UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] quarterly report under section 13 0r 15(d) of the securities exchange act of 1934

 

For the quarterly period ended November 30, 2018

 

[  ] transition report under section 13 0r 15(d) of the securities exchange act of 1934

 

For the transition period from __________________________________ to __________________________________

 

Commission file number 000-54875

 

Sustainable Projects Group Inc.
(Exact name of registrant as specified in its charter)

 

Incorporated in the State of Nevada   81-5445107

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

     

225 Banyan Boulevard, Suite 220, Naples, Florida

 

34102

(Address of principal executive offices)   (Zip Code)

 

239-307-2925

 

(Registrant’s telephone number, including area code)

 

Sustainable Petroleum Group Inc., 2316 Pine Ridge Road, Suite 383, Naples Florida, 34109

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[  ] Yes [X] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (s. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[  ] Yes [X] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company in Rule 12b-2 of the Exchange Act.

 

  Larger accelerated filer [  ]   Accelerated filer [  ]
       
  Non-accelerated filer [X]   Smaller reporting company [X]
       
      Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

[  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[  ] Yes [X] No

 

Applicable only to corporate issuers

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

 

Class   Outstanding at October 15, 2019  
common stock - $0.0001 par value     7,648,113  

 

 

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. F- 1

 

part I – financial information

 

Item 1. Financial Statements.

 

sustainable Projects group inc.

 

For the SIX Months Ended NOVEMBER 30, 2018

 

index to condensed unaudited CONSOLIDATED interim financial statements

 

  Page
   
Condensed Consolidated Unaudited Interim Balance Sheets F-2
   
Condensed Consolidated Unaudited Interim Statements of Operations and Comprehensive Loss F-3
   
Condensed Consolidated Unaudited Interim Statements of Stockholders’ Equity F-4
   
Condensed Consolidated Unaudited Interim Statements of Cash Flows F-6
   
Notes to Condensed Consolidated Unaudited Interim Financial Statements F-7

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. F- 2

 

SUSTAINABLE PROJECTS GROUP INC.

 

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

 

    November,     May 31,  
    2018     2018  
As at   (Unaudited)     (Audited)  
ASSETS                
Current Assets:                
Cash and cash equivalents   $ 86,900     $ 1,419  
Other receivables – related party - Note 4     328,526       447,400  
Interest receivables – Note 4     10,077       6,463  
Investments – Note 5     26,750       26,750  
Prepaid expenses and deposits – Note 6     633,424       611,250  
      1,085,677       1,093,282  
Long Term Assets:                
Note Receivable – Note 4     200,000       200,000  
                 
ROU Asset – lease – Note 7     143,256       -  
Office Equipment – Note 7     11,940       -  
Leasehold improvements – Note 7     5,776       2,041  
Mineral properties – Note 8     3,473,682       3,473,682  
Intangible assets – Note 9     943,000       400,000  
                 
TOTAL ASSETS   $ 5,863,331     $ 5,169,005  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
LIABILITIES                
CURRENT LIABILITIES:                
Accounts payable and accrued liabilities – Note 10   $ 79,279     $ 68,949  
Amount due to directors – Note 13     -       12,911  
Amount due to shareholders – Note 13     41,833       9,833  
Lease liability – Note 7     52,074       -  
Deferred revenue – Note 13     -       25,000  
TOTAL CURRENT LIABILITIES     173,186       116,693  
                 
NON-CURRENT LIABILITIES                
Obligations under operating lease – Note 7     74,662       -  
TOTAL NON- CURRENT LIABILITIES   $ 74,662       -  
                 
TOTAL LIABILITIES   $ 247,848     $ 116,693  
                 
Commitments and Contingencies   $ -     $ -  
                 
STOCKHOLDERS’ EQUITY                
Common Stock – Note 11                
Par Value: $0.0001 Authorized 500,000,000 shares                
Common Stock Issued: 9,090,018 (May 31, 2018 – 9,090,018)     909       909  
Additional Paid in Capital     6,797,682       6,797,682  
Accumulated Deficit     (2,010,478 )     (1,746,279 )
Non-controlling interest - Note 12     827,370       -  
TOTAL STOCKHOLDERS’ EQUITY     5,615,483       5,052,312  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 5,863,331     $ 5,169,005  

 

See accompanying notes to the condensed consolidated unaudited interim financial statements

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. F- 3

 

SUSTAINABLE PROJECTS GROUP INC.

