Company is currently assessing the impact of
the adoption of this ASU on its financial statements.
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.
Other receivables – related party
On
January 18, 2018, the Company entered into an agreement with Amixca AG for a period of three years commencing February 1, 2018
in which Amixca AG has agreed to provide business development services. The prepayment of $190,000 to Amixca AG was supposed to
serve as consulting fees over the next three year period. The consulting agreement with Amixca AG was never utilized and Amixca
AG did not provide any services. The consulting agreement was annulled and Amixca AG agreed to return the deposit with a payment
schedule spanning over a year, beginning July 5, 2019 of $20,000 and thereafter, the first of every month of $15,455 until the
full $190,000 has been repaid. At March 31, 2020, the full amount was repaid.
Form 10-Q – Q1
|
Sustainable Projects Group Inc.
|
F-9
|
5.
Inventory
Inventories
are stated at the lower of cost or net realizable value using the first-in, first out (FIFO) cost method of accounting. Cost is
determined using the first in, first out (FIFO) cost method. Costs include the cost of purchase and transportation costs that
are directly incurred to bring the inventories to their present location, and duty. Net realizable value is the estimated selling
price of the inventory in the ordinary course of business, less any estimated selling costs. At March 31, 2020, inventory consists
of 3-D massage chairs from Hero Wellness Systems Inc. of $62,077.
6.
Prepaid expenses and deposits
|
|
Mar 31, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
$
|
9,956
|
|
|
$
|
7,521
|
|
Deposit on lease
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,956
|
|
|
$
|
12,521
|
|
7.
Assets
Right
of Use Asset – Vehicle Lease
On
June 12, 2018, the Company entered into an operating vehicle lease for a period of two years. The Company made an upfront payment
of $22,724 for its obligation which covered all the monthly lease payments. The Company intends to return the vehicle at the end
of the lease period. At March 31, 2020, the remaining right of use asset was $2,367.
Right of Use Asset
|
|
$
|
22,724
|
|
Accum Amortization
|
|
$
|
(20,357
|
)
|
|
|
$
|
2,367
|
|
Form 10-Q – Q1
|
Sustainable Projects Group Inc.
|
F-10
|
Right
of Use Asset – Office Lease
On
June 18, 2018, the Company entered into a sublease agreement to rent office space in Naples, Florida. The office lease commences
September 01, 2018 through to March 31, 2021. The monthly base rent for the first year is $4,552.56 (annual $54,630.75); the monthly
base rent for the second year is $4,684.52 (annual $56,214.25); and the monthly base rent for the third year is $4,816.48 (annual
$57,797.75). The Company has elected to separate the lease and non-lease components. The following remaining annual minimum lease
commitments under the lease do not include CAM costs and taxes:
2020
|
|
$
|
43,349
|
|
2021
|
|
|
14,449
|
|
|
|
$
|
57,798
|
|
Amount
representing interest
|
|
|
(1,081
|
)
|
Lease
obligation, net
|
|
$
|
56,717
|
|
Less
current portion
|
|
|
(56,717
|
)
|
Lease
obligation - long term
|
|
$
|
-
|
|
The
remaining office lease liability at March 31, 2020 was $56,717.
At
March 31, 2020, the remaining right of use asset for the office lease was $53,889. An annual rate of 3.5% was used which is the
rate used for loans in the Company. The right of use asset is being amortized over the duration of the lease.
Right of Use Asset
|
|
$
|
139,212
|
|
Accum Amortization
|
|
$
|
(85,323
|
)
|
|
|
$
|
53,889
|
|
Leasehold
Improvements
The
leasehold improvements for the Florida office will be depreciated straight-line over the term of the office lease commencing September
1, 2018 and ending March 31, 2021.
For Florida office
|
|
Mar 31, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
6,072
|
|
|
$
|
6,072
|
|
Accumulated Depreciation
|
|
|
(3,721
|
)
|
|
|
(3,134
|
)
|
Net
|
|
$
|
2,351
|
|
|
$
|
2,938
|
|
Office
Furniture and Equipment
The
office furniture and equipment are depreciated straight-line for a period of 3 years.
