See accompanying notes to the condensed consolidated interim financial
statements
See accompanying notes to the condensed consolidated interim financial
statements
See accompanying notes to the condensed consolidated interim financial
statements
See accompanying notes to the condensed consolidated interim financial
statements
NOTES TO THE
CONDENSED CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS
June 30, 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.
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 $2,995,743 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 $1,947
cash on hand as at June 30, 2020. 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.
Form 10-Q – Q2
|
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 six months ended
June 30, 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, it’s wholly subsidiary YER Brands
Inc., 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 the joint venture
companies are considered variable interest entities that requires the Company to consolidate their accounts. 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 and the non-controlling interest that were not attributable to the Company have been reported separately.
At June 30, 2020, Cormo USA Inc.’s assets were impaired and the Company impaired its investment and eliminated that company’s
accounts from the condensed consolidated financial statements.
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.
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 Hero Wellness Systems, YER Brands and Sustainable Projects Group. The segment for Cormo USA has been
extinguished at June 30, 2020. 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. As at June 30, 2020, revenues were reported
from YER Brands.
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F-7
|
|
|
For the six
|
|
|
For the twelve
|
|
|
|
months ended
|
|
|
months ended
|
|
|
|
Jun 30 2020
|
|
|
Dec 31 2019
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
Sustainable Projects Group
|
|
$
|
2,000
|
|
|
$
|
95,986
|
|
YER Brands
|
|
|
893
|
|
|
|
-
|
|
Hero Wellness Systems
|
|
|
-
|
|
|
|
6,080
|
|
Cormo USA
|
|
|
-
|
|
|
|
-
|
|
Total Sales
|
|
$
|
2,893
|
|
|
$
|
103,066
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
|
|
|
|
|
|
Sustainable Projects Group
|
|
$
|
14,187
|
|
|
$
|
423,984
|
|
YER Brands
|
|
|
304,231
|
|
|
|
-
|
|
Hero Wellness Systems
|
|
|
62,277
|
|
|
|
66,686
|
|
Cormo USA
|
|
|
-
|
|
|
|
684,635
|
|
Total Assets
|
|
$
|
380,695
|
|
|
$
|
1,175,305
|
|
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 – Q2
|
Sustainable Projects Group Inc.
|
F-8
|
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 Jun 30, 2020, inventory consists of following:
|
|
June 30, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Hero Wellness Systems
|
|
$
|
62,077
|
|
|
$
|
62,077
|
|
YER Brands
|
|
|
5,335
|
|
|
|
-
|
|
Total
|
|
$
|
67,412
|
|
|
$
|
62,077
|
|
6.
|
Prepaid
expenses and deposits
|
|
|
June 30, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
$
|
8,979
|
|
|
$
|
7,521
|
|
Deposit on lease
|
|
|
-
|
|
|
|
5,000
|
|
Total
|
|
$
|
8,979
|
|
|
$
|
12,521
|
|
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 June 30, 2020, the remaining right of use asset was $Nil.
|
|
June 30, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Right of Use Asset
|
|
$
|
22,724
|
|
|
$
|
22,724
|
|
Accum. Amortization
|
|
|
(22,724
|
)
|
|
|
(17,517
|
)
|
Net
|
|
$
|
-
|
|
|
$
|
5,207
|
|
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F-9
|
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.
On
May 31, 2020, the office lease was terminated and the Company agreed to pay the past due amount of $36,304. In addition, the Company
also agreed that the sub-landlord may add a late fee of $50 every weeks that there remains any past due rent. The Company is obligated
to pay the sub-landlord an additional $32,300 which represent all the remaining rent due, beginning June 1 2020 through to December 2020.
The $5,000 security deposit provided by the Company has been relinquished and the sub-landlord may use those funds to pay the rent obligation.
At at June 30, 2020, the Company owed $36,304.
At
June 30, 2020, the Company has written off the remaining lease liability of $47,401 and has written off the right of use asset o $44,907
to reflect the extinguishment of the office lease, thereby creating a gain on disposal of the office lease of $2,494.
