The following is a discussion of our financial condition and results of operations and is intended to assist in the understanding and assessment of significant changes and trends related to our results of operations and financial position. This discussion should be read in conjunction with our audited consolidated financial statements as of and for the years ended December 31, 2022 and 2021 and the accompanying notes appearing elsewhere in this Annual Report on Form 10-K.





Overview

We are a pure-play lithium company focused on supplying high performance lithium compounds to the fast-growing 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.

On February 14, 2023, we entered into the Agreement with Lithium Harvest and all of the Shareholders. Pursuant to the terms of the Agreement, we acquired all of the outstanding shares of capital stock of Lithium Harvest in exchange for issuing to the Shareholders 206,667,233 shares of our common stock. The Exchange Transaction closed on February 14, 2023.

Prior to the Exchange Transaction, we were 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 and a purchase agreement with the inventors of the Soy-yer Dough product line. During September 2022, we decided to exit the joint venture with Hero Wellness, and following the Exchange Transaction, the company has not made a decision on sale or outlicensing of the Soy-yer Dough project.

We plan to establish our first lithium carbonate manufacturing facility in 2023, which will be capable of manufacturing up to 1,000 metric tons of LCE, and we plan to begin manufacturing battery-grade lithium compounds at such facility in the first half of 2024.

In order to meet our targets, management will focus on the achievement of several critical missions over the next year:

Site Selection. Our proprietary technology operates on a vastly smaller footprint compared to traditional lithium production. While conventional production facilities require up to 65 acres for solar evaporation brine extraction and 115 acres for hard rock mining per 1,000 metric tons of LCE production, our production facilities require only 1.4 acres and can be located in remote areas or co-located with existing oil mining operation sites.

In order to achieve the planned start of production in the first half of 2024, we will need to locate a suitable manufacturing site. To this end, we are currently in discussions with oil and gas producers and service providers.

Lithium feedstock. We are dependent on a continued supply of produced water. Currently, the disposal of produced water is a costly undertaking for oil well operators and carries a large environmental footprint. We believe our proprietary technology offers significant cost savings for oil well operators as water is cleaned and used for re-injection or other purposes.

The current 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. Based on ongoing discussions, management does not currently anticipate significant difficulties in sourcing sufficient quantities of produced water.

Sourcing of Components. We source the major components for our proprietary lithium extraction process from blue-chip international suppliers. Management currently anticipates timely access to all major components. However, supply chain difficulties as seen during late 2021 and early 2022 could delay production start dates. We have identified our major vendors and are currently in contract discussions.

Hiring of Key Personnel. While our production process is largely automated, we will require significant additions to our personnel to achieve production start targets. Key areas of expansion are anticipated to include management, research and development, sales, project management and administration. We currently have eight full-time employees and are in the process of hiring additional key personnel.

Sustainable Projects Group Inc. Form 10-K Page 22









COVID-19

In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our product and harm our business and results of operations. As a company operating with offices in Demark and the United States, we are dependent on a free flow of goods and people, as well as a sound economic environment, especially as we develop our first production site. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time.





Results of Operation



                                                       Year Ended        Year Ended
                                                       Dec 31,2022      Dec 31, 2021
Revenues
Gross Revenues
Cost of Goods Sold                                    $           -     $         233
Gross Margin                                                      -               (74 )
                                                                  -               159
Operating Expenses
Administrative and other operating expenses           $      16,703     $      14,198
Depreciation                                                 28,667            29,348
Management fees                                             160,690            36,000
Professional fees                                           145,626            49,609
Travel Expenses                                               9,785                 -
                                                            361,471           129,155

Operating loss before other items                          (361,471 )        (128,996 )
Financing fees - restated (Note 8)                         (692,977 )      (2,771,908 )
Interest expense                                             (1,750 )          (1,964 )

Loss from continuing operations                          (1,056,198 )      (2,902,868 )
Loss from discontinued operations (Note 14)                 (57,136 )         (16,251 )
Gain on deconsolidation                                      50,106                 -

Net loss                                                 (1,063,228 )      (2,919,119 )

Net loss attributed to non-controlling interest on discontinued operations

                                      25,711             7,313
Net loss on continuing operations, attributed to
shareholders                                             (1,037,517 )      (2,911,806
Comprehensive loss - translation                             (2,715 )            (583 )

Net loss and comprehensive loss attributed to
shareholders                                             (1,040,232 )      (2,912,389 )

Loss per share of common stock
-Basic and diluted                                    $      (0.004 )   $      (0.012 )
Weighted average no. of shares of common stock
-Basic and diluted                                      272,701,519       240,404,286

During the year ended December 31, 2022, we had revenues of $Nil compared to $233 during the year 2021. The decrease in revenues as compared to the previous year is due to ending in sales of Soy-yer Dough products in 2021.

Operating expenses for the year ended December 31, 2022 were $361,471 as compared to $129,155 in 2021. This increase in operating expenses is largely attributable to management fees to the company from directors in Lithium Harvest. Additionally, we had a significant increase in legal expenses related to the Exchange Transaction.

The increase in expenses during the year 2022 resulted in an operating loss of $361,471 as compared to $128,996 for the full year 2021.

We incurred financing costs of $692,977 for the year ended December 31, 2022 as compared to $2,771,908 in 2021. These costs were related to the share issuance to Kestrel Merchant Partners in connection with the Exchange Transaction.

