UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 2)
(Mark One)
| quarterly report under section 13 0r 15(d) of the securities exchange act of 1934 |
| For the quarterly period ended |
| transition report under section 13 0r 15(d) of the securities exchange act of 1934 |
For the transition period from ________________________________ to __________________________________
| Commission file number |
(Exact name of registrant as specified in its charter)
| Incorporated
in the State of |
||
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Sustainable Petroleum Group Inc., 2316 Pine Ridge Rd
(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.
☒
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).
☒
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 ☐ | |
| Smaller
reporting company | ||
| 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 ☒
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 May 15, 2023 | |
| common stock - $0.0001 par value |
EXPLANATORY NOTE
These consolidated financial statements have also been restated for the three months ended March 31, 2023 and 2022 to remove the results of the Consolidated Balance Sheets, Statement of Operations and Comprehensive Loss, Statements of Stockholder’s Equity (Deficit) and Statements of Cash Flows of Lithium Harvest.
This Form 10-Q/A is presented as of the filing date of the Original Form 10-Q, does not reflect events occurring after that date, and does not modify or update disclosures in any way other than as required to reflect the change described above and in Amendment No. 1. Accordingly, this Form 10-Q/A should be read in conjunction with the Company’s filings with the SEC subsequent to the date on which the Company filed the Original Form 10-Q and Amendment No. 1.
This Form 10-Q/A sets forth the Original Form 10-Q, as amended by Amendment No. 1, in its entirety, as amended to reflect the change described above. Among other things, forward-looking statements made in the Original Form 10-Q have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the Original Form 10-K, and such forward-looking statements should be read in their historical context.
In accordance with applicable SEC rules, this Form 10-Q/A includes an updated signature page and certifications of the Company’s Chief Executive Officer and Chief Financial Officer in Exhibits 31.1, 31.2, 32.1 and 32.2 as required by Rule 12b-15.
| 1 |
SUSTAINABLE PROJECTS GROUP INC.
For the THREE MONTHS Ended MARCH 31, 2023 AND 2022
index to UNAUDITED CONSOLIDATED INTERIM financial statements
| Page F-1 |
SUSTAINABLE PROJECTS GROUP INC.
CONSOLIDATED INTERIM BALANCE SHEETS
(Unaudited - Restated)
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| As at | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivables | ||||||||
| Other receivables – Note 4 | ||||||||
| Prepaid expenses | ||||||||
| Equipment – Note 5 | ||||||||
| Intangible assets – Note 7 | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| LIABILITIES | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued liabilities – Note 8 | $ | $ | ||||||
| Amounts due to related parties – Note 11 | ||||||||
| Payroll liabilities | ||||||||
| Notes and interest payable, related party | ||||||||
| Notes and interest payable | ||||||||
| Deposits received | ||||||||
| Deferred revenues | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Note payable – Note 9 | ||||||||
| TOTAL NON-CURRENT LIABILITIES | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common Stock – Note 10 | ||||||||
| Par Value: $ Authorized shares | ||||||||
| Common Stock Issued:
(Dec 31, 2022 – Capital Shares | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Other Accumulated Comprehensive Loss | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
| Page F-2 |
SUSTAINABLE PROJECTS GROUP INC.
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited – Restated)
| For the three | For the three | |||||||
| Months ended | Months ended | |||||||
| March 31, 2023 | March 31, 2022 | |||||||
| Operating Expenses | ||||||||
| Administrative and other operating expenses | ||||||||
| Depreciation | ||||||||
| Management fees | ||||||||
| Professional fees | ||||||||
| Rent | ||||||||
| Wages and salaries | ||||||||
| Travel Expenses | ||||||||
| Operating loss before other items | ( | ) | ( | ) | ||||
| Miscellaneous income | ||||||||
| Interest expense | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Net loss attributed to non-controlling interest | ||||||||
| Comprehensive loss - translation | ( | ) | ( | ) | ||||
| Net loss and comprehensive loss attributed to shareholders | $ | ( | ) | $ | ( | ) | ||
| Loss per share of common stock | ||||||||
| -Basic and diluted | $ | ) | $ | ( | ) | |||
| Weighted average no. of shares of common stock | ||||||||
| -Basic and diluted | ||||||||
See accompanying notes to the consolidated financial statements.
| Page F-3 |
SUSTAINABLE PROJECTS GROUP INC.
CONSOLIDATED INTERIM STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Three Months Ended March 31, 2023 and 2022
(Unaudited - Restated)
| Par Value | Accumulated Other | |||||||||||||||||||||||
| Common | Share | at $0.0001 | Accumulated | Comprehensive | ||||||||||||||||||||
| For March 31, 2023 | Shares | Capital | Amount | Deficit | Loss | Total | ||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Common stock issued in reverse acquisition* | ( |
) | ( | ) | ( | ) | ||||||||||||||||||
| Net loss and comprehensive loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| * |
| Accumulated Other | ||||||||||||||||||||
| Common | Share | Accumulated | Comprehensive | |||||||||||||||||
| For March 31, 2022 | Shares | Capital | Deficit | Loss | Total | |||||||||||||||
| Balance, December 31, 2021 | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||
| Net loss and comprehensive loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||
| Balance, March 31, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||
See accompanying notes to the consolidated financial statements.
| Page F-4 |
SUSTAINABLE PROJECTS GROUP INC.
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited - Restated)
| For the three | For the three | |||||||
| Months ended | Months ended | |||||||
| March 31, 2023 | March 31, 2022 | |||||||
| Cash Flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Changes in current assets and liabilities | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Other receivables | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Payroll liabilities | ||||||||
| Deposits received | ||||||||
| Deferred revenue | ||||||||
| Amount due to related parties | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash Flows from investing activities: | ||||||||
| Office equipment | ( | ) | ||||||
| Filtration equipment | ( | ) | ||||||
| Intangible assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows from financing activities: | ||||||||
| Proceeds from note and interest payable, related party | ||||||||
| Proceeds from note payable | ||||||||
| Common stock issued in reverse acquisition | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Effect of foreign exchange on cash | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental Disclosures | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
| Page F-5 |
SUSTAINABLE PROJECTS GROUP INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023 (Restated)
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. 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 its business at the time. The name change was effective on October 20, 2017. Prior to the Exchange Transaction (as defined below), the Company was a multinational business development company that pursued investments and partnerships with companies across sustainable sectors. The Company also was involved in consulting services and collaborative partnerships.
The Company is a pure-play lithium company focused on supplying high performance lithium compounds to the fast-growing electric vehicle (“EV”) and broader battery markets. It has developed a proprietary technology to extract lithium from oilfield wastewater, which it believes will enable it to manufacture lithium compounds quickly, at an attractive cost, and with a minimal environmental footprint, which it expects to provide a competitive advantage over other lithium manufacturers.
On February 14, 2023, the Company entered into a Securities Exchange Agreement (the “Agreement”) with Lithium Harvest ApS (“Lithium Harvest”), and all the shareholders of Lithium Harvest (the “Shareholders”). Pursuant to the Agreement, the Company acquired all outstanding shares of capital stock of Lithium Harvest in exchange for issuing to the Shareholders shares of the Company’s common stock (the “Exchange Transaction”). In addition, the lender of a convertible note payable exercised its conversion feature and received shares of common stock in exchange for its debt and interest. The Exchange Transaction represents a change of control and was accounted for as a reverse acquisition with Lithium Harvest being the accounting acquirer and the Company being the accounting acquiree. As a result of the transaction, the number of shares of common stock outstanding was increased to .
The Company’s year-end is December 31.
2. Going Concern
These consolidated 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 revenue 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 consolidated balance sheets 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 successful completion of the Company´s planned lithium project.
The
Company has accumulated a deficit of $
The
Company had $
| Page F-6 |
3. Summary of accounting policies
Basis of presentation
While the information presented is unaudited, it includes all adjustments, which are, in our opinion of management, necessary to present fairly the financial position, results of operations and cashflows for the interim period 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 audited December 31, 2022 year-end financial statements. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that can be expected for the year ended December 31, 2023.
Reverse Acquisition
The Exchange Transaction between the Company and Lithium Harvest was accounted for as a “reverse acquisition” since, immediately following completion of the Exchange Transaction, the Shareholders effectuated control of the post-combination Company. For accounting purposes, Lithium Harvest was deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of Lithium Harvest (i.e., a capital transaction involving the issuance of shares by the Company for the shares of Lithium Harvest). Accordingly, the consolidated assets, liabilities and results of operations of Lithium Harvest became the historical financial statements of the Company and its subsidiaries, and the Company’s assets, liabilities and results of operations were consolidated with those of Lithium Harvest beginning on the acquisition date. No step-up in basis or intangible assets or goodwill were recorded in this Exchange Transaction. As a result of the Exchange Transaction, Lithium Harvest became a wholly owned subsidiary of the Company.
Restatement of Previously Issued Consolidated Financial Statements
The Company has restated its Consolidated Interim Balance Sheets as of March 31, 2023 and December 31, 2022, Consolidated Interim Statements of Operations and Comprehensive Loss, Consolidated Interim Statements of Stockholders’ Deficit, Consolidated Interim Statements of Cash Flows and its Notes to the Interim Consolidated Financial Statements for each of the three months ended March 31, 2023 and 2022, which was originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 19, 2023 (the “Original Form 10-Q”). These consolidated interim financial statements have been restated to reflect the identification of impairment of goodwill, intellectual property and inventories associated with the Company’s intellectual property related to its YER Brands subsidiary in the three months ended March 31, 2023 and 2022. These financial statements include the impairment of inventory, intellectual properties and intangible assets of YER Brands Inc.