 

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

    For the three     For the three     For the six     For the six  
    Months ended     Months ended     Months ended     Months ended  
    November 30,     November 30,     November 30,     November 30,  
    2018     2017     2018     2017 (Restated)  
Revenues                                
Revenues   $ 133,500     $ 15,000     $ 238,500     $ 30,000  
                                 
Operating Expenses                                
Administrative and other operating expenses     47,053       6,178       55,934       12,287  
Advertising and Promotions     4,740       1,248       5,740       3,266  
Amortization     2,526       875       4,095       1,458  
Consulting fees     35,500       10,500       46,000       21,000  
Foreign Exchange loss(gain)     18,386       8,722       6,415       8,722  
Management fees     22,500       3,582       44,840       69,100  
Professional fees     36,075       58,614       45,575       76,514  
Rent     8,647       750       9,397       1,750  
Salaries and Wages     77,737       -       131,602       -  
Travel     4,413       -       26,158       -  
Amortized Right of Use Asset     16,313       -       18,680       -  
Loss on debt extinguishment     -       -       -       76,334  
Loss on acquisition of deposit     -       -       -       779,278  
      273,890       90,469       394,436       1,049,709  
                                 
Operating loss     (140,390 )     (75,469 )     (155,936 )     (1,019,709 )
Other interest income     1,807       1,746       3,614       2,973  
Lease interest expense     (1,182 )     -       (1,182 )     -  
Impairment     (168,000 )     -       (168,000 )     -  
Interest expense     -       -       -       (2,727 )
                                 
Operating loss before income taxes     (307,765 )     (73,723 )     (321,504 )     (1,019,463 )
Income Taxes     -       -       -       -  
Net loss attributed to non-controlling interest of joint ventures     57,305       -       57,305       -  
                                 
Net loss and comprehensive loss   $ (250,460 )   $ (73,723 )   $ (264,199 )   $ (1,019,463 )
Loss per share of common stock                                
-Basic and diluted   $ (0.028 )   $ (0.008 )   $ (0.029 )   $ (0.116 )
                                 
Weighted average no. of shares of common stock                                
-Basic and diluted     9,090,018       8,938,147       9,090,018       8,778,049  

 

See accompanying notes to the condensed consolidated unaudited interim financial statements

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. F- 4

 

SUSTAINABLE PROJECTS GROUP INC.

 

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months Ended November 30, 2018 and November 30, 2017

(Unaudited)

 

          par value     Additional     Shares           Non-        
For November   Common     at $0.0001     Paid-in     to be     Accumulated     Controlling        
30, 2018:   Shares     Amount     Capital     Issued     Deficit     Interests     Total  
                                           
Balance, May 31, 2018     9,090,018     $ 909     $ 6,797,682     $        -     $ (1,746,279 )   $ -     $ 5,052,312  
                                                         
Net loss and comprehensive loss     -       -       -       -       (13,739 )     -       (13,739 )
                                                         
Balance, August 31, 2018     9,090,018     $ 909     $ 6,797,682     $ -     $ (1,760,018 )   $ -     $ 5,038,573  
Non-controlling equity interests of JV     -       -       -       -       -       884,675       884,675  
Net loss and comprehensive loss     -       -       -       -       (250,460 )     (57,305 )     (307,765 )
                                                         
Balance, November 30, 2018     9,090,018     $ 909     $ 6,797,682     $ -     $ (2,010,478 )   $ 827,370     $ 5,615,483  

 

See accompanying notes to the condensed consolidated unaudited interim financial statements

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. F- 5

 

SUSTAINABLE PROJECTS GROUP INC.

 

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months Ended November 30, 2018 and November 30, 2017

(Unaudited)

 

          par value     Additional     Shares           Non-        
For November   Common     at $0.0001     Paid-in     to be     Accumulated     Controlling        
30, 2017:   Shares     Amount     Capital     Issued     Deficit     Interests     Total  
                                           
Balance, May 31, 2017     8,263,332     $ 826     $ 3,806,170     $ 59,598     $ (330,382 )   $          -     $ 3,536,212  
                                                         
Shares issued at $3.50 per share for assets     400,000       40       1,399,960       -       -       -       1,400,000  
Shares issued at $3.50 per share for assets     6,000       1       20,999       -       -       -       21,000  
Shares issued at $3.50 per share     31,128       3       108,945       (59,598 )     -       -       49,350  
Shares issued at $3.50 per share for services     10,000       1       34,999       -       -       -       35,000  
Shares issued at $3.50 per share     78,671       8       275,340       -       -       -       275,348  
Shares issued at $3.00 per share for debts     101,778       10       381,658       -       (76,334 )     -       305,334  
Shares issued at $3.50 per share for services     16,000       2       55,998       -       -       -       56,000  
Subscriptions received at $3.50 per share     -       -       -       107,131       -       -       107,131  
Net loss and comprehensive loss     -       -       -       -       (869,406 )     -       (869,406 )
                                                         
Balance, August 31, 2017 (restated)     8,906,909     $ 891     $ 6,084,069     $ 107,131     $ (1,276,122 )   $ -     $ 4,915,969  
                                                         
Shares issued at $3.50 per share     40,609       4       142,127       (107,131 )     -       -       35,000  
Subscriptions received at $3.50 per share     -       -       -       3,500       -       -       3,500  
Subscriptions received at $4.00 per share     -       -       -       20,000       -       -       20,000  
Net loss and comprehensive loss     -       -       -       -       (73,723 )     -       (73,723 )
                                                         
Balance, November 30, 2017     8,947,518     $ 895     $ 6,226,196     $ 23,500     $ (1,349,845 )   $ -     $ 4,900,746  

 

See accompanying notes to the condensed consolidated unaudited interim financial statements

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. F- 6

 

SUSTAINABLE PROJECTS GROUP INC.

