Sustainable Green Team Ltd. (SGTM)

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THE SUSTAINABLE GREEN TEAM, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL QUARTER ENDED APRIL 2, 2022

THE SUSTAINABLE GREEN TEAM LTD. AND SUBSIDIARIES FOR THE FISCAL QUARTER ENDED APRIL 2, 2022
TABLE OF CONTENTS
Condensed Unaudited Consolidated Balance Sheets
Condensed Unaudited Consolidated Statements of Operations
Condensed Unaudited Consolidated Statements of Changes in Stockholders’ Equity Condensed Unaudited Consolidated Statements of Cash Flows
Notes to Unaudited Condensed Consolidated Financial Statements
Page
3
4
5
6
7 - 21

Current Assets Cash
$
788,242 52 2,538,626 - 7,588,085 1,503,504 12,418,509
52,049,146
1,051,702 324,000 84,440 977,355 2,437,497
66,905,152
2,671,776 249,086 4,486,461 7,407,423
751,606 17,480,621 18,232,227 25,639,650
-
9,046 34,636,450 6,620,006 41,265,502
THE SUSTAINABLE GREEN TEAM AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
April 2, 2022
January 1, 2022
ASSETS
Short-term investments
Accounts receivable, net of allowance for doubtful accounts Receivables from Factor
$ 106,736 52 261,081 2,429,147 Inventories 7,081,140
Prepaid expenses and other current assets Total Current Assets
Property and equipment, net
Other Assets
Long-term investments Goodwill
Intangibles, net
ROU asset
Total Other Assets
Total Assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses Current portion of lease liability
Notes payable
Total Current Liabilities
Long-term Liabilities
Lease liabilities, net of current portion Notes payable, net of current portion
Total Long-term Liabilities Total Liabilities
Commitments and contingencies
Stockholders' Equity
Preferred Series A stock, $0.0001 par value, 5,000,000 shares authorized,
90 shares outstanding
Common stock, $0.0001 par value; 245,000,000 shares authorized;
88,026,816 and 90,460,425 shares issued and outstanding, respectively Additional paid-in capital
Retained earnings
Total Stockholders' Equity
$ $
1,750,859 11,629,015
55,501,114
1,024,417 324,000 81,800 912,474 2,342,691
69,472,820
2,369,979 234,029 7,311,207 9,915,215
699,944 17,878,496 18,578,440 28,493,655
-
8,803 35,151,652 5,818,710 40,979,165
$
$
Total Liabilities and Stockholders' Equity
$
The accompanying footnotes are an integral part of these condensed consolidated financial
$
statements. `
69,472,820
66,905,152
3

THE SUSTAINABLE GREEN TEAM AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended
April 2, 2022
10,329,448 9,207,057 1,122,391
1,275,406 5,640 1,281,046
(158,655)
(425,044) 598,300 16,923 66,605 256,784
98,129 21,968 76,161
0.00 0.00
88,334,047 93,974,051
April 3, 2021
Net Revenue Cost of revenue
Total gross profit
Operating expenses
Selling, general and administrative Depreciation and amortization
Total operating expenses Income (loss) from operations
Other income (expense) Interest expense, net
Bargain purchase gain Gain on sale of fixed assets Other, net
Total other expense
Income (loss) before provision for income taxes
Provision for income taxes Net Income (loss)
Net loss per common share - basic Net loss per common share - diluted
Weighted average shares outstanding - basic Weighted average shares outstanding - diluted
$
$
9,291,931 7,891,211 1,400,720
1,164,954 6,860 1,171,814
228,906
(249,788) - - (3,582) (253,370)
(24,464) 96,971 (121,435)
(0.00) (0.00)
89,440,108 89,440,108
$
$ $
$
$ $
The accompanying footnotes are an integral part of these condensed consolidated financial statements.
4

