| Summary of Accounting Policies | 3.
Summary of accounting policies Summary
of Accounting Policies Use
of estimates and assumptions The
preparation of the consolidated financial statements in conformity with 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 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. 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. Consolidation The
accompanying consolidated 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 Financial Accounting Standards Board issued Accounting Standards Update (“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
Company adopted the new standard as of April 1, 2023. 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 service equipment lease. The Company uses an annual interest rate of 10% 2.50% Stock
Based Compensation The
Company follows the guideline under Accounting Standards Codification (“ASC”) 718, “Compensation—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 are recognized in the statements of operations and consolidated loss
based on their fair values. For non-employee stock-based compensation, the Company applies ASC 505-50, “Equity—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. 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 December
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. For the year ended December 31, 2023 and the year ended December 31, 2022, segment income and total assets
were reported as follows: Schedule of Segment Reporting
For the For the
December 31, December 31,
Sales and miscellaneous income
Sustainable Projects Group $ - $ -
YER Brands - -
Lithium Harvest 251,089 -
Total Sales $ 251,089 $ -
Total Assets at End of Period
Sustainable Projects Group $ 6,090 $ -
YER Brands - -
Lithium Harvest 3,063,514 42,269
Total Assets $ 3,069,604 $ 42,269 Revenue
Recognition The
Company adopted ASC 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. This revenue is billed in advance, arrears and/or is 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 when received. The
Company recognizes revenue in accordance with ASC 606 using the following five 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. This revenue is billed in advance, arrears and/or
is 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. Intangible
assets Intangible
assets are non-monetary identifiable assets, controlled by the Company that will produce future economic benefits, based on reasonable
and supportable assumptions about conditions that will exist over the life of the asset. An intangible asset that does not meet these
attributes will be recognized as an expense when it is incurred. Intangible assets that do, are capitalized and initially measured at
cost. Those with a determinable life will be amortized on a systematic basis over their future economic life. Those with an indefinite
useful life shall not be amortized until its useful life is determined to be longer indefinite. An intangible asset subject to amortization
shall be periodically reviewed for impairment. A recoverability test will be performed and, if applicable, unscheduled amortization is
considered. License
agreements have been capitalized, recorded at cost and amortized over the life of the contracts. Website costs have been capitalized
and will be subject to amortization once the website is operational. They will be amortized over the life of the license to which it
supports. Equipment Equipment
represents purchases made for assets, whose useful life was determined to be greater than one year. The assets are initially recorded
at cost and depreciated over their estimated useful lives on a 3 Loss
per share The
Company reports basic loss per share in accordance with ASC Topic 260, Earnings Per Share (“ASC 260”). Basic loss per share
is based on the weighted average number of common shares outstanding and diluted loss per share is based on the weighted average number
of common shares outstanding and dilutive common stock equivalents. Basic loss per share is computed by dividing net loss (numerator)
applicable to common stockholders by the weighted average number of common shares outstanding (denominator) for the period. Loss per
share presented in the financial statements is basic loss per share as defined by ASU 260. There is no diluted net loss per share on
the potential exercise of the equity-based financial instruments; thus, a state of anti-dilution has occurred. Website
development costs The
Company recognized the costs associated with developing a website in accordance with ASC 350-50, “Website Development Cost”
that codified the American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”)
NO. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”. Relating to website development
costs, the Company follows the guidance pursuant to the Emerging Issues Task Force (EITF) NO. 00-2, “Accounting for Website Development
Costs”. The website development costs are divided into three stages, planning, development and production. The development stage
can further be classified as application and infrastructure development, graphics development and content development. In short, website
development cost for internal use should be capitalized except content input and data conversion costs in content development stage. Costs
associated with the website consist primarily of website development costs paid to third parties. These capitalized costs will be amortized
based on their estimated useful life over three years upon the website becoming operational. Internal costs related to the development
of website content will be charged to operations as incurred. Website development costs related to the customers are charged to cost
of sales. Concentration
of credit risk The
Company places its cash and cash equivalents with a high credit quality financial institution. The Company maintains United States Dollars.
The Company minimizes its credit risks associated with cash by periodically evaluating the credit quality of its primary financial institution. Financial
instruments The
Company’s financial instruments consist principally of cash, accounts payable, accrued liabilities and notes payable. The carrying
amounts of such financial instruments in the accompanying financial statements approximate their fair values due to their relatively
short-term nature or the underlying terms are consistent with market terms. It is management’s opinion that the Company is not
exposed to any significant currency or credit risks arising from these financial instruments. Fair
value measurements The
Company follows the guidelines in ASC Topic 820 “Fair Value Measurements and Disclosures”. Fair value is defined as the price
that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair
value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk
measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions
and credit risk. The
Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases
the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement.
All financial instruments approximate their fair value.
Level 1 — Observable
inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
Level 2 — Observable
inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets
or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities
Level 3 — Inputs
are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in
pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models
and discounted cash flow models. Advertising
and Promotion Costs The
Company follows ASC 720, “Advertising Costs” and expenses costs as incurred. Credit
Losses In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses”. The ASU sets forth a “current
expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held
at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing
incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies
to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim
periods within those fiscal years, with early adoption permitted. The Company adopted this ASU with no impact on its financial
statements. Income
Taxes The
Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, “Income Taxes”. 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 in 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. |