 

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

 

    For the six     For the six  
    months ended     months ended  
    Nov 30 2018     Nov 30 2017  
          (Restated)  
Cash Flows from operating activities:                
Net loss and comprehensive loss   $ (321,504 )   $ (1,019,463 )
Adjustments to reconcile net income(loss) to net                
Non-controlling equity interest of joint ventures     884,675       -  
cash used in operating activities:                
Impairment on intangible asset     168,000       -  
Loss on debt extinguishment     -       76,334  
Loss on acquisition of deposit     -       779,278  
Amortization     4,095       1,458  
Interest on receivables     (3,614 )     (2,973 )
Lease interest     1,182       -  
Amortization of ROU asset - Vehicle     5,208       -  
Amortization of ROU asset - Office lease     13,472       -  
Shares for debt     -       2,730  
Shares for services     -       56,000  
Changes in current assets and liabilities                
Prepaid expenses     (22,174 )     (333,607 )
Other receivables     93,874       -  
Right of Use Asset - vehicle     (22,724 )     -  
Accounts payable and accrued expenses     42,330       37,286  
Amount due to directors     12,089       2,289  
Payment of lease liability     (13,658 )     -  
Deferred revenue     (25,000 )     (30,000 )
Net cash used in operating activities     816,251       (430,667 )
                 
Cash Flows from investing activities:                
Note receivables     -       (200,000 )
Acquisition of assets     (730,770 )     -  
Net Cash used in investing activities     (730,770 )     (200,000 )
                 
Cash Flows from financing activities:                
Proceeds from issuance of common stock     -       466,830  
Shares to be issued     -       23,500  
Net Cash generated from financing activities     -       490,330  
                 
Net (decrease) increase in cash and cash equivalents     85,481       (140,337 )
Cash and cash equivalents at beginning of period     1,419       161,096  
Cash and cash equivalents at end of period   $ 86,900     $ 20,759  

Supplement Disclosures                
Cash paid for:                
Interest   $ -     $ 14,478  
Taxes   $ -     $ -  
                 
Non-cash Financing and Investing Activities                
Common stock issued for deposit on lease   $ -     $ 1,400,000  
Common stock issued for leasehold improvements     -       35,000  
Common stock issued for investments     -       21,000  
Common stock issued for debts     -       305,334  

 

See accompanying notes to the condensed consolidated unaudited interim financial statements

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. F- 7

 

SUSTAINABLE PROJECTS GROUP INC.

 

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

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

 

General

 

The following discussion of SPGX’s financial condition, changes in financial condition and results of operations for the six months ended November 30, 2018 should be read in conjunction with SPGX’s unaudited consolidated interim financial statements and related notes for the six months ended November 30, 2018.

 

Sustainable Projects Group Inc. (“SPGX”) is a business development company engaged in project development and holdings through value based investments and collaborative partnerships with companies across sustainable sectors. It is continually evaluating and acquiring assets for holding and or development. SPGX initiated its goals by pursuing investment and partnerships amongst diversified holdings and companies globally. SPGX is currently involved in the evaluation and acquisition of assets and partnerships for holding or business development activities with a continued focus on sustainability projects.

 

Forward Looking Statements

 

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding SPGX’s capital needs, business plans and expectations. Such forward-looking statements involve risks and uncertainties regarding SPGX’s ability to carry out its planned development and production of products. Forward-looking statements are made, without limitation, in relation to SPGX’s operating plans, SPGX’s liquidity and financial condition, availability of funds, operating and exploration costs and the market in which SPGX competes. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined below, and, from time to time, in other reports SPGX files with the SEC. These factors may cause SPGX’s actual results to differ materially from any forward-looking statement. SPGX disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. Page 3

 

Plan of Operation

 

SPGX’s plan of operation for the next 12 months is to continue to evaluate and acquire assets and partnerships for holding or business development activities, and to collaborate, develop and create new assets with a continued focus on sustainability. SPGX is currently evaluating other projects to find attractive partnerships to expand SPGX’s business development activities. Other projects of interest that management is currently researching are in the field of sustainability. Currently, SPGX is engaged in the following projects:

 

  1. Cormo USA Inc.;
  2. Gator Lotto; and
  3. Vitalizer Americas Inc.

 

  1. Cormo USA Inc.

 

Cormo USA Inc. – Based on a letter of intent and a shareholder agreement, SPGX entered into a joint venture with Cormo AG to assist in the business development of Cormo’s operations in the United States. Cormo AG is in the business of producing and developing peat moss replacement and natural foam products and technologies. Also, for its participation in the joint venture, SPGX will be required to provide certain services, including U.S. business development, management, market research, and determination of potential distribution channels. Under the agreement, Cormo USA Inc has exclusive marketing and distribution rights to Cormo AG’s sustainable agriculture business and suite of patents. Cormo’s technology allows field waste from maize farms to be turned into a variety of products, including peat moss. In May 2019, a site was chosen for its first production facility, with production scheduled to start in early 2020. The joint venture is controlled by Cormo AG (35%) and SPGX (35%) equally with the balance of shares held by eight non-controlling shareholders.