1. Restatement of Financial Statements:
The Company is restating its financial statements as of and for the three months ended March 31, 2023 and 2022, included in its Original Form 10-Q, due to the identification of impairment of goodwill associated with the Company’s intellectual property related to its YER Brands subsidiary. This impairment occurred subsequent to the filing of the Original Form 10-Q, retroactively, and has resulted in material adjustments to the consolidated interim financial statements. The impairment assessment was performed in accordance with auditing standards generally accepted in the United States (“US GAAP”).
2. Change in Accounting Treatment of Reverse Acquisition:
The Company has revised its accounting treatment for a reverse acquisition that was previously reported in its Original Form 10-Q. Upon further evaluation, the Company determined that prior year adjustments were necessary. The Company impaired goodwill and intellectual property and wrote-off inventory of YER Brands Inc. as of the year ended December 31, 2021.
Consolidation
The accompanying consolidated unaudited interim financial statements include the accounts of the Sustainable Projects Group Inc., Lithium Harvest ApS and YER Brands Inc. All significant intercompany transactions have been eliminated in the consolidation process.
Operating Leases – Right of Use Assets
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 (“ROU 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. The Company has elected not to recognize lease assets and lease liabilities for leases with an initial term of 12 months or less. There are no other material asset leases whether operating or finance except as indicated below.
Lithium Harvest has one office lease. The lease conveys no ownership at the end of the lease term and contains no purchase option nor any guarantee of residual value. The lease does not contain renewal periods at the end of the term. The leases are amortized straight line over the entire office lease agreement. The Company uses an annual interest rate of 10% or a rate of 0.83% per month. This operating lease is classified as a right-to-use asset under the new standard (ASU 206-02). The office lease commenced April 1, 2023, and accordingly, no recognition has been recorded in these interim financial statements.
During the three months ended March 31, 2023, the lease was classified as a short-term lease.
Significant Accounting Policies
There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the December 31, 2022 annual report.
| Page F-7 |
Use of estimates
The preparation of the consolidated interim financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates.
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 various businesses on a corporation-wide basis. As of March 31, 2023, the Company has three reportable segments: YER Brands, Sustainable Projects Group and Lithium Harvest. The segments are determined based on several factors including the nature of products and services, nature of production processes and delivery channels and consultancy services. Each operating segment’s performance is evaluated based on its segment income. Segment income is defined as gross sales and miscellaneous income. At March 31, 2023, segment income and total assets were reported as follows:
| For the three | For the year | |||||||
| Months ended | ended | |||||||
March 31, 2023 | December 31, 2022 | |||||||
| Sales and miscellaneous income | ||||||||
| Sustainable Projects Group | $ | $ | ||||||
| YER Brands | ||||||||
| Lithium Harvest | ||||||||
| Total Sales | $ | $ | ||||||
| Total Assets | ||||||||
| Sustainable Projects Group | $ | $ | ||||||
| YER Brands | ||||||||
| Lithium Harvest | ||||||||
| Total Assets | $ | $ | ||||||
Revenue Recognition
The Company adopted the ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The Company recognizes revenue in accordance with ASC 606 using the following 5 steps to identify revenues:
| · | identify the contract with a customer; |
| · | identify the performance obligations in the contract; |
| · | determine the transaction price; |
| · | allocate the transaction price to performance obligations in the contract; and |
| · | recognize revenue as the performance obligation is satisfied. |
Sub-leasing office
The Company recognizes revenue when the Company transfers promised services to the customer. The performance obligation is the monthly services rendered. The Company has one main revenue source at the moment from Lithium Harvest, which is sub-leasing office space with and/or without furniture. Accordingly, the Company recognizes revenue when services are provided. These revenues are billed in advance, arrears and/or are prepaid. The performance obligation is the monthly services rendered. Where there is a sub-leasing contract for office space with and/or without furniture, the Company bills monthly for its services as rendered.
| Page F-8 |
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied.
Advances from Client’s deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Where possible, we obtain retainers to lessen our risk of non-payment by our customers. Advances from Client’s deposits are recognized as revenue as we meet specified performance obligations as detailed in the contract.
The income earned from sub-leasing office space is recognized as “miscellaneous income”.
Accounts Receivable and Concentration of Risk
Accounts receivable, net is stated at the amount the Company expects to collect, or the net realizable value. The Company provides a provision for allowances that includes returns, allowances and doubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the provision for allowances will change.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, “Income Taxes” (“ASC 740”). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Recently issued accounting pronouncements
The Company adopts new pronouncements relating to GAAP applicable to the Company as they are issued, which may be in advance of their effective date. Management does not believe that any pronouncements not included above will have a material effect on the Company’s consolidated financial statements.
4. Other Receivables
Other
receivables pertain to VAT receivables (value added taxes) of Lithium Harvest. The standard VAT rate in Denmark is
5. Equipment
| Accumulated | ||||||||||||
| Cost | Depreciation | Net | ||||||||||
| Computer | $ | $ | $ | |||||||||
| Equipment | ||||||||||||
| Machinery under construction | ||||||||||||
| $ | $ | $ | ||||||||||
Machinery under construction has not been depreciated as it is not yet available for use.
6. Reverse Acquisition
On
February 14, 2023, the Company entered into the Agreement with Lithium Harvest Lithium Harvest and all the Shareholders. Pursuant to
the Agreement, the Company acquired all outstanding shares of capital stock of Lithium Harvest in exchange for issuing to the
Shareholders
shares of the Company’s common stock. The lender of a convertible note payable exercised its conversion feature and received
shares of common stock in exchange for its debt and interest. The Exchange Transaction represents a change of control and was
accounted for as a reverse acquisition with Lithium Harvest being the accounting acquirer and the Company being the accounting
acquiree. As a result of the Exchange Transaction, the number of shares of common stock outstanding increased to .
The purchase price of Lithium Harvest was valued at $
| Page F-9 |
7. Intangible Assets
| Accumulated | ||||||||||||
| Cost | Depreciation | Net | ||||||||||
| Patent - Denmark | $ | $ | $ | |||||||||
8. Accounts payable and accrued liabilities
Accounts payable and accrued liabilities as of March 31, 2023 and December 31, 2022 are summarized as follows:
| Accounts Payable: | Mar 31, 2023 | Dec 31, 2022 | ||||||
| Accounting fee | $ | $ | ||||||
| Audit fee | ||||||||
Consulting fee | ||||||||
Purchase of property, plant and equipment | ||||||||
Purchase of patents | ||||||||
Rental expenses | ||||||||
Professional fees | ||||||||
Others | ||||||||
| $ | $ | |||||||
| Accrued liabilities: | Mar 31, 2023 | Dec 31, 2022 | ||||||
| Accounting fee | ||||||||
Audit fee | $ | $ | ||||||
| $ | $ |
| Page F-10 |
9. Notes payable
On
March 1, 2019, the Company entered into an unsecured loan agreement for $
On
July 23, 2021, the Company received $
During
the quarter ended March 31, 2023, Lithium Harvest entered into two notes payable with a company controlled by the CEO of the Company
of $
On
March 29, 2023, the Company entered into a $
10. Common stock
The following stock transactions occurred in the Company’s common stock during the three months ended March 31, 2023:
| a) | On
February 14, 2023, shares of common stock were issued pursuant to the Agreement with Lithium Harvest valued at $ | |
| b) | On
February 14, 2023, shares of common stock were issued pursuant to a convertible loan settlement valued at $ |
11. Related party transactions
Related party transactions as of March 31, 2023 and December 31, 2022 are summarized as follows:
| Mar 31, 2023 | Dec 31, 2022 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| $ | $ | |||||||
Stefan
Muehlbauer resigned as a director on February 14, 2023 and is currently the Chief Financial Officer (“CFO”). During the
three months ended March 31, 2023, the Company incurred management fees to the CFO totaling an aggregate of $
| Page F-11 |
On
February 14, 2023, Tiffany Muehlbauer resigned as Chief Technology Officer. At March 31, 2023, $
At
March 31, 2023, the Company owed a company controlled by the above two related parties of $
On
February 14, 2023, Sune Mathiesen became the director and Chief Executive Officer (“CEO”) of the Company. During the three
months ended March 31, 2023, Lithium Harvest incurred management fees from the CEO totaling an aggregate of $
At
March 31, 2023, a company controlled by the director and CEO was owed $
On
February 14, 2023, Paw Juul became the Chief Technology Officer (“CTO”) of the Company. During the three months ended March
31, 2023, Lithium Harvest incurred management fees from the CTO totaling an aggregate of $
12. Commitments and Contingencies
As of March 31, 2023, the Company did not have any commitments.
13. Income Taxes
The Company and its subsidiaries file separate income tax returns.
The
Company files income tax returns in the United States of America and in the States of Florida and Indiana (Sustainable Projects Group
Inc. and YER Brands Inc., respectively) and is subject to a U.S. federal corporate income tax rate of
14. Legal Matters
The Company has no known legal issues pending.
15. Subsequent Events
On
April 28, 2023, a company controlled by a director and CTO, Paw Juul, of the Company loaned the Company $
On
May 1, 2023, Lithium Harvest finalized its office lease to commence from April 1, 2023. The lease may be terminated at the end of
January 31, 2031. The office is located at Tankedraget 7, 4th – 6th Floor, 9000 Aalborg, Denmark. The
annual rent is approximately $
On May 10, 2023, the Company approved restricted stock unit awards for certain key employees and directors under the Company’s 2023 Equity Incentive Plan. The grant of these restricted stock unit awards is subject to stockholder approval. The Company is authorized to grant options and other stock-based awards to executive officers, directors, employees and consultants enabling them to acquire up to shares of common stock of the Company. The exercise price of each option equals the market price of the Company’s shares of common stock as calculated on the date of the grant. The maximum term and/or vesting period shall not be more than ten years from the grant date. The vesting period for all options is at the discretion of the board of directors of the Company and shall not be more than ten years from the grant date. The options are non-transferable.
