SUSTAINABLE PROJECTS: Discussion and analysis by management of the financial position and operating results (Form 10-Q)


Caution Regarding Forward-Looking Statements



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



Overview



The following discussion of Sustainable Projects Group Inc.'s (the "Company")
financial condition, changes in financial condition and results of operations
for the three months ended June 30, 2020 should be read in conjunction with the
Company's unaudited consolidated interim financial statements and related notes
for the three months ended June 30, 2020.



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



Plan of Operation



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



Covid-19 has had a significant impact on development of legacy projects, as well
as the sourcing of new participations and partnerships. The company has
experienced significant difficulty in virtually all aspects of project
development, including but not limited to access to funding, sourcing of
materials and machinery as well as staffing. For this reason, the company has
undertaken a stringent cost cutting and operations optimization plan.



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

Currently, the Company is engaged in the following projects:


  1. Gator Lotto
  2. Hero Wellness Systems Inc. and
  3. YER Brands Inc.




  1. Cormo USA Inc.




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



Cormo USA Inc. is in its development stage and in the process of establishing
the first pilot project in the United States. Cormo USA Inc. intends to utilize
the substantial corn production volume in the U.S. to gain a foothold in the
agricultural industry and provide a revenue source for struggling farmers.
Likewise, the company offers a viable alternative to harvested peat moss, a
major source of carbon dioxide (CO2). Major consumers of peat moss, such as the
horticultural industry are looking for a stable, price beneficial solution for
their peat moss needs. At this time Cormo USA Inc. has initiated early
discussions with several major industry partners and peat moss consumers across
the United States. Additionally, Cormo USA Inc. is in the process of
establishing industry partnerships to develop additional applications for the
company's foam replacement product BABS.



The company anticipates the distribution of peat moss replacement TEFA through
its own brand of soil blends through retail channels and wholesale through
partnerships with industrial end-users. The main uses of the company's BABS foam
replacement are in the agricultural, industrial, and building materials
industry. At this point, the company is in development stages with proven
prototypes in the segments air filtrations and building materials.



Cormo USA's products are sustainable replacements for existing, widely-used
materials, such as peat moss, building bricks and air filters. While "being
green" is an attribute that speaks loudly, the Company realizes that it is
operating in a crowded market space where the price is a bigger motivator for
customers than sustainability. Hence, it will be vitally important for the
company to operate under strict cost controls to fulfill its mission to offer
"greener, better solutions - at better prices" to be commercially successful.



On May 1st, 2020 Cormo USA Inc. signed a 2 year lease for an interim 108,000 sq
ft. production site in Rushville, IN as the company finalizes plants to
construct its own 20-acre state-of-the art facility at the Rushville Commerce
Park. Rushville, IN offers an excellent combination of access to raw materials
(the region has 100's of thousands addressable acres of cornfields) and
logistics given Indiana's beneficial location and connection to the United
States Road, Rail and Ship transport channels. The company planned site
improvements at the Rushville site that will continue into the early summer in
anticipation of production equipment assembly and commission in time for the
2020 corn harvest.



During these unprecedented times with the onset of the global pandemic, Covid-19
has disrupted the development of this business and presented a lot of challenges
primarily related to knowledge transfer from the licensor, sourcing and/or price
increases in equipment and financing. Cormo AG has withdrawn its license
agreement and therefore the joint venture has collapsed. The Company has
impaired the investment of Cormo USA as of June 30, 2020.



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






  2. Gator Lotto



Gator Lotto - In 2018 the Company acquired all technology assets including
source code, graphics, and online assets for US$400,000 through the issuance of
new shares. SPGX aims to commercialize this project which features a fully
functioning lotto ticket management app (currently in version 2.0) with more
than 40,000 downloads. Management plans to spin out this technology into a newly
formed partnership within the next 24 months with the aim to increase
monetization, user growth and eventual sale or licensing. The Company spent an
additional $11,000 to further develop the technology in 2019. See Exhibit 10.12
- Asset Purchase Agreement for more details.



The latest version of the Lotto App was launched February 2019. The product
currently covers lottery players in the state of Florida. The app is available
for download on Android (Google Play) and iOS (App Store) and its associated
website www.gatorlotto.com. The app is currently in Version 2.0 offering stable
optical character recognition of all major lottery games offered in the state of
Florida, with real time updates.



While december 2018, the Company recorded an impairment of $ 168,000 which then approaches its market value. The Company does not currently have the resources to operate the application and may consider selling this asset in the future. TO June 30, 2020, the Company wrote down the asset.