 

See Exhibit 10.13 - Letter of Intent and Exhibit 10.20 - Shareholder’s Agreement for more details.

 

  2. Gator Lotto

 

Gator Lotto – In 2018 SPGX acquired all technology assets including source code, graphics, and online assets for US$400,000 through the issuance of new shares. SPGX aims to commercialize this project which features a fully functioning lotto ticket management app (currently in version 2.0) with more than 40,000 downloads. Management plans to spin out this technology into a newly formed partnership within the next 18 months with the aim to increase monetization, user growth and eventual sale or licensing. SPGX spent an additional $11,000 to further develop the technology. SPGX is currently analyzing impairment and estimated this to be approximately $168,000 which may change once the calculations are final. See Exhibit 10.12 - Asset Purchase Agreement for more details.

 

  3. Vitalizer Americas Inc.

 

Vitalizer Americas Inc. –Pursuant to the terms and conditions of a shareholder’s agreement dated in September, 2018, SPGX entered into a joint venture relationship for the purpose of importing, selling and distributing products offered by Vitalizer International of Switzerland. SPGX’s participation in the joint venture is 55%. SPGX’s role is to provide certain services, including general management and day to day operations of the joint venture. The joint venture is comprised of the following ownership: 55% SPGX, with the balance of ownership held by three non-controlling owners. See Exhibit 10.14 - Shareholder’s Agreement for more details.

 

During the quarter ended August 31, 2018, SPGX was involved with the following business ventures, but subsequently has terminated those business ventures or SPGX’s involvement in such venture.

 

Consulting Services - Amixa AG

 

Amixa AG - Effective January 18, 2018 SPGX engaged Amixca AG, a private Swiss corporation, for a period of 36 months commencing February 1, 2018 to January 31, 2021. Amixca AG was to provide business development services to SPGX on projects currently under development and on projects to be rolled out in the next three years. The consulting arrangement 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 that spans over a year. The first payment of $20,000 was received on July 16, 2019 and thereafter, payments of $15,455 due on the first of every month 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.

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. Page 4

 

Thunder Bay Mineral Claims

 

Thunder Bay Claims - SPGX had planned to complete two 2,000 meter diamond drill programs on the Thunder Bay Claims by the end of 2018 at an estimated cost of $1.2 million. The two programs would have required approximately 80 days to complete. One drill program would have been conducted on the Foisey claims of the Thunder Bay Claims to test the north branching arm of a gold-bearing breccia system. The second drill program would have been conducted on gold-mineralized zones on the Thunder Bay claims, which have been identified from previous and historic work. Subsequent to December 31, 2018, SPGX decided to dispose the investment of the Thunder Bay Claims to focus more on other projects in the field of sustainability. The mineral properties claims located in the Thunder Bay Mining Division in the townships of Rickaby and Lapierre, Ontario, Canada were returned back to its original owner, John Leliever, with the negotiated return of 1,052,631 common shares of SPGX for cancellation on December 31, 2018.

 

In addition, management anticipates incurring the following expenses during the next 12 month period:

 

  Management anticipates spending approximately $7,500 in ongoing general and administrative expenses per month for the next 12 months, for a total anticipated expenditure of $90,000 over the next 12 months. The general and administrative expenses for the year will consist primarily of professional fees for the audit and legal work relating to SPGX’s regulatory filings throughout the year, as well as transfer agent fees, development costs and general office expenses.
     
  Management anticipates spending approximately $16,000 in complying with SPGX’s obligations as a reporting company under the Securities Exchange Act of 1934. These expenses will consist primarily of professional fees relating to the preparation of SPGX’s financial statements and completing and filing its annual report, quarterly report, and current report filings with the SEC.

 

As at November 30, 2018, SPGX had cash of $86,900 and total liabilities of $247,848. During the 12 month period following the date of this report, management anticipates that SPGX will not generate enough revenue to continue the development of current projects and projects in the pipeline. Accordingly, SPGX will be required to obtain additional financing in order to continue its plan of operations. Management believes that debt financing will not be an alternative for funding SPGX’s plan of operations as it does not have tangible assets to secure any debt financing. Rather management anticipates that additional funding will be in the form of equity financing from the sale of SPGX’s common stock. However, SPGX does not have any financing arranged and cannot provide investors with any assurance that it will be able to raise sufficient funding from the sale of its common stock to fund its plan of operations. In the absence of such financing, SPGX will not be able to develop its products and its business plan will fail. Even if SPGX is successful in obtaining equity financing and developing its various business ventures, additional development of its website and marketing program will be required. If SPGX does not continue to obtain additional financing, it will be forced to abandon its business and plan of operations.

 

SPGX 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 SPGX’s May 31, 2018 audited year end financial statements and the accompanying notes to the financial statements therein.