On
August 18, 2023, the Company issued
common shares for gross proceeds of $
| Page F-12 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
Cautionary Note Regarding Forward Looking Statements
Forward Looking Statements
Cautionary Language Regarding Forward-Looking Statements and Industry Data
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, many of which are beyond our control. Our actual results could differ materially and adversely from those anticipated in such forward-looking statements as a result of certain factors, including those set forth in this report. Important factors that may cause actual results to differ from projections include, but are not limited to, for example:
| ● | changes in economic and business conditions; | |
| ● | our limited operating history in the lithium industry; | |
| ● | availability of raw materials; | |
| ● | increases in the cost of raw materials and energy; | |
| ● | the pace of adoption and cost of developing electric transportation and storage technologies dependent upon lithium batteries; | |
| ● | estimates of and volatility in lithium prices or demand for lithium; | |
| ● | changes in our market in general; | |
| ● | the occurrence of regulatory actions, proceedings, claims or litigation; | |
| ● | changes in laws and government regulations impacting our operations; | |
| ● | the effects of climate change, including any regulatory changes to which we might be subject; | |
| ● | hazards associated with chemicals manufacturing; | |
| ● | changes in accounting standards; | |
| ● | our ability to access capital and the financial markets; | |
| ● | volatility and uncertainties in the debt and equity markets; | |
| ● | the development of an active trading market for our common stock; | |
| ● | the occurrence of cyber-security breaches, terrorist attacks, industrial accidents or natural disasters; | |
| ● | technology or intellectual property infringement, including through cyber-security breaches, and other innovation risks; | |
| ● | recruiting, training and developing employees; | |
| ● | our failure to successfully execute our growth strategy, including any delays in our future growth; | |
| ● | decisions we may make in the future; | |
| ● | uncertainties as to the duration and impact of the COVID-19 pandemic; and | |
| ● | other specific risks that may be referred to in this report. |
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All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, financial position, estimated revenue or losses, projected costs, prospects and plans and objectives of management are forward-looking statements. When used in this report, the words “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “plan,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements or other information contained herein. Stockholders and potential investors should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we cannot assure stockholders and potential investors that these plans, intentions, or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under Part I, Item 1A. “Risk Factors” and elsewhere in this Annual Report on Form 10-K. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
Information regarding market and industry statistics contained in this Annual Report on Form 10-K is included based on information available to us that we believe is accurate. It is generally based on publications that are not produced for purposes of securities offerings or economic analysis. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. We have no obligation to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements, except as required by federal securities laws. See Part I, Item 1A. “Risk Factors” for a more detailed discussion of uncertainties and risks that may have an impact on our future results.
Overview
Sustainable Projects Group Inc. (“SPGX,” “we,” “us,” our” or the “Company”) is a pure-play lithium company focused on supplying high performance lithium compounds to the fast-growing electric vehicle (“EV”) and broader battery markets. We have developed a proprietary technology to extract lithium from oilfield wastewater, which we believe will enable us to manufacture lithium compounds quickly, at an attractive cost, and with a minimal environmental footprint, which we expect to provide us with a competitive advantage over other lithium manufacturers. We believe this competitive advantage will enable us to capitalize on the acceleration of vehicle electrification and renewable energy adoption.
We plan to establish our first lithium carbonate manufacturing facility in 2023, which we anticipate will be capable of manufacturing up to 1,000 metric tons of lithium carbonate equivalent (“LCE”), and we plan to begin manufacturing battery-grade lithium compounds at such facility in the first half of 2024.
On February 14, 2023, SPGX entered into a Securities Exchange Agreement (the “Agreement”) with Lithium Harvest ApS, a Denmark private limited liability company (“Lithium Harvest”), and all of the shareholders of Lithium Harvest (the “Shareholders”). Pursuant to the terms of the Agreement, the Company acquired all of the outstanding shares of capital stock of Lithium Harvest in exchange for issuing to the Shareholders 206,667,233 shares of SPGX’s common stock (the “Exchange Transaction”). The Exchange Transaction closed on February 14, 2023.
Prior to the Exchange Transaction, SPGX was a business development company engaged in project development and holdings through value-based investments and collaborative partnerships, including a joint venture relationship with Hero Wellness Systems Inc. (“Hero Wellness”) and a purchase agreement with the inventors of the Soy-yer Dough product line. During September 2022, SPGX decided to exit the joint venture with Hero Wellness, and following the Exchange Transaction, SPGX has not made concrete plans on expansion of the Soy-yer Dough project.
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Our Market
The market for battery grade lithium compounds is global, and we plan to sell our products worldwide. Based on estimates by Benchmark Minerals, lithium demand is forecasted to rise from 350,000 tons in 2020 to 2.5 million tons in 2030 and over 7 million tons in 2040, with a positive long-term price trend estimate of $15,000 per ton for battery-grade Lithium Carbonate and Lithium Hydroxide from 2025 to 2040. We believe that the continued electrification of transportation and transition to renewable energy sources will support continued significant growth in demand for lithium compounds over the next decade.
Raw Materials
Lithium
We produce our lithium products from oilfield wastewater. The annual global production of produced water is more than 250 million barrels per day. The U.S. production of produced water is more than 50 million barrels per day. Not all produced water is suitable for lithium production, but we estimate that the current U.S. production of produced water is sufficient to produce more than 500,000 metric tons of LCE annually.
We plan to enter into long-term supply agreements with oil and gas companies and service providers for the supply of produced water.
Water
All fresh water used in our production will be reused water from the production of oil and natural gas. We do not require any additional fresh water supplies.
Energy
Our production relies on a steady source of energy. We expect to use solar energy to the extent possible, but we will require an external supply of energy for our equipment.
Other raw materials
We use a range of raw materials and chemicals intermediates in our production processes. We generally expect to satisfy our requirements through spot purchases but likely will rely on medium-to-long-term agreements for the supply of certain raw materials.
Generally, we are not expecting supply chain constraints, but temporary shortages of certain raw materials may occur and cause temporary price increases. During periods of high demand, our raw materials are subject to significant price fluctuations that may have an adverse impact on our results of operations. In addition, there could be inflationary pressure on the costs of raw materials.
Competition
Our products will compete with other lithium compounds available in the market. Many of our competitors are large companies with long-term experience in the industry. The market for battery grade lithium compounds faces barriers to entry, including access to a stable and sufficient supply of lithium feedstock, the ability to produce a sufficient quality and quantity of lithium, technical know-how, and sufficient lead time to develop new lithium mining projects. We believe that our DLE technology enables us to produce high quality products quickly, at an attractive cost, and with a minimal environmental footprint, which we believe will differentiate us from our competitors. We intend to continue to invest in research and development to further improve our products, develop new products, and build market share.
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Intellectual Property
Our success depends in part upon our ability to protect and use our DLE technology and the intellectual property rights related to our DLE technology. On December 15, 2022 we received an “Intention to Grant” notification from the Danish Patent and Trademark Office. We expect the Danish patent to be granted in the first quarter of 2023. Further, we have a pending application for a U.S. patent. If granted, these patents will expire in 2042.
Customers
We intend to sell our products to customers in the EV and broader battery markets, and plan to initially sell lithium locally to customers in the regions close to our manufacturing facilities.
Sales and Marketing
We intend to initially sell our products directly to customers in the U.S. and anticipate that we will subsequently sell our products to customers throughout North America, Asia and Europe.
Manufacturing
We intend to manufacture the lithium compounds we extract at our own facilities. We intend to construct our first commercial manufacturing facility in 2023.
Research and Development
We conduct research and development to optimize our DLE technology and our lithium products and to develop new product candidates and technologies.
Seasonality
Our operations are generally not impacted by seasonality. However, production is expected to be marginally lower during the summer due to the U.S. vacation season.
Government Controls and Regulations
We are subject to and will incur capital and operating costs to comply with U.S. federal, state and local environmental, health and safety laws and regulations, including those governing employee health and safety, the composition of our products, the discharge of pollutants into the air and water, and the management and disposal of hazardous substances and wastes.
In June 2016, modifications to the Toxic Substances Control Act in the United States were signed into law, requiring chemicals to be assessed against a risk-based safety standard and for the elimination of unreasonable risks identified during risk evaluation. Other initiatives in Asia and potentially in other regions will require toxicological testing and risk assessments of a wide variety of chemicals, including chemicals used or produced by us. These assessments may result in heightened concerns about the chemicals involved and additional requirements being placed on the production, handling, labeling or use of the subject chemicals. Such concerns and additional requirements could also increase the cost incurred by our customers to use our chemical products and otherwise limit the use of these products, which could lead to a decrease in demand for these products.
To the extent we manufacture or import products into the European Union (“EU”) or downstream users of our products are located in the EU, we may be subject to the European Community Regulation for the Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”). REACH imposes obligations on EU manufacturers and importers of chemicals and other products into the EU to compile and file comprehensive reports, including testing data, on each chemical substance, and perform chemical safety assessments. Currently, certain lithium products are undergoing a risk assessment review under REACH, which may eventually result in restrictions in the handling or use of lithium carbonate and other lithium products that we produce, which may increase our production costs. In addition, REACH regulations impose significant additional responsibilities and costs on chemical producers, importers, downstream users of chemical substances and preparations, and the entire supply chain. REACH, if applicable to the sale or manufacture of our products, may lead to increases in the costs of raw materials we may purchase and the products we may sell in the EU, which could increase the costs of our products and result in a decrease in their overall demand.
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We use and generate hazardous substances and wastes in our operations and may become subject to claims and substantial liability for personal injury, property damage, wrongful death, loss of production, pollution and other environmental damages relating to the release of such substances into the environment. Depending on the frequency and severity of such incidents, it is possible that the Company’s revenues, operating costs, insurability and relationships with customers, employees and regulators could be impaired.
Human Capital Management
We had eight full-time employees as of March 1, 2023. None of our employees are represented by a labor organization or are a party to a collective bargaining arrangement. We have not experienced any work stoppages, and we consider our relations with our employees to be good.
