NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2019
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 pursues 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 changed its year end to December 31.
These
consolidated 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 $2,632,115 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
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The
Company has $68,992 cash on hand as at December 31, 2019. Cash used in operations was $272,482 for the twelve months ended December
31, 2019. The Company will need to raise additional cash in order to fund ongoing operations over the next 12 months period. The
Company may seek additional equity as necessary and it expects to raise funds through private or public equity investment in order
to support existing operations and expand the range of its business. There is no assurance that such additional funds will be
available for the Company on acceptable terms, if at all.
3.
|
Summary
of principal accounting policies
|
Use
of estimates
The
preparation of the consolidated 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
|
Page F-8
|
Consolidation
The
consolidated 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 financial statements. The non-controlling
interest that were not attributable to the Company have been reported separately. (See Note 13, Note 14).
Certain
prior year amounts have been re-conformed to current year presentation due to the change in fiscal year end and quarterly reporting
periods.
Segment
Reporting
The
Company reports segment information based on the “management” approach. The management approach designates the internal
reporting used by management for making decisions and assessing performance of its corporation wide basis in comparison to its
various businesses. The Company has three reportable segments. The business operating ventures consist of Hero Wellness Systems,
Cormo USA and Sustainable Projects Group. The segments are determined based on several factors including the nature of products
and services, nature of production processes and delivery channels and consultancy services. The operating segment’s performance
is evaluated based on its segment income. Segment income is defined as the net sales less cost of sales, general and administrative
expenses and does not include amortization of any sorts, stock-based compensation or any other charges (income), and interest.
As at December 31, 2019, the Company reported revenues for its consultancy work it performed and product sales from Hero Wellness
Systems. There were no revenues from Cormo USA.
|
|
For the twelve months ended
|
|
|
For the twelve months ended
|
|
|
|
Dec 31, 2019
|
|
|
Dec 31, 2018
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
Sustainable Projects Group
|
|
$
|
95,986
|
|
|
$
|
313,500
|
|
Hero Wellness Systems
|
|
|
6,080
|
|
|
|
-
|
|
Cormo USA
|
|
|
-
|
|
|
|
-
|
|
Total Sales
|
|
$
|
103,066
|
|
|
$
|
313,500
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
|
|
|
|
|
|
Sustainable Projects Group
|
|
$
|
423,984
|
|
|
$
|
913,156
|
|
Hero Wellness Systems
|
|
|
144,911
|
|
|
|
188,660
|
|
Cormo USA
|
|
|
684,635
|
|
|
|
1,087,500
|
|
Total Assets
|
|
$
|
1,253,530
|
|
|
$
|
2,189,316
|
|
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.
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-9
|
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 of three years.
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. During the period ended December 31, 2018, the Company determined that an impairment of $168,000
was required. The Gator Lotto App was re-valued to be $243,000 which approximate its market value. The Company currently does
not have the resources to exploit the app until it has the financial support and can hire key workers. The Company may consider
selling this asset in the future.
Included
in the intangible asset is also the exclusive license 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. The license is amortized over its estimated useful life of fifteen years. The amortization
commenced January 1, 2019.
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 twelve months period ended December 31, 2019, there was $551,779 (December 31, 2018 - $68,911) of non-controlling interest
that was reconciled to the net loss and comprehensive loss presented in the statements of operations.
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.
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.
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.
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-10
|
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.
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. At December 31, 2018, the Company sold and transferred all the
mineral properties claims to its original owner in exchange for the return of 1,052,631 common shares of the Company for cancellation.
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.
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 their 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.
|
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-11
|
Advertising
and Promotion Costs
The
Company follows ASC 720 “Advertising Costs” and expenses costs as incurred.
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 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.
Revenue
recognition
In
May 2014, the FASB issued guidance on the recognition of Revenue from Contracts with Customers. The core principle of the guidance
is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration which the company expects to receive in exchange for those goods or services. To achieve this core
principle, the guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The guidance
addresses several areas including transfer of control, contracts with multiple performance obligations, and costs to obtain and
fulfill contracts. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue
and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized
from costs incurred to obtain or fulfill a contract.