  3. Hero Wellness Systems Inc.




Hero Wellness Systems Inc. ("Hero Wellness") -Pursuant to the terms and
conditions of a shareholder's agreement dated in September 29, 2018, the Company
entered into a joint venture relationship originally for the purpose of
importing, selling and distributing products offered by Vitalizer International
of Switzerland. However, due to supplies and other processing issues, Hero
Wellness has sourced its own supplier and is now importing, selling and
distributing its own products. The Company's participation in the joint venture
is 55%. The Company's role is to provide certain services, including general
management and day to day operations of the joint venture. Currently, the joint
venture is comprised of the following ownership: 55% the Company with the
balance of ownership held by two non-controlling owners.



The Company was previously focused almost exclusively on the B2B market segment
of the lifestyle and healthcare markets. B2B clients consisted of spas and
salons, hotels and hospitality and entertainment venues in the United States.
Covid has led to a near total collapse of B2B customer interest due to changes
in disinfection between users and other safety protocols relating to Covid 19.
This has led to a refocus on the B2C segment, focusing on direct to consumer
sales through the company's webstore www.herochroma.com and additional websites
operated by the company.


Hero Wellness Systems Inc. is dependent upon a functioning supply chain, as it
sources finished products from its suppliers in China. Hero Wellness sees this
as a risk-factor and is looking for alternative suppliers at this time. Thus
far, the supplier has never experienced inventory shortfall, however increased
logistics rates pose a risk to increased cost of goods sold. Additionally, due
to its targeting retail customers through internet sales, as well as key account
management to gain corporate customers, Hero Wellness is not dependent on
singular customers. However, the company's products are considered luxury
lifestyle products and thus are dependent on healthy consumer spending behavior.
Slowdowns in consumer confidence could have a negative impact on purchasing
behavior of these types of products across the economy.



Hero Wellness Systems operates in a crowded market place. Several providers of
massage chair products from low-end to high-end exist. Hero Wellness Systems
Inc. operates in the high end-spectrum, competing against a number of
established companies. The company aims to differentiate itself from existing
providers through a higher level of service, including white glove delivery and
significantly faster delivery times (through a US based in-sourced logistics
operation).


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






  4. Soy-yer Dough



On May 8th, 2020 Sustainable Projects Group Inc. signed a letter of intent with
inventors of the Soy-yer Dough product line, Sawyer and Samantha Sparks, to
purchase all production rights, know-how, trademarks and manufacturing equipment
of Soy-yer Dough. Soy-yer Dough is a soy and corn-based, gluten free modeling
clay. It is estimated that up 6% of the US population suffers from some form of
gluten intolerance, with approximately 1% of the US population suffering from
the more severe form, Celiac Disease.



The product gained initial commercial success when it was featured on the TV
Show ABC's Shark Tank and was named as one of the most innovative product
inventions by college students in the New York Times newspaper. Since its
invention, the product has been sold in all 50 states in the United States, and
to a smaller extent internationally, both online and in retail locations.
However, with limited production capabilities and resources, growth prospects
were limited.



Sustainable Projects Group has formed YER Brands Inc. as a wholly-owned
subsidiary to establish increased production and distribution capabilities of
the Soy-yer Dough product line. Inventor and face of the brand, Sawyer Sparks,
has agreed to take on the CEO position, while his wife and co-inventor Samantha
Sparks will be responsible for production. Production facilities will be
co-located with one of the Company's portfolio companies, Cormo USA Inc.
manufacturing facility to benefit from raw material sourcing, logistics and
marketing infrastructure synergies. As of May 8th, the new company has begun
site improvement at the Rushville production site and is anticipated to produce
and ship first retail-ready products by mid-May 2020.



Previously Soy-yer Dough was sold through the Online B2C, Brick and Mortar, and
Scholastic Market. Over the past years, predominantly driven by limited
production capacities, a heavy focus was placed on the scholastic market. With
COVID-19 related shutdowns, that market has been severely impacted and is
currently virtually non-existent even as schools have reopened across the United
States.



Upon production start, YER Brands Inc. will place initial focus on low-hanging
online sales opportunities and upon increasing production capabilities later in
2020, it will initiate a campaign to regain footing in the brick-and-mortar
sales channel. While the exact timing of school re-openings still appears
uncertain, with some schools hoping to reopen for the fall semester 2020,
management does not anticipate significant revenues from the scholastic sales
channel until January 2021.



There is a multitude of modeling clays available on the market, Soy-yer Dough
shines as a "Made in the USA" and a "Gluten-Free" product with a long track
record of positive reviews in the US media. Management believes the product is
well positioned for market expansion in the near term. Additionally, YER Brands
Inc is in the planning stages for additional, value-added products that involve
Soy-yer Dough modeling clay to further the product portfolio and potential
revenue and profit generation.