Furniture & Equipment
|
|
Mar 31, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
13,698
|
|
|
$
|
13,698
|
|
Additions
|
|
|
1,394
|
|
|
|
1,394
|
|
Accumulated Depreciation
|
|
|
(8,320
|
)
|
|
|
(7,064
|
)
|
Net
|
|
$
|
6,772
|
|
|
$
|
8,028
|
|
Form 10-Q – Q1
|
Sustainable Projects Group Inc.
|
F-11
|
8.
Intangible Assets
The
Company entered into an agreement with Global Gaming Media Inc., a company with a common majority shareholder and acquired the
Gator Lotto App on May 25, 2018 by issuing 100,000 restricted shares at $4.00 per share for the valuation of $400,000. The purchase
includes the application for the Florida lotteries, all software rights to the Gator Lotto App, the domain, etc. The Company spent
an additional $11,000 toward development costs. The Company commenced amortization of its intangible asset over a three-year period
effective January 2019. The latest version of the Lotto App was launched February 2019. At December 31, 2018, the Company recorded
an impairment of $168,000 was required which approximate its market value. The Company currently does not have the resources to
exploit the app and may consider selling this asset in the future.
Cormo
USA Inc., the joint venture with the Company, has an exclusive license agreement from Cormo AG (of Switzerland) for North America.
The exclusive license includes, but not limited to, the intellectual property, know-how, patent trade marks and all present and
future process improvements, product applications and related know how from Cormo AG. As part of the joint venture agreement,
Cormo AG’s contribution for its 35% interest was the license to Cormo USA. The license was valued to be $700,000 pursuant
to its authorized share capital. The license will be amortized over its estimated useful life of fifteen years. The amortization
commenced January 1, 2019. The following is the amortization amounts for each of the next five years:
Remaining 2020
|
|
$
|
35,000
|
|
2021
|
|
$
|
46,666
|
|
2022
|
|
$
|
46,666
|
|
2023
|
|
$
|
46,666
|
|
2024
|
|
$
|
46,666
|
|
And thereafter
|
|
$
|
420,003
|
|
Summary
of intangibles:
|
|
Cost less Impairment
|
|
|
Accumulated
Depreciation
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
Gator Lotto App
|
|
$
|
243,000
|
|
|
$
|
101,250
|
|
|
$
|
141,750
|
|
License
|
|
|
700,000
|
|
|
|
58,333
|
|
|
|
641,667
|
|
Trademark
|
|
|
574
|
|
|
|
-
|
|
|
|
574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
943,574
|
|
|
$
|
159,583
|
|
|
$
|
783,991
|
|
9.
Accounts payable and accrued liabilities
Accounts
payable and accrued liabilities as of March 31, 2020 are summarized as follows:
|
|
March 31, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Accrued audit fees
|
|
$
|
13,750
|
|
|
$
|
42,750
|
|
Accrued accounting fees
|
|
|
13,000
|
|
|
|
26,000
|
|
Accrued legal fees
|
|
|
23,040
|
|
|
|
23,040
|
|
Accrued office expenses
|
|
|
55,394
|
|
|
|
30,537
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
105,184
|
|
|
$
|
122,327
|
|
Form 10-Q – Q1
|
Sustainable Projects Group Inc.
|
F-12
|
10.
Notes Payable
On
March 1, 2019, the Company entered into a loan agreement with a shareholder for $50,000 with an interest rate of 3.5% per annum.
The loan is due on or before April 15, 2022. As at March 31, 2020, there was $1,903 in accrued interest (see Note 13).
On
July 12, 2019, the Company entered into a 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. The closing price of the Company’s stock was $1.45
at July 11, 2019. As at March 31, 2020, there was $432 in accrued interest (See Note 13).
11.
Common stock
There
were no share transactions during the three months ended March 31, 2020,
Share
transactions during the twelve months ended December 31, 2019:
a)
Issued 725 shares of common stock for cash at $2.75 per share.
12.
