NOTES
TO THE FINANCIAL STATEMENTS
May
31, 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 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.
2.
Going Concern
These
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 and a working capital deficiency. 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 $1,746,279 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 $1,419 cash on hand as at May 31, 2018. Cash used in operations was $303,012 for the twelve-month period ended May
31, 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.
Summary of principal accounting policies
Use
of estimates
The
preparation of 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.
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-8
|
Segment
Reporting
Management
has considered segment reporting for the current period and found that there were not material segments as of May 31, 2018 and
May 31, 2017.
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.
Cash
and cash equivalents
The
Company considers all short-term highly liquid investments that are readily convertible to known amounts of cash and have original
maturities of three months or less to be cash equivalents.
Intangible
assets
Included
in intangible asset is the acquisition of the Gator Lotto App. The purchase includes the application for the Florida lotteries,
all software rights to the Gator Lotto App, the domain, etc. This is amortized over its estimated useful life. The gross cost
and accumulated amortization of the intangible asset will be removed when the recorded amounts are fully amortized and the asset
is no longer in use.
Comprehensive
income
The
Company has adopted ASU 220 “Reporting Comprehensive Income”, which establishes standards for reporting and display
of comprehensive income, its components and accumulated balances. The Company is disclosing this information on its Statement
of Stockholders’ Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions
to owners.
For
the year ended May 31, 2018 there are no material reconciling items between the net loss presented in the statements of operations
and comprehensive loss as defined by ASU 220.
Loss
per share
The
Company reports basic loss per share in accordance with ASC Topic 260 Earnings Per Share (“EPS”). Basic loss per share
is based on the weighted average number of common shares outstanding and diluted EPS is based on the weighted average number of
common shares outstanding and dilutive common stock equivalents. Basic EPS is computed by dividing net loss (numerator) applicable
to common stockholders by the weighted average number of common shares outstanding (denominator) for the period. All EPS presented
in the financial statements are basic EPS as defined by ASU 260, “Earnings Per Share”. There are no diluted
net income/ (loss) per share on the potential exercise of the equity-based financial instruments, hence a state of anti-dilution
has occurred. All per share and per share information are adjusted retroactively to reflect stock splits and changes in par value.
Website
development costs
The
Company recognized the costs associated with developing a website in accordance with ASC 350-50 “Website Development Cost”
that codified the American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”)
NO. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”. Relating to website
development costs the Company follows the guidance pursuant to the Emerging Issues Task Force (EITF) NO. 00-2, “Accounting
for Website Development Costs”. The website development costs are divided into three stages, planning, development and production.
The development stage can further be classified as application and infrastructure development, graphics development and content
development. In short, website development cost for internal use should be capitalized except content input and data conversion
costs in content development stage.
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-9
|
Costs
associated with the website consist primarily of website development costs paid to third party. These capitalized costs will be
amortized based on their estimated useful life over three years upon the website becoming operational. Internal costs related
to the development of website content will be charged to operations as incurred. Web-site development costs related to the customers
are charged to cost of sales.
Concentration
of credit risk
The
Company places its cash and cash equivalents with a high credit quality financial institution. The Company maintains United States
Dollars. The Company minimizes its credit risks associated with cash by periodically evaluating the credit quality of its primary
financial institution.
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 May 31, 2018, the Company received $25,000 deferred revenue. This was primarily
composed of prepaid consulting services fees.
Revenue
recognition
The
Company recognize revenue in accordance with ASC 605-10 “Revenue Recognition” and Staff Accounting Bulletin No.104
which requires that four basic criteria must be met before revenue can be recognized: 1) persuasive evidence of an arrangement
exists; 2) delivery has occurred; 3) the selling price is fixed and determinable; and 4) collectability is reasonably assured.
Financial
instruments
The
Company’s financial instruments consist principally of cash, accounts payable, accrued liabilities and notes payable. The
carrying amounts of such financial instruments in the accompanying financial statements approximate their fair values due to their
relatively short-term nature or the underlying terms are consistent with market terms. It is the management’s opinion that
the Company is not exposed to any significant currency or credit risks arising from these financial instruments.
