SUSTAINABLE PROJECTS GROUP INC. 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$20,000 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 theUS 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 atDecember 31, 2021 , the Company had a cash from continuing operations of$55,971 (202 -$1,265 ) and working capital (deficit) from continuing operations of ($194,507 ) (2020 -$155,275 ). 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 atDecember 31, 2021 , the Company had a cash balance of$55,971 compared to a cash balance of$1,265 atDecember 31, 2020 . 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. 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 cannot predict what the future holds. These are unprecedented times and the Company will adjust to the new realities.
Liquidity and Capital Resources
As ofDecember 31, 2021 , the Company had total assets of$367,942 , and a working capital deficit of$194,507 , compared with a total assets of$355,227 and a working capital of$155,275 atDecember 31, 2020 . 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 a Note of$50,000 coming due within the business year 2022. The Company was short staffed and didn't have the required resources to seek new customers and sales.
During the year endedDecember 31, 2021 , net cash used in operating activities was$45,294 compared to$66,459 for the same period endedDecember 31, 2020 . The decrease in cash used in operating activities was due re-organization of its internal structure and stringent cost-cutting, as well as cash used in discontinued operations in the prior year. The companies' activities were limited due to the shortage of workers.
During the period ended
Net Cash Generated from Financing Activities
During the period endedDecember 31, 2021 , net cash flows provided from financing activities was$100,000 as compared with financing activities of $Nil for the same period endedDecember 31, 2020 . The net cash generated in financing activities was due to proceeds from issuance of a loan to the company. Results of Operation The Company had operating revenues of$5,353 during the period endedDecember 31, 2021 as compared to$4,569 during the same period endedDecember 31, 2020 . The continued low level of revenues can be attributed to the shortage of qualified employees as well as shortage of cash to sufficiently develop existing projects during the prior 12 months. 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 endedDecember 31, 2021 , 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 endedDecember 31, 2020 andDecember 31, 2019 : For the year ended For the year ended December 31, 2021 December 31, 2020 Gross Revenues $ 5,353 $ 4,569 Cost of goods sold (6,673 ) (4,278 ) Gross Margin (1,320 ) (291 ) Operating Expenses
Administrative and other operating expenses 24,520
94,494
Advertising and Promotion 1,156 5,258
Depreciation 29,582 42,340
Consulting fees - 46,495
Management fees - Note 14 36,000 44,500
Professional fees 51,568 25,750
Rent - 28,202
Salaries and wages - 41,420
Travel - 1,022
Amortized right of use assets - 27,661
Loss on disposal of assets - 145,249
Total Expenses 142,826 502,391
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
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.
Significant Accounting Policies
The Company's financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles inthe 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$3,243,727 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$55,971 cash on hand as atDecember 31, 2021 . Cash used by operations was$45,294 for the twelve-month period endedDecember 31, 2021 . 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 financial statements include the accounts of the Company, it's wholly subsidiaryYER Brands Inc. , and its joint ventures,Hero Wellness Systems Inc. (formerlyVitalizer Americas Inc. ). The Company controls 55% ofHero Wellness Systems Inc. Pursuant to Accounting Standards Codification Topic 810, the joint venture company is considered a variable interest entity that requires the Company to consolidate its 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. Up toJune 30, 2020 , the Company also consolidatedCormo USA Inc. , a 35% controlled joint venture. EffectiveJune 30, 2020 , the Company stopped its active participation in that company, impaired Cormo's assets and deconsolidated its accounts from the condensed consolidated financial statements. During the year endedDecember 31, 2020 , the six-month operations of Cormo that were consolidated into the Company's operation were designated as discontinued. 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 InMay 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 InFebruary 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 afterDecember 15, 2018 , including interim periods within those fiscal years, with early adoption permitted. The Company adopted the new standardJune 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:
InJune 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 afterDecember 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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