NOTES
TO THE CONDENSED CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS
November
30, 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
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 $2,010,478 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
condensed consolidated interim financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
The
Company has $86,900 cash on hand as at November 30, 2018. Cash provided by (used in) operations was $816,251 for the six-month
period ended November 30, 2018. 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
While
the information presented is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present
fairly the financial position, result of operations and cash flows for the interim periods presented in accordance with accounting
principles generally accepted in the United States of America. All adjustments are of a normal recurring nature. These consolidated
interim financial statements should be read in conjunction with the Company’s May 31, 2018 annual financial statements.
Operating results for the six months period ended November 30, 2018 are not necessarily indicative of the results that can be
expected for the period ended December 31, 2018. The Company has changed its year end from May 31 to December 31.
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F- 8
|
Restatement
The
Company has restated its previously reported financial statements at August 31, 2017 to record a debt extinguishment of $76,334.
The restated six months ended November 30, 2017 were reflected in the Company’s May 31, 2018 audited year end financial
statements and the accompanying notes to the financial statements therein.
Consolidation
The
consolidated interim financial statements include the accounts of the Company’s 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 interim financial statements
commencing September 01, 2018. The non-controlling interest that were not attributable to the Company have been reported separately.
(See Note 12, Note 13)
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 reportable segments. The Company manages its
business primarily by its business ventures. The reportable segments consist of Hero Wellness Systems, Cormo USA and Gator Lotto.
At November 30, 2018, the segment reporting was not material.
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 May 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 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. 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 customer where a time period required for notice of termination. Termination penalties are non-substantive and can be
performed by either party.
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F- 9
|
Operating
Leases
In
February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”). 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. For leases with an initial term of 12 months or less, a lessee is permitted to make an accounting policy election
by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize
lease expense for such leases generally on a straight-line basis over the term of the lease. 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 adopted the new standard June 01, 2018.
The Company will also elect to not recognize lease assets and lease liabilities for leases with an initial term of 12 months or
less.
Current
Expected Credit Loss
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. 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 do not
expect to have a material effect on the accompanying financial statements.
4.
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 the date of this report, the
total principal and accrued interest was paid in full. (see Note 13, Note 14).
As
of November 30, 2018, the balance and interest owing was $210,077.
Principal
|
|
|
Interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
200,000
|
|
|
$
|
10,077
|
|
|
$
|
210,077
|
|
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, there was approximately $44,775 remaining to be paid on the repayment. (See Note 13, Note 14)
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F- 10
|
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). At November 30, 2018, the company received
full payment for the sale of the asset. (See Note 13).
5.
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 August 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 its shares of Falcon Projects
AG for $11,000. (See Note 14).
6.
Prepaid expenses and deposits
|
|
November 30, 2018
|
|
|
May 31, 2018
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
$
|
28,424
|
|
|
$
|
-
|
|
Deposit on lease
|
|
|
5,000
|
|
|
|
5,250
|
|
Deposit on lease (CHF)
|
|
|
600,000
|
|
|
|
600,000
|
|
Foreign exchange on lease deposit
|
|
|
-
|
|
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
633,424
|
|
|
$
|
611,250
|
|
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.
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F- 11
|
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 November 30, 2018, the remaining right of use asset was $17,516.
Right of Use Asset
|
|
$
|
22,724
|
|
Accum Amortization
|
|
$
|
(5,208
|
)
|
|
|
$
|
17,516
|
|
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 annual minimum lease commitments under the lease at November 30, 2018 are as follows:
2018
|
|
$
|
4,553
|
|
2019
|
|
|
55,818
|
|
2020
|
|
|
57,402
|
|
2021
|
|
|
14,449
|
|
|
|
$
|
132,222
|
|
Amount representing interest
|
|
|
(5,486
|
)
|
Lease obligation, net
|
|
$
|
126,736
|
|
Less current portion
|
|
|
(52,074
|
)
|
Lease obligation - long term
|
|
$
|
74,662
|
|
The
remaining office lease liability at November 30, 2018 was $126,736. The current portion of the lease liability was $52,074 and
the non-current portion of the lease liability was $74,662.
At
November 30, 2018, the remaining right of use asset for the office lease was $125,740. The Company used an annual rate of 3.5%
which is the rate used for loans in the Company.
Right of Use Asset
|
|
$
|
139,212
|
|
Accum Amortization
|
|
$
|
(13,472
|
)
|
|
|
$
|
125,740
|
|
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F- 12
|
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.
The
leasehold improvements for the Florida office will be depreciated straight-line over the term of the office lease commencing September
1, 2018.
