Sustainable Projects Group Inc. - Quarter Report: 2017 August (Form 10-Q)

United states

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended August 31, 2017

For the transition period from _________________________ to _________________________

Commission file number  000-54875

239-316-4593

(Registrant’s telephone number, including area code)

n/a

(Former name, former address and former fiscal year, if changed since last report)

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 [X] 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).

[  ] Yes [X] 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.

sustaianble petroleum group inc.

(Formerly known as BLUE SPA INCORPORATED)

For the three Months Ended August 31, 2017

index to condensed unaudited interim financial statements

SUSTAINABLE PETROLEUM GROUP INC.

Condensed Unaudited Interim Financial Statements

For the three months ended August 31, 2017

(Stated in US Dollars)

SUSTAINABLE PETROLEUM GROUP INC.

(Formerly known as BLUE SPA INCORPORATED)

FOR THE THREE MONTHS ENDED AUGUST 31, 2017

INDEX TO CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS

SUSTAINABLE PETROLEUM GROUP INC.

CONDENSED UNAUDITED INTERIM BALANCE SHEETS

See accompanying notes to condensed unaudited financial statements

SUSTAINABLE PETROLEUM GROUP INC.

CONDENSED UNAUDITED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

See accompanying notes to condensed unaudited financial statements

SUSTAINABLE PETROLEUM GROUP INC.

CONDENSED UNAUDITED INTERM STATEMENTS OF STOCKHOLDERS’ DEFICIT

See accompanying notes to condensed unaudited financial statements

SUSTAINABLE PETROLEUM GROUP INC.

CONDENSED UNAUDITED INTERIM STATEMENTS OF CASH FLOWS

See accompanying notes to condensed unaudited financial statements

SUSTAINABLE PETROLEUM GROUP INC.

(Formerly known as BLUE SPA INCORPORATED)

NOTES TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS

AUGUST 31, 2017

Sustainable Petroleum Group Inc. (“the Company”) was incorporated in the State of Nevada, USA on September 4, 2009 as Blue Spa Incorporated which was engaged in the development of an internet based retailer of a multi-channel concept combining a wholesale distribution with a retail strategy relating to the quality personal care products, fitness apparel and related accessories. On December 19, 2016, the Company amended its name from “Blue Spa Incorporated” to “Sustainable Petroleum Group Inc.” On September 6, 2017, the Company obtained a majority vote from its shareholders to amend the Company’s name from “Sustainable Petroleum Group Inc.” to “Sustainable Projects Group Inc.” to better reflect the business it has undertaken. The name change will be effected by the beginning of October 2017.

The Company is engaged in the business of natural resource development and holdings through value based investments and collaborative partnerships with companies across the natural resources sector. 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.

These financial statements have been prepared in conformity with generally accepted accounting principles in the United States or “GAAP”, which contemplate continuation of the Company as a going concern. However, the Company has limited operations and has sustained operating losses resulting in a deficit. In view of these matters, realization of a major portion of the assets in the accompanying balance sheet is dependent upon the continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements, and the success of its future operations.

The Company has accumulated a deficit of $1,199,788 since inception September 4, 2009, 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 believes that the cash on hand will be able to meet its on-going costs 12 months from the date of the financial statements. 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.

While the information presented is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, result of operation and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature. It is suggested that the interim financial statements be read in conjunction with the Company’s May 31, 2017 annual financial statements. Operating results for the three months period ended August 31, 2017 are not necessarily indicative of the results that can be expected for the year ended May 31, 2018.

SUSTAINABLE PETROLEUM GROUP INC.

(Formerly known as BLUE SPA INCORPORATED)

NOTES TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS

AUGUST 31, 2017

There have been no changes in the accounting policies from those disclosed in the notes to the audited financial statements for the year ended May 31, 2017.

Equity investments

Investments where the Company exercises significant influence but does not exercise control over these investments are accounted for using the equity method of accounting and are initially recorded at cost. The Company’s allocation of the entities’ profits or losses is recognized in the statements of operations and comprehensive income. Where the Company’s share of losses on its investments equal or exceed the carrying amount of the investments, the Company would then only recognize further losses if it incurred obligations or made payments on behalf of the equity investments. The Company’s equity investments are reduced by any distributions received and may increase for any additional investments made.