Available Information
We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy and information statements and other reports required by the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Reports, proxy and information statements and other information regarding issuers that file electronically with the SEC are available to the public free of charge on the SEC’s website at www.sec.gov.
In addition, we voluntarily send an annual report to our stockholders. This report includes audited financial statements and other information about our company’s performance, operations, and strategies. Stockholders can elect to receive this report in electronic form by visiting our Investor Relations website at www.spgroupe.com or by contacting our Investor Relations department at info@spgroupe.com. Information contained on our website is not a part of this Annual Report on Form 10-K and the inclusion of our website address is an inactive textual reference only.
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CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited – Restated)
| For the three | For the three | |||||||
| Months ended | Months ended | |||||||
| March 31, 2023 | March 31, 2022 | |||||||
| Operating Expenses | ||||||||
| Administrative and other operating expenses | 19,064 | 175 | ||||||
| Depreciation | 770 | - | ||||||
| Management fees | 201,591 | - | ||||||
| Professional fees | 83,308 | - | ||||||
| Rent | 49,607 | - | ||||||
| Wages and salaries | 53,476 | - | ||||||
| Travel Expenses | 7,018 | - | ||||||
| 414,834 | 175 | |||||||
| Operating loss before other items | (414,834 | ) | (175 | ) | ||||
| Miscellaneous income | 21,574 | - | ||||||
| Interest expense | 1,228 | - | ||||||
| Net loss | (392,032 | ) | (175 | ) | ||||
| Net loss attributed to non-controlling interest | - | - | ||||||
| Comprehensive loss - translation | (4,898 | ) | (133 | ) | ||||
| Net loss and comprehensive loss attributed to shareholders | $ | (396,930 | ) | $ | (308 | ) | ||
| Loss per share of common stock | ||||||||
| -Basic and diluted | $ | (0.003 | ) | $ | (0.006 | ) | ||
| Weighted average no. of shares of common stock | ||||||||
| -Basic and diluted | 147,958,345 | 50,000 | ||||||
In addition, management anticipates incurring the following expenses during the next 12 month period:
| ● | Management anticipates spending approximately $100,000 in ongoing general and administrative expenses per month for the next 12 months, for a total anticipated expenditure of $3,000,000 over the next 12 months. The general and administrative expenses for the year will consist primarily of employee and rental expenses, 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 $150,000 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 the Company’s financial statements and completing and filing its annual report, quarterly report, and current report filings with the SEC. |
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As of March 31, 2023, the Company had cash of $60,701 and total liabilities of $1,132,474. During the 12 month period following the date of this report, management anticipates that the Company will not generate sufficient revenues to continue the development of current projects and projects in the pipeline. Accordingly, the Company will be required to obtain additional financing in order to continue its plan of operations. Management believes that debt financing will not be available for the Company to fund its plan of operations as it does not have tangible assets to secure any debt financing. Management anticipates that additional funding will be in the form of equity financing from the sale of the Company’s common stock. However, the Company 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, the Company will not be able to develop its products and its business plan will fail. Even if the Company is successful in obtaining equity financing and developing its various business ventures, additional development of its website and marketing program will be required. If the Company does not continue to obtain additional financing, it will be forced to abandon its business and plan of operations.
Liquidity and Capital Resources
Three Month Period Ended March 31, 2023
At March 31, 2023, the Company had a cash balance of $60,701 and a working capital deficit of $974,817 compared to a cash balance of $Nil for the period ended December 31, 2022.
The notes to the Company’s financial statements as of March 31, 2023, discloses its uncertain ability to continue as a going concern. The Company has accumulated a deficit of $1,003,837 since inception and has yet to achieve profitable operations and further losses are anticipated in the development of our 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 financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company had $60,701 cash on hand as at March 31, 2023. Cash flow from operations was $393,499 for the three months period ended March 31, 2023. The Company will need to raise additional cash in order to fund ongoing operations over the next 12 months period. The Company may seek additional equity as necessary, and it expects to raise funds through private or public equity investments, 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.
Net Cash Flows Provided By (Used in) Operating Activities.
Net cash flows provided by operating activities during the three months period ended March 31, 2023 were $393,498, which was primarily due to accrued expenses and amounts due to related parties. This compares to net cash flows used in operating activities of $591 for the period ended March 31, 2022.
Net Cash Flows from Investing Activities.
The Company’s net cash flow used in investing activities during the three months period ended March 31, 2023 was $47,240, as compared to $Nil for the same time period for the prior fiscal year period. These investments were made largely in office equipment and filtration equipment.
Net Cash Flows from Financing Activities.
The Company’s net cash flow used in financing activities during the three months period ended March 31, 2023 was $280,038, as compared to $Nil, in the same period for the prior fiscal year period, largely due to share issuances related to the Exchange Transaction.
Operations Results for the Three Month Period Ended March 31, 2023
Net Loss. During the three months period ended March 31, 2023, the Company had a net loss of $392,032. The loss consisted generally of professional fees, employee expenses and other operating expenses such as administrative fees, management fees, financing fees and depreciation, compared to the same period for the prior fiscal period, when the Company had a net loss of $175.
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Revenue. During the three months period ended March 31, 2023, the Company had revenues of $Nil compared to $Nil from the same period in the prior year. The low level of levels of revenues is largely attributed to the Company still developing its first lithium production plant, which is anticipated to be operational in 2024.
Operating Expenses. The Company’s operating expenses during the three months period ended March 31, 2023 were $414,834 as compared to the same time period for the prior fiscal period of $175. The increase in operating expenses can be attributed to the management and professional fees, as well as rental expenses for our offices in Denmark.
Going Concern
We have limited operations and have sustained operating losses resulting in a deficit. In view of these matters, realization values may be substantially different from carrying values as shown. We have accumulated a deficit of $1,003,837 since inception and have yet to achieve profitable operations and further losses are anticipated in the development of our business. Our 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. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. We had $60,701 in cash and cash equivalents as of March 31, 2023. Cash from operations was $393,498 for the quarter ended March 31, 2023. We will need to raise additional cash in order to fund ongoing operations over the next 12 months. We expect to finance our operations through public or private equity, debt or other available financing transactions. However, there is no assurance that such additional funds will be available for us on acceptable terms, if at all.
Future Financings
Management anticipates raising financing through debt financing or the sale of The Company’s common stock in order to continue to fund its business operations. Issuances of additional common stock will result in dilution to the Company’s existing stockholders. There is no assurance that the Company will achieve any additional sales of its common stock or arrange for debt or other financing to fund its planned activities.
Inflation
Management anticipates increased inflation in all areas of operations. High rates of inflation could impact the company’s development costs for its first production plant expected to be operational in 2024.
Off-balance Sheet Arrangements
The Company 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.
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.
Critical Accounting Policies
Significant Accounting Estimates
The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates.
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A critical accounting estimate is defined as a financial statement item where significant judgment is required in the selection of accounting policies and the determination of estimates. The accounting estimates that require more significant judgment are included below:
| 1. | Revenue recognition: We use judgment in determining the timing of revenue recognition and the amount of revenue to be recognized. This judgment is based on the timing of delivery, customer acceptance and other factors. Our revenue recognition policies are subject to periodic review and changes, and any changes could have a material impact on our financial statements. | |
| 2. | Allowance for doubtful accounts: We estimate the allowance for doubtful accounts based on historical data, current economic conditions and other factors. The actual amount of uncollectible accounts may differ from our estimates, and any significant changes could impact our financial statements. | |
| 3. | Inventory valuation: We estimate the value of inventory based on historical cost, estimated future demand and other factors. We regularly review our inventory and may write down the value if it is deemed to be obsolete or overvalued. Any significant changes to our inventory valuation could impact our financial statements. | |
| 4. | Depreciation and amortization: We estimate the useful lives of our property, plant and equipment and intangible assets, and the residual values used in our depreciation and amortization calculations. Our estimates are subject to change based on economic conditions, technological advancements and other factors, and any changes could have a material impact on our financial statements. | |
| 5. | Impairment of long-lived assets: We periodically review our long-lived assets for impairment and estimate the fair value of those assets. Our estimates are based on a variety of factors, including market conditions and future plans for the assets. If the estimated fair value of the assets is lower than the carrying value, we recognize an impairment charge. Any changes to our estimates could result in impairment charges and have a material impact on our financial statements. | |
| 6. | Exchange rates and translational risks: We are exposed to exchange rate fluctuations and translational risks, particularly with respect to the Danish Krone. We estimate the impact of these fluctuations on our financial statements and make adjustments as necessary. The fluctuations in exchange rates could have a significant impact on the value of our assets and liabilities denominated in foreign currencies, and on our results of operations when translating these amounts into our functional currency. Any material changes in exchange rates could have a significant impact on our financial statements. |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure Controls and Procedures
In connection with the preparation of this Quarterly Report on Form 10-Q/A, an evaluation was carried out by the Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of March 31, 2023. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Company’s management concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were not effective as a result of the material weaknesses in internal control over financial reporting described below.
Material Weaknesses in Internal Control over Financial Reporting
Management has identified material weaknesses in our internal control over financial reporting. A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The matters involving internal controls and procedures that management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were:
(1) We currently lack a functioning audit committee and lack a majority of outside directors on the Company’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
(2) We currently have inadequate segregation of duties consistent with control objectives;
(3) We have insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and
(4) We have ineffective controls over period end financial disclosure and reporting processes.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The above mentioned materials weaknesses (1), (2), (3) and (4) contributed to additional material weaknesses:
(5) We have ineffective controls over timely impairments of intangible assets; and
(6) We lack internal control over financial reporting in the controls over the accounting treatment of subsequent events.