Remaining
annual minimum lease commitments under the lease:
|
|
June 30, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Commitments
|
|
$
|
48,165
|
|
|
$
|
71,851
|
|
Amount representing interest
|
|
|
(764
|
)
|
|
|
(1,656
|
)
|
Lease obligation
|
|
|
47,401
|
|
|
|
70,195
|
|
Write down
|
|
|
(47,401
|
)
|
|
|
-
|
|
Balance
|
|
|
-
|
|
|
|
70,195
|
|
Current portion
|
|
|
-
|
|
|
|
55,850
|
|
Long term portion
|
|
$
|
-
|
|
|
|
14,365
|
|
The
remaining right of use asset for the office lease:
|
|
June 30, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Right of Use Asset
|
|
$
|
139,212
|
|
|
$
|
139,212
|
|
Accum. Amortization
|
|
|
(94,305
|
)
|
|
|
(71,851
|
)
|
Lease obligation
|
|
|
44,907
|
|
|
|
67,361
|
|
Write down
|
|
|
(44,907
|
)
|
|
|
-
|
|
Net
|
|
$
|
-
|
|
|
$
|
67,361
|
|
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F-10
|
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. The Company’s lease was terminated on May 31, 2020 and the Company has written down the balance
$1,959 to reflect the extinguishment of the leasehold improvements.
|
|
June 30, 2020
|
|
|
Dec 31, 2019
|
|
For Florida office
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
6,072
|
|
|
$
|
6,072
|
|
Accum. Depreciation
|
|
|
(4,113
|
)
|
|
|
(3,134
|
)
|
Net
|
|
|
1,959
|
|
|
|
2,938
|
|
Write down
|
|
|
(1,959
|
)
|
|
|
-
|
|
Net
|
|
$
|
-
|
|
|
$
|
2,938
|
|
Office
Furniture and Equipment
The
office furniture and equipment are depreciated straight-line for a period of 3 years.
|
|
June 30, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
13,698
|
|
|
$
|
13,698
|
|
Additions
|
|
|
10,070
|
|
|
|
1,394
|
|
Disposals
|
|
|
(696
|
)
|
|
|
-
|
|
|
|
|
23,072
|
|
|
|
15,092
|
|
Accum. Depreciation
|
|
|
(9,533
|
)
|
|
|
(7,064
|
)
|
Net
|
|
$
|
13,539
|
|
|
$
|
8,028
|
|
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. At June 30, 2020, the Company has written the asset down.
|
|
June 30, 2020
|
|
|
Dec 31, 2019
|
|
For Gator Lotto App
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
243,000
|
|
|
$
|
243,000
|
|
Accum. Depreciation
|
|
|
(101,250
|
)
|
|
|
(81,000
|
)
|
Net
|
|
|
141,750
|
|
|
|
162,000
|
|
Disposal
|
|
|
(141,750
|
)
|
|
|
-
|
|
Net
|
|
$
|
-
|
|
|
$
|
162,000
|
|
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F-11
|
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. At June 30, 2020,
Cormo USA has written the license down and the Company has de-consolidated Cormo USA’s financial data from its financial statements.
|
|
June 30, 2020
|
|
|
Dec 31, 2019
|
|
For Cormo USA License
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
700,000
|
|
|
$
|
700,000
|
|
Accum. Depreciation
|
|
|
(69,991
|
)
|
|
|
(46,666
|
)
|
Net
|
|
|
630,001
|
|
|
|
653,334
|
|
Disposal
|
|
|
(630,001
|
)
|
|
|
-
|
|
Net
|
|
$
|
-
|
|
|
$
|
653,334
|
|
The
trademark for Cormo USA of $574 was written off as of June 30, 2020.
YER
Brands, the Company’s wholly owned subsidiary acquired intellectual properties (see Note 11).