Mineral
property costs and impairment
All
costs of acquisition and option costs of mineral and property rights are capitalized upon acquisition. To determine if the capitalized
mineral property costs are in excess of their recoverable amount, the Company shall conduct periodic evaluation of the carrying
value of the capitalized costs based upon expected future cash flows and/or estimated salvage value in accordance to ASC 360-10-35-15
“Impairment or Disposal of Long Lived Assets”. Exploration and pre-extraction expenditures shall be expensed until
such time the Company exits the exploration stage by establishing proven or probable reserves. Expenditures relating to exploration
activities such as drill programs to search for mineralized materials shall be expensed as incurred. Expenditures relating to
pre-extraction activities such as construction of mine, well fields, ion exchange facilities and disposal wells shall be expensed
as incurred until such time proven or probable reserves are established for a particular project, after which subsequent expenditures
relating to mine development activities for the particular project shall be capitalized as incurred. As at May 31, 2018, the Company
recorded an impairment of $276,318 for the mineral properties.
Fair
value measurements
The
Company follows the guidelines in ASC Topic 820 “Fair Value Measurements and Disclosures”. Fair value is defined as
the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required
to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact
and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such
as inherent risk, transfer restrictions and credit risk.
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-10
|
The
Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels
and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair
value measurement. All financial instruments approximate fair value.
Level
1 — Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
Level
2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for
identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities
Level
3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants
would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including
option pricing models and discounted cash flow models.
Related
parties
Related
parties are affiliates of the Company, principal owners of the Company, its management, members of the immediate families of the
principal owners of the Company and its management and other parties with which the Company may deal if one party controls or
can significantly influence the management or operating policies of the other to an extent that one of the transacting parties
might be prevented from fully pursuing its own separate interests. Another party also is a related party if it can significantly
influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting
parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented
from fully pursuing its own separate interests.
Equity
investments
The
Company invests in equity securities of public and non-public companies for business and strategic purposes. Investments in public
companies are carried at fair value based on quoted market prices. Investments in equity securities without readily determinable
fair values are carried at cost, minus impairment, if any. The Company reviews its equity securities without readily determinable
fair values on a regular basis to determine if the investment is impaired. For purposes of this this assessment, the Company considers
the investee’s cash position, earnings and revenue outlook, liquidity and management ownership, and among other factors
in its review. If management’s assessment indicates that an impairment exists, the Company estimates the fair value of the
equity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value
of the equity investment and its’ carrying amount.
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. There are
no receivables considered uncollectible as of May 31, 2018. As of May 31, 2018, there are no trade accounts receivables.
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-11
|
Stock
based compensation
The
Company follows the guideline under ASC 718, “Stock Compensation”. The standard provides that for all stock based
compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights,
which requires that all share-based payments to both employees and directors be recognized in the income statement based on their
fair values. For non-employees stock based compensation, the Company applies ASC 505 Equity-Based Payments to Non-employees. This
standard provides that all stock based compensation related to non-employees be measured at the fair value of the consideration
received or the fair value of the equity instruments issued, whichever can be most reliably be measured or determinable.
Income
taxes
The
Company follows the guideline under ASC Topic 740 Income Taxes. “Accounting for Income Taxes” which requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Since
the Company is in the developmental stage and has losses, no deferred tax asset or income taxes have been recorded in the financial
statements. There are no uncertain tax positions as at May 31, 2018 and 2017.
The
Company has identified its federal tax return and its state tax returns in the State of Nevada as its major tax jurisdictions.
The Company maintains an office in the State of Florida and has also filed its registration there, and shall be subject to state
tax returns in Florida as well.
4.
Recently issued accounting pronouncements
In
May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (ASU 2014-09) as modified
by ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” ASU 2016-08,
“Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus
Net),” ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,”
and ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.”