Material weaknesses (1), (2), (3) and (4), which were originally identified by the Company’s Chief Financial Officer in connection with fiscal year 2021 financial results, were not remediated and therefore remained ineffective at March 31, 2023. Material weaknesses (5) and (6), which were identified by the Company’s Chief Financial Officer in connection with the re-audit of its financial statements as of December 31, 2022 and December 31, 2021, were not remediated and therefore remained ineffective at March 31, 2023.
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Management believes that the material weaknesses set forth in items (1), (2), (3), (4), (5) and (6) above had an effect on the Company’s financial results, leading to the restatement of its consolidated financial statements as of and for the years ending December 31, 2022 and 2021 and the three months ended March 31, 2023 and 2022. These restatements primarily were impacted by the impairment of intangible assets associated with the wholly owned subsidiary of the Company, YER Brands Inc., and treatment of the reverse acquisition of Lithium Harvest ApS on February 14, 2023 within the reporting of subsequent events.
The Company is committed to improving its financial organization. As part of this commitment and when funds are available, the Company intends to create a position to segregate duties consistent with control objectives and increase its personnel resources and technical accounting expertise within the accounting function by:
| (i) | appointing one or more outside directors to its board of directors who will also be appointed to the audit committee of the Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls over financial reporting; | |
| (ii) | preparing and implementing sufficient written policies and checklists that will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; | |
| (iii) | preparing and implementing sufficient written policies and checklists that will set forth procedures for the treatment of impairment for intangible assets with respect to the requirements and application of US GAAP; and | |
| (iv) | preparing and implementing sufficient written policies and checklists that will set forth procedures for the treatment of subsequent events with respect to the requirements and application of US GAAP and SEC disclosure requirements. |
Management believes that the appointment of one or more outside directors, who will also be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on the Company’s Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses:
| (i) | insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; | |
| (ii) | ineffective controls over period end financial disclosure and reporting processes; | |
| (iii) | ineffective controls over required impairments of intellectual assets; and | |
| (iv) | lack of internal control over financial reporting in the controls over the accounting treatment of subsequent events. |
Further, management believes that the hiring of additional personnel who have technical expertise and knowledge will result in proper segregation of duties and provide more checks and balances within the Company’s finance department. The Company expects additional personnel will also provide the cross training needed to support the Company if personnel turnover issues occur within the finance department.
Management will continue to monitor and evaluate the effectiveness of the Company’s internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. The material weaknesses will not be considered remediated until management completes the design and implementation of the measures described above, until the controls operate for a sufficient period of time, and until management has concluded, through testing, that the controls are effective.
Changes in Internal Controls over Financial Reporting
There have been no changes (other than as described above) in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, the Company’s 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 the Company’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.
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Part II – Other Information
Item 1. Legal Proceedings.
The Company is not a party to any pending legal proceedings and, to the best of management’s knowledge, none of the Company’s property or assets are the subject of any pending legal proceedings.
Item 1A. Risk Factors.
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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During three month period ended March 31, 2023, the Company did not issue shares.
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 the Company. 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, the Company reported all information that was required to be disclosed in a report on Form 8-K.
The Company 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. The Company undertakes to provide any person with a copy of its financial code of ethics free of charge. Please contact the Company at 2316 Pine Ridge Road, Suite 383, Naples, Florida, 34109 to request a copy of the Company’s code of ethics. Management believes the Company’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.
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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 the Company’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.
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* 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.
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized person.
| Sustainable projects Group Inc. | ||
| By: | /s/ Sune Mathiesen | |
| Name: | Sune Mathiesen | |
| Title: | President & CEO | |
| Dated: | December 27, 2023 | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated have signed this report below.
| Signature | Title | Date | ||
| /s/ Sune Mathiesen | Chairman, President and Chief Executive Officer (principal executive officer) |
December 27, 2023 | ||
| Sune Mathiesen | ||||
| /s/ Kristian Jensen | Director | December 27, 2023 | ||
| Kristian Jensen | ||||
| /s/ Stefan Muehlbauer | Chief Financial Officer (principal financial and principal accounting officer) |
December 27, 2023 | ||
| Stefan Muehlbauer |
| Page 16 |
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sune Mathiesen, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A 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: December 27, 2023
| /s/ Sune Mathiesen | |
| Sune Mathiesen | |
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Stefan Muehlbauer, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A 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: December 27, 2023
| /s/ Stefan Muehlbauer | |
| Stefan Muehlbauer | |
| Chief Financial Officer |
Exhibit 32.1
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/A for the period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sune Mathiesen, President and Chief Executive Officer of the Company, 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/ Sune Mathiesen | |
| Sune Mathiesen | |
| Chief Executive Officer | |
| Date: December 27, 2023 |
Exhibit 32.2
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/A for the period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stefan Muehlbauer, Chief Financial Officer of the Company, 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 | |
| Date: December 27, 2023 |
Cover - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
May 15, 2023 |
|
| Cover [Abstract] | ||
| Document Type | 10-Q/A | |
| Amendment Flag | true | |
| Amendment Description | Sustainable Projects Group Inc. (the “Company”) is filing this Amendment No. 2 on Form 10-Q/A (the “Amendment”) to amend its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 19, 2023 (the “Original Form 10-Q”), as amended by Amendment No. 1 on Form 10-Q/A filed on December 15, 2023 (“Amendment No. 1”), to remove the following statement from Note 3 – Summary of accounting policies of Notes to Consolidated Unaudited Interim Financial Statements in Amendment No. 1: | |
| Document Quarterly Report | true | |
| Document Transition Report | false | |
| Document Period End Date | Mar. 31, 2023 | |
| Document Fiscal Period Focus | Q1 | |
| Document Fiscal Year Focus | 2023 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity File Number | 000-54875 | |
| Entity Registrant Name | Sustainable Projects Group Inc. | |
| Entity Central Index Key | 0001500305 | |
| Entity Tax Identification Number | 81-5445107 | |
| Entity Incorporation, State or Country Code | NV | |
| Entity Address, Address Line One | Tankedraget 7 | |
| Entity Address, City or Town | Aalborg | |
| Entity Address, Country | DK | |
| Entity Address, Postal Zip Code | 9000 | |
| City Area Code | 305 | |
| Local Phone Number | 814-2915 | |
| Entity Current Reporting Status | Yes | |
| Entity Interactive Data Current | Yes | |
| Entity Filer Category | Non-accelerated Filer | |
| Entity Small Business | true | |
| Entity Emerging Growth Company | false | |
| Entity Shell Company | false | |
| Entity Common Stock, Shares Outstanding | 287,190,813 |
Consolidated Interim Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 500,000,000 | 500,000,000 |
| Common Stock, Shares, Issued | 287,190,813 | |
| Capital Units, Outstanding | 50,000 |
Consolidated Interim Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Operating Expenses | ||
| Administrative and other operating expenses | $ 19,064 | $ 175 |
| Depreciation | 770 | |
| Management fees | 201,591 | |
| Professional fees | 83,308 | |
| Rent | 49,607 | |
| Wages and salaries | 53,476 | |
| Travel Expenses | 7,018 | |
| Total Operating Expenses | 414,834 | 175 |
| Operating loss before other items | (414,834) | (175) |
| Miscellaneous income | 21,574 | |
| Interest expense | 1,228 | |
| Net loss | (392,032) | (175) |
| Net loss attributed to non-controlling interest | ||
| Comprehensive loss - translation | (4,898) | (133) |
| Net loss and comprehensive loss attributed to shareholders | $ (396,930) | $ (308) |
| Loss per share of common stock - Basic | $ 0.003 | $ 0.006 |
| Loss per share of common stock - Diluted | $ 0.003 | $ 0.006 |
| Weighted average no. of shares of common stock - Basic | 147,958,345 | 50,000 |
| Weighted average no. of shares of common stock - Diluted | 147,958,345 | 50,000 |
Consolidated Interim Statements of Stockholders Deficit (Unaudited) - USD ($) |
Share Capital [Member] |
Common Stock [Member] |
Retained Earnings [Member] |
AOCI Attributable to Parent [Member] |
Total |
||
|---|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2021 | $ 7,940 | $ (1,475) | $ (268) | $ 6,197 | |||
| Balance, shares at Dec. 31, 2021 | 50,000 | ||||||
| Net loss and comprehensive loss | (175) | (133) | (308) | ||||
| Balance at Mar. 31, 2022 | $ 7,940 | (1,650) | (401) | 5,889 | |||
| Balance, shares at Mar. 31, 2022 | 50,000 | ||||||
| Balance at Dec. 31, 2022 | $ 7,940 | (224,419) | (4,853) | (221,332) | |||
| Balance, shares at Dec. 31, 2022 | 50,000 | ||||||
| Common stock issued in reverse acquisition | [1] | (7,940) | $ 28,719 | (387,386) | (366,607) | ||
| Common stock issued in reverse acquisition, shares | [1] | 287,140,813 | |||||
| Net loss and comprehensive loss | (392,032) | (4,898) | (396,930) | ||||
| Balance at Mar. 31, 2023 | $ 28,719 | $ (1,003,837) | $ (9,751) | $ (984,869) | |||
| Balance, shares at Mar. 31, 2023 | 287,190,813 | ||||||
| |||||||
Consolidated Interim Statements of Stockholders Deficit (Parenthetical) |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
shares
| |
| Statement of Stockholders' Equity [Abstract] | |
| Common stock issued for convertible loan settlement | 71,979,703 |
Organization and Nature of Operations |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization and Nature of Operations | 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. 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 its business at the time. The name change was effective on October 20, 2017. Prior to the Exchange Transaction (as defined below), the Company was a multinational business development company that pursued investments and partnerships with companies across sustainable sectors. The Company also was involved in consulting services and collaborative partnerships.
The Company is a pure-play lithium company focused on supplying high performance lithium compounds to the fast-growing electric vehicle (“EV”) and broader battery markets. It has developed a proprietary technology to extract lithium from oilfield wastewater, which it believes will enable it to manufacture lithium compounds quickly, at an attractive cost, and with a minimal environmental footprint, which it expects to provide a competitive advantage over other lithium manufacturers.