Foreign currency translations

The Company maintains an office in Naples, Florida. The functional currency of the Company is the U.S. Dollar, which is also its reporting currency, all figures presented unless otherwise indicated are stated in 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.

During the period the Company entered into a transaction whereby it acquired a lease deposit denominated in Swiss Francs, as denoted by “CHF” (see Note 7).

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.

On June 28, 2017, the Company entered into a note receivable with a company with a common director of the Company in the amount of $200,000 with an interest rate of 3.5% per annum that is payable annually. Any unpaid annual interest shall be added to the principal of the loan and together will become the new amount used to calculate the amount of interest going forward. The note receivable, together with any accrued interest outstanding, is due March 15, 2022.

As of August 31, 2017, the balance and interest owing was $201,227.

As of July 6, 2017, the Company entered into a share exchange agreement to acquire 20% ownership of SPG (Europe) AG by purchasing 2,000 shares of SP Group (Europe) AG from a shareholder of SP Group (Europe) AG, in exchange for the issuance of 6,000 common shares of the Company at a value of $3.50 per share. In accordance to the Dividend Agreement signed by the parties, the Company is to receive 20% of the declared dividends. The Company share a common director, common management and a majority shareholder with SP Group (Europe) AG. As a result, it was determined that the Company would ordinarily have significant influence; however, the investee lacks the financial information that the Company, and any other shareholder, would need to apply the equity method of accounting. The Company has attempted and failed to obtain that information and accordingly concluded it appropriate to account for the investment using the cost method at this time.

 SUSTAINABLE PETROLEUM GROUP INC.

(Formerly known as BLUE SPA INCORPORATED)

NOTES TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS

AUGUST 31, 2017

On June 23, 2017, the Company acquired a lease deposit in the amount of CHF600,000 for the office building located at Falkenstrasse 28, Zurich, Switzerland, 8008, made by an arm’s length party, Daniel Greising, on behalf of SP Group (Europe) AG. As consideration for an assignment of the lease deposit to the Company, the Company issued Mr. Greising 400,000 restricted shares of common stock. In addition, the owner of the office building granted a sublease of the office from SP Group (Europe) AG to the Company rent-free for a term of 10 years commencing July 1, 2017 to be completed and terminated on June 30, 2027. The shares were valued at $3.50 per share for a valuation of $1,400,000. The Company has incurred an $779,278 loss on the acquisition of the deposit.

On July 6, 2017, the Company issued 10,000 restricted common shares at a value of $3.50 per share for leasehold improvements rendered for a total valuation of $35,000.

On March 13, 2017, the Company entered into a property purchase agreement to acquire mineral claims located in the Thunder Bay Mining Division in the townships of Rickaby and Lapierre, Ontario, Canada. The Company paid 1,250,000 restricted common stocks at $3.00 per share for a total value of USD $3,750,000. (See Note 11).

The Company have an interest in 13 mineral claims. All the mineral claims are contiguous. Nine (9) of the mineral claims are freehold patented mineral claims and the other four (4) mineral claims are unpatented Crown Land claims. The combined claims make up an area of 336 hectares which is equivalent to approximately 810 acres.

SUSTAINABLE PETROLEUM GROUP INC.

(Formerly known as BLUE SPA INCORPORATED)

NOTES TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS

AUGUST 31, 2017

Accrued expenses as of August 31, 2017 are summarized as follows:

Share issuances during the first quarter ended August 31, 2017:

Share issuances during the year ended May 31, 2017:

At August 31, 2017, the Company had 8,906,909 common shares outstanding (May 31, 2017 – 8,263,332).

There were no warrants or stock options outstanding as of August 31, 2017 and August 31, 2016.

SUSTAINABLE PETROLEUM GROUP INC.

(Formerly known as BLUE SPA INCORPORATED)

NOTES TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS

AUGUST 31, 2017

Share Subscriptions

At August 31, 2017, the Company received 30,609 common shares subscriptions at a price of $3.50 per share for a value of $107,131 not yet issued.

Subsequent to the quarter ended August 31, 2017, the Company received an additional 10,000 common shares subscription at a price of $3.50 per share for a value of $35,000.

The Company issued an aggregate of 40,609 common shares subsequent to this report for subscriptions received of $142,131 valued at $3.50 per share.