The
Company adopted the ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), from June 01, 2018 using the
modified retrospective method. Revenues for the year ended December 31, 2018 were not adjusted. The adoption of Topic 606 did
not have a material impact to the Company’s financial statements. The Company recognizes revenue when the Company transfers
promised services to the customer. The performance obligation is the monthly services rendered. The Company has one main revenue
source which is providing consulting services. Accordingly, the Company recognizes revenue from consulting services when the Company’s
performance obligation is complete. Where there is a contract for services, the Company performs the obligations and bills monthly
for its services as rendered. Where there is no contract, the Company performs the obligation and/or service and recognize revenues
as provided. Even though the Company entered into contract with the customer, the contract could be terminated at any time with
notice. The Company may receive payments from customers in advance of the satisfaction of performance obligations for services.
These advance payments are recognized as deferred revenue until the performance obligations are completed and then, recognized
as revenues. The Company has one contract with one related party customer with a time period required for notice of termination.
Termination penalties are non-substantive and can be performed by either party. As at December 31, 2019, most of the revenues
were from related parties except the revenue from Hero Wellness Systems.
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. As of December
31, 2019, the Company believes there are no receivables considered uncollectible.
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-12
|
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 December 31, 2019, inventory consists
of 3-D massage chairs from Hero Wellness Systems Inc. of $62,077.
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.
In
June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718), Improvements to Non-employee
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
non-employee 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 re-assess 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. The adoption of this new standard does not have an impact on the Company’s financial statements.
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 has elected not to recognize lease assets and lease liabilities for leases with an initial term of 12 months or less.
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-13
|
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 December 31, 2019 and 2018.
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.
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. During the period ended December 31,
2019, the total principal and accrued interest was paid in full of $215,228. (see Note 14).
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 December 31, 2019, there remains $29,733 outstanding. As of the date of this report, the full
amount has been repaid. (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). During the period ended December 31, 2018,
the full amount was paid.
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-14
|
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 ($21,000).
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.
On
January 18, 2018, the Company sold 25% interest of its ownership of SP Group (Europe) AG for $6,000. The sale from SP Group (Europe)
AG created a gain of $750 for the Company. 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 ($42,000). During the year ended May 31, 2018, the Company recorded an
impairment of $31,000. 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
|
|
|
Dec 31, 2019
|
|
|
Dec 31, 2018
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
$
|
7,521
|
|
|
$
|
29,160
|
|
Deposit on lease
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,521
|
|
|
$
|
34,160
|
|
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 Company no longer requires an office in Zurich and has terminated its arrangement
for the office space during the period ended December 31, 2018. The 400,000 restricted shares were cancelled.
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-15
|
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 December 31, 2019, the remaining right of use asset was $5,207.
Right of Use Asset
|
|
$
|
22,724
|
|
Accum Amortization
|
|
$
|
(17,517
|
)
|
|
|
$
|
5,207
|
|
Right
of Use Asset – Office Lease
On
June 18, 2018, the Company entered into a sublease agreement to rent office space in Naples, Florida. The office lease commences
September 01, 2018 through to March 31, 2021. The monthly base rent for the first year is $4,552.56 (annual $54,630.75); the monthly
base rent for the second year is $4,684.52 (annual $56,214.25); and the monthly base rent for the third year is $4,816.48 (annual
$57,797.75). The Company has elected to separate the lease and non-lease components. The following remaining annual minimum lease
commitments under the lease do not include CAM costs and taxes:
2020
|
|
$
|
57,402
|
|
2021
|
|
|
14,449
|
|
|
|
$
|
71,851
|
|
Amount representing interest
|
|
|
(1,656
|
)
|
Lease obligation, net
|
|
$
|
70,195
|
|
Less current portion
|
|
|
(55,830
|
)
|
Lease obligation - long term
|
|
$
|
14,365
|
|
The
remaining office lease liability at December 31, 2019 was $70,195. The current portion of the lease liability was $55,830 and
the non-current portion of the lease liability was $14,365.
At
December 31, 2019, the remaining right of use asset for the office lease was $67,361. An annual rate of 3.5% was used which is
the rate used for loans in the Company. The right of use asset is being amortized over the duration of the lease.
Right of Use Asset
|
|
$
|
139,212
|
|
Accum Amortization
|
|
$
|
(71,851
|
)
|
|
|
$
|
67,361
|
|
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-16
|
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.
For Zurich office
|
|
Dec 31, 2019
|
|
|
Dec 31, 2018
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
-
|
|
|
$
|
35,000
|
|
Extinguishment
|
|
|
-
|
|
|
|
(29,750
|
)
|
Accumulated Depreciation
|
|
|
-
|
|
|
|
(5,250
|
)
|
Net
|
|
$
|
-
|
|
|
$
|
-
|
|
The
leasehold improvements for the Florida office is depreciated straight-line over the term of the office lease commencing September
1, 2018 and ending March 31, 2021.