On February 14, 2023, the Company entered into a Securities Exchange Agreement (the “Agreement”) with Lithium Harvest ApS (“Lithium Harvest”), and all the shareholders of Lithium Harvest (the “Shareholders”). Pursuant to the Agreement, the Company acquired all outstanding shares of capital stock of Lithium Harvest in exchange for issuing to the Shareholders shares of the Company’s common stock (the “Exchange Transaction”). In addition, the lender of a convertible note payable exercised its conversion feature and received shares of common stock in exchange for its debt and interest. The Exchange Transaction represents a change of control and was accounted for as a reverse acquisition with Lithium Harvest being the accounting acquirer and the Company being the accounting acquiree. As a result of the transaction, the number of shares of common stock outstanding was increased to .
The Company’s year-end is December 31.
|
Going Concern |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Going Concern | 2. Going Concern
These consolidated 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 revenue 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 consolidated balance sheets 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 successful completion of the Company´s planned lithium project.
The Company has accumulated a deficit of $1,003,837 since inception and has yet to achieve profitable operations and further losses are anticipated in the development of its business. The Company’s ability to continue as a going concern is in substantial doubt and is dependent upon obtaining additional financing and/or achieving a sustainable profitable level of operations. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company had $60,701 cash as of March 31, 2023. The Company will need to raise additional cash in order to fund ongoing operations over the next 12 months. The Company may seek additional equity as necessary, and it expects to raise funds through private or public equity investment in order to support the 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.
|
Summary of accounting policies |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of accounting policies | 3. Summary of accounting policies
Basis of presentation
While the information presented is unaudited, it includes all adjustments, which are, in our opinion of management, necessary to present fairly the financial position, results of operations and cashflows for the interim period 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 audited December 31, 2022 year-end financial statements. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that can be expected for the year ended December 31, 2023.
Reverse Acquisition
The Exchange Transaction between the Company and Lithium Harvest was accounted for as a “reverse acquisition” since, immediately following completion of the Exchange Transaction, the Shareholders effectuated control of the post-combination Company. For accounting purposes, Lithium Harvest was deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of Lithium Harvest (i.e., a capital transaction involving the issuance of shares by the Company for the shares of Lithium Harvest). Accordingly, the consolidated assets, liabilities and results of operations of Lithium Harvest became the historical financial statements of the Company and its subsidiaries, and the Company’s assets, liabilities and results of operations were consolidated with those of Lithium Harvest beginning on the acquisition date. No step-up in basis or intangible assets or goodwill were recorded in this Exchange Transaction. As a result of the Exchange Transaction, Lithium Harvest became a wholly owned subsidiary of the Company.
Restatement of Previously Issued Consolidated Financial Statements
The Company has restated its Consolidated Interim Balance Sheets as of March 31, 2023 and December 31, 2022, Consolidated Interim Statements of Operations and Comprehensive Loss, Consolidated Interim Statements of Stockholders’ Deficit, Consolidated Interim Statements of Cash Flows and its Notes to the Interim Consolidated Financial Statements for each of the three months ended March 31, 2023 and 2022, which was originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 19, 2023 (the “Original Form 10-Q”). These consolidated interim financial statements have been restated to reflect the identification of impairment of goodwill, intellectual property and inventories associated with the Company’s intellectual property related to its YER Brands subsidiary in the three months ended March 31, 2023 and 2022. These financial statements include the impairment of inventory, intellectual properties and intangible assets of YER Brands Inc.
1. Restatement of Financial Statements:
The Company is restating its financial statements as of and for the three months ended March 31, 2023 and 2022, included in its Original Form 10-Q, due to the identification of impairment of goodwill associated with the Company’s intellectual property related to its YER Brands subsidiary. This impairment occurred subsequent to the filing of the Original Form 10-Q, retroactively, and has resulted in material adjustments to the consolidated interim financial statements. The impairment assessment was performed in accordance with auditing standards generally accepted in the United States (“US GAAP”).
2. Change in Accounting Treatment of Reverse Acquisition:
The Company has revised its accounting treatment for a reverse acquisition that was previously reported in its Original Form 10-Q. Upon further evaluation, the Company determined that prior year adjustments were necessary. The Company impaired goodwill and intellectual property and wrote-off inventory of YER Brands Inc. as of the year ended December 31, 2021.
Consolidation
The accompanying consolidated unaudited interim financial statements include the accounts of the Sustainable Projects Group Inc., Lithium Harvest ApS and YER Brands Inc. All significant intercompany transactions have been eliminated in the consolidation process.
Operating Leases – Right of Use Assets
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 (“ROU 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. The Company has elected not to recognize lease assets and lease liabilities for leases with an initial term of 12 months or less. There are no other material asset leases whether operating or finance except as indicated below.
Lithium Harvest has one office lease. The lease conveys no ownership at the end of the lease term and contains no purchase option nor any guarantee of residual value. The lease does not contain renewal periods at the end of the term. The leases are amortized straight line over the entire office lease agreement. The Company uses an annual interest rate of 10% or a rate of 0.83% per month. This operating lease is classified as a right-to-use asset under the new standard (ASU 206-02). The office lease commenced April 1, 2023, and accordingly, no recognition has been recorded in these interim financial statements.
During the three months ended March 31, 2023, the lease was classified as a short-term lease.
Significant Accounting Policies
There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the December 31, 2022 annual report.
Use of estimates
The preparation of the consolidated interim financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates.
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 various businesses on a corporation-wide basis. As of March 31, 2023, the Company has three reportable segments: YER Brands, Sustainable Projects Group and Lithium Harvest. The segments are determined based on several factors including the nature of products and services, nature of production processes and delivery channels and consultancy services. Each operating segment’s performance is evaluated based on its segment income. Segment income is defined as gross sales and miscellaneous income. At March 31, 2023, segment income and total assets were reported as follows:
Revenue Recognition
The Company adopted the ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The Company recognizes revenue in accordance with ASC 606 using the following 5 steps to identify revenues:
Sub-leasing office
The Company recognizes revenue when the Company transfers promised services to the customer. The performance obligation is the monthly services rendered. The Company has one main revenue source at the moment from Lithium Harvest, which is sub-leasing office space with and/or without furniture. Accordingly, the Company recognizes revenue when services are provided. These revenues are billed in advance, arrears and/or are prepaid. The performance obligation is the monthly services rendered. Where there is a sub-leasing contract for office space with and/or without furniture, the Company bills monthly for its services as rendered.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied.
Advances from Client’s deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Where possible, we obtain retainers to lessen our risk of non-payment by our customers. Advances from Client’s deposits are recognized as revenue as we meet specified performance obligations as detailed in the contract.
The income earned from sub-leasing office space is recognized as “miscellaneous income”.
Accounts Receivable and Concentration of Risk
Accounts receivable, net is stated at the amount the Company expects to collect, or the net realizable value. The Company provides a provision for allowances that includes returns, allowances and doubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the provision for allowances will change.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, “Income Taxes” (“ASC 740”). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Recently issued accounting pronouncements
The Company adopts new pronouncements relating to GAAP applicable to the Company as they are issued, which may be in advance of their effective date. Management does not believe that any pronouncements not included above will have a material effect on the Company’s consolidated financial statements.
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Other Receivables |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Other Receivables | |
| Other Receivables | 4. Other Receivables
Other receivables pertain to VAT receivables (value added taxes) of Lithium Harvest. The standard VAT rate in Denmark is 25%.
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Equipment |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equipment | 5. Equipment
Machinery under construction has not been depreciated as it is not yet available for use.
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Reverse Acquisition |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Reverse Acquisition | |
| Reverse Acquisition | 6. Reverse Acquisition
On February 14, 2023, the Company entered into the Agreement with Lithium Harvest Lithium Harvest and all the Shareholders. Pursuant to the Agreement, the Company acquired all outstanding shares of capital stock of Lithium Harvest in exchange for issuing to the Shareholders shares of the Company’s common stock. The lender of a convertible note payable exercised its conversion feature and received shares of common stock in exchange for its debt and interest. The Exchange Transaction represents a change of control and was accounted for as a reverse acquisition with Lithium Harvest being the accounting acquirer and the Company being the accounting acquiree. As a result of the Exchange Transaction, the number of shares of common stock outstanding increased to . The purchase price of Lithium Harvest was valued at $10,333,362 using the fair market value of the Company’s common stock price on the date of the Exchange Transaction, February 14, 2023.
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Intangible Assets |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets | 7. Intangible Assets
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Accounts payable and accrued liabilities |
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| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts payable and accrued liabilities | 8. Accounts payable and accrued liabilities
Accounts payable and accrued liabilities as of March 31, 2023 and December 31, 2022 are summarized as follows:
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Notes payable |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Debt Disclosure [Abstract] | |
| Notes payable | 9. Notes payable
On March 1, 2019, the Company entered into an unsecured loan agreement for $50,000 with an interest rate of 3.5% per annum. The loan is due on or before April 15, 2022. On March 28, 2022, the loan agreement was extended to April 15, 2024. At March 31, 2023, there was $7,144 in accrued interest.
On July 23, 2021, the Company received $100,000 pursuant to a unsecured convertible promissory note payable, bearing an interest at 10% per annum. The loan may be renewed at the option of the lender and is secured via a security agreement supported by the Company’s present and future assets. The outstanding principal and unpaid accrued interest will automatically convert into shares of the Company on or before the maturity date upon the closing of a “Qualified Transaction” to an amount equal to 25% of the fully diluted capitalization of the Company on a post-money basis. In the event that the Qualified Transaction is not consummated on or prior to the maturity date, the lender has the right to convert the principal and unpaid accrued interest of the note into shares of the Company to an amount equal to 25% of the fully diluted capitalization of the Company. A Qualified Transaction is defined as the reverse merger of the Company with a target company. On June 22, 2022, the Company received an additional loan advance of $25,000. The outstanding principal and unpaid accrued interest may be converted to an amount equal to 5% of the fully diluted capitalization of the Company on a post-money basis. During the quarter ended March 31, 2023 the lender exercised the convertible feature of the debt and the loan and interest were converted into shares of common stock valued at $3,589,885 (See Note 10).