On July 31, 2017, all the notes below were repaid in full. The Company issued 101,778 common shares by converting the debt at $3.00 per share.

Related Parties:

There were six (6) unsecured promissory notes bearing interest at 8% per annum which were due on demand to a shareholder of the Company. These promissory notes were repaid in full by converting into common shares of the Company at $3.00 per share.

There were six (6) unsecured promissory notes bearing interest at 4% per annum which were due on demand due to shareholders of the Company. These promissory notes were repaid in full by converting into common shares of the Company at $3.00 per share.

There was one (1) unsecured promissory note bearing interest at 8% per annum which was due on demand, and convertible at a conversion price of US$0.005 per share at the lender’s option. The convertible note was at the same interest rate as promissory notes that have no conversion feature. The promissory note was repaid in full by converting into common shares of the Company at $3.00 per share.

Unrelated Parties:

There was one (1) unsecured promissory note bearing interest at 8% per annum which was due on demand. The promissory note was repaid in full by converting into common shares of the Company at $3.00 per share.

There were five (5) unsecured promissory notes bearing interest at 8% per annum which were due on demand, and convertible at a conversion price of US$0.005 per share at the lender’s option. The convertible notes were at the same interest rate as promissory notes that have no conversion feature. These promissory were repaid in full by converting into common shares of the Company at $3.00 per share.

During the quarter ended August 31, 2017, the Company incurred management fees from two directors totaling an aggregate of $65,518 (2016 – nil). As at August 31, 2017, $2,000 was owing to a director for management fees and $9,833 was owing to two shareholders for expenses paid on behalf of the Company.

Transactions with a Majority Shareholder

Workplan Holdings Inc.

During the year ended May 31, 2017, Workplan Holdings Inc., a company controlled by a sole shareholder, purchased 4,000,000 restricted common shares from the former sole officer and director of the Company.

The Company entered into a property purchase agreement with Workplan Holdings Inc. and issued 1,250,000 restricted common stocks at $3.00 per share and acquired two mineral properties. (see Note 9)

The shareholder paid expenses on behalf of the Company in the amount of $500. As at August 31, 2017, this amount was owing.

The Company entered into a $30,000 demand notes payable with Workplan Holdings AG at an interest rate of 4% per annum. As at August 31, 2017, the total principal and interest outstanding on the note was repaid in full by converting the principal loan and interest at $3.00 per share. The Company issued 10,159 common shares.

SP Group (Europe) AG

SP Group (Europe) AG and the Company share a common majority shareholder. The Company entered into a 3 year consulting agreement with SP Group (Europe) AG whereby the Company will provide advisory and consulting services commencing May 1, 2017. The agreement provides that SP Group (Europe) AG pays the Company as follows:

a.   $5,000 per month for the first year

b.   $10,000 per month for the second year

c.   $15,000 per month for the third year

The Company received a lump sum payment which have been allocated to deferred revenues. As of August 31, 2017, there was $15,000 remaining in deferred revenues (May 31, 2017 - $30,000).

On July 6, 2017, the Company entered into an agreement with SP Group (Europe) AG to acquire 20% ownership of SP Group (Europe) AG by issuing 6,000 restricted common stock of the Company at $3.50 per share for a total value of $21,000. SP Group (Europe) AG has a portfolio of approximately 20 different projects in the natural resources sector which it develops and finances. SP Group (Europe) AG and Workplan Holdings Inc. have a common shareholder and director. (See Note 6)

The Company received $35,000 for subscription of 10,000 common shares at $3.50 per share.

On September 21, 2017, the board of directors authorized the issuance of 40,609 restricted shares of common stock at an offering price of $3.50 per share. The Company raised $142,131 cash in this offering to non-US subscribers, which included $107,131 of shares subscribed at August 31, 2017.

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

General

The following discussion of SPGX’s financial condition, changes in financial condition and results of operations for the three months ended August 31, 2017 should be read in conjunction with SPGX’s unaudited interim financial statements and related notes for the three months ended August 31, 2017.

SPGX is an exploration stage issuer engaged in the business of natural resource development and holdings through value based investments and collaborative partnerships with companies across the natural resources sector. It is continually evaluating and acquiring assets for holding and or development. SPGX initiated its goals by pursuing investment and partnerships amongst diversified holdings and companies globally. SPGX is currently involved in the following businesses: (1) Mineral Exploration; (2) Consulting Services; and (3) Collaborative partnerships.