For Florida office
|
|
Dec 31, 2019
|
|
|
Dec 31, 2018
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
6,072
|
|
|
$
|
6,072
|
|
Accumulated Depreciation
|
|
|
(3,134
|
)
|
|
|
(784
|
)
|
Net
|
|
$
|
2,938
|
|
|
$
|
5,288
|
|
Office
Furniture and Equipment
The
office furniture and equipment are depreciated straight-line for a period of 3 years.
Furniture & Equipment
|
|
Dec 31, 2019
|
|
|
Dec 31, 2018
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
13,698
|
|
|
$
|
13,698
|
|
Additions
|
|
|
1,394
|
|
|
|
-
|
|
Accumulated Depreciation
|
|
|
(7,064
|
)
|
|
|
(2,137
|
)
|
Net
|
|
$
|
8,028
|
|
|
$
|
11,561
|
|
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 had an interest in 13 mineral claims. All the mineral claims were contiguous. Nine (9) of the mineral claims were freehold
patented mineral claims and the other four (4) mineral claims were unpatented Crown Land claims. The combined claims make up an
area of 336 hectares which was equivalent to approximately 810 acres.
On
December 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.
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-17
|
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 determined
an impairment of $168,000 was required. The Gator Lotto App was re-valued to be $243,000 which approximate its market value. The
Company currently does not have the resources to exploit the app until it has the financial support and can hire key workers.
The Company may consider selling this asset in the future.
Cormo
USA Inc., the joint venture with the Company, has an exclusive license agreement from Cormo AG (of Switzerland) for North America.
The exclusive license includes, but not limited to, the intellectual property, know-how, patent trade marks and all present and
future process improvements, product applications and related know how from Cormo AG. As part of the joint venture agreement,
Cormo AG’s contribution for its 35% interest was the license to Cormo USA. The license was valued to be $700,000 pursuant
to its authorized share capital. The license is amortized over its estimated useful life of fifteen years. The amortization commenced
January 1, 2019. The following is the amortization amounts for each of the next five years:
2020
|
|
$
|
46,666
|
|
2021
|
|
$
|
46,666
|
|
2022
|
|
$
|
46,666
|
|
2023
|
|
$
|
46,666
|
|
And thereafter
|
|
$
|
466,670
|
|
Summary
of intangibles:
|
|
Cost less Impairment
|
|
|
Accumulated Depreciation
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
Gator Lotto App
|
|
$
|
243,000
|
|
|
$
|
81,000
|
|
|
$
|
162,000
|
|
License
|
|
|
700,000
|
|
|
|
46,666
|
|
|
|
653,334
|
|
Trademark
|
|
|
574
|
|
|
|
-
|
|
|
|
574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
943,574
|
|
|
$
|
127,666
|
|
|
$
|
815,908
|
|
10.
|
Accounts
payable and accrued liabilities
|
Accounts
payable and accrued liabilities as of December 31, 2019 are summarized as follows:
|
|
Dec 31, 2019
|
|
|
Dec 31, 2018
|
|
|
|
|
|
|
|
|
Accrued audit fees
|
|
$
|
42,750
|
|
|
$
|
53,500
|
|
Accrued accounting fees
|
|
|
26,000
|
|
|
|
50,500
|
|
Accrued legal fees
|
|
|
23,040
|
|
|
|
6,075
|
|
Accrued office expenses
|
|
|
30,537
|
|
|
|
33,845
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
122,327
|
|
|
$
|
143,920
|
|
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-18
|
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 December 31, 2019, there was $1,467 in accrued interest (see Note 14).
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 December 31, 2019, there was $283 in accrued interest (See Note 14).
Share
transactions during the twelve months ended December 31, 2019:
|
a)
|
Issued
725 shares of common stock for cash at $2.75 per share.
|
Share
transactions during the twelve months ended December 31, 2018:
|
a)
|
Cancellation
and the return of 400,000 restricted shares of common stock for the deposit for the office lease back to treasury. The cancellation
of the lease deposit was valued at $612,000 which is the deposit of CHF 600,000.
|
|
|
|
|
b)
|
The
Company settled debts totaling $33,001 to shareholders by providing 10,001 shares at $3.30 per share, which was the fair value
of the shares at the time of the transaction. The shares were issued subsequent to the period ended December 31, 2018.
