THE FOLLOWING PRESENTATION OF THE PLAN OF OPERATION OF SUSTAINABLE Projects
GROUP INC. SHOULD BE READ IN CONJUNCTION WITH THE AUDITED FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION INCLUDED HEREIN.
Overview
The Company 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. The Company initiated its goals by
pursuing investment and partnerships amongst diversified holdings and companies
globally. The Company is currently involved in the following businesses: (1)
Consulting Services; and (2) Collaborative partnerships.
Plan of Operation
The Company's plan of operation for the next 12 months is to continue to
streamline its operations and develop its activities for holding or business
development activities, and to collaborate, develop and create new assets with a
continued focus on sustainability. The Company is currently evaluating other
projects to find attractive partnerships to expand its business development
activities. Other projects of interest that management is currently researching
are in the field of sustainability.
Accounting and Audit Plan
The Company has retained a CPA to assist in the bookkeeping and organization of
the Company's financial records. The Company's accountant is expected to charge
approximately $20,000 to maintain the Company's financial records for the next
12 months. The Company's independent auditor is expected to charge approximately
$3,750 to review each of the Company's quarterly financial statements and
approximately $28,000 to audit the Company's annual financial statements. In the
next 12 months, SPGX anticipates spending approximately $48,000 to pay for its
accounting and audit requirements.
SEC Filing Plan
As a reporting company, the Company is required to file documents with the US
Securities and Exchange Commission on a quarterly basis. The Company expects to
incur filing costs of approximately $6,000 per quarter to support its quarterly
and annual filings. In the next 12 months, the Company anticipates spending
approximately $24,000 for filing costs to pay for three quarterly filings and
one annual filing.
As at December 31, 2020, the Company had a cash from continuing operations of of
$1,265 (2019 - $38,825) and working capital (deficit) from continuing operations
of ($155,275) (2019 - $17,847). Accordingly, the Company will require additional
financing to fund its obligations as a reporting company under the Securities
Act of 1934 and its general and administrative expenses for the next 12 months.
Financial Condition
As at December 31, 2020, the Company had a cash balance of $1,265 compared to a
cash balance of $38,825 at December 31, 2019. Management is seeking additional
funds to develop the company's activities, additional funding will come from
equity financing from the sale of the Company's common shares or from debt
financing. If the Company is successful in completing an equity financing,
existing shareholders will experience dilution of their interest in the Company.
Management cannot provide investors with any assurance that the Company will be
able to raise sufficient funding from the sale of its common shares or from debt
financing to fund its plan of operations. In the absence of any required
funding, the Company will not be able to execute its plan of operation and its
business plan will fail. Even if the Company is successful in obtaining the
required financing and executes its plan of operation, if the Company does not
continue to obtain additional financing, it will be forced to abandon its
business and plan of operations.
Sustainable Projects Group Inc. Form 10-K Page 7
Based on the nature of Company's business, management anticipates incurring
operating losses in the foreseeable future. Management bases this expectation,
in part, on the fact that the Company will continue to acquire business assets.
The Company's future financial results are also uncertain due to a number of
factors, some of which are outside its control. These factors include, but are
not limited to:
? The ability to raise additional funding; and
? The ability to find new projects; and
? The cost of maintaining or developing current assets.
Due to the Company's lack of operating history and present inability to generate
consistent revenues, the Company's auditors have stated their opinion that there
currently exists a substantial doubt about the Company's ability to continue as
a going concern.
COVID-19
With the ongoing COVID-19 pandemic, this has created a challenge that none of us
could imagine globally. Under these circumstances, the Company will need to
manage its cash flow during these difficult time and funding resources may not
be available and the outlook is uncertain. Our plan of operations may not
proceed and may be held up. As a multinational business development company, the
Company is dependent on a free flow of goods and people, as well as a sound
economic environment. The Company sees significant risks to the business
operations as prolonged timeline of ongoing travel restrictions and economic
uncertainty creates the inability to raise finances to continue to operate and
expand.
The world continues to be collectively impacted by COVID-19. Curbing the
expansion of the pandemic is in everyone's interest and although there is still
no clear end in sight, we are hopeful that we can navigate the challenges the
Company is facing with our resourcefulness and resiliency. We can not predict
what the future holds. These are unprecedented times and the Company will adjust
to the new realities.
Liquidity and Capital Resources
As of December 31, 2020, the Company had total assets of $355,227, and a working
capital deficit of $155,275, compared with a total assets of $1,175,305 and a
working capital of $36,471 at December 31, 2019. The decrease in the working
capital was primarily due to the fact that the Company incurred reduced revenues
during the year, the impact of the ongoing COVID-19 pandemic as well as the
effect of the discontinuation of its participation in Cormo USA Inc. and
write-downs in the value of Gator Lotto Technology. The Company was short
staffed and didn't have the required resources to seek new customers and sales.