Loss from discontinued operations for the year ended December 31, 2022 was $57,136 as compared to $16,251 in 2021. Gain on deconsolidation for the year ended December 31, 2022 was $50,106 as compared to $Nil in 2021. These increases were primarily due to the discontinuation of Hero Wellness' operations.

Net loss for the year ended December 31, 2022 was $1,040,232 as compared to $2,912,389 for 2021. This translates to basic and diluted loss per share of $0.004 in 2022 as compared to $0.012 for 2021

Sustainable Projects Group Inc. Form 10-K Page 23









Financial Condition

As of December 31, 2022, we had cash and cash equivalents of $9,363 compared to a cash balance of $62,929 at December 31, 2021. The decrease in cash balance was primarily due to our ongoing operations generating no revenues during the year. Additionally, our general and administrative expenses increased, including higher legal and administrative expenses related to regulatory requirements. Until such time, if ever, that we generate substantial revenues, we expect to finance our operations through public or private equity, debt or other available financing transactions. If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in the Company. Management cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of equity or from debt financing to fund our plan of operations. In the absence of required funding, we will not be able to execute our plan of operations and our business plan will fail.

Based on the nature of our business, management anticipates incurring operating losses for the foreseeable future. Management bases this expectation, in part, on the fact that the year 2023 and into early 2024 will be focused on the development of our first lithium production site. Our future financial results are also uncertain due to a number of factors, some of which are outside our control. These factors include, but are not limited to:





  ? The ability to raise additional funding;
  ? Inflation on equipment and raw materials;
  ? The development of lithium prices;
  ? The availability of produced water;
  ? The global demand for lithium; and
  ? The cost of maintaining or developing future lithium projects.

Due to our lack of operating history and present inability to generate revenues, our auditors have stated their opinion that substantial doubt currently exists about our ability to continue as a going concern. We will need to raise additional cash in order to fund ongoing operations over the next 12 months. However, there is no assurance that such funds will be available on acceptable terms, or at all.

Liquidity and Capital Resources

As of December 31, 2022, we had total assets of $282,040, and a working capital deficit of $517,914, compared with total assets of $374,900 and a working capital deficit of $149,037 at December 31, 2021. The increase in the working capital deficit was primarily due to the discontinuation of Hero Wellness's operations, as well as a significant increase in accounts payable for management services provided to us, as well as legal expenses incurred as part of the Exchange Transaction.

Net Cash Used in Operating Activities

During the year ended December 31, 2022, net cash used in operating activities was $65,791 compared to $45,634 for the year ended December 31, 2021. The increase in cash used in operating activities was primarily due to increased legal, audit and accounting fees as compared to the previous year, as well as decreased financing expense related to the share issuance to Kestrel Merchant Partners in connection with the Exchange Transaction. This increase was partially offset by increased accruals of fees owed to management.

Sustainable Projects Group Inc. Form 10-K Page 24

Net Cash Used in Investing Activities

During the year ended December 31, 2022, net cash used in investing activities was $10,060 compared to $Nil for the year ended December 31, 2021. This use of cash was driven by a change in intangible assets.

Net Cash Generated from Financing Activities

During the year ended December 31, 2022, net cash flows provided by financing activities was $25,000 as compared with financing activities of $100,000 for the year ended December 31, 2021. The net cash generated in financing activities was due to proceeds from a loan by Kestrel Merchant Partners.

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.

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.

Sustainable Projects Group Inc. Form 10-K Page 25









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 $17,375,748 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 $9,363 in cash and cash equivalents as of December 31, 2022. Cash used by operations was $65,791 for the year ended December 31, 2022. 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.





Consolidation

The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries YER Brands Inc. and Lithium Harvest ApS and, prior to September 30, 2022, our joint venture, Hero Wellness Systems Inc. (formerly Vitalizer Americas Inc.) ("Hero Wellness"). The Company controls 55% of Hero Wellness. At September 30, 2022, Hero Wellness' assets were impaired and the Company impaired its investment and eliminated Hero Wellness' accounts from the consolidated financial statements. Previously, pursuant to ASC Topic 810, the joint venture company was considered as a variable interest entity that required the Company to consolidate its account. All intercompany balances and transactions were eliminated in this consolidation. The operating results of the joint venture were included in the Company's consolidated financial statements and the non-controlling interest that was not attributable to the Company was reported separately.





Equity Investments

We invest in equity securities of public and non-public companies for business and strategic purposes. Investments in public companies are carried at fair value based on quoted market prices. Investments in equity securities without readily determinable fair values are carried at cost, minus impairment, if any. We review our equity securities without readily determinable fair values on a regular basis to determine if the investment is impaired. For purposes of this assessment, we consider the investee's cash position, earnings and revenue outlook, liquidity and management ownership, among other factors in our review. If management's assessment indicates that an impairment exists, we estimate the fair value of the equity investment and recognize in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount.

Sustainable Projects Group Inc. Form 10-K Page 26









Revenue Recognition

In May 2014, the Financial Accounting Standards Board ("FASB") issued guidance on the recognition of Revenue from Contracts with Customers. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. To achieve this core principle, the guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The guidance addresses several areas, including transfer of control, contracts with multiple performance obligations, and costs to obtain and fulfill contracts. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses." The provision sets forth a "current expected credit loss" model which requires us 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 prior 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. SPGX adopted this standard as of December 31, 2022, with no impact.

We adopt new pronouncements relating to US GAAP applicable to us as they are issued, which may be in advance of their effective date. Management does not believe that any pronouncement not yet effective but recently issued would, if adopted, have a material effect on the accompanying consolidated financial statements.

© Edgar Online, source Glimpses