 

Risk Factors

 

An investment in SPGX’s common stock involves a number of very significant risks. Prospective investors should refer to all the risk factors disclosed in SPGX’s Form S-1/A – Amendment #3 filed on December 15, 2011.

 

Liquidity and Capital Resources

 

Three Month Period Ended November 30, 2018

 

At November 30, 2018, SPGX had a cash balance of $86,900 and a working capital of $912,491, compared to a cash balance of $1,419 and a working capital of $976,589 for the fiscal period ended May 31, 2018.

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. Page 5

 

The notes to SPGX’s financial statements as of November 30, 2018, disclose its uncertain ability to continue as a going concern. SPGX 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. SPGX’s ability to continue as a going concern is in substantial doubt and is dependent upon obtaining additional financing and/or achieving a sustainable profitable level of operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

SPGX has $86,900 cash on hand as at November 30, 2018. Cash provided by operations was $816,251 for the six month period ended November 30, 2018. SPGX will need to raise additional cash in order to fund ongoing operations over the next 12 month period. SPGX 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 SPGX on acceptable terms, if at all.

 

Net Cash Flows Provided By (Used in) Operating Activities.

 

Net cash flows from operating activities during the six month period ended November 30, 2018 was net cash provided by operations of $816,251, which was primarily due to receivables of $235,029 from the sale of assets, increase in interest receivables of $3,614, increase in prepaid expenses of $22,174, and an impairment of $168,000 on intangible asset compared to a net cash used in operations of $430,667 for the same time period for the prior fiscal period, which was primarily due to a net loss of $1,019,463 and non-cash items consisting of a loss on acquisition of deposit of $779,278, loss of debt extinguishment of $76,334, amortization of $1,458, shares for debt and shares for services of $2,730 and $56,000, respectively, changes in current assets and liabilities consisting of an increase in prepaid expenses of $333,605, an increase in accounts payable and accrued expenses of $37,286, increase in amount due to director of $2,289, a decrease in lease liability of $13,658 and a decrease in deferred revenue of $30,000.

 

Net Cash Flows From Investing Activities.

 

SPGX’s net cash flow used in investing activities during the six month period ended November, 2018 was $730,770, which was primarily due to funds of $11,000 for further development of the Gator Lotto app, $13,698 for office equipment and $6,072 used for leasehold improvements, and $700,000 for a license as compared to $200,000 for the same time period for the prior fiscal period, which was primarily due to an advance of a note receivable.

 

Net Cash Flows From Financing Activities.

 

SPGX’s net cash flow from financing activities during the six month period ended November 30, 2018 was $Nil as compared to $490,330 for the same time period for the prior fiscal period.

 

Results of Operations – Three months ended November 30, 2018 and November 30, 2017

 

    For the three     For the three     For the six     For the six  
    Months ended     Months ended     Months ended     Months ended  
    November 30,     November 30,     November 30,     November 30,  
    2018     2017     2018     2017 (Restated)  
Revenues                        
Revenues   $ 133,500     $ 15,000     $ 238,500     $ 30,000  
                                 
Operating Expenses                                
Administrative and other operating expenses     47,053       6,178       55,934       12,287  
Advertising and Promotions     4,740       1,248       5,740       3,266  
Amortization     2,526       875       4,095       1,458  
Consulting fees     35,500       10,500       46,000       21,000  
Foreign Exchange loss(gain)     18,386       8,722       6,415       8,722  
Management fees     22,500       3,582       44,840       69,100  
Professional fees     36,075       58,614       45,575       76,514  
Rent     8,647       750       9,397       1,750  
Salaries and Wages     77,737       -       131,602       -  
Travel     4,413       -       26,158       -  
Amortized Right of Use Asset     16,313       -       18,680       -  
Loss on debt extinguishment     -       -       -       76,334  
Loss on acquisition of deposit     -       -       -       779,278  
      273,890       90,469       394,436       1,049,709  
                                 
Operating loss     (140,390 )     (75,469 )     (155,936 )     (1,019,709 )
Other interest income     1,807       1,746       3,614       2,973  
Lease interest expense     (1,182 )     -       (1,182 )     -  
Impairment     (168,000 )     -       (168,000 )     -  
Interest expense     -       -       -       (2,727 )
                                 
Operating loss before income taxes     (307,765 )     (73,723 )     (321,504 )     (1,019,463 )
Income Taxes     -       -       -       -  
Net loss attributed to non-controlling interest of joint ventures     57,305       -       57,305       -  
                                 
Net loss and comprehensive loss   $ (250,460 )   $ (73,723 )   $ (264,199 )   $ (1,019,463 )

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. Page 6

 

Three Month Period Ended November 30, 2018

 

Net Loss. During the three month period ended November 30, 2018, SPGX had a net loss of $307,765, which include a net loss attributed to non-controlling interest of $57,305 and an impairment of $168,000. The loss consisted of general administrative and other operating expenses, management fees, salaries and wages, and professional fees, compared to the same time period for the prior fiscal period, when SPGX had a net loss of $73,723, which was primarily due to professional fees, consulting fees, administrative and other operating expenses.