The revenue recognition principle in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. In addition, new and enhanced disclosures will be required. Companies may adopt the new standard either
using the full retrospective approach, a modified retrospective approach with practical expedients, or a cumulative effect upon
adoption approach. The Company implemented the standard on the effective date of June 1, 2018 on a modified retrospective basis
to contracts which were not completed as of this date. Adoption of this standard did not have a material impact on the Company’s
financial statements as the Company did not have a material amount of revenue.
In
February 2016, the FASB issued ASU 2016-02, “Leases”. The new standard establishes a right-of-use model that requires
a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.
Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. Similarly,
lessors will be required to classify leases as sales-type, finance or operating, with classification affecting the pattern of
income recognition. Classification for both lessees and lessors will be based on an assessment of whether risks and rewards as
well as substantive control have been transferred through a lease contract. The new standard is effective for fiscal years beginning
after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The Company does
not have any leases at May 31, 2018 and will adopt the provisions effective June 1, 2018.
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses”. The provision 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 provision is effective for fiscal years beginning
after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company is currently
evaluating the impact of adopting this guidance.
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-12
|
In
June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718)”, Improvements to
Nonemployee Share-Based Payment Accounting”, which is intended to improve the usefulness of the information provided to
the users of financial statements while reducing cost and complexity in financial reporting. Under the new standard, nonemployee
share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that
an entity is obligated to issue when conditions necessary to earn the right to benefit from the instruments have been satisfied.
These equity-classified nonemployee share-based payment awards are measured at the grant date. Consistent with the accounting
for employee share-based payment awards, an entity considers the probability of satisfying performance conditions when nonemployee
share-based payment awards contain such conditions. The new standard also eliminates the requirement to reassess classification
of such awards upon vesting. The new standard is effective for annual periods, and interim periods within those annual periods,
beginning after December 15, 2018. Management is currently evaluating the impact of adopting this standard.
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.
5.
Note receivable
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 May 31, 2018, the balance and interest owing was $206,463.
Principal
|
|
|
Interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
200,000
|
|
|
$
|
6,463
|
|
|
$
|
206,463
|
|
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
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.
As of the date of this report, the Company is in receipt of repayment of $35,455. (See Note 14)
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 was purchased and the acquisition was classified as a
held for sale asset and was recorded at fair market value. Due diligence costs with respect to this Share Purchase Agreement were
included in investments. Each company was managed and financed autonomously. The Company held the asset and subsequently sold
this asset in its present condition as at May 31, 2018 for $257,400 (EUR 220,000). Subsequent to the year ended May 31, 2018,
the Company received incremental payments, spanning over the next 6 months, for the sale of the asset. (See Note 14)
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-13
|
6.
Investments
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 SP Group (Europe) AG. The sale from SP Group (Europe) AG created a gain of $750 for the Company. Subsequent
to the year ended May 31, 2018, the Company sold all their remaining shares of SP Group (Europe) on December 26, 2018 back to
SP Group (Europe) AG for $15,000. (See Note 14).
On
January 30, 2018, the Company acquired 10% ownership of Falcon Projects AG by purchasing 10 shares of Falcon Projects by issuing
10,000 shares of the Company valued at $4.20 per share. On December 26, 2018, the Company sold all of their shares of Falcon Projects
AG for $11,000. (See Note 14).
7.
Prepaid expenses and deposits
|
|
May
31, 2018
|
|
|
May
31, 2017
|
|
|
|
|
|
|
|
|
Prepaid
legal
|
|
$
|
-
|
|
|
$
|
6,917
|
|
Prepaid
expenses
|
|
|
5,250
|
|
|
|
-
|
|
Deposit
on lease (CHF)
|
|
|
600,000
|
|
|
|
-
|
|
Foreign
exchange on lease deposit
|
|
|
6,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
611,250
|
|
|
$
|
6,917
|
|
Prepaid
expenses represent rent of $1,750 and accounting services of $3,500.
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 incurred
a $779,278 loss on the acquisition of the deposit. The 400,000 restricted shares of common stock were returned back to treasury
and subsequently cancelled at the beginning of February 2019. The Company no longer requires an office in Zurich and has terminated
its arrangement for the office space.
