Sustainable Projects Group Inc. - Quarter Report: 2013 November (Form 10-Q)

United states

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended November 30, 2013

For the transition period from                                          to                                         

Commission file number 333-169331

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. 

[X] Yes [  ] No

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). 

[  ] Yes [  ] No

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

[X] Yes [  ] No

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.

part I – financial information

Item 1. Financial Statements.

BLUE SPA INCORPORATED

Financial Statements

For The Period September 4, 2009 (inception)

To The Six Months Ended November 30, 2013

(Stated in US Dollars)

BLUE SPA INCORPORATED

unaudited Financial Statements

For the six Months Ended November 30, 2013

index to unaudited financial statements

BLUE SPA INCORPORATED

(A Development Stage Company)

UNAUDITED BALANCE SHEETS

See accompanying notes to financial statements

BLUE SPA INCORPORATED

(A Development Stage Company)

UNAUDITED STATEMENTS OF OPERATIONS

See accompanying notes to financial statements

BLUE SPA INCORPORATED

(A Development Stage Company)

UNAUDITED STATEMENTS OF STOCKHOLDERS’ DEFICIT

AND COMPREHENSIVE INCOME

See accompanying notes to financial statements

BLUE SPA INCORPORATED

(A Development Stage Company)

UNAUDITED STATEMENTS OF CASH FLOWS

See accompanying notes to financial statements

BLUE SPA INCORPORATED

(A Development Stage Company)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

BLUE SPA INCORPORATED

(A Development Stage Company)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

BLUE SPA INCORPORATED

(A Development Stage Company)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

BLUE SPA INCORPORATED

(A Development Stage Company)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

November 30, 2013

The carrying values of cash, accounts payable and loan payable approximate fair value because of the short-term nature of these instruments. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.

BLUE SPA INCORPORATED

(A Development Stage Company)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

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 at a bank in the Slovenia that are not insured. The Company minimizes its credit risks associated with cash by periodically evaluating the credit quality of its primary financial institution.

Recently issued accounting pronouncements

The Company adopts new pronouncements relating to generally accepted accounting principles applicable to the Company 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 financial statements.

Accrued expenses as of November 30, 2013 are summarized as follows:

During the six months ended November 30, 2013, no shares of common stock were sold. There were a total of 7,000,000 common stocks issued and outstanding as of November 30, 2013. There were no warrants or stock options outstanding as of November 30, 2013.

BLUE SPA INCORPORATED

(A Development Stage Company)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

There are six unsecured promissory notes bearing interest at 8% per annum which are due on demand.

There are three unsecured promissory notes bearing interest at 8% per annum which are due on demand, and convertible at a conversion price of US$0.005 per share at the lender’s option.

We have evaluated significant events and transactions that occurred from December 1, 2013 through the date of this report and have determined that there were no events or transactions other than those disclosed in this report, if any, that would require recognition or disclosure in our unaudited financial statements for the quarterly period ended November 30, 2013.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

General

The following discussion of Blue Spa’s financial condition, changes in financial condition and results of operations for the six months ended November 30, 2013 should be read in conjunction with Blue Spa’s unaudited interim financial statements and related notes for the six months ended November 30, 2013.

Blue Spa is a startup company that intends to be engaged in the development, production, wholesale distribution, and retail sales of quality natural skin and body care products, fitness apparel, and related accessories. Blue Spa is also a “shell” company as defined by the SEC as a result of only having nominal operations and nominal assets. Blue Spa is focused on developing a multi-channel concept, and intends to develop its business operations into a wholesale distribution network with a retail strategy, e-commerce, and a consumer catalogue.