Three Months Ended April 2, 2022: Balance at January 2, 2022
Stock subscriptions Stock redemptions Net income
Balance as of April 2, 2022
Three Months Ended April 3, 2021: Balance at January 1, 2021
Stock issued for 2020 debt inducement Stock issued for compensation
Net loss
Balance as of April 3, 2021
Preferred Stock
Additional Common Stock Paid-in Amount Capital
Retained Earnings
$ 6,620,006
(877,459) 76,161
$ 5,818,710
Retained Earnings
$ 3,957,946
(121,435) $ 3,836,511
THE SUSTAINABLE GREEN TEAM AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
Shares
Amount
Shares
90,460,425 1,466,667 (3,900,275)
88,026,817
Total
$ 41,265,502 1,100,000 (1,462,500) 76,161
$ 40,979,165
90
90
$
$
-
-
$
$
9,046 $ 34,636,450 147 1,099,853 (390) (584,651)
8,803 $ 35,151,652
Additional Paid-in Amount Capital
8,917 $ 6,825,996 30 62,970 3 28,797
8,950 $ 6,917,763
Preferred Stock Shares
Common Stock Amount Shares
Total
$ 10,792,859 63,000 28,800 (121,435)
$ 10,763,224
90
90
$
$
- 89,168,405 300,000 25,000
- 89,493,405
$
$
The accompanying footnotes are an integral part of these condensed consolidated financial statements.
5

THE SUSTAINABLE GREEN TEAM AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Cash flows from operating activities:
Net Income (Loss)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for doubtful accounts Depreciation and amortization Common stock issued as compensation Bargain purchase gain
Gain on sale of fixed assets
Changes in operating assets and liabilities:
$
76,161
- 904,137 - (598,300) (16,923)
$
Accounts receivable, net
Receivable from Factor
Inventory 506,945
Prepaid expenses and other current assets
Accounts payable and accrued expenses Net cash from (used in) operating activities
Cash flows from investing activities:
Purchases of property, and equipment & ROU assets Net short-term investment redemptions (purchases) Purchases of long-term investments
Proceeds from long-term investments Net cash from (used in) investing activities
Cash flows from financing activities: Principal payments on leases
Proceeds from notes payable
Payment on notes payable
Payment on notes payable, related parties Distributions
Net cash provided by (used in) financing activities Net increase (decrease) in cash
Cash - beginning of period
Cash - end of period
Supplemental cash flow information: Cash paid for:
Interest
Income taxes
Non-cash investing and financing activities:
Purchase of plant, property and equipment for notes payable Stock issued for accrued borrowing inducement
Property and equipment bargain purchase recognition
$
(247,355) (301,797) 171,266
(3,673,361) 2,299,713
17,771 2,193,489
(32,284)
(386,715) (398,193)
(817,192) (502,363) 506,287 3,924
418,663 -
1,340,000 -
598,300
$
$ $
$ $ $
Three Months Ended
April 2, 2022
April 3, 2021
(121,435)
(350) 834,591 28,800 - -
(4,121,843) - (3,820) 5,151 1,500,246 (1,878,660)
(123,995) 2,299,713
17,771 2,193,489
(32,284)
(386,715) (398,193)
(817,192) (502,363) 506,287 3,924
134,874 -
- 63,000
-
2,277,545 (2,429,147)
The accompanying footnotes are an integral part of these condensed consolidated financial statements.
6
$ $
$ $ $