The majority of raw ingredients required for the formulation of the product are
widely available and produced in the United States. The company does not
anticipate supply chain issues for the main ingredients of the Soy-Yer Dough
line of products. Additional raw materials are widely available, and several
sources of suppliers exist. The company is not dependent on one single source of
supplies for any of its ingredients and packaging materials and management sees
limited supply chain and sourcing risks.



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







     RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019



                                    For the three       For the three       For the six       For the six
                                    months ended        months ended       months ended      months ended
                                     Jun 30 2020         Jun 30 2019        Jun 30 2020       Jun 30 2019

Revenues
Gross Revenues                     $         2,893     $           986     $       2,893     $      95,986

Operating Expenses
Administrative and other
operating expenses                 $        36,816     $        26,295     $      62,407     $      71,619
Advertising and Promotion                    5,775               2,660     
       5,775             6,181
Depreciation                                16,897              30,805            50,657            61,590
Consulting fees                             53,995             137,500            73,995           178,000
Management fees                             29,500              22,500            74,500            45,000
Professional fees                            8,000              28,178            18,250            52,124
Rent                                        10,809               8,069            24,992            18,961
Salaries and wages                          22,674              45,945            40,959           103,054
Travel                                       1,022              23,863             4,922            30,969
Amortized right of use assets               11,349              16,312            27,661            32,625
Loss/Gain on disposition of
assets                                     771,216                   -           771,216                 -
Loss/Gain on deconsolidation              (240,582 )                 -          (240,582 )               -
                                           727,471             342,127           914,752           600,123

Operating income/loss before
interest expense and impairment           (724,578 )          (341,141 )        (911,859 )        (504,137 )
Other interest income                            -               1,819                 -             3,605
Interest expense                              (586 )              (437 )          (1,172 )            (585 )
Impairment                                       -                   -                 -                 -

Operating loss before income
taxes                                     (725,164 )          (339,759 )        (913,031 )        (501,117 )
Loss/Gain attributed to
disposition of non-controlling
interest                                   449,589                   -           506,622                 -
Net income/loss attributed to
non-controlling interest                    20,579             206,644            42,781           308,443

Net loss and overall loss $ (254,996) $ (133,115) $ (363,628) ($ 192,674)

In addition, management plans to incur the following expenses over the next 12 months:

? Management plans to spend approximately $ 8,000 in general and

administrative costs per month for the next 12 months, for a total

planned spending of $ 96,000 over the next 12 months. The general and

the administrative costs for the year will mainly consist of professional costs

fees for audit and legal work relating to the Company’s regulatory filings

throughout the year, as well as transfer agent fees, development fees and

office overhead.

? Management plans to spend approximately $ 60,000 by complying with

Obligations of the company as a reporting company under the Securities Exchange Act

of 1934. These expenses will consist mainly of professional fees relating to

the preparation of the financial statements of the Company and the realization and

filing of registration fees, annual report, quarterly report and current report

    filings with the SEC.




As of June 30, 2020, the Company had cash of $1,947 and total liabilities of
$309,401. During the 12 month period following the date of this report,
management anticipates that the Company will not generate enough revenue 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 an alternative for funding the Company's plan of
operations as it does not have tangible assets to secure any debt financing.
Rather management anticipates that additional funding will be in the form of
equity financing from the sale of 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.


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

Liquidity and capital resources

Six month period ended June 30, 2020



At June 30, 2020, the Company had a cash balance of $1,947 and a working capital
deficit of $161,063, compared to a cash balance of $68,992 for the period ended
December 31, 2019.



The notes to the Company's financial statements as of June 30, 2020, disclose
its uncertain ability to continue as a going concern. The Company has
accumulated a deficit of $2,995,743 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 financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.



The Company has $1,947 cash on hand as at June 30, 2020. Cash used by operations
was $82,777 for the six month period ended June 30, 2020. The Company will need
to raise additional cash in order to fund ongoing operations over the next 12
month period. The Company may seek additional equity as necessary and it expects
to raise funds through private or public equity investment in order to support
existing operations and expand the range of its business. There is no assurance
that such additional funds will be available for the Company on acceptable
terms, if at all.



Net cash flow provided by (used in) operating activities.

Net cash flows from operating activities during the six month period ended June
30, 2020 was net cash used in operations of $82,777 which was primarily due to
restructuring of liabilities and obligations.



Net cash flow from investing activities.

Net cash flows used in investing activities during the six-month period ended June 30, 2020 was the net cash used in investing activities of $ 4,268

Net cash flow from financing activities.