Blue Spa has not commenced significant operations nor generated any revenues and is considered a Development Stage Company, as defined by Statement of Financial Accounting Standard (“SFAS”) No.7 Accounting and Reporting by Development Stage Enterprises, and follows the guideline of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 915 Development State Entities

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 Blue Spa’s capital needs, business plans and expectations. Such forward-looking statements involve risks and uncertainties regarding Blue Spa’s ability to carry out its planned development and production of products. Forward-looking statements are made, without limitation, in relation to Blue Spa’s operating plans, Blue Spa’s liquidity and financial condition, availability of funds, operating and exploration costs and the market in which Blue Spa 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 Blue Spa files with the SEC. These factors may cause Blue Spa’s actual results to differ materially from any forward-looking statement. Blue Spa 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.

Plan of Operation

Blue Spa’s plan of operation for the next 12 months is to:

Phase 1 - Develop and populate Website (six months)

In Phase 1, Blue Spa plans to (1) upgrade and update its website so that it is more visually appealing and technologically sound, (2) update its product line and visuals on the Website, and (3) implement a downloadable high resolution picture format for viewing its products.

Unlike current e-commerce models, management does not intend to use the Internet to establish Blue Spa’s products or its brand, or bring them to market. The e-commerce consumer is typically brand and convenience conscience. The early ventures have shown that the costs associated with establishing a brand via this medium are prohibitive and significant. Instead, Blue Spa will develop its initial Internet capabilities as a combination business-to-business tool and e-catalogue. The Website will be simple and direct with minimal cost. Also, the e-commerce platform will provide Blue Spa with a valuable wholesale tool as it will provide distributors with an access code that will allow them to place orders and utilize Blue Spa’s product knowledge database as a training tool for their employees.

Blue Spa has budgeted $10,000 for this phase and expects it to take six months to complete, with completion expected within the next six months of Blue Spa’s plan of operation.

Phase 2 - Identify, develop, and purchase products and inventory (six months)

In Phase 2, Blue Spa plans to identify and develop its Water Range skin care products. Also, Blue Spa will identify and purchase fitness apparel and related accessories that fits in with its Blue Spa’s brand. Phase 2 will overlap with Phase 1 and will be worked on simultaneously with Phase 1.

Blue Spa has budgeted $25,000 for this phase and expects it to take six months to complete, with completion expected within the next six months of Blue Spa’s plan of operation.

Phase 3 - Launch Blue Spa wholesale (12 months)

In Phase 3, Blue Spa plans to (1) to identify and secure partnerships with well-respected distributors, (2) identify and contract with key wholesale showrooms in which to display Blue Spa’s products, (3) further enhance and develop the brand image of Blue Spa, and (4) identify and retain key biotechnology specialists and management to assist in the continued development of its products and the administration of its business operations.

By identifying and securing partnerships with distributors and showrooms to represent Blue Spa and its products, management intends to gain key show positions in Hong Kong, Tokyo, San Francisco, and New York gift shows. Terms and conditions of any contract will include a commission on all sales at a rate higher than the industry standard to provide motivation for the representatives to promote Blue Spa’s products.

Blue Spa has budgeted $100,000 for this phase and expects it to take 12 months to complete, with completion expected within the next 12 months of Blue Spa’s plan of operation. Also in this phase, Blue Spa will continue to (a) maintain and populate the Website with new products and (b) continue to develop and purchase products and inventory to brand.

In addition, management anticipates incurring the following expenses during the next 12 month period:

As at November 30, 2013, Blue Spa had cash of $11,903 and a working capital deficit of $93,302. Accordingly, Blue Spa will require additional financing in the amount of $109,399 in order to fund its obligations as a reporting company under the Securities Act of 1934 and its general and administrative expenses for the next 12 months.

During the 12 month period following the date of this report, management anticipates that Blue Spa will not generate any revenue. Accordingly, Blue Spa 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 Blue Spa’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 Blue Spa’s common stock. However, Blue Spa 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, Blue Spa will not be able to develop its products and its business plan will fail. Even if Blue Spa is successful in obtaining equity financing and developing its products, additional development of its website and marketing program will be required. If Blue Spa does not continue to obtain additional financing, it will be forced to abandon its business and plan of operations.

Risk Factors

An investment in Blue Spa’s common stock involves a number of very significant risks. Prospective investors should refer to all the risk factors disclosed in Blue Spa’s Form S-1/A – Amendment #3 filed on December 15, 2011.