 

Revenue. During the three month period ended November 30, 2018, SPGX had revenues of $133,500. The increase in revenue was primarily due to changes to a consulting agreement and new revenue streams from other customers as compared to the same time period for the prior fiscal period, when SPGX had revenues of $15,000. SPGX’s activities have been financed from the proceeds of share subscriptions and debt financing.

 

Operating Expenses. SPGX’s operating expenses during the three month period ended November 30, 2018 were $273,890, which consisted $22,500 in management fees, $77,737 in salaries and wages, $35,500 in consulting fees, $36,075 in professional fees and the balance in operating and general administrative expenses as compared to the same time period for the prior fiscal period, which SPGX’s operating expenses were $90,469, which were primarily due to $58,614 in professional fees, $3,582 in management fees, $10,500 in consulting fees and the balance in administrative and other operating expenses. The increased operating expenses were the result of the Company changing its business focus and incurring start up costs relating to an office, hiring staff, advertisements, acquiring furniture and equipment.

 

Six Month Period Ended November 30, 2018

 

Net Loss. During the six month period ended November 30, 2018, SPGX had a net loss of $264,199, which include a net loss attributed to non-controlling interest of $57,305. The loss consisted of general administrative and other operating expenses, management fees, salaries and wages, and professional fees, compared to the same time period for the prior fiscal period, when SPGX had a net loss of $1,019,463, which was primarily due to a loss on debt extinguishment of $76,334, a loss on acquisition of deposit of $779,278, management fees of $69,100, professional fees of $76,514, consulting fees of $21,000 and other general administrative expenses.

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. Page 7

 

Revenue. During the six month period ended November 30, 2018, SPGX had revenues of $238,500. The increase in revenue was primarily due to changes to a consulting agreement as compared to the same time period for the prior fiscal period, when SPGX had revenues of $30,000. SPGX’s activities have been financed from the proceeds of share subscriptions and debt financing.

 

Operating Expenses. SPGX’s operating expenses during the six month period ended November 30, 2018 were $394,436, which consisted $44,840 in management fees, $131,602 in salaries and wages, $46,000 in consulting fees, $45,575 in professional fees and the balance in operating and general administrative expenses as compared to the same time period for the prior fiscal period, which SPGX’s operating expenses were $1,049,709 which were primarily due to $76,514 in professional fees, $69,100 in management fees, $21,000 in consulting fees, a loss on debt extinguishment of $76,334, a loss of acquisition of deposit of $779,278 and the balance in administrative and other operating expenses.

 

Going Concern

 

SPGX has not attained profitable operations and is dependent upon obtaining financing to pursue any extensive business activities. For these reasons the financial statements have been prepared assuming SPGX will continue as a going concern. SPGX 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. SPGX’s ability to continue as a going concern is in substantial doubt and is dependent upon obtaining additional financing and/or achieving a sustainable profitable level of operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. SPGX has $86,900 cash on hand as at November 30, 2018. Cash provided operations was $816,251 which include a non-controlling interest adjustment of $827,370 for the six month period ended November 30, 2018. SPGX will need to raise additional cash in order to fund ongoing operations over the next 12 month period. SPGX 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 SPGX on acceptable terms, if at all.

 

Future Financings

 

Management anticipates raising financing through debt financing or the sale of SPGX’s common stock in order to continue to fund its business operations. Issuances of additional common stock will result in dilution to SPGX’s existing stockholders. There is no assurance that SPGX will achieve any additional sales of its common stock or arrange for debt or other financing to fund its planned activities.

 

Inflation

 

Management does not believe that inflation will have a material impact on SPGX’s future operations.

 

Off-balance Sheet Arrangements

 

SPGX has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

 

Contingencies and Commitments

 

The Company entered into an agreement to sub-lease office space in Naples, Florida effective September 1, 2018 to March 31, 2021. The monthly base rent for the first year is $4,552.56 (annual $54,630.75); the monthly base rent for the second year is $4,684.52 (annual $56,214.25); and the monthly base rent for the third year is $4,816.48 (annual $57,797.75).

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. Page 8

 

Tabular Disclosure of Contractual Obligations

 

SPGX is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

 

Critical Accounting Policies

 

SPGX’s financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Management believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of SPGX’s financial statements is critical to an understanding of SPGX’s financial statements.

 

Interim reporting and significant 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 operation 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. It is suggested that the condensed consolidated interim financial statements be read in conjunction with SPGX’s May 31, 2018 annual financial statements. Operating results for the six month period ended November 30, 2018, are not necessarily indicative of the results that can be expected for the period ended December 31, 2018.

 

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 fulfil 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 fulfil a contract.

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. Page 9

 

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 two weeks’ 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. Revenue is from several customers and the Company has one contract with one customer. Termination penalties are non-substantive and can be performed by either party.

 

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.