Net Cash Used in Operating Activities
During the period ended December 31, 2020, net cash used in operating activities
was $66,459 compared to $272,482 for the same period ended December 31, 2019.
The decrease in cash used in operating activities was due re-organization of its
internal structure and stringent cost-cutting. The companies' activities were
limited due to the shortage of workers.
Net Cash Used in Investing Activities
During the period ended December 31, 2020, net cash used in investing activities
was $1,268 compared to $1,969 for the same period ended December 31, 2019. The
net cash used in investing activities was primarily due to the acquisition of
assets, which was largely balanced out from sale of assets.
Net Cash Generated from Financing Activities
During the period ended December 31, 2020, net cash flows provided from
financing activities was $Nil as compared with financing activities of $93,768
for the same period ended December 31, 2019. The prior periods net cash used in
financing activities was due to proceeds from issuance of common shares,
proceeds of sale of investments and from contributions from the non-controlling
interest.
Sustainable Projects Group Inc. Form 10-K Page 8
Results of Operation
The Company had operating revenues of $4,569 during the period ended December
31, 2020 as compared to $105,729 during the same period ended December 31, 2019.
The decrease in revenues were primarily due to the discontinuation of certain
consulting agreements, as well as the Company was short staffed and didn't have
skilled workers to maintain the sales.
The Company changed its business focus to pursue investments, partnerships and
collaboration across sustainable sectors. The Company plans to establish
strategic business projects in sustainable fields. With the new acquisitions of
assets and investments, the Company expected the increase in operation
expenditures to develop and build the business. However, during the year ended
December 31, 2020, the Company didn't have enough resources and skilled workers
to upkeep with sales. The Company's continued success and existence will be
impacted if the Company is not able to obtain enough capital through the
services it provides or obtain enough capital through additional equity
financing.
References to the discussion below relates to the fiscal year ended December 31,
2020 and December 31, 2019:
For the twelve For the twelve
months ended months ended
December 31, December 31,
2020 2019
Revenues
Gross revenues - continuing operations $ 4,569 $ 105,729
Cost of goods sold - continuing operations
(4,278 ) -
Gross Margin - continuing operations (291 ) 105,729
Operating Expenses
Administrative and other operating expenses $ 94,494 $ 112,945
Advertising and Promotion 5,258 5,469
Depreciation 42,340 88,143
Consulting fees 46,495 59,500
Management fees 44,500 90,000
Professional fees 25,750 109,626
Rent 28,202 32,781
Salaries and wages 41,420 186,059
Travel 1,022 10,651
Amortized right of use assets 27,661 62,250
Loss/Gain on disposition of assets 145,249 -
Total Expenses $ 502,391 $ 757,424
General and Administrative
General and administrative expenses are the general office and operational
expenses of the Company. They include, but not limited to, bank charges, general
office expenses, and filing and transfer agent fees.
Off-Balance Sheet Arrangements
The has no off-balance sheet arrangements including arrangements that would
affect its liquidity, capital resources, market risk support and credit risk
support or other benefits.
Material Commitments for Capital Expenditures
The Company had no contingencies or long-term commitments at December 31, 2020.
Tabular Disclosure of Contractual Obligations
The Company 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.
Sustainable Projects Group Inc. Form 10-K Page 9
Significant Accounting Policies
The Company'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 the Company's financial statements is critical to an understanding of
Company's financial statements.
Going Concern
The Company has limited operations and has sustained operating losses resulting
in a deficit. In view of these matters, realization values may be substantially
different from carrying values as shown. The Company has accumulated a deficit
of $3,100,629 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 dependent upon its ability to generate
future profitable operations and/or obtain the necessary financing to meet its
obligations when they come due. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. The Company
has $1,265 cash on hand as at December 31, 2020. Cash used by operations was
$66,459 for the twelve-month period ended December 31, 2020. Therefore, the
Company will need to raise additional cash in order to fund ongoing operations
over the next 12-month period. The Company may seek additional equity as
necessary and it expects to raise funds through private or public equity
investment in order to support existing operations and expand the range of its
business. There is no assurance that such additional funds will be available for
the Company on acceptable terms, if at all.