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold Improvements
|
|
$
|
35,000
|
|
|
|
|
|
|
|
|
|
Write down of assets
|
|
$
|
(29,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,250
|
|
|
$
|
4,958
|
|
|
$
|
292
|
|
Leasehold Improvements (Florida)
|
|
$
|
6,072
|
|
|
$
|
588
|
|
|
$
|
5,484
|
|
|
|
$
|
11,322
|
|
|
$
|
5,546
|
|
|
$
|
5,776
|
|
Office
Furniture and Equipment
The
office furniture and equipment is depreciated straight-line for a period of 3 years.
Cost
|
|
|
Accumulated Depreciation
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,698
|
|
|
$
|
1,758
|
|
|
$
|
11,940
|
|
8.
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 13).
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 August 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.
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F- 13
|
9.
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 will amortize the intangible asset once it completes further development
on its App. The latest version of the Lotto App was launched February 2019. Management is currently analyzing impairment and estimated
this to be approximately $168,000 which may change once the calculations are final.
Cormo
USA Inc., the joint venture with the Company, has an exclusive license agreement from Cormo AG 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.
10.
Accounts payable and accrued liabilities
Accounts
payable and accrued liabilities as of November 30, 2018 are summarized as follows:
|
|
November 30, 2018
|
|
|
May 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued audit fees
|
|
$
|
18,500
|
|
|
$
|
23,500
|
|
Accrued accounting fees
|
|
|
27,000
|
|
|
|
20,500
|
|
Accrued legal fees
|
|
|
3,425
|
|
|
|
10,814
|
|
Accrued office expenses
|
|
|
30,354
|
|
|
|
14,135
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
79,279
|
|
|
$
|
68,949
|
|
11.
Common stock
Share
issuances during the year 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.
|
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F- 14
|
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.
|
|
|
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.
|
At
November 30, 2018, the Company had 9,090,018 common shares outstanding (May 31, 2018 – 9,090,018 shares).
There
were no warrants or stock options outstanding as of November 30, 2018 and November 30, 2017.
12.
Equity in joint venture, Non-controlling interest
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. Hero Wellness Systems was incorporated in September 2018 and a summary information on the joint venture are
as follows at November 30, 2018:
Assets
|
|
$
|
409,489
|
|
Liabilities
|
|
|
28,500
|
|
Net Assets
|
|
$
|
380,989
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
Expenses
|
|
|
90,511
|
|
Net Income
|
|
$
|
(90,511
|
)
|
|
|
|
|
|
Company’s interest share on net income
|
|
$
|
(49,781
|
)
|
|
|
|
|
|
Capital contribution to joint venture
|
|
$
|
51,000
|
|
|
|
|
|
|
Company’s interest share in net assets
|
|
$
|
209,544
|
|
|
|
|
|
|
Non-controlling interest on net income
|
|
$
|
(40,730
|
)
|
|
|
|
|
|
Equity of Joint Venture
|
|
$
|
471,500
|
|
Less Company’s portion
|
|
|
286,825
|
|
Non-controlling interest in equity
|
|
$
|
184,675
|
|
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F- 15
|
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 a summary information on the joint venture are as follows. The amounts are based on contributions received through to
November 30, 2018:
Assets
|
|
$
|
1,400,000
|
|
Liabilities
|
|
|
25,500
|
|
Net Assets
|
|
$
|
1,374,500
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
Expenses
|
|
|
25,500
|
|
Net Income
|
|
$
|
(25,500
|
)
|
|
|
|
|
|
Company’s interest share on net income
|
|
$
|
(8,925
|
)
|
|
|
|
|
|
Capital contribution to joint venture
|
|
$
|
-
|
|
|
|
|
|
|
Company’s interest share in net assets
|
|
$
|
481,075
|
|
|
|
|
|
|
Non-controlling interest on net income
|
|
$
|
(16,575
|
)
|
|
|
|
|
|
Equity of Joint Venture
|
|
$
|
1,400,000
|
|
Less Company’s portion
|
|
|
700,000
|
|
Non-controlling interest in equity
|
|
$
|
700,000
|
|
In
summary, the total aggregate non-controlling interest on net income was ($ 57,305) and the total aggregate non-controlling interest
in equity was $827,370.
For Hero Wellness Systems Inc.
|
|
$
|
(40,730
|
)
|
For Cormo USA Inc.
|
|
|
(16,575
|
)
|
Total non-controlling interest on net income
|
|
$
|
(57,305
|
)
|
For Hero Wellness Systems Inc.
|
|
$
|
184,675
|
|
For Cormo USA Inc.
|
|
|
700,000
|
|
Sub total
|
|
$
|
884,675
|
|
Less Non-controlling interest on net income
|
|
|
(57,305
|
)
|
Total non-controlling interest
|
|
$
|
827,370
|
|
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F- 16
|
13.