 

SPGX adopts new pronouncements relating to generally accepted accounting principles applicable to SPGX 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.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

SPGX is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. Page 10

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Management maintains “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in SPGX’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to management, including SPGX’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of SPGX’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of November 30, 2018.

 

Based on that evaluation, management concluded, as of the end of the period covered by this report, that SPGX’s disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Securities and Exchange Commission’s rules and forms. In particular, SPGX failed to complete and file its assessment of its internal controls over financial reporting in a timely manner for the period ended November 30, 2018. As a result, SPGX’s disclosure controls and procedures have not been effective since then and, as a result, were not effective for the period covered by this report.

 

Changes in Internal Controls over Financial Reporting

 

As of the end of the period covered by this report, there were no changes in SPGX’s internal controls over financial reporting during the quarter ended November 30, 2018, that materially affected, or are reasonably likely to materially affect, SPGX’s internal control over financial reporting subsequent to the date of management’s last evaluation. However, as a result of management’s completion of the assessment of SPGX’s internal controls over financial reporting, certain changes have been made, as discussed above, that will materially affect internal control over financial reporting.

 

Limitations on the Effectiveness of Controls and Procedures

 

Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that SPGX’s controls and procedures will prevent all potential error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

 

Part II – Other Information

 

Item 1. Legal Proceedings.

 

SPGX is not a party to any pending legal proceedings and, to the best of management’s knowledge, none of SPGX’s property or assets are the subject of any pending legal proceedings.

 

Item 1A. Risk Factors.

 

SPGX is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the quarter of the fiscal year covered by this report, (i) SPGX did not modify the instruments defining the rights of its shareholders, (ii) no rights of any shareholders were limited or qualified by any other class of securities, and (iii) SPGX did not sell any unregistered equity securities.

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. Page 11

 

Item 3. Defaults Upon Senior Securities.

 

During the quarter of the fiscal year covered by this report, no material default has occurred with respect to any indebtedness of SPGX. Also, during this quarter, no material arrearage in the payment of dividends has occurred.

 

Item 4. Mining Safety Disclosures.

 

There are no current mining activities at the date of this report.

 

Item 5. Other Information.

 

During the quarter of the fiscal year covered by this report, SPGX reported all information that was required to be disclosed in a report on Form 8-K.

 

SPGX has adopted a code of ethics that applies to all its executive officers and employees, including its CEO and CFO. See Exhibit 14 – Code of Ethics for more information. SPGX undertakes to provide any person with a copy of its financial code of ethics free of charge. Please contact SPGX at 225 Banyan Boulevard, Suite 220, Naples, Florida, 34102 to request a copy of SPGX’s code of ethics. Management believes SPGX’s code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. Management is currently updating is Code of Ethics and will file an updated Code of Ethics when completed.

 

Item 6. Exhibits

 

(a) Index to and Description of Exhibits

 

All Exhibits required to be filed with the Form 10-Q are included in this quarterly report or incorporated by reference to SPGX’s previous filings with the SEC, which can be found in their entirety at the SEC website at www.sec.gov under SEC File Number 000-54875.

 

Exhibit   Description   Status
3.1   Articles of Incorporation, filed as an exhibit to SPGX’s Form S-1/A – Amendment #1 (Registration Statement) filed on December 17, 2010, and incorporated herein by reference.   Filed
         
3.2   By-Laws, filed as an exhibit to SPGX’s Form S-1 (Registration Statement) filed on September 13, 2010, and incorporated herein by reference.   Filed
         
3.3   Certificate of Amendment, filed as an exhibit to SPGX’s Form S-1 (Registration Statement) filed on September 13, 2010, and incorporated herein by reference.   Filed
         
3.4   Certificate of Amendment, filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on December 19, 2016, and incorporated herein by reference.   Filed
         
3.5   Certificate of Amendment, filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on October 26, 2017, and incorporated herein by reference.   Filed
         
10.1   Share Purchase Agreement dated July 25, 2016 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on August 11, 2016, and incorporated herein by reference.   Filed
         
10.2   Property Purchase Agreement dated March 13, 2017 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on March 17, 2017, and incorporated herein by reference.   Filed

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. Page 12

 

Exhibit   Description   Status

10.3   Deposit Agreement dated June 23, 2017 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on July 11, 2017, and incorporated herein by reference.   Filed
         
10.4   Share Purchase Agreement dated July 6, 2017 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on July 11, 2017, and incorporated herein by reference.   Filed
         
10.5   Dividend Agreement dated July 10, 2017 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on July 11, 2017, and incorporated herein by reference.   Filed
         
10.6   Consulting Agreement dated April 24, 2017 filed as an exhibit to SPGX’s Form 10-K (Annual Report) filed on August 31, 2017, and incorporated herein by reference.   Filed
         
10.7   Services Agreement dated August 1, 2017 filed as an exhibit to SPGX’s Form 10-K (Annual Report) filed on August 31, 2017, and incorporated herein by reference.   Filed
         
10.8   Share Purchase Agreement dated July 25, 2017 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on December 6, 2017, and incorporated herein by reference.   Filed
         