|
|
|
|
|
c)
|
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. The cancelled shares were valued at $3,473,682 valued at
$3.30 per share, which was the market value.
|
|
|
|
|
d)
|
Sold
1,000 shares of common stock for cash at $3.50 per share.
|
|
|
|
|
e)
|
Sold
5,000 shares of common stock for cash at $4.00 per share.
|
|
|
|
|
f)
|
Issued
10,000 shares of common stock at $4.20 per share for the purchase of 10% holdings of Falcon Projects AG.
|
|
|
|
|
g)
|
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.
|
|
|
|
|
h)
|
Sold
1,500 shares of common stock for cash at $4.00 per share.
|
|
|
|
|
i)
|
Issued
100,000 shares of common stock at $4.00 per share for the acquisition of Gator Lotto.
|
At
December 31, 2019, the Company had 7,648,113 common shares outstanding (December 31, 2018 – 7,647,388 common shares).
There
were no warrants or stock options outstanding as of December 31, 2019 and December 31, 2018.
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-19
|
13.
|
Equity
in joint venture, Non-controlling interest
|
The
Company is involved in two joint venture businesses and has a majority control of both Hero Wellness Systems Inc. and Cormo USA
Inc. Pursuant to Accounting Standards Codification Topic 810, both of these companies are considered variable interest entities
that requires the Company to consolidate. It runs the day to day operations, makes all managerial decisions and has the voting
power over these entities. The Company will provide and help in the financial support of these ventures, on an as needed basis.
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 14). Hero Wellness Systems Inc. is in the business of importing, marketing, distribution and sale of luxury massage
therapeutic chairs. As at December 31, 2019, 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 December 31, 2019 and 2018:
|
|
Dec 31, 2019
|
|
|
Dec 31, 2018
|
|
Assets
|
|
$
|
109,709
|
|
|
$
|
415,723
|
|
Liabilities
|
|
|
(6,178
|
)
|
|
|
(5,000
|
)
|
Net Assets
|
|
$
|
103,531
|
|
|
$
|
410,723
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
8,743
|
|
|
$
|
-
|
|
Expenses
|
|
|
(237,710
|
)
|
|
|
(110,777
|
)
|
Net Income
|
|
$
|
(228,967
|
)
|
|
$
|
(110,777
|
)
|
|
|
|
|
|
|
|
|
|
Company’s joint venture interest portion on net income
|
|
$
|
(125,932
|
)
|
|
$
|
(60,928
|
)
|
|
|
|
|
|
|
|
|
|
Company’s Capital contribution to joint venture
|
|
$
|
250,191
|
|
|
$
|
51,000
|
|
|
|
|
|
|
|
|
|
|
Company’s joint venture interest portion in net assets
|
|
$
|
56,942
|
|
|
$
|
225,897
|
|
|
|
|
|
|
|
|
|
|
Non-controlling joint venture interest on net income
|
|
$
|
(103,035
|
)
|
|
$
|
(49,850
|
)
|
|
|
|
|
|
|
|
|
|
Total Equity of Joint Venture
|
|
$
|
443,275
|
|
|
$
|
521,500
|
|
Company’s portion of the Joint Venture
|
|
|
286,825
|
|
|
|
286,825
|
|
Non-controlling interest portion in equity
|
|
$
|
156,450
|
|
|
$
|
234,675
|
|
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-20
|
Cormo
USA Inc.
The
Company has a controlling interest of 35% in a joint venture of Cormo USA Inc. (See Note 14) 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
December 31, 2019 and 2018:
|
|
Dec 31, 2019
|
|
|
Dec 31, 2018
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
1,191,843
|
|
|
$
|
1,787,500
|
|
Liabilities
|
|
|
(11,543
|
)
|
|
|
(16,824
|
)
|
Net Assets
|
|
$
|
1,180,301
|
|
|
$
|
1,770,676
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
Expenses
|
|
|
(690,375
|
)
|
|
|
(29,324
|
)
|
Net Income
|
|
$
|
(690,375
|
)
|
|
$
|
(29,324
|
)
|
|
|
|
|
|
|
|
|
|
Company’s joint venture interest portion of net income
|
|
$
|
(241,631
|
)
|
|
$
|
(10,264
|
)
|
|
|
|
|
|
|
|
|
|
Company’s Capital contribution to joint venture
|
|
$
|
247,647
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Company’s joint venture interest share in net assets
|
|
$
|
413,105
|
|
|
$
|
619,736
|
|
|
|
|
|
|
|
|
|
|
Non-controlling joint venture interest on net income
|
|
$
|
(448,744
|
)
|
|
$
|
(19,061
|
)
|
|
|
|
|
|
|
|
|
|
Total equity of joint venture received
|
|
$
|
1,900,000
|
|
|
$
|
1,800,000
|
|
Company’s portion of the joint venture
|
|
|
700,000
|
|
|
|
700,000
|
|
Non-controlling interest portion in equity
|
|
$
|
1,200,000
|
|
|
$
|
1,100,000
|
|
In
summary, the total aggregate non-controlling joint venture interest on net income for the period was ($551,779) (Dec 2018 - $(68,911))
and the total aggregate non-controlling joint venture interest in equity was $ 1,356,450 since inception to December 31, 2019
(Dec 31, 2018 - $1,334,675).