Through its main initiatives, the development of natural resources, holdings, consulting services, and collaborative partnerships, SPGX plans to build on shareholder value which in return, will present opportunity for new and exciting projects ahead.

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

SPGX’s plan of operation for the next 12 months is to continue to evaluate and acquire assets for holding or development, and to collaborate, develop and create new assets with industry leaders in the natural resources and other sustainable industries. SPGX is currently evaluating other projects such as gold mining and mineral exploration interests in Mongolia. Other projects of interest that management is currently researching are in the field of energy technology and sustainability. Currently, SPGX is evaluating the following projects:

1. Thunder Bay Claims - Work Program.

By the end of the 3rd quarter (February 2018) management plans to complete a two 2,000 meter diamond drill programs on the Thunder Bay Claims at an estimated cost of $1.2 million. The two programs will require approximately 80 days to complete. One drill program will be conducted on the Foisey claims of the Thunder Bay Claims to test the north branching arm of a gold-bearing breccia system. The second drill program will be conducted on gold-mineralized zones on the Thunder Bay claims, which have been identified from previous and historic work. See ‘Item 1.b - Business of SPGX’ for more details on the proposed work program.

2. Alimex GmbH - Collaborative Partnership

On June 28, 2017, SPGX loaned Alimex GmbH $200,000 with a per annum interest rate of 3.5%. Alimex GmbH is a global producer of high-precision aluminium cast plates. In 2017 SPGX plans to negotiate and enter into a collaborative partnership to work with Alimex to finance their structural and organic growth to position Alimex as the world leader in their sector.

3. Oil & Gas Projects - Arundel AG

During the next 12 months SPGX will continue to seek opportunities to fund and invest in projects in the oil & gas sector. Currently, SPGX has been negotiating with Arundel AG, a Swiss investment company whose shares are listed on the SIX Swiss Exchange, to fund and invest in projects in the oil & gas sector. SPGX is currently negotiating terms.

4. Consulting Services - Amixca AG

SPGX plans to continue to provide consulting services throughout the next 12 months, in addition to the consulting services it is currently providing SP Group (Europe) AG. On July 18^th, 2017 SPGX paid a refundable deposit of $190,000 in order to perform due diligence on Amixca AG’s records. Amixca AG is a private Swiss corporation whose business is consulting. Management is in the process of completing its due diligence on Amixca AG.

5. Myfactor.io AG

On July 26, 2017, SPGX paid a refundable deposit of $83,496 (70,000 Euro) in order to perform due diligence on the entities records of Myfactor.io AG. Myfactor.io AG is a company incorporated in Liechtenstein. The company holds a bond and its purpose is the acquisition and exploitation various interests from real estate, patents and other industrial property rights. Management is in the process of completing its due diligence on Myfactor.io AG.

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

As at August 31, 2017, SPGX had cash of $68,159 and total liabilities of $56,093. Accordingly, SPGX will require additional financing in the amount of $27,934 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 SPGX will not generate any revenue. Accordingly, SPGX 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 SPGX’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 SPGX’s common stock. However, SPGX 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, SPGX will not be able to develop its products and its business plan will fail. Even if SPGX is successful in obtaining equity financing and developing its products, additional development of its website and marketing program will be required. If SPGX does not continue to obtain additional financing, it will be forced to abandon its business and plan of operations.

Liquidity and Capital Resources

Three Month Period Ended August 31, 2017

At August 31, 2017, SPGX had a cash balance of $68,159 and a working capital surplus of $1,131,552 for the three month period ended August 31, 2017, compared to a cash balance of $161,096 and negative cash flows from operating activities of $213,788 for the fiscal period ended May 31, 2017.

The notes to SPGX’s unaudited interim financial statements as of August 31, 2017, disclose its uncertain ability to continue as a going concern. SPGX 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 SPGX has accumulated a deficit of $1,199,788 since inception. As of August 31, 2017, SPGX had $56,093 in current liabilities compared to $381,801 for the time period ended May 31, 2017. When its current liabilities are offset against its current assets of $1,187,645 SPGX is left with a working capital of $1,131,552.