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-14
|
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. The office lease in Zurich was terminated at the end of December 31, 2018. The Company has written
down $29,750 to reflect the extinguishment of the leasehold improvements.
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold
Improvements
|
|
$
|
35,000
|
|
|
|
|
|
|
|
|
|
Write
down of asset
|
|
|
(29,750
|
)
|
|
|
|
|
|
|
|
|
Balance
at May 31, 2018
|
|
$
|
5,250
|
|
|
$
|
3,208
|
|
|
$
|
2,042
|
|
9.
Mineral Properties
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 12).
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.
Subsequent
to May 31, 2018, the Company returned the interest of the mineral properties back to its original owner and negotiated the return
of 1,052,631 of the restricted shares back to treasury and cancelled. The Company calculated the re-acquisition of the 1,052,631
restricted shares and determined that an impairment of $276,318 was required.
10.
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.
11.
Accounts payable and accrued liabilities
Accounts
payable and accrued liabilities as of May 31, 2018 are summarized as follows:
|
|
May
31, 2018
|
|
|
May
31, 2017
|
|
|
|
|
|
|
|
|
Accrued
audit fees
|
|
$
|
23,500
|
|
|
$
|
9,000
|
|
Accrued
accounting fees
|
|
|
20,500
|
|
|
|
1,126
|
|
Accrued
legal fees
|
|
|
10,814
|
|
|
|
22,756
|
|
Accrued
office expenses
|
|
|
14,135
|
|
|
|
5,190
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
68,949
|
|
|
$
|
38,072
|
|
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-15
|
12.
Common stock
Share
issuances during the period ended May 31, 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 for debt of $305,334 which consisted of $253,901 in principal loan and $51,433
in interest. At the time, the Company’s stock price was at $3.75 per share. The Company recorded a debt extinguishment
loss of $76,334.
|
|
|
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.
|
|
|
l)
|
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 14). The shares were issued subsequent to May 31, 2018.
|
|
|
m)
|
Sold
1,500 shares of common stock for cash at $4.00 per share.
|
|
|
n)
|
Issued
100,000 shares of common stock at $4.00 per share for the acquisition of Gator Lotto.
|
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
May 31, 2018, the Company had 9,090,018 common shares outstanding (May 31, 2017 – 8,263,332).
There
were no warrants or stock options outstanding as of May 31, 2018 and May 31, 2017.
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-16
|
13.
Notes payable
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. The Company recorded a debt extinguishment loss of $76,334.
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. The balances shown
were as of the date of the repayment.
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. The balances shown
were as of the date of the repayment.
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. The balance shown was as of the date of the repayment.
Date
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
04, 2013
|
|
$
|
30,000
|
|
|
$
|
9,376
|
|
|
$
|
39,376
|
|
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-17
|
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. The balance shown was as of the date of the repayment.
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. The balances shown were as of the date of the repayment.
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
|
|
14.
Related party transactions
During
the period ended May 31, 2018, the Company incurred management fees from two directors totaling an aggregate of $88,040 (2017
– $3,625). As at May 31, 2018, $11,340 (2017 - $1,293) was owing to directors for management fees and $1,572 for expenses
paid on behalf of the Company; and $9,833 (2017 - $9,833) was owing to three 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 May 31, 2018, the Company paid $3,250 (2017 - $750) 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 May 31, 2018, this amount was owing.
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-18
|
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. During the period ended May 31, 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 shares were issued during the period ended May 31, 2018.
Subsequent
to May 31, 2018, the Company sold all of its interest of Falcon Projects to Workplan Holding AG for USD 11,000. (See Note 6).
Amixca
AG
The
Company advanced a refundable $190,000 deposit to Amixca AG for due diligence. After such due diligence, the Company decided not
to proceed with the acquisition of Amixca AG. Amixca AG and Workplan Holdings AG have a common significant shareholder. 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 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. As of the
date of this report, the Company is in receipt of repayment of $35,455. (see Note 5)
Alimex
GmbH
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 May 31, 2018, the principal
and interest owing was $206,463. On May 2, 2018, Alimex Gmbh assigned its interest in the note receivable from the Company to
Workplan Holding on the same repayment terms.