10.9   Share Purchase Agreement dated January 18, 2018 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on January 19, 2018, and incorporated herein by reference.   Filed
         
10.10   Consultant Agreement dated January 18, 2018 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on January 19, 2018, and incorporated herein by reference.   Filed
         
10.11   Share Purchase Agreement dated January 30, 2018 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on January 31, 2018, and incorporated herein by reference.   Filed
         
10.12   Asset Purchase Agreement dated for reference May 22, 2018 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on May 31, 2018, and incorporated herein by reference.   Filed
         
10.13   Letter of Intent dated for reference September 25, 2018 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on October 3, 2018, and incorporated herein by reference.   Filed
         
10.14   Shareholder’s Agreement dated September 29, 2018 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on October 3, 2018, and incorporated herein by reference.   Filed
         
10.15   Letter Agreement dated December 31, 2018 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on February 14, 2019, and incorporated herein by reference   Filed
         
10.16   Purchase Agreement dated December 26, 2018 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on February 14, 2019, and incorporated herein by reference.   Filed
         
10.17   Call Option Agreement dated December 26, 2018 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on February 14, 2019, and incorporated herein by reference.   Filed
         
10.18   Purchase Agreement dated December 26, 2018 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on February 14, 2019, and incorporated herein by reference.   Filed
         
10.19   Call Option Agreement dated December 26, 2018 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on February 14, 2019, and incorporated herein by reference.   Filed
         
10.20   Shareholder’s Agreement dated February 25, 2019 filed as an exhibit to SPGX’s Form 8-K (Current Report) filed on March 1, 2019, and incorporated herein by reference.   Filed
         
10.21   Share Purchase Agreement dated May 31, 2018 filed as an exhibit to SPGX’s Form 10-K (Annual Report) filed on August 29, 2019, and incorporated herein by reference.   Filed
         
10.22   Employment Agreement dated May 1, 2018 filed as an exhibit to SPGX’s Form 10-K (Annual Report) filed on August 29, 2019, and incorporated herein by reference.   Filed

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. Page 13

 

Exhibit   Description   Status
10.23   Employment Agreement dated May 1, 2018 filed as an exhibit to SPGX’s Form 10-K (Annual Report) filed on August 29, 2019, and incorporated herein by reference.   Filed
         
14   Code of Ethics, filed as an exhibit to SPGX’s Form S-1 (Registration Statement) filed on September 13, 2010, and incorporated herein by reference.   Filed
         
31   Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.   Included
         
32   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   Included
         
101 *   Financial statements from the quarterly report on Form 10-Q of SPGX Incorporated for the quarter ended November 30, 2018, formatted in XBRL: (i) the Condensed Consolidated Unaudited Interim Balance Sheets, (ii) the Condensed Consolidated Unaudited Interim Statements of Operations; (iii) the Condensed Consolidated Unaudited Interim Statements of Stockholders’ Equity and Comprehensive Income, and (iv) the Condensed Consolidated Unaudited Interim Statements of Cash Flows   Furnished

 

* In accordance with Rule 402 of Regulation S-T, the XBRL (“eXtensible Business Reporting Language”) related information is furnished and not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

     
Form 10-Q – Q2 Sustainable Projects Group Inc. Page 14

 

Signatures

 

In accordance with the requirements of the Securities Exchange Act of 1934, Sustainable Projects Group Inc. has caused this report to be signed on its behalf by the undersigned duly authorized person.

 

  Sustainable Projects Group Inc.
     
Dated: October 17, 2019 By: /s/ Stefan Muehlbauer
  Name: Stefan Muehlbauer
    President and Chief Executive Officer
    (Principal Executive Officer)

 

     
     

 

 

 

 

Exhibit 31

 

 

 

     
 

 

sustainable projects group inc.

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

CERTIFICATION

 

I, Stefan Muehlbauer, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the quarter ending November 30, 2018 of Sustainable Projects Group Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: October 17, 2019  
   
/s/ Stefan Muehlbauer  
Stefan Muehlbauer  
Chief Executive Officer  

 

     
 

 

sustainable Projects group inc.

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

CERTIFICATION

 

I, Stefan Muehlbauer, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the quarter ending November 30, 2018 of Sustainable Projects Group Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: October 17, 2019  
   
/s/ Stefan Muehlbauer  
Stefan Muehlbauer  
Chief Financial Officer  

 

     
 

 

 

 

 

Exhibit 32

 

 

 

     
 

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Sustainable Projects Group Inc. (the “Company”) on Form 10-Q for the period ending November 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stefan Muehlbauer, Chief Executive Officer of the Company and a member of the Board of Directors, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Stefan Muehlbauer  
Stefan Muehlbauer  
Chief Executive Officer  
October 17, 2019  

 

     
 

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Sustainable Projects Group Inc. (the “Company”) on Form 10-Q for the period ending November 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stefan Muehlbauer, Chief Financial Officer of the Company and a member of the Board of Directors, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Stefan Muehlbauer  
Stefan Muehlbauer  
Chief Financial Officer  
October 17, 2019