| 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 the opinion of management, necessary to present
fairly the financial position, results of operations and cashflows for the interim period presented in accordance with GAAP. 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 six months ended June 30,
2023 are not necessarily indicative of the results that can be expected for the year ending 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. 1. Restatement of Financial
Statements: The Company is restating
its financial statements as of and for the three and six months ended June 30, 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 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 lease is amortized straight line
over the entire term of the office lease agreement. The Company uses an annual interest rate of 10 2.50 Lithium
Harvest has one software 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 has one renewal period of one year at the end of the term. The lease is amortized straight
line over the entire term of the software lease. The Company uses an annual interest rate of 10 2.50 Lithium
Harvest has one equipment 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 lease is amortized straight line
over the entire term of the equipment lease. The Company uses an annual interest rate of 10 2.50 Lithium
Harvest has one service equipment 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 lease is amortized
straight line over the entire term of the software lease. The Company uses an annual interest rate of 10 2.50 Stock
Based Compensation The
Company follows the guideline under ASC 718, “Stock Compensation”. The standard provides that for all stock-based compensation
plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, all share-based payments to both employees and directors be recognized in the income statement based on their fair values. For non-employee
stock-based compensation, the Company applies ASC 505 Equity-Based Payments to Non-employees. This standard provides that all stock-based
compensation related to non-employees be measured at the fair value of the consideration received or the fair value of the equity instruments
issued, whichever can be most reliably measured or determinable. Significant
Accounting Policies There
have been no material changes in the Company’s significant accounting policies 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 June 30,
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 June 30, 2023, segment income and total assets were reported as follows: Schedule of Segment Reporting
For
the Six For
the Year
Months
Ended Ended
June
30, 2023 December
31, 2022
Sales
and miscellaneous income
Sustainable Projects Group $ - $ -
YER Brands - -
Lithium Harvest 91,391 -
Total Sales $ 91,391 $ -
Total
Assets at End of Period
Sustainable Projects Group $ 25,989 $ -
YER Brands - -
Lithium Harvest 2,853,088 42,269
Total Assets $ 2,879,077 $ 42,269 Revenue
Recognition The
Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). 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. Where there is no contract, the revenue is recognized as provided. 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. 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 the Company’s obligation to either transfer goods or services
in the future, or refund the amount received. Where possible, the Company obtains retainers to lessen risk of non-payment by customers.
Advances from client’s deposits are recognized as revenue as the Company meets 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. |