Liquidity and Capital Resources

Six Month and Three Month Period Ended November 30, 2013

At November 30, 2013, Blue Spa had a cash balance of $11,903 and a working capital deficiency of $93,302 for the six month period ended November 30, 2013, compared to a cash balance of $7,788 and negative cash flows from operations of $21,497 for the fiscal period ended May 31, 2013.

The notes to Blue Spa’s unaudited interim financial statements as of November 30, 2013, disclose its uncertain ability to continue as a going concern. Blue Spa has not and does not expect to generate any revenues to cover its expenses while it is in the development stage and as a result Blue Spa has accumulated a deficit of $110,302 since inception. As of November 30, 2013, Blue Spa had $115,479 in current liabilities compared to $82,576 for the time period ended May 31, 2013. When its current liabilities are offset against its current assets of $22,177 Blue Spa is left with a negative working capital of $93,302.

While Blue Spa has successfully generated sufficient working capital through the sale of common stock and management believes that Blue Spa can continue to do so for the next year, there are no assurances that Blue Spa will succeed in generating sufficient working capital through the sale of common stock to meet its ongoing cash needs.

Net Cash Flows Used in Operating Activities. Net cash flows from operating activities during the six month period ended November 30, 2013 was a net loss of $40,885, which was primarily due to accrued expenses of $15,187 prepaid expenses of $10,274 and interest payable of $3,090, compared to a net loss of $2,169 for the same time period for the prior fiscal period, which was also primarily due to accrued expenses and interest payable.

Net Cash Flows From Investing Activities. Blue Spa did not have any net cash flow from investing activities during the six month period ended November 30, 2013 compared to nil for the same time period for the prior fiscal period.

Net Cash Flows From Financing Activities. Blue Spa’s net cash flow from financing activities during the six month period ended November 30, 2013 was $45,000 due to notes payable, compared to nil for the same time period for the prior fiscal period..

Results of Operations – Six months ended November 30, 2013 and November 30, 2012

References to the discussion below to fiscal 2013 are to Blue Spa’s current fiscal year, which ended on May 31, 2013. References to fiscal 2012 are to Blue Spa’s fiscal year ended May 31, 2012.

Six Month Period Ended November 30, 2013

Net Loss. During the six month period ended November 30, 2013, Blue Spa had a net loss of $18,514 or $(0.002) per share. The loss was primarily due to administrative and other operating expenses and interest expenses, compared to the same time period for the prior fiscal period, when Blue Spa had a net loss of $5,803 or $(0.000) per share, which was primarily due to administrative and other operating expenses.

Revenue. Blue Spa had no operating revenues since its inception on September 4, 2009, through to November 30, 2013. Blue Spa’s activities have been financed from the proceeds of share subscriptions.

Operating Expenses. Blue Spa’s operating expenses since its inception on September 4, 2009, through to November 30, 2013 were $110,302. The operating expenses were primarily due to $99,390 in administrative and other operating expenses, $2,916 in formation costs, and $7,996 in interest expenses.

Going Concern

Blue Spa 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 Blue Spa will continue as a going concern.

Future Financings

Management anticipates continuing to rely on equity sales of Blue Spa’s common stock in order to continue to fund its business operations. Issuances of additional common stock will result in dilution to Blue Spa’s existing stockholders. There is no assurance that Blue Spa will achieve any additional sales of its common stock or arrange for debt or other financing to fund its planned activities.

Inflation

Management does not believe that inflation will have a material impact on Blue Spa’s future operations.

Off-balance Sheet Arrangements

Blue Spa 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

Blue Spa had no contingencies or long-term commitments at November 30, 2013.

Tabular Disclosure of Contractual Obligations

Blue Spa 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

Blue Spa’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 Blue Spa’s financial statements is critical to an understanding of Blue Spa’s financial statements.

Use of Estimates

The preparation of 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.