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 May 31, 2018, there was $25,000 remaining
in deferred revenues (May 31, 2017 - $30,000). As of the May 31, 2018, the Company booked $65,000 in consulting revenues from
SP Group (Europe) AG (May 31, 2017 - $5,000). The agreement was mutually terminated when the lump sum payment was used up.
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-19
|
Subsequent
to the year ended May 31, 2018, the Company entered into another consultancy agreement with SP Group (Europe) AG whereby SP Group
(Europe) agrees to pay a monthly consulting fee of $40,000 to the Company for providing research, assessments and analysis of
potential business feasibility reports. The services commence July 1, 2018 for a period of 24 months. Either party may terminate
the agreement by providing 2 weeks written notice.
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 during the period ended May 31, 2018. Subsequent to the year ended May 31, 2018, the Company sold all their
remaining shares of SP Group (Europe) on December 26, 2018 back to SP Group (Europe) AG for $15,000.
SP
Group (Europe) AG purchased myfactor.io for EUR 220,000. Subsequent to the year ended May 31, 2018, the Company received incremental
payments, spanning over the next 6 months, for the sale of the asset. (See Note 5)
Global
Gaming Media Inc.
The
Company entered into an agreement with Global Gaming Media Inc., a company with a common majority shareholder (Christopher Grunder),
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.
15.
Income taxes
Income
tax recovery differs from that which would be expected from applying the effective tax rates to the net loss for the years ended
May 31, 2018 and 2017 as follows:
|
|
For
the year Ended
|
|
|
|
May
31, 2018
|
|
|
May
31, 2017
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
$
|
(1,415,897
|
)
|
|
$
|
(101,285
|
)
|
Statutory
and effective tax rate
|
|
|
21
|
%
|
|
|
34
|
%
|
|
|
|
|
|
|
|
|
|
Income
tax expense (recovery) at the effective rate
|
|
$
|
(297,338
|
)
|
|
$
|
(34,437
|
)
|
Permanent
differences
|
|
|
-
|
|
|
|
-
|
|
Tax
losses carry forward deferred
|
|
|
297,338
|
|
|
|
34,437
|
|
|
|
|
|
|
|
|
|
|
Income
tax recovery and income taxes recoverable
|
|
$
|
-
|
|
|
$
|
-
|
|
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-20
|
The
Company has accumulated net operating losses totaling approximately $1,746,279 for income tax purposes which expire starting in
2032. The components of the net deferred tax asset at May 31, 2018 and the statutory tax rate, the effective tax rate and the
amount of the valuation allowance are scheduled below:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Tax
loss carried forward
|
|
$
|
1,746,279
|
|
|
$
|
330,382
|
|
Statutory
and effective tax rate
|
|
|
21
|
%
|
|
|
34
|
%
|
|
|
|
|
|
|
|
|
|
Deferred
tax asset
|
|
$
|
409,668
|
|
|
$
|
112,330
|
|
Valuation
allowance
|
|
|
(409,668
|
)
|
|
|
(112,330
|
)
|
|
|
|
|
|
|
|
|
|
Net
deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The
change in valuation allowance from 2017 to 2018 was $34,437 and from 2018 to 2019 was $297,338. The Company file income tax returns
in the United States of America and in the State of Nevada. The Company maintains its office in the State of Florida and is subject
to state tax returns as well. At May 31, 2018, the Company is current with all its filings.
The
US Tax Cuts and Jobs Act (the “Tax Reform Act”) was enacted on December 22, 2017. The Tax Reform Act reduced the US
federal corporate tax rate to 21% effective January 1, 2018, and requires companies to pay a one-time transition tax on earnings
of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. As
of May 31, 2018, we have not completed the accounting for the tax effects of enactment of the Tax Reform Act; however, we have
made a reasonable estimate of the effects on existing deferred tax balances. These amounts are provisional and subject to change.
16.