Net cash flows from financing activities during the six month period ended June
30, 2020 was net cash provided from financing activities of $20,000. This was
generated due to issuance of shares for repayment of outstanding invoices from a
service provider


Net Loss. During the six month period ended June 30, 2020, the Company had a net
loss of $913,183 compared to a net loss for the same period for the previous
year of $501,117. After allocations attributed to non-controlling interests, the
loss for the six months attributed to stockholders was $363,628 in 2020 compared
to 192,674 in 2019.There were more expenses incurred during the same period last
year due to more staff and resources.



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

Revenue. During the six month period ended June 30, 2020, the Company had $2,893
revenues as compared to $95,986 for the same period last year. The increase in
revenue was primarily due first revenues derived from product sales and a
government emergency grant related to Covid-19. The Company's activities have
been financed from the proceeds of share subscriptions and debt financing.



Operating Expenses. The Company's operating expenses during the six month period
ended June 30, 2020 were $914,752 as compared to the same period last year of
$600,123. The increase in expenses relates to significant losses attributed to
Loss on Disposal of Assets of $771,216 which relates to the write down of the
Cormo USA license and the write down of the Gator Lotto App. When the Company
de-consolidated Cormo USA, there was a gain of $240,582.



Going Concern



The Company has not attained profitable operations and is dependent upon
obtaining financing to pursue any extensive business activities. For these
reasons the financial statements have been prepared assuming the Company will
continue as a going concern. The Company has accumulated a deficit of $2,995,743
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 financial statements do not include any adjustments that
might result from the outcome of this uncertainty. The Company has $1,947 cash
on hand as at June 30, 2020. Cash used in operations was $82,777. The Company
will need to raise additional cash in order to fund ongoing operations over the
next 12 month period. The Company may seek additional equity as necessary, and
it expects to raise funds through private or public equity investment in order
to support existing operations and expand the range of its business. There is no
assurance that such additional funds will be available for the Company on
acceptable terms, if at all.



Impact of COVID-19



With the present COVID-19 pandemic, the Company will need to manage its cash
flow during these difficult times and funding resources may not be available as
the outlook is uncertain. The Company's plan of operations may not proceed and
can be held up due to the impact of COVID-19. These are unprecedented times and
the Company will adjust to the new realties and will actively monitor the impact
of the pandemic on the Company's business. The full extent of the impact of
economic uncertainty on the Company's business, operations and financial results
will depend on numerous factors that the Company may not be able to accurately
predict. In an effort to protect the health and safety our employees and
consultants, a significant amount of time is spent working remotely,
international travel has been curtailed and a lot of our functions has been
paused. Governments from around the world have enacted various measures to slow
the spread and contain COVID-19. These measures include orders to close all
businesses deemed "not essential", isolate residents to their homes and practice
social distancing when engaging in essential activities. The Company anticipates
that these actions and the global health crisis caused by the pandemic will
continue to negatively impact business activity across the globe. It is not
clear what the potential effects, if any, that such alterations or modifications
may have on our business, financial condition and cash flows. The duration of
these measures is also unknown and may be extended with additional imposed
measures. The Company has applied for governmental subsidies and/or relief
during this time and there is no assurance that such resources will be
achievable or available for the Company.



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.


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

Off-balance sheet provisions

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.



Contingencies and Commitments


The Company entered into an agreement to sub-lease office space in Naples,
Florida effective September 1, 2018 to March 31, 2021. The monthly base rent for
the first year is $4,552.56 (annual $54,630.75); the monthly base rent for the
second year is $4,684.52 (annual $56,214.25); and the monthly base rent for the
third year is $4,816.48 (annual $57,797.75). On May 31, 2020, the office lease
was terminated and the Company agreed to pay the past due amount of $36,304. In
addition, the Company also agreed that the sub-landlord may add a late fee of
$50 every weeks that there remains any past due rent. The Company is obligated
to pay the sub-landlord an additional $32,300 which represent all the remaining
rent due, beginning June 1 2020 through to December 2020. The $5,000 security
deposit provided by the Company has been relinquished and the sub-landlord may
use those funds to pay the rent obligation. At June 30, 2020, the Company owed
$36,304. At June 30, 2020, the Company has written off the remaining lease
liability of $47,401 and has written off the right of use asset o $44,907 to
reflect the extinguishment of the office lease, thereby creating a gain on
disposal of the office lease of $2,494.



Tabular disclosure of contractual obligations

The Company is a small reporting company within the meaning of Rule 12b-2 of the Exchange Act and is not required to provide the information required under this point.



Critical Accounting Policies



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

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