Equity in joint venture, Non-controlling interest
The
Company is involved in two joint venture businesses and has a majority control of both Hero Wellness Systems Inc. and Cormo USA
Inc. Pursuant to Accounting Standards Codification Topic 810, both of these companies are considered variable interest entities
that requires the Company to consolidate. It runs the day to day operations, makes all managerial decisions and has the voting
power over these entities. The Company will provide and help in the financial support of these ventures, on an as needed basis.
Form 10-Q – Q1
|
Sustainable Projects Group Inc.
|
F-13
|
Hero
Wellness Systems Inc.
The
Company has a controlling interest of 55% in a joint venture of Hero Wellness Systems Inc. (formerly Vitalizer Americas Inc.)
(See Note 13). Hero Wellness Systems Inc. is in the business of importing, marketing, distribution and sale of luxury massage
therapeutic chairs. As at March 31, 2020, Hero Wellness Systems is still in its early stages of development. The company participated
in several conferences in 2019 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 March 31, 2020 and December 31, 2019:
|
|
Mar 31, 2020
|
|
|
Dec 31, 2019
|
|
Assets
|
|
$
|
68,513
|
|
|
$
|
109,709
|
|
Liabilities
|
|
|
(14,320
|
)
|
|
|
(6,178
|
)
|
Net Assets
|
|
$
|
54,193
|
|
|
$
|
103,531
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
8,743
|
|
Expenses
|
|
|
(49,338
|
)
|
|
|
(237,710
|
)
|
Net Income
|
|
$
|
(49,338
|
)
|
|
$
|
(228,967
|
)
|
|
|
|
|
|
|
|
|
|
Company’s joint venture interest portion on net income
|
|
$
|
(27,136
|
)
|
|
$
|
(125,932
|
)
|
|
|
|
|
|
|
|
|
|
Company’s Capital contribution to joint venture
|
|
$
|
286,825
|
|
|
$
|
250,191
|
|
|
|
|
|
|
|
|
|
|
Company’s joint venture interest portion in net assets
|
|
$
|
29,806
|
|
|
$
|
56,942
|
|
|
|
|
|
|
|
|
|
|
Non-controlling joint venture interest on net income
|
|
$
|
(22,202
|
)
|
|
$
|
(103,035
|
)
|
|
|
|
|
|
|
|
|
|
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
|
|
Cormo
USA Inc.
The
Company has a controlling interest of 35% in a joint venture of Cormo USA Inc. (See Note 13) Cormo USA Inc. is in the business
of producing and developing peat moss replacement and natural foam products and technologies. Cormo USA was incorporated November
2018 and just started to set up its business. The company is researching viable properties to set up its manufacturing plant.
It is also investigating various economic development programs for assistance to build its plant and operations. The following
summary information on the joint venture amounts are based on contributions received from activities since inception through to
March 31, 2020 and December 31, 2019:
|
|
Mar 31, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
1,109,195
|
|
|
$
|
1,191,843
|
|
Liabilities
|
|
|
(16,637
|
)
|
|
|
(11,543
|
)
|
Net Assets
|
|
$
|
1,092,558
|
|
|
$
|
1,180,301
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
Expenses
|
|
|
(87,743
|
)
|
|
|
(690,375
|
)
|
Net Income
|
|
$
|
(87,743
|
)
|
|
$
|
(690,375
|
)
|
|
|
|
|
|
|
|
|
|
Company’s joint venture interest portion of net income
|
|
$
|
(30,710
|
)
|
|
$
|
(241,631
|
)
|
|
|
|
|
|
|
|
|
|
Company’s Capital contribution to joint venture
|
|
$
|
296,592
|
|
|
$
|
247,647
|
|
|
|
|
|
|
|
|
|
|
Company’s joint venture interest share in net assets
|
|
$
|
382,395
|
|
|
$
|
413,105
|
|
|
|
|
|
|
|
|
|
|
Non-controlling joint venture interest on net income
|
|
$
|
(57,033
|
)
|
|
$
|
(448,744
|
)
|
|
|
|
|
|
|
|
|
|
Total equity of joint venture received
|
|
$
|
1,900,000
|
|
|
$
|
1,900,000
|
|
Company’s portion of the joint venture
|
|
|
700,000
|
|
|
|
700,000
|
|
Non-controlling interest portion in equity
|
|
$
|
1,200,000
|
|
|
$
|
1,200,000
|
|
Form 10-Q – Q1
|
Sustainable Projects Group Inc.