While SPGX has successfully generated sufficient working capital through the sale of common stock and management believes that SPGX can continue to do so for the next year, there are no assurances that SPGX 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 three month period ended August 31, 2017 was a net cash used in operations of $324,766, which was primarily due to a net loss of $869,406 and non-cash items consisting of a loss on acquisition of deposit of $779,278, amortization of $583, shares for debt and shares for services of $2,730 and $56,000, respectively, changes in current assets and liabilities consisting of an increase in prepaid expenses of $269,620, a decrease in accounts payable and accrued expenses of $8,812, increase in amount due to director of $708, and a decrease in deferred revenue of $15; compared to a net loss of $19,732 for the same time period for the prior fiscal period, which was primarily due to an increase in accounts payable and accrued expenses of $12,416 and an increase in interest payable of $3,249, resulting in net cash used in operation activities of $4,067.

Net Cash Flows From Investing Activities. SPGX’s net cash flow from investing activities during the three month period ended August 31, 2017 was $1,817,334, which was primarily due to an advance of a note receivable in the amount of $200,000, shares issued for the lease deposit of $1,400,000, and shares issued for debt settlement of $305,334, as compared to $nil for the same time period for the prior fiscal period.

Net Cash Flows From Financing Activities. SPGX’s net cash flow from financing activities during the three month period ended August 31, 2017 was $431,829 which was due to subscription proceeds, compared to $26,000 for the same time period for the prior fiscal period.

Results of Operations – Three months ended August 31, 2017 and August 31, 2016

References to the discussion below to fiscal 2017 are to SPGX’s current fiscal year, which ended on May 31, 2017. References to fiscal 2016 are to SPGX’s fiscal year ended May 31, 2016.

Three Month Period Ended August 31, 2017

Net Loss. During the three month period ended August 31, 2017, SPGX had a net loss of $869,406 or $(0.100) per share. The loss was primarily due to a loss on acquisition of the lease deposit, administrative and other operating expenses, management fees, and professional fees, compared to the same time period for the prior fiscal period, when SPGX had a net loss of $19,732 or $ (0.003) per share, which was primarily due to administrative and other operating expenses and interest expenses.

Revenue. During the three month period ended August 31, 2017, SPGX had revenues of $16,227. The revenue was primarily due to consulting fees and interest income, compared to the same time period for the prior fiscal period, when SPGX had no operating revenues. SPGX’s activities have been financed from the proceeds of share subscriptions and debt financing.

Operating Expenses. SPGX’s operating expenses during the three month period ended August 31, 2017 were $882,906, which were primarily due to $779,278 in a loss on acquisition of the lease deposit, $65,518 in management fees, $18,627 in administrative and other operating expenses, and $17,900 in professional fees, compared to the same time period for the prior fiscal period, which SPGX’s operating expenses were$16,483,which were due to $13,779 in professional fees, and $2,704 in administrative and other operating expenses.

Going Concern

SPGX 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 SPGX will continue as a going concern.

Future Financings

Management anticipates continuing to rely on equity sales of SPGX’s common stock in order to continue to fund its business operations. Issuances of additional common stock will result in dilution to SPGX’s existing stockholders. There is no assurance that SPGX 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 SPGX’s future operations.

Off-balance Sheet Arrangements

SPGX 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

SPGX had no contingencies or long-term commitments at August 31, 2017.

Tabular Disclosure of Contractual Obligations

SPGX 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

SPGX’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 SPGX’s financial statements is critical to an understanding of SPGX’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.

Foreign Currency Translation

SPGX maintains an office in Naples, Florida. The functional currency of SPGX 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.

Website Development Costs

SPGX 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 SPGX 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.

Revenue Recognition

SPGX recognizes revenue in accordance with ASC 605-10 “Revenue Recognition” which requires that four basic criteria must be met before revenue can be recognized: 1) persuasive evidence of an arrangement exists; 2) delivery has occurred; 3) the selling price is fixed and determinable; and 4) collectability is reasonably assured.

Financial Instruments

SPGX’s financial instruments consist principally of cash, accounts payable, accrued liabilities and some 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 the management’s opinion that SPGX is not exposed to any significant currency or credit risks arising from these financial instruments.