Other
Intangibles:
The
Company entered into an asset purchase with Soy Yer Dough to acquire intellectual property and trademarks. The following assets were
identified as intangible assets with finite useful lives and are amortized on a straight-line basis over their useful lives. Amortization
commences when the assets are available for use. Intellectual properties consist of production process, know-how, product recipe, marketing,
and branding,
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
Intellectual properties
|
|
$
|
135,000
|
|
|
$
|
(3,375
|
)
|
|
$
|
131,625
|
|
Trademark, patents
|
|
|
593
|
|
|
|
-
|
|
|
|
593
|
|
|
|
$
|
135,593
|
|
|
$
|
(3,375
|
)
|
|
$
|
132,218
|
|
Goodwill:
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. At June 30, 2020, the goodwill recorded was $156,752.
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F-12
|
9.
|
Accounts
payable and accrued liabilities
|
Accounts
payable and accrued liabilities as of June 30, 2020 are summarized as follows:
|
|
June 30, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Accrued audit fees
|
|
$
|
8,000
|
|
|
$
|
42,750
|
|
Accrued accounting fees
|
|
|
25,250
|
|
|
|
26,000
|
|
Accrued legal fees
|
|
|
23,040
|
|
|
|
23,040
|
|
Subsidies from Govt (CARES ACT)*
|
|
|
52,327
|
|
|
|
-
|
|
Accrued office expenses
|
|
|
40,618
|
|
|
|
30,537
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
149,235
|
|
|
$
|
122,327
|
|
On
May 5, 2020, the Company entered into a promissory note with the Bank of America for $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
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 June 30, 2020, there was $2,340 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 June 30, 2020, there was $582 in accrued interest (See Note 13).
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. 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. (See Note 8, Other intangibles and goodwill.)
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 was $12,500.
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F-13
|
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 up to $225,000 at 9% interest rate for a period of two years.
During
the period ended June 30, 2020, the Company issued the following shares:
a)
|
32,500
shares of common stock for services rendered by a consultant at $1.80 per share valued at
$58,500; and
|
b)
|
105,264
shares of common stock for the acquisition of assets from Soy Yer Dough at $2.85 per share
valued at $300,002.
|
Share
transactions during the twelve months ended December 31, 2019:
a)
|
Issued
725 shares of common stock for cash at $2.75 per share.
|
14.
|
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 those entities. 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 – Q2
|
Sustainable Projects Group Inc.
|
F-14
|
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 June 30, 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 June
30, 2020 and December 31, 2019:
|
|
June 30, 2020
|
|
|
Dec 31, 2019
|
|
Assets
|
|
$
|
66,999
|
|
|
$
|
109,709
|
|
Liabilities
|
|
|
(58,538
|
)
|
|
|
(6,178
|
)
|
Net Assets
|
|
$
|
8,461
|
|
|
$
|
103,531
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
8,743
|
|
Expenses
|
|
|
(95,070
|
)
|
|
|
(237,710
|
)
|
Net Income
|
|
$
|
(95,070
|
)
|
|
$
|
(228,967
|
)
|
|
|
|
|
|
|
|
|
|
Company’s joint venture interest portion on net income
|
|
$
|
(52,289
|
)
|
|
$
|
(125,932
|
)
|
|
|
|
|
|
|
|
|
|
Non-controlling joint venture interest on net income
|
|
$
|
(42,782
|
)
|
|
$
|
(103,035
|
)
|
|
|
|
|
|
|
|
|
|
Company’s Capital contribution to joint venture
|
|
$
|
286,825
|
|
|
$
|
250,191
|
|
|
|
|
|
|
|
|
|
|
Company’s joint venture interest portion in net assets
|
|
$
|
4,653
|
|
|
$
|
56,942
|
|
|
|
|
|
|
|
|
|
|
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 June 30, 2020 and December 31, 2019. At June 30,
2020, the Cormo license was written down and as such, Cormo USA has been de-consolidated.