|
F-14
|
In
summary, the total aggregate non-controlling joint venture interest on net income for the period was ($79,235) (Dec 2019 - $(551,779))
and the total aggregate non-controlling joint venture interest in equity was $ 1,356,450 since inception to March 31, 2020 (Dec
31, 2019 - $1,356,450).
|
|
Mar 31, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
For Hero Wellness Systems Inc.
|
|
$
|
(22,202
|
)
|
|
$
|
(103,035
|
)
|
For Cormo USA Inc.
|
|
|
(57,033
|
)
|
|
|
(448,744
|
)
|
Total non-controlling joint venture interest on net income current period
|
|
$
|
(79,235
|
)
|
|
$
|
(551,779
|
)
|
|
|
|
|
|
|
|
|
|
For Hero Wellness Systems Inc.
|
|
$
|
156,450
|
|
|
$
|
156,450
|
|
For Cormo USA Inc.
|
|
|
1,200,000
|
|
|
|
1,200,000
|
|
Total non-controlling joint venture interest in equity
|
|
$
|
1,356,450
|
|
|
$
|
1,356,450
|
|
Less total non-controlling joint venture interest on net income in prior period
|
|
|
(620,690
|
)
|
|
|
(68,911
|
)
|
Less total non-controlling joint venture interest on net income, current period
|
|
|
(79,235
|
)
|
|
|
(551,779
|
)
|
Total non-controlling joint venture interest
|
|
$
|
656,525
|
|
|
$
|
735,760
|
|
13.
Related party transactions
During
the period ended March 31, 2020, the Company incurred management fees from a director totaling an aggregate of $45,000 (December
31, 2019 - $127,500). As at March 31, 2020, $33,250 was owing to a director for management fees. During the period ended March
31, 2020, the Company incurred management fees from an officer who is a relative of the CEO, totaling $15,000 (December 31, 2019
- $58,269). As at March 31, 2020, $12,766 was owing to an officer for salaries.
During
the period ended March 31, 2020, the Company owed $36,332 to shareholders for expenses paid on behalf of the Company and consulting
fees (December 31, 2019 - $36,332).
During
the period ended March 31, 2020, the Company incurred $Nil to a company with a director and officer in common for website/app
maintenance (December 31, 2019 - $9,500), and owe $19,301 for office expenses (December 31, 2019 - $19,403)
Form 10-Q – Q1
|
Sustainable Projects Group Inc.
|
F-15
|
During
the period ending March 31, 2020, the Company owed $1,903 (December 31, 2019 - $1,467) for interest to a shareholder of the Company
for a note payable with a principal amount of $50,000. The loan bears an annual interest rate of 3.5% and is due on or before
April 15, 2022 (see Note 10).
During
the period ending March 31, 2020, the Company owed $432 (December 31, 2019 - $283) for interest to a relative of the CEO for a
convertible note payable with a principal amount of $20,000. The loan bears an annual interest rate of 3.0% and 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. The closing price of the Company’s stock was $1.45 at July 11, 2019. (see Note 10).
Transactions
in Joint Ventures
The
Company is involved in two joint venture businesses and has a majority control of both Hero Wellness Systems Inc. and Cormo USA
Inc. Pursuant to Accounting Standards Codification Topic 810, both of these companies are considered variable interest entities
that requires the Company to consolidate. It runs the day to day operations, makes all managerial decisions and has the voting
power over these entities. The Company will provide and help in the financial support of these ventures, on an as needed basis.
Hero
Wellness Systems Inc.