|
|
Dec 31, 2019
|
|
|
Dec 31, 2018
|
|
|
|
|
|
|
|
|
For Hero Wellness Systems Inc.
|
|
$
|
(103,035
|
)
|
|
$
|
(49,850
|
)
|
For Cormo USA Inc.
|
|
|
(448,744
|
)
|
|
|
(19,061
|
)
|
Total non-controlling joint venture interest on net income current period
|
|
$
|
(551,779
|
)
|
|
$
|
(68,911
|
)
|
|
|
|
|
|
|
|
|
|
For Hero Wellness Systems Inc.
|
|
$
|
156,450
|
|
|
$
|
234,675
|
|
For Cormo USA Inc.
|
|
|
1,200,000
|
|
|
|
1,100,000
|
|
Total non-controlling joint venture interest in equity
|
|
$
|
1,356,450
|
|
|
$
|
1,334,675
|
|
Less total non-controlling joint venture interest on net income in prior period
|
|
|
(68,911
|
)
|
|
|
-
|
|
Less total non-controlling interest on net income
|
|
|
(551,779
|
)
|
|
|
(68,911
|
)
|
Total non-controlling joint venture interest
|
|
$
|
735,760
|
|
|
$
|
1,265,764
|
|
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-21
|
14.
|
Related
party transactions
|
During
the period ended December 31, 2019, the Company incurred management fees from a director totaling an aggregate of $127,500 (December
31, 2018 - $74,029 from two directors). During the period ended December 31, 2019, the Company incurred management fees from an
officer totaling $58,269. As at December 31, 2019, $Nil was owing to a director for out of pocket expenses (December 31, 2018
- $1,200); and $36,332 was owing to shareholders for expenses paid on behalf of the Company and consulting fees (December 31,
2018- $12,068). As at December 31, 2019, an aggregate of $19,403 was owing to a company with a director and officer in common
for office expenses (December 31, 2018 - $5,685).
During
the period ended December 31, 2019, the Company incurred $Nil (December 31, 2018 - $2,500) to a company with a director in common
for rent for its office in Naples, Florida; $9,500 (December 31, 2018 - $4,000) for website/app maintenance; $2,429 for communication
expenses (December 31, 2018 - $1,412).
During
the period ending December 31, 2019, the Company entered into a note payable with a shareholder of the Company for $50,000. The
loan bears an annual interest rate of 3.5% and is due on April 15, 2022. At December 31, 2019, the accrued interest was $1,467
(see Note 11).
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. At December 31, 2019, the accrued interest was $283 (See Note 11)
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 during the period ended May 31, 2017. As December 31,
2019, $Nil was owing (December 31, 2018 - $236). As of December 31, 2019, the shareholder owed the Company $514 for expenses,
which was subsequently paid.
The
Company entered into a $30,000 demand note 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.
The
Company settled $25,000 debt with Workplan Holding Inc. by entering into an agreement to issue 7,576 restricted shares valued
at $3.30 per share during the period ended December 31, 2018.
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-22
|
Amixca
AG
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 received $124,772. There remains $29,733 outstanding at December 31, 2019. (see Note
4). The Amixca AG $190,000 was part of the assignment of receivables agreement with a shareholder of the Company. As of the date
of this report, the $190,000 has been repaid in full.
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 December 31, 2018, the principal
and interest owing was $210,692. 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). The Alimex GmbH loan and accrued interest was part of the assignment of receivables agreement
with a shareholder of the Company.