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F-15
|
|
|
Jun 30, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
419,840
|
|
|
$
|
1,191,843
|
|
Liabilities
|
|
|
(18,958
|
)
|
|
|
(11,543
|
)
|
Net Assets
|
|
$
|
400,883
|
|
|
$
|
1,180,301
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
Expenses
|
|
|
(779,418
|
)
|
|
|
(690,375
|
)
|
Net Income
|
|
$
|
(779,418
|
)
|
|
$
|
(690,375
|
)
|
|
|
|
|
|
|
|
|
|
Company’s joint venture interest portion of net income
|
|
$
|
(272,796
|
)
|
|
$
|
(241,631
|
)
|
|
|
|
|
|
|
|
|
|
Company’s Capital contribution to joint venture
|
|
$
|
337,922
|
|
|
$
|
247,647
|
|
|
|
|
|
|
|
|
|
|
Company’s joint venture interest share in net assets
|
|
$
|
140,309
|
|
|
$
|
413,105
|
|
|
|
|
|
|
|
|
|
|
Non-controlling joint venture interest on net income
|
|
$
|
(506,622
|
)
|
|
$
|
(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
|
|
In
summary, the total aggregate non-controlling joint venture interest on net income for the period was ($39,216) after de-consolidation
of Cormo USA Inc. (Dec 2019 - $(551,779)) and the total aggregate non-controlling joint venture interest in equity was $156,450 at June
30, 2020 (Dec 31, 2019 - $1,356,450).
|
|
Jun 30, 2020
|
|
|
Dec 31, 2019
|
|
|
|
|
|
|
|
|
For Hero Wellness Systems Inc.
|
|
$
|
(42,782
|
)
|
|
$
|
(103,035
|
)
|
For Cormo USA Inc.
|
|
|
(506,622
|
)
|
|
|
(448,744
|
)
|
Total non-controlling joint venture interest on net income current period
|
|
$
|
(549,403
|
)
|
|
$
|
(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
|
|
|
(549,403
|
)
|
|
|
(551,779
|
)
|
De-consolidation of Cormo USA Inc.
|
|
|
(225,573
|
)
|
|
|
-
|
|
Total non-controlling joint venture interest remaining
|
|
$
|
(39,216
|
)
|
|
$
|
735,760
|
|
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F-16
|
15.
|
Related
party transactions
|
During
the period ended June 30, 2020, the Company incurred management fees from a director totaling an aggregate of $45,500 (December 31, 2019
- $127,500). As at June 30, 2020, $18,250 was owing to a director for management fees. During the period ended June 30, 2020, the Company
incurred management fees from an officer totaling $30,000 (December 31, 2019 - $58,269). As at June 30, 2020, $12,766 was owing to an
officer for salaries.
During
the period ended June 30, 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 Jun 30, 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 $19,796 for office expenses (December 31, 2019 - $19,403)
During
the period ending June 30, 2020, the Company owe $2,240 (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 June 30, 2020, the Company owe $582 (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. 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 prior consolidated financial statements of the Company. At June
30, 2020 the operating results of Cormo USA Inc. have been de-consolidated as the Cormo license was recognized as impaired. The non-controlling
interest that were not attributable to the Company have been reported separately.
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F-17
|
On
May 10, 2021, the Company agreed to issue 640,000 common shares at $0.035 per share to a relative of the CEO to redeem a convertible
note payable with a principal amount of $20,000 plus accrued interest and fees valued at $22,400.
Pursuant
to an agreement entered into by the Company with a consultant on May 10, 2021, the Company agreed to issue 300,000 common
shares at $0.035 per share for services valued at $10,500.
On
July 23, 2021, the Company entered into a two year $100,000 convertible promissory note bearing an interest of 10% per annum. The loan
may be renewed at the option of the Lender and is secured with the Company’s 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 have 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.
On
September 30, 2020, the Company received the resignation from Dr. Philip Grothe as director.
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F-18
|
Sustainable
Projects Group Inc.