Subsequent events
Subsequent
to May 31, 2018, the following events took place:
A.
|
The
Company entered into an agreement to lease a vehicle and made an upfront payment of $22,757 which covers the lease payments
for 2 years.
|
|
|
B.
|
The
Company entered into an agreement to sub-lease office space in Naples, Florida effective July 1, 2018 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).
|
|
|
C.
|
The
Company’s majority shareholder, Christopher Grunder of Workplan Holding Inc., sold an aggregate 4,148,868 restricted
shares of the Company in three separate private transactions. As a result, there was a change in the voting shares of the
Company. Stefan Muehlbauer, the CEO of the Company, now owns 13.1% of the issued and outstanding shares of Company; Paul Meier
now owns 19.7% of the issued and outstanding shares of the Company; and Kurt Muehlbauer now owns 6.5% of the issued and outstanding
shares of the Company. Christopher Grunder, sole shareholder of Workplan Holding Inc., now owns 1.1% of the issued and outstanding
shares of the Company. Kurt Muehlbauer is the father of Stefan Muehlbauer, CEO and director of the Company.
|
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-21
|
D.
|
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 has 55% interest, Christopher Grunder of Workplan Holding Inc. has 15% interest and Kurt Muehlbauer has 15%
interest. Hero Wellness Systems is in the business of providing luxury massage therapy solutions.
|
|
|
E.
|
The
Company disposed all its remaining shares of Falcon Projects AG for a total of $11,000 to Workplan Holding Inc.
|
|
|
F.
|
The
Company disposed all its remaining shares of SP Group (Europe) AG for a total of $15,000 back to SP Group (Europe) AG.
|
|
|
G.
|
The
Company sold and transferred all the mineral properties claims located in the Thunder Bay Mining Division in the townships
of Rickaby and Lapierre, Ontario, Canada to John Leliever in exchange for the return of 1,052,631 common shares of the Company
for cancellation.
|
|
|
H.
|
The
400,000 restricted shares of common stock issued to Daniel Greising for the office lease deposit in Switzerland were returned
back to treasury and subsequently cancelled at December 31, 2018. The Company no longer requires an office in Zurich and has
terminated its arrangement for the office space.
|
|
|
|
|
I.
|
The
Company settled debts of $8,001 with a shareholder of the Company by issuing 2,425 restricted shares of the Company at $3.30
per share. The Company settled debts with Workplan Holding Inc. of $25,000 by issuing 7,576 restricted shares of the Company
at $3.30 per share.
|
|
|
J.
|
The
Company issued 725 shares of the Company for subscription of $2.75 per share for the total amount of $1,993.75.
|
|
|
K.
|
On
February 25, 2019 the Company entered into a joint venture shareholder’s agreement with a group of investors with its
principal purpose to import, sale, distribute and license products offered by Cormo AG of Switzerland. The joint venture is
owned by the Company with 35% interest, Cormo AG with 35% interest, Paul Meier with 2.5% interest, Stefan Muehlbauer of 2.5%
interest, and other investors totaling an aggregate of 15% interest. Cormo AG is in the business of producing and developing
peat moss replacement, natural foam products and technologies. As part of the joint venture agreement, the Company will provide
business development, market research, sourcing, determination of market distribution and overall operations of the joint
venture. Cormo AG will provide the exclusive unrestricted use of the patents and licenses in North America. The other group
of investors will contribute an aggregate of CHF 400,000 to the joint venture.
|
|
|
L.
|
On
March 1, 2019, the Company entered into a loan agreement with a shareholder of $50,000 with an interest rate of 3.5% per annum.
The loan is due on or before April 15, 2022.
|
|
|
M.
|
On
July 12, 2019, the Company entered into a convertible loan agreement with a relative of the Chief Executive Officer of $20,000.
The loan bears an interest rate of 3.5% per annum and is due on or before July 12, 2022. The loan is convertible in whole
or in part at $1.45 per share.
|
The
Company evaluated all events and transactions that occurred after May 31, 2018 through the date the Company issued these financial
statements and found no other subsequent events that needed to be reported.
Sustainable Projects Group Inc.
|
Form 10-K – 2018
|
Page F-22
|