On
September 29, 2018, the Company entered into a joint venture agreement with Vitalizer Americas Inc. with its principal purpose
to import, sale and distribute certain products offered by Vitalizer International AG of Switzerland. In April 2019, Vitalizer
Americas Inc.’s name was changed to Hero Wellness Systems Inc. as it was no longer dealing with Vitalizer International
AG. The Company holds 55% interest, Christopher Grunder of Workplan Holding Inc. holds 15% interest and Kurt Muehlbauer holds
15% interest. Hero Wellness Systems is in the business of providing luxury massage therapy solutions. The operating results of
Hero Wellness Systems Inc. have been incorporated in the consolidated financial statements of the Company. The non-controlling
interest that were not attributable to the Company have been reported separately.
Cormo
USA Inc.
The
Company entered into a letter of intent with Cormo AG on October 25, 2018 to form a joint venture agreement for the Company to
provide business development, market research, sourcing, distribution and overall operations of Cormo AG’s exclusive unrestricted
use of its patents and licenses in North America. Cormo AG is in the business of producing and developing peat moss replacement,
natural foam products and technologies. On February 25, 2019 the joint venture shareholders’ agreement was finalized with
a group of investors whereby the Company holds 35% interest, Cormo AG holds 35% interest, Paul Meier holds 2.5% interest, Stefan
Muehlbauer holds 2.5% interest, and other investors hold an aggregate of 25% interest. As of the date of this report, the other
investors contributed an aggregate of $400,000 to the joint venture. The operating results of Cormo USA Inc. have been incorporated
in the consolidated financial statements of the Company. The non-controlling interest that were not attributable to the Company
have been reported separately.
Form 10-Q – Q1
|
Sustainable Projects Group Inc.
|
F-16
|
14.
Subsequent events
Subsequent
to March 31, 2020, the following events took place:
On
May 5, 2020, the Company accepted the resignation of Mrs. Fani-Grunder, a director of the Company.
On
May 5, 2020, the Company entered into a promissory note with the Bank of America of $52,327 pursuant to the Paycheck Protection
Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The loan
has a two year term and bears interest at a rate of 1.0% per annum. The monthly principal and interest payments are deferred for
six months after the date of disbursement. The PPP loan may be paid back at any time prior to the maturity date with no penalties.
On
May 5, 2020, the Company issued 32,500 shares to a vendor for services rendered in lieu of payment.
On
May 8th, 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.
On
May 1, 2020, the Company’s joint venture Cormo USA Inc. entered into a commercial lease of approximately 100,000 square
feet of building space for one year with an option to renew. The monthly rent is $12,500.
Effective
May 1, 2020, the Company’s joint venture Cormo USA Inc. entered into a Development Agreement with the City of Rushville,
Rushville Development Commission, and Rushville Economic Development Commission (the “City Parties” to do business
in Indiana. The City Parties is assisting Cormo USA Inc. with its business in Indiana and have provided financial incentives of
up to $1,100,000 for Cormo USA Inc. to pay for its project costs. These include:
|
1.
|
Cash incentives sufficient to reimburse the acquisition of
twenty acres of property in the Commerce Park at Rushville following purchase of site in the Commerce Park at Rushville which
shall be subject to rights of first refusal and repurchase rights on the purchased site granted to the City
|
|
2.
|
A commitment that at least twenty acres of land in the Commerce
Park at Rushville or equivalent property suitable for the contemplated commercial development shall be kept available for
a period of two years
|
|
3.
|
Up to $225,000 in the form of forgivable loan
|
|
4.
|
An initial 3 year tax abatement on eligible personal property
in place in Rushville in 2020 with an alternative phase-in schedule of 100%, 67% and 33%
|
|
5.
|
Tax abatement for future eligible personal property and real
property improvements at a standard ten yar tax abatement schedule
|
On May 1, 2020, Cormo USA Inc. entered
into a forgivable loan agreement and promissory note with the City of Rushville, Indiana in conjunction to the Development Agreement
of $225,000 at 0% interest rate over a two year period.
The
Company evaluated all events and transactions that occurred after March 31, 2020 through the date the Company issued these financial
statements and found no other subsequent events that needed to be reported.
Form 10-Q – Q1
|
Sustainable Projects Group Inc.
|
F-17
|
Sustainable
Projects Group Inc.