Development Stage Company

Blue Spa is a developmental stage company, and follows the guideline of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 915 Development State Entities. All losses accumulated since inception has been considered as part of Blue Spa’s development stage activities.

Website Development Costs

Blue Spa 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 Blue Spa 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 party. 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. Web-site development costs related to the customers are charged to cost of sales.

Fair Value of Financial Instruments

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values. The fair value of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and short term note - related party, approximate their carrying values since they are short term in nature and they are receivable or payable on demand. Management is of the opinion that Blue Spa is exposed to significant interest or credit risks arising from the bank-held assets. Blue Spa is operating outside the United States of America and may have significant exposure to foreign currency risk due to the fluctuation of the currency in which Blue Spa operates and the U.S. dollar. Blue Spa accounts for certain assets and liabilities at fair value.

Concentration of Credit Risk

Blue Spa places its cash and cash equivalents with a high credit quality financial institution. Blue Spa maintains United States Dollars at a bank in the Switzerland that are not insured. Blue Spa minimizes its credit risks associated with cash by periodically evaluating the credit quality of its primary financial institution.

Foreign Currency Translation

Blue Spa is located and operating outside of the United States of America. The functional currency of Blue Spa is the U.S. Dollar. At the transaction date, each asset, liability, revenue and expense is translated into U.S. dollars by the use of the exchange rate in effect at that date. At the period end, monetary assets and liabilities are re-measured by using the exchange rate in effect at that date. The resulting foreign exchange gains and losses are included in operations.

Research and Development Costs

Research and development costs will be expensed as incurred.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Blue Spa 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

Management maintains “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in Blue Spa’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to management, including Blue Spa’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of Blue Spa’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of November 30, 2013.

Based on that evaluation, management concluded, as of the end of the period covered by this report, that Blue Spa’s disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Securities and Exchange Commission’s rules and forms. In particular, Blue Spa failed to complete and file its assessment of its internal controls over financial reporting in a timely manner for the period ended November 30, 2013. As a result, Blue Spa’s disclosure controls and procedures have not been effective since then and, as a result, were not effective for the period covered by this report.

Subsequently, management has adopted policy to utilize external service providers to review and provide comment on disclosure reports and statements. As a result of the implementation of this policy, management believes that Blue Spa’s disclosure controls and procedures will now be effective.

Changes in Internal Controls over Financial Reporting

As of the end of the period covered by this report, there were no changes in Blue Spa’s internal controls over financial reporting during the quarter ended November 30, 2013, that materially affected, or are reasonably likely to materially affect, Blue Spa’s internal control over financial reporting subsequent to the date of management’s last evaluation. However, as a result of management’s completion of the assessment of Blue Spa’s internal controls over financial reporting, certain changes have been made, as discussed above, that will materially affect Pioneer’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 Blue Spa’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.

Part II – Other Information

Item 1. Legal Proceedings.

Blue Spa is not a party to any pending legal proceedings and, to the best of management’s knowledge, none of Blue Spa’s property or assets are the subject of any pending legal proceedings.

Item 1A. Risk Factors.

Blue Spa 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 the quarter of the fiscal year covered by this report, (i) Blue Spa did not modify the instruments defining the rights of its shareholders, (ii) no rights of any shareholders were limited or qualified by any other class of securities, and (iii) Blue Spa did not sell any unregistered equity securities.

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 Blue Spa. 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, Blue Spa reported all information that was required to be disclosed in a report on Form 8-K.

Blue Spa has adopted a new 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. Blue Spa undertakes to provide any person with a copy of its financial code of ethics free of charge. Please contact Blue Spa at info@bluespashop.com to request a copy of Blue Spa’s code of ethics. Management believes Blue Spa’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.

Item 6. Exhibits

All Exhibits required to be filed with the Form 10-Q are included in this quarterly report or incorporated by reference to Blue Spa’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 333-169331.

* 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.

Signatures

In accordance with the requirements of the Securities Exchange Act of 1934, Blue Spa Incorporated has caused this report to be signed on its behalf by the undersigned duly authorized person.