During the quarter ended March 31, 2023, Lithium Harvest entered into two notes payable with a company controlled by the CEO of the Company of $17,173 (DKK 118,000) and with the CEO of $2,183 (DKK 15,000) respectively, with a 3% interest rate per annum that is due on or before May 1, 2023. Subsequent to March 31, 2023, these loans have been repaid. (See Note 13)
On March 29, 2023, the Company entered into a $10,000 note payable with a 15% interest rate per annum. The loan is due on or before December 31, 2023. At March 31, 2023, there was accrued interest of $12.
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Common stock |
3 Months Ended | |||||||||
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Mar. 31, 2023 | ||||||||||
| Equity [Abstract] | ||||||||||
| Common stock | 10. Common stock
The following stock transactions occurred in the Company’s common stock during the three months ended March 31, 2023:
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Related party transactions |
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Related party transactions | 11. Related party transactions
Related party transactions as of March 31, 2023 and December 31, 2022 are summarized as follows:
Stefan Muehlbauer resigned as a director on February 14, 2023 and is currently the Chief Financial Officer (“CFO”). During the three months ended March 31, 2023, the Company incurred management fees to the CFO totaling an aggregate of $15,625. At March 31, 2023, $110,465 was owing to the CFO for management fees, current and past due, and $1,180 for out of pocket expenses. The Company entered into an Employment Agreement the CFO on February 14, 2023. His annual salary is $125,000, payable on a monthly basis with other benefits. The employment agreement is for a period of one year and at such time, the CFO will be eligible to receive a one-time, lump sum bonus of $25,000, subject to other conditions and terms. (Agreement was previously filed on a Form 8K dated February 14, 2023)
On February 14, 2023, Tiffany Muehlbauer resigned as Chief Technology Officer. At March 31, 2023, $12,766 was owing to the prior officer for past due salaries and $25,500 for management fees.
At March 31, 2023, the Company owed a company controlled by the above two related parties of $20,647 for office expenses.
On February 14, 2023, Sune Mathiesen became the director and Chief Executive Officer (“CEO”) of the Company. During the three months ended March 31, 2023, Lithium Harvest incurred management fees from the CEO totaling an aggregate of $40,023 (DKK 275,000). At March 31, 2023, $40,023 (DKK 275,000) was owing to the CEO for salaries, $1,915 (DKK 13,157) for out of pocket expenses. An aggregate of $2,195 (DKK 15,088) was owed to the CEO for a notes payable and accrued interest. The loan has a 3% interest rate that is due on or before May 1, 2023. Subsequent to March 31, 2023, the loan has been repaid. (See Note 9) Lithium Harvest entered into an Employment Agreement with Mr. Mathiesen on February 14, 2023. His annual salary is approximately $300,000 (DKK 2,200,000), payable on a monthly basis with other benefits. The employment agreement is non-terminable until December 31, 2025. Subject to other conditions and terms, the CEO may be eligible to receive annual bonus up to 150% of the current annual salary. (Agreement was previously filed on a Form 8K dated February 14, 2023)
At March 31, 2023, a company controlled by the director and CEO was owed $284,243 (DKK 1,953,067) for management fees and out of pocket expenses, current and past due. An aggregate of $17,217 (DKK 118,300) was also owed to a company controlled by the director and CEO for a notes payable and accrued interest. The loan has a 3% interest rate that is due on or before May 1, 2023. Subsequent to March 31, 2023, the loan has been repaid. (See Note 9)
On February 14, 2023, Paw Juul became the Chief Technology Officer (“CTO”) of the Company. During the three months ended March 31, 2023, Lithium Harvest incurred management fees from the CTO totaling an aggregate of $40,023 (DKK 275,000). Lithium Harvest entered into an Employment Agreement with Mr. Juul on February 14, 2023. His annual salary is approximately $300,000 (DKK 2,200,000), payable on a monthly basis with other benefits. The employment agreement is non-terminable until December 31, 2025. Subject to other conditions and terms, the CTO may be eligible to receive annual bonus up to 150% of the current annual salary. (Agreement was previously filed on a Form 8K dated February 14, 2023)
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Commitments and Contingencies |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | 12. Commitments and Contingencies
As of March 31, 2023, the Company did not have any commitments.
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Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | 13. Income Taxes
The Company and its subsidiaries file separate income tax returns.
The Company files income tax returns in the United States of America and in the States of Florida and Indiana (Sustainable Projects Group Inc. and YER Brands Inc., respectively) and is subject to a U.S. federal corporate income tax rate of 21%. The Company generated a taxable loss for the three months ended March 31, 2023 and 2022. Lithium Harvest ApS is subject to Denmark corporate income tax rate of 22%.
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Legal Matters |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Legal Matters | 14. Legal Matters
The Company has no known legal issues pending.
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Subsequent Events |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | 15. Subsequent Events
On April 28, 2023, a company controlled by a director and CTO, Paw Juul, of the Company loaned the Company $14,506 (DKK 99,000). The loan has a 3% interest rate that was due on or before June 30, 2023.
On May 1, 2023, Lithium Harvest finalized its office lease to commence from April 1, 2023. The lease may be terminated at the end of January 31, 2031. The office is located at Tankedraget 7, 4th – 6th Floor, 9000 Aalborg, Denmark. The annual rent is approximately $336,016 (DKK 2,308,800), payable quarterly in advance. The six-month security deposit as well as the quarterly rent advance was paid on April 28, 2023 of approximately $252,012 (Deposit DKK 1,154,400 and Rent DKK 577,200) plus other operating costs and taxes.
On May 10, 2023, the Company approved restricted stock unit awards for certain key employees and directors under the Company’s 2023 Equity Incentive Plan. The grant of these restricted stock unit awards is subject to stockholder approval. The Company is authorized to grant options and other stock-based awards to executive officers, directors, employees and consultants enabling them to acquire up to shares of common stock of the Company. The exercise price of each option equals the market price of the Company’s shares of common stock as calculated on the date of the grant. The maximum term and/or vesting period shall not be more than ten years from the grant date. The vesting period for all options is at the discretion of the board of directors of the Company and shall not be more than ten years from the grant date. The options are non-transferable.
On August 18, 2023, the Company issued common shares for gross proceeds of $375,000 and issued common shares for gross proceeds of $1,402,100. The total subscriptions for private placements received to date was $2,246,450. As of the date of this Quarterly Report on Form 10-Q/A, there is $ subscribed, which represents common shares to be issued upon closing. |
Summary of accounting policies (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of presentation | Basis of presentation
While the information presented is unaudited, it includes all adjustments, which are, in our opinion of management, necessary to present fairly the financial position, results of operations and cashflows for the interim period 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 audited December 31, 2022 year-end financial statements. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that can be expected for the year ended December 31, 2023.
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| Reverse Acquisition |
Reverse Acquisition
The Exchange Transaction between the Company and Lithium Harvest was accounted for as a “reverse acquisition” since, immediately following completion of the Exchange Transaction, the Shareholders effectuated control of the post-combination Company. For accounting purposes, Lithium Harvest was deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of Lithium Harvest (i.e., a capital transaction involving the issuance of shares by the Company for the shares of Lithium Harvest). Accordingly, the consolidated assets, liabilities and results of operations of Lithium Harvest became the historical financial statements of the Company and its subsidiaries, and the Company’s assets, liabilities and results of operations were consolidated with those of Lithium Harvest beginning on the acquisition date. No step-up in basis or intangible assets or goodwill were recorded in this Exchange Transaction. As a result of the Exchange Transaction, Lithium Harvest became a wholly owned subsidiary of the Company.
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| Restatement of Previously Issued Consolidated Financial Statements | Restatement of Previously Issued Consolidated Financial Statements
The Company has restated its Consolidated Interim Balance Sheets as of March 31, 2023 and December 31, 2022, Consolidated Interim Statements of Operations and Comprehensive Loss, Consolidated Interim Statements of Stockholders’ Deficit, Consolidated Interim Statements of Cash Flows and its Notes to the Interim Consolidated Financial Statements for each of the three months ended March 31, 2023 and 2022, which was originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 19, 2023 (the “Original Form 10-Q”). These consolidated interim financial statements have been restated to reflect the identification of impairment of goodwill, intellectual property and inventories associated with the Company’s intellectual property related to its YER Brands subsidiary in the three months ended March 31, 2023 and 2022. These financial statements include the impairment of inventory, intellectual properties and intangible assets of YER Brands Inc.
1. Restatement of Financial Statements:
The Company is restating its financial statements as of and for the three months ended March 31, 2023 and 2022, included in its Original Form 10-Q, due to the identification of impairment of goodwill associated with the Company’s intellectual property related to its YER Brands subsidiary. This impairment occurred subsequent to the filing of the Original Form 10-Q, retroactively, and has resulted in material adjustments to the consolidated interim financial statements. The impairment assessment was performed in accordance with auditing standards generally accepted in the United States (“US GAAP”).
2. Change in Accounting Treatment of Reverse Acquisition:
The Company has revised its accounting treatment for a reverse acquisition that was previously reported in its Original Form 10-Q. Upon further evaluation, the Company determined that prior year adjustments were necessary. The Company impaired goodwill and intellectual property and wrote-off inventory of YER Brands Inc. as of the year ended December 31, 2021.
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| Consolidation | Consolidation
The accompanying consolidated unaudited interim financial statements include the accounts of the Sustainable Projects Group Inc., Lithium Harvest ApS and YER Brands Inc. All significant intercompany transactions have been eliminated in the consolidation process.