Consolidation
The accompanying consolidated unaudited financial statements include the
accounts of the Company, it's wholly subsidiary YER Brands Inc., and its joint
ventures, Hero Wellness Systems Inc. (formerly Vitalizer Americas Inc.) and
Cormo USA Inc. The Company controls 55% of Hero Wellness Systems Inc. and 35% of
Cormo USA Inc. Pursuant to Accounting Standards Codification Topic 810, both of
the joint venture companies are considered variable interest entities that
requires the Company to consolidate their accounts. All intercompany balances
and transactions have been eliminated in the consolidation. The operating
results of the joint ventures have been included in the Company's consolidated
financial statements and the non-controlling interest that were not attributable
to the Company have been reported separately. At June 30, 2020, Cormo USA Inc.'s
assets were impaired and the Company impaired its investment and eliminated that
company's accounts from the consolidated financial statements.
Equity Investments
The Company invests in equity securities of public and non-public companies for
business and strategic purposes. Investments in public companies are carried at
fair value based on quoted market prices. Investments in equity securities
without readily determinable fair values are carried at cost, minus impairment,
if any. The Company reviews its equity securities without readily determinable
fair values on a regular basis to determine if the investment is impaired. For
purposes of this assessment, The Company considers the investee's cash position,
earnings and revenue outlook, liquidity and management ownership, and among
other factors in its review. If management's assessment indicates that an
impairment exists, the Company estimates the fair value of the equity investment
and recognizes in current earnings an impairment loss that is equal to the
difference between the fair value of the equity investment and its' carrying
amount.
Revenue Recognition
In May 2014, the FASB issued guidance on the recognition of Revenue from
Contracts with Customers. The core principle of the guidance is that a company
should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration which the company expects
to receive in exchange for those goods or services. To achieve this core
principle, the guidance provides a five-step analysis of transactions to
determine when and how revenue is recognized. The guidance addresses several
areas including transfer of control, contracts with multiple performance
obligations, and costs to obtain and fulfill contracts. The guidance also
requires additional disclosure about the nature, amount, timing, and uncertainty
of revenue and cash flows arising from customer contracts, including significant
judgments and changes in judgments and assets recognized from costs incurred to
obtain or fulfill a contract.
Operating Leases
In February 2016, the FASB issued ASU 2016-02, Leases ("Topic 842"). The new
standard establishes a right-of-use model that requires a lessee to record a
right-of-use asset and a lease liability on the balance sheet for all leases
with terms longer than 12 months. For leases with an initial term of 12 months
or less, a lessee is permitted to make an accounting policy election by class of
underlying asset not to recognize lease assets and lease liabilities. If a
lessee makes this election, it should recognize lease expense for such leases
generally on a straight-line basis over the term of the lease. Leases will be
classified as either finance or operating, with classification affecting the
pattern of expense recognition. Similarly, lessors will be required to classify
leases as sales-type, finance or operating, with classification affecting the
pattern of income recognition. Classification for both lessees and lessors will
be based on an assessment of whether risks and rewards as well as substantive
control have been transferred through a lease contract. The new standard is
effective for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years, with early adoption permitted. The Company
adopted the new standard June 01, 2018. The Company has elected not to recognize
lease assets and lease liabilities for leases with an initial term of 12 months
or less.
Correction of an Error in Previously Issued Financial statements
The Company follows ASC Topic 250, "Accounting Changes and Error Corrections"
when accounting for accounting changes and errors in previously issued financial
statements. The former is a change in accounting principle, a change in
accounting estimates or a change in reporting entity. The latter is an error in
recognition, measurement, presentation, or disclosure in financial statements
resulting from mathematical mistakes, mistakes in the application of generally
accepted accounting principles, or oversight or misuse of facts that existed at
the time the financial statements were prepared.
Recently issued accounting pronouncements:
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit
Losses". The provision sets forth a "current expected credit loss" (CECL) model
which requires SPGX to measure all expected credit losses for financial
instruments held at the reporting date based on historical experience, current
conditions, and reasonable supportable forecasts. This replaces the existing
incurred loss model and is applicable to the measurement of credit losses on
financial assets measured at amortized cost and applies to some off-balance
sheet credit exposures. This provision is effective for fiscal years beginning
after December 15, 2019, including interim periods within those fiscal years,
with early adoption permitted. Recently, the FASB is expected to issue the final
ASU to delay adoption for smaller reporting companies to calendar year 2023.
SPGX is currently evaluating the impact of adopting this guidance.
The Company adopts new pronouncements relating to generally accepted accounting
principles applicable to the Company as they are issued, which may be in advance
of their effective date. Management does not believe that any pronouncement not
yet effective but recently issued would, if adopted, have a material effect on
the accompanying financial statements.
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SUSTAINABLE PROJECTS GROUP INC. 