Mineral Property Costs

All costs of acquisition and option costs of mineral and property rights are capitalized upon acquisition. To determine if the capitalized mineral property costs are in excess of their recoverable amount, SPGX shall conduct periodic evaluation of the carrying value of the capitalized costs based upon expected future cash flows and/or estimated salvage value in accordance to ASC 360-10-35-15 “Impairment or Disposal of Long Lived Assets”. Exploration and pre-extraction expenditures shall be expensed until such time SPGX exits the exploration stage by establishing proven or probable reserves. Expenditures relating to exploration activities such as drill programs to search for mineralized materials shall be expensed as incurred. Expenditures relating to pre-extraction activities such as construction of mine, well fields, ion exchange facilities and disposal wells shall be expensed as incurred until such time proven or probable reserves are established for a particular project, after which subsequent expenditures relating to mine development activities for the particular project shall be capitalized as incurred.

Fair Value Measurements

SPGX 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, SPGX considers the principal or most advantageous market in which SPGX 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.

SPGX 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:

Concentration of Credit Risk

SPGX places its cash and cash equivalents with a high credit quality financial institution. SPGX maintains United States Dollars. SPGX minimizes its credit risks associated with cash by periodically evaluating the credit quality of its primary financial institution.

Income Taxes

SPGX follows the guideline under ASC Topic 740 Income Taxes. “Accounting for Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Since SPGX is in the exploration stage and has losses, no deferred tax asset or income taxes have been recorded in the financial statements.

SPGX has identified its federal tax return and its state tax returns in Nevada as its major tax jurisdictions, and such returns remain subject to examination. Subsequent to the year ended May 31, 2017, SPGX recently filed a registration in the State of Florida, and shall be subject to state tax return in Florida as well.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

SPGX 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 SPGX’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 SPGX’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 SPGX’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of August 31, 2017.

Based on that evaluation, management concluded, as of the end of the period covered by this report, that SPGX’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, SPGX failed to complete and file its assessment of its internal controls over financial reporting in a timely manner for the period ended August 31, 2017. As a result, SPGX’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 SPGX’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 SPGX’s internal controls over financial reporting during the quarter ended August 31, 2017, that materially affected, or are reasonably likely to materially affect, SPGX’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 SPGX’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 SPGX’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.

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

Item 1A. Risk Factors.

SPGX 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) SPGX 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) SPGX did not sell any unregistered equity securities, with the exception of the following:

September 2017 - $3.50 Private Placement Offering

On September 21, 2017 the board of directors authorized the issuance of 40,609 restricted shares of common stock at an offering price of $3.50 per restricted share. SPGX raised $142,131 in cash in this offering, and issued an aggregate 40,609 restricted shares of common stock to 16 non-US subscribers outside the United States.

SPGX set the value of the restricted shares arbitrarily without reference to its assets, book value, revenues or other established criteria of value. All the restricted shares issued in this offering were issued for investment purposes in a “private transaction”.

For the 16 non-US subscribers outside the United States in this one closing, SPGX relied upon Section 4(2) of the Securities Act of 1933 and Rule 903 of Regulation S promulgated pursuant to that Act by the Securities and Exchange Commission. Management is satisfied that SPGX complied with the requirements of the exemption from the registration and prospectus delivery of the Securities Act of 1933. The offerings were not public offerings and were not accompanied by any general advertisement or any general solicitation. SPGX received from each of the 16 subscribers a completed and signed subscription agreement containing certain representations and warranties, including, among others, that (a) the subscriber was not a U.S. person, (b) the subscriber subscribed for the shares for their own investment account and not on behalf of a U.S. person, and (c) there was no prearrangement for the resale of the shares with any buyer. No offer was made or accepted in the United States and the share certificates representing the shares were issued bearing a legend with the applicable trading restrictions.

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

SPGX has adopted a 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. SPGX undertakes to provide any person with a copy of its financial code of ethics free of charge. Please contact SPGX at 2316 Pine Ridge Road, 383, Naples, Florida, 34109 to request a copy of SPGX’s code of ethics. Management believes SPGX’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

(a) Index to and Description of Exhibits

All Exhibits required to be filed with the Form 10-Q are included in this quarterly report or incorporated by reference to SPGX’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 000-54875.

* 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, Sustainable Petroleum Group Inc. has caused this report to be signed on its behalf by the undersigned duly authorized person.