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| Operating Leases – Right of Use Assets | Operating Leases – Right of Use Assets
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 (“ROU 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. The Company has elected not to recognize lease assets and lease liabilities for leases with an initial term of 12 months or less. There are no other material asset leases whether operating or finance except as indicated below.
Lithium Harvest has one office lease. The lease conveys no ownership at the end of the lease term and contains no purchase option nor any guarantee of residual value. The lease does not contain renewal periods at the end of the term. The leases are amortized straight line over the entire office lease agreement. The Company uses an annual interest rate of 10% or a rate of 0.83% per month. This operating lease is classified as a right-to-use asset under the new standard (ASU 206-02). The office lease commenced April 1, 2023, and accordingly, no recognition has been recorded in these interim financial statements.
During the three months ended March 31, 2023, the lease was classified as a short-term lease.
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| Significant Accounting Policies | Significant Accounting Policies
There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the December 31, 2022 annual report.
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| Use of estimates | Use of estimates
The preparation of the consolidated interim financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates.
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| Segment Reporting | 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 various businesses on a corporation-wide basis. As of March 31, 2023, the Company has three reportable segments: YER Brands, Sustainable Projects Group and Lithium Harvest. The segments are determined based on several factors including the nature of products and services, nature of production processes and delivery channels and consultancy services. Each operating segment’s performance is evaluated based on its segment income. Segment income is defined as gross sales and miscellaneous income. At March 31, 2023, segment income and total assets were reported as follows:
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| Revenue Recognition | Revenue Recognition
The Company adopted the ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The Company recognizes revenue in accordance with ASC 606 using the following 5 steps to identify revenues:
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| Sub-leasing office | Sub-leasing office
The Company recognizes revenue when the Company transfers promised services to the customer. The performance obligation is the monthly services rendered. The Company has one main revenue source at the moment from Lithium Harvest, which is sub-leasing office space with and/or without furniture. Accordingly, the Company recognizes revenue when services are provided. These revenues are billed in advance, arrears and/or are prepaid. The performance obligation is the monthly services rendered. Where there is a sub-leasing contract for office space with and/or without furniture, the Company bills monthly for its services as rendered.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied.
Advances from Client’s deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Where possible, we obtain retainers to lessen our risk of non-payment by our customers. Advances from Client’s deposits are recognized as revenue as we meet specified performance obligations as detailed in the contract.
The income earned from sub-leasing office space is recognized as “miscellaneous income”.
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| Accounts Receivable and Concentration of Risk | Accounts Receivable and Concentration of Risk
Accounts receivable, net is stated at the amount the Company expects to collect, or the net realizable value. The Company provides a provision for allowances that includes returns, allowances and doubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the provision for allowances will change.
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| Income Taxes | Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, “Income Taxes” (“ASC 740”). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.
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| Recently issued accounting pronouncements | Recently issued accounting pronouncements
The Company adopts new pronouncements relating to GAAP applicable to the Company as they are issued, which may be in advance of their effective date. Management does not believe that any pronouncements not included above will have a material effect on the Company’s consolidated financial statements. |
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Summary of accounting policies (Tables) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Segment Reporting |
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Equipment (Tables) |
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Equipment |
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Intangible Assets (Tables) |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Intangible assets |
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Accounts payable and accrued liabilities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Payable and Accrued Liabilities | Accounts payable and accrued liabilities as of March 31, 2023 and December 31, 2022 are summarized as follows:
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Related party transactions (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Related Party Transaction | Related party transactions as of March 31, 2023 and December 31, 2022 are summarized as follows:
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Organization and Nature of Operations (Details Narrative) - Securities Agreement [Member] - Common Stock [Member] |
Feb. 14, 2023
shares
|
|---|---|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |
| Shares received, conversion | 206,667,233 |
| Increase in outstanding, shares | 287,190,813 |
| Convertible Notes Payable [Member] | |
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |
| Shares received, conversion | 71,797,703 |
Going Concern (Details Narrative) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Accumulated deficit | $ 1,003,837 | $ 224,419 |
| Cash on hand | $ 60,701 |
Schedule of Segment Reporting (Details) - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
| Total Sales | $ 21,574 | |
| Total Assets | 147,605 | 42,269 |
| Sustainable Projects Group [Member] | ||
| Total Sales | ||
| Total Assets | 4,406 | |
| YER Brands [Member] | ||
| Total Sales | ||
| Total Assets | 208 | |
| Lithium Harvest [Member] | ||
| Total Sales | 21,574 | |
| Total Assets | $ 142,991 | $ 42,269 |
Other Receivables (Details Narrative) |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Other Receivables | |
| Value added tax rate | 25.00% |
Schedule of Equipment (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Cost | $ 41,772 | |
| Accumulated Depreciation | 5,011 | |
| Net | 36,761 | |
| Computer Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Cost | 11,885 | |
| Accumulated Depreciation | 219 | |
| Net | 11,666 | |
| Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Cost | 5,000 | |
| Accumulated Depreciation | 4,792 | |
| Net | 208 | |
| Machinery Under Construction [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Cost | 24,887 | |
| Accumulated Depreciation | ||
| Net | $ 24,887 |
Reverse Acquisition (Details Narrative) - Securities Agreement [Member] - Common Stock [Member] |
Feb. 14, 2023
USD ($)
shares
|
|---|---|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |
| Shares received, conversion | 206,667,233 |
| Increase in outstanding, shares | 287,190,813 |
| Purchase value | $ | $ 10,333,362 |
| Convertible Notes Payable [Member] | |
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |
| Shares received, conversion | 71,797,703 |
Schedule of Intangible assets (Details) - Patents [Member] |
Mar. 31, 2023
USD ($)
|
|---|---|
| Finite-Lived Intangible Assets [Line Items] | |
| Cost | $ 10,467 |
| Accumulated Amortization | 136 |
| Net | $ 10,331 |
Schedule of Accounts Payable and Accrued Liabilities (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Accounting fee | $ 11,500 | |
| Audit fee | 7,400 | |
| Consulting fee | 37,500 | |
| Purchase of property, plant and equipment | 37,678 | |
| Purchase of patents | 13,925 | |
| Rental expenses | 62,445 | |
| Professional fees | 276,721 | 117,199 |
| Others | 64,207 | |
| Total Accounts Payable | 511,376 | 117,199 |
| Accounting fee | 4,000 | |
| Audit fee | 3,228 | |
| Total Accrued liabilities | $ 7,228 |
Notes payable (Details Narrative) |
3 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
|
Mar. 29, 2023
USD ($)
|
Jul. 23, 2021
USD ($)
|
Mar. 01, 2019
USD ($)
|
Mar. 31, 2023
USD ($)
shares
|
Mar. 31, 2023
DKK (kr)
shares
|
Mar. 31, 2022
USD ($)
|
Jun. 22, 2022
USD ($)
|
|
| Debt Instrument [Line Items] | |||||||
| Promissory note | 15.00% | ||||||
| Accrued interest | $ 12 | ||||||
| Convertible feature shares | shares | 71,979,703 | 71,979,703 | |||||
| Management fee | $ 201,591 | ||||||
| Promissory note | $ 10,000 | ||||||
| Director And Office [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Promissory note | 3.00% | ||||||
| Management fee | $ 17,173 | kr 118,000 | |||||
| Chief Executive Officer [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Management fee | $ 2,183 | kr 15,000 | |||||
| Common Stock [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Convertible feature shares | shares | 71,797,703 | 71,797,703 | |||||
| Convertible feature value | $ 3,589,885 | ||||||
| Convertible Promissory Note Payable [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Promissory note | 10.00% | ||||||
| Additional loan advance | $ 100,000 | $ 25,000 | |||||
| Debt instrument term | 2 years | ||||||
| Debt conversion description | The outstanding principal and unpaid accrued interest will automatically convert into shares of the Company on or before the maturity date upon the closing of a “Qualified Transaction” to an amount equal to 25% of the fully diluted capitalization of the Company on a post-money basis. In the event that the Qualified Transaction is not consummated on or prior to the maturity date, the lender has the right to convert the principal and unpaid accrued interest of the note into shares of the Company to an amount equal to 25% of the fully diluted capitalization of the Company. | ||||||
| Loan Agreement [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt Instrument, Face Amount | $ 50,000 | ||||||
| Promissory note | 3.50% | ||||||
| Debt Instrument, Maturity Date | Apr. 15, 2022 | ||||||
| Accrued interest | $ 7,144 | ||||||
Common stock (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Feb. 14, 2023 |
Mar. 31, 2023 |
|
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Common stock issued for convertible loan settlement | 71,979,703 | |
| Common Stock [Member] | ||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Common stock issued for convertible loan settlement | 71,797,703 | |
| Common stock issued for convertible loan settlement value | $ 3,589,885 | |
| Common Stock [Member] | Convertible Loan Settlement [Member] | ||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Common stock issued for convertible loan settlement | 71,979,703 | |
| Common stock issued for convertible loan settlement value | $ 3,589,885 | |
| Lithium Harvest [Member] | ||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Issuance of common stock, shares | 206,667,233 | |
| Issuance of common stock, value | $ 10,333,362 |
Schedule of Related Party Transaction (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Related Party Transaction [Line Items] | ||
| Accounts payable | $ 511,376 | $ 117,199 |
| Accrued liabilities | 7,228 | |
| Related Party [Member] | ||
| Related Party Transaction [Line Items] | ||
| Accounts payable | 417,276 | 146,402 |
| Accrued liabilities | 81,225 | |
| Total | $ 498,501 | $ 146,402 |
Income Taxes (Details Narrative) |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Income Tax Disclosure [Abstract] | |
| U.S. federal corporate income tax rate | 21.00% |
| Denmark corporate income tax rate | 22.00% |
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