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. The Company performs the obligations
and invoices SP Group (Europe) AG on a monthly basis for services as rendered. Either party may terminate the agreement by providing
2 weeks written notice. As of the December 31, 2019 Company booked $95,000 (Dec 31 2018 - $240,000) in consulting revenues from
SP Group (Europe) AG. The consultancy agreement with SP Group (Europe) AG was mutually terminated at the end of March 2019. At
December 31, 2019, owing in receivables for consultancy fees was $101,985. As of the date of this report, the outstanding amounts
was paid.
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. 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. The Company sold all their remaining
shares of SP Group (Europe) on December 26, 2018 back to SP Group (Europe) AG for $15,000.
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-23
|
In
December 2018, 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.
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. The Company spent an additional $11,000 toward development costs. The Company commenced amortization of its intangible asset
over a three-year period effected January 2019. The latest version of the Lotto App was launched February 2019. At December 31,
2018, the Company determined an impairment of $168,000. The Gator Lotto App was re-valued to $243,000 which approximate its market
value.
Assignment
of Receivables
On
August 7, 2019, the Company entered into an assignment of receivables with a shareholder whereby the Company is to assign $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. The rights and title will pass over to the shareholder when full payment is received. As of the date of this report,
the Company was in receipt of $465,000. The cash payment was re-negotiated due to the delay in payment. The cash payment received
was applied towards the Alimex Gmbh loan and accrued interest thereof, the Amixca AG deposit, and other receivables. Subsequent
to December 31, 2019, the Company incurred $6,758 for assignment expenses. (See Note 4).
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
joint venture interest that were not attributable to the Company have been reported separately.
Sustainable Projects Group Inc.
|
Form 10-K
|
Page F-24
|
Cormo
USA Inc.
The
Company entered into a letter of intent with Cormo AG on October 25, 2018 to form a joint venture agreement for the Company to
provide business development, market research, sourcing, distribution and overall operations of Cormo AG’s exclusive unrestricted
use of its patents and licenses in North America. Cormo AG is in the business of producing and developing peat moss replacement,
natural foam products and technologies. On February 25, 2019 the joint venture shareholders’ agreement was finalized with
a group of investors whereby the Company holds 35% interest, Cormo AG holds 35% interest, Paul Meier holds 2.5% interest, Stefan
Muehlbauer holds 2.5% interest, and other investors hold an aggregate of 25% interest. As of the date of this report, the other
investors contributed an aggregate of $400,000 to the joint venture. The operating results of Cormo USA Inc. have been incorporated
in the consolidated financial statements of the Company. The non-controlling joint venture interest that were not attributable
to the Company have been reported separately.
The
following income tax do not include amounts from the joint ventures. The Company does not file consolidated income tax returns.
Income tax recovery differs from that which would be expected from applying the effective tax rates to the net loss for the twelve
months ended December 31, 2019 and the seven months ended December 31, 2018 for the Company is as follows:
|
|
Dec 31, 2019
|
|
|
Dec 31, 2018
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
$
|
(155,660
|
)
|
|
$
|
(281,179
|
)
|
Statutory and effective tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
Income tax expense (recovery) at the effective rate
|
|
$
|
(32,689
|
)
|
|
$
|
(59,048
|
)
|
Permanent differences
|
|
|
-
|
|
|
|
394
|
|
Timing differences
|
|
|
-
|
|
|
|
(74,106
|
)
|
Tax benefit deferred
|
|
|
32,689
|
|
|
|
132,760
|
|
Income tax recovery and income taxes recoverable
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company has accumulated net operating losses for income taxes purposes of $1,413,644 of which $625,796 will expire beginning in
2032 and the balance of $787,848 is indefinite. The components of the net deferred tax asset at December 31, 2019 and December
31, 2018 and the statutory tax rate and the effective tax rate, and the amount of the valuation respectively, are scheduled below:
|
|
Dec 31 2019
|
|
|
Dec 31 2018
|
|
|
|
|
|
|
|
|
Tax losses carried forward
|
|
$
|
1,413,644
|
|
|
$
|
1,257,984
|
|
|
|
|
|
|
|
|
|
|
Statutory and effective tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
Deferred tax asset
|
|
|
296,865
|
|
|
|
264,177
|
|
Valuation allowance
|
|
|
(296,865
|
)
|
|
|
(264,177
|
)
|
Net deferred asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The
change in the valuation allowance for the period ended December 31, 2019 was $32,688. The change in valuation for years ended
December 31, 2018 was $132,760 respectively.
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 December 31, 2019, the Company is current with all its filings.
The
Company evaluated all events and transactions that occurred after December 31, 2019 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
|
Page F-25
|