Related party transactions
During
the period ended November 30, 2018, the Company incurred management fees from two directors totalling an aggregate of $44,840
(2017 – $69,100). As at November 30, 2018, $Nil (May 31, 2018 - $2,000) was owing to directors for management fees and
$41,833 (May 31, 2018 - $9,833) was owing to shareholders for expenses paid on behalf of the Company.
During
the period ended November 30, 2018, the Company paid $1,500 (2017 - $1,750) to a company with a director in common for rent for
its office in Naples, Florida; $3,000 for website maintenance; $1,164 for communication expenses and $11,000 for further development
of its intangible asset.
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 8)
The
shareholder paid expenses on behalf of the Company in the amount of $500. As at November 30, 2018, this amount was owing.
The
Company entered into a $30,000 demand notes payable with Workplan Holding AG, a company controlled by Workplan Holdings Inc.,
at an interest rate of 4% per annum. 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.
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, there was approximately $44,775 remaining to be paid on the repayment. (see Note 4, Note 14).
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 June 28, 2022. As of May 31, 2018, the principal and
interest owing was $208,270. On May 2, 2018, Alimex Gmbh assigned its interest in the note receivable from the Company to Workplan
Holding on the same repayment terms. As of the date of this report, the note receivable and accrued interest totaling $215,228
was paid in full. (see Note 4, Note 14).
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F- 17
|
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. This consulting
agreement was terminated in August 2018. A new consulting agreement was entered on June 27, 2018 for a two year period commencing
July 1, 2018 and ending June 30, 2020 in which SP Group (Europe) AG agrees to pay the Company $40,000 per month for financial
research, due diligence services, and presentation materials for developmental prospects.
As
of November 30, 2018, there was $Nil remaining in deferred revenues (May 31, 2018 - $25,000). As of the November 30 Company booked
$255,000 in consulting revenues from SP Group (Europe) AG (May 31, 2018 - $65,000).
On
July 6, 2017, the Company entered into an agreement with SP Group (Europe) AG to acquire 20% ownership of SP Group (Europe) AG
by issuing 6,000 restricted common stock of the Company at $3.50 per share for a total value of $21,000. SP Group (Europe) AG
has a portfolio of approximately 20 different projects in the natural resources sector which it develops and finances. SP Group
(Europe) AG and Workplan Holdings Inc. have a common shareholder and director. (See Note 5)
The
Company sold 25% interest of its ownership of SP Group (Europe) AG for $6,000. Therefore, the Company now holds 15% interest of
SPG Group (Europe) AG. The sale from SP Group (Europe) AG created a gain of $750 for the Company. The $6,000 was paid by the buyer
during the period ended May 31, 2018. Subsequent to the November 30, 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)
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.
Transactions
in Joint Ventures
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 holds15%
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 interim financial statements of the Company. The non-controlling
interest that were not attributable to the Company have been reported separately.
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
F-18
|
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. The Company formed Cormo USA Inc. in November 2018. From that point forward,
the Company handled the day to day operations and the management of Cormo USA. Cormo USA is considered as a variable interest
entity and the Company has consolidated its financial statements. 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 shareholder’s 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 USD 500,000 to the joint venture. The operating results of Cormo
USA Inc. have been incorporated in the consolidated interim financial statements of the Company. The non-controlling interest
that were not attributable to the Company have been reported separately.
14.
Subsequent events
Subsequent
to November 30, 2018, the following events took place:
A.
|
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.
|
|
|
B.
|
The
Company disposed all its remaining shares of Falcon Projects AG for a total of $11,000 to Workplan Holding Inc.
|
|
|
C.
|
The
Company disposed all its remaining shares of SP Group (Europe) AG for a total of $15,000 back to SP Group (Europe) AG.
|
|
|
D.
|
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.
|
|
|
E.
|
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.
|
|
|
F.
|
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.
|
|
|
G.
|
The
Company issued 725 shares of the Company for subscription of $2.75 per share for the total amount of $1,993.75.
|
|
|
H.
|
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.
|
|
|
I.
|
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.
|
|
|
J.
|
On
August 7, 2019, the Company entered into an assignment of receivables with a shareholder whereby the Company assigned $471,759
of receivables and accrued interest in return for a cash payment of $450,000, payable in three separate transactions by September
15, 2019. As of the date of this report, the Company was in receipt of $325,000. The cash payment received was applied towards
the Alimex Gmbh loan and accrued interest thereof, the Amixca AG deposit, and other receivables.
|
The
Company evaluated all events and transactions that occurred after November 30, 2018 through the date the Company issued these
financial statements and found no other subsequent events that needed to be reported.
Form 10-Q – Q2
|
Sustainable Projects Group Inc.
|
Page 2
|