THE SUSTAINABLE GREEN TEAM, LTD. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS
Corporate History
The Sustainable Green Team, Ltd., (f/k/a Sierra Gold Corp.) (the “Parent” or “SGTM”), a Delaware corporation, conducts business activities principally through its three wholly-owned subsidiaries: National Storm Recovery LLC (“NSR LLC”), a Delaware limited liability company, Mulch Manufacturing, Inc., an Ohio corporation (“MM”) and Sierra Gold Merger Corp. (“SGMC”), a Delaware corporation (collectively, the “Company”).
The Company was initially formed, under the name Alpha Diamond Corporation in the State of Nevada on January 22, 1997. It’s undergone multiple name changes over the years and a domicile change to Wyoming on February 15, 2011.
Effective April 18, 2019, Sierra Gold Corp., (“SGCP”), entered into an equity exchange agreement (the “Merger”), as amended on December 31, 2019 with NSR LLC, pursuant to which SGCP acquired all of the membership units of NSR LLC. Upon closing, NSR LLC became a wholly-owned subsidiary of SGCP.
On July 22, 2019, a Certificate of Amendment was filed with the State of Wyoming to change the name of the Company from “Sierra Gold Corporation” to “National Storm Recovery, Inc.” and to affect a 1 for 10,000 reverse stock split. At September 11, 2019, the Company’s trading symbol changed from “SGCP” to “NSRI”.
The stock split decreased the issued and outstanding shares of its common stock from 3,406,865,285 to 602,636 (after rounding up to a 100 share minimum) before SGCP issued 40,000,000 shares of its common stock to the members of NSR LLC as consideration for the equity interests exchange. As a result of the Merger, NSR LLC members acquired 99% of SGCP’s issued and outstanding shares of common stock and SGCP changed its principal focus to providing tree services, debris hauling and removal, biomass recycling, mulch manufacturing, packaging and sales.
The Merger was treated as a reverse recapitalization effected by an equity exchange for financial and reporting purposes since SGCP was deemed to be a shell corporation with nominal operations and no assets at the time of the merger. NSR LLC is considered the acquirer for accounting purposes, and the SGCP’s historical financial statements before the Merger have been replaced with the historical financial statements of NSR LLC before the Merger in future filings.
On December 31, 2019, the Company entered into a restructuring as a holding company pursuant to Delaware General Corporation Law (“DGCL”) §251(g) known as “the Delaware Holding Company Statute.” In order to affect this restructuring NSRI and NSR LLC company each changed domiciles to the State of Delaware by filing Certificates of Conversion. Immediately thereafter, NSRI incorporated SGTM as its wholly-owned subsidiary and SGTM formed Sierra Gold Merger Corp., a Delaware corporation (“SGMC”) as its wholly-owned subsidiary. Similarly, NSR LLC issued SGTM, 1,000 limited liability company Common Membership Units. Each of the four parties next executed an Agreement and Plan of Merger (the “Merger Agreement”) as well as a Certificate of Merger, the latter of which was filed with the Delaware Secretary of State Division of Corporations on December 31, 2019 (collectively, the “Reorganization”). Pursuant to the terms of the Reorganization, NSRI merged down into SGMC with SGMC surviving as the successor to the reorganization, with all of the assets and liabilities of NSRI merging into SGMC and the separate existence of NSRI ceasing. The shares of SGTM and Membership Interests of NSR LLC, held by NSRI were canceled in the reorganization as part of the restructuring and the shares of NSRI became exchangeable for shares of SGTM on a one for one basis making SGTM the parent to both SGMC and NSR LLC as well as making SGTM the publicly-traded successor to NSRI. After obtaining FINRA approval on July 21, 2020, the Company changed its trading symbol to SGTM.
Effective January 31, 2020, the Company entered into a Business Combination Agreement (the “Mulch Acquisition”) pursuant to which MM has become its wholly-owned subsidiary. Under the Mulch Acquisition, all issued and outstanding common stock in MM were converted into an aggregate of 40,000,000 shares of the Company’s common stock (See Note 5).
The Company closed on the acquisition of 100% of the membership interests in Day Dreamer Productions LLC (DDP) on December 30, 2021. DDP is in the business of producing informational and promotional videography (See Note 5).
The Company closed on the acquisition of the Beaver, Washington real estate property on March 18, 2022. The Beaver mill is expected to come online in 2024 (See Note 5).
7

Business Overview
The Company provides tree services, debris hauling and removal, biomass recycling, mulch manufacturing, packaging and sales. The Company’s objective is to provide a solution for the treatment and handling of tree debris that has historically been disposed of in landfills, creating an environmental burden and pressure on disposal sites around the nation. This objective is founded in sustainability, based on vertically integrated operations that begin with collecting of tree debris through its tree services and collection sites, through its processing services, and then recycling and using that tree debris as a feedstock that is manufactured into a variety of organic, attractive, next-generation mulch products that are packaged and sold to landscapers, installers, and garden centers. The Company plans to expand its operations through a combination of organic growth and strategic acquisitions of synergistic companies that are both accretive to earnings and enable the Company to be positioned for rapid growth. The Company operates in a highly seasonal industry generating most of its sales and profits in the first six months of the year.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements as of April 2, 2022 and January 1, 2022 and for the three months ended April 2, 2022 and April 3, 2021 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the Company’s financial position at such date and the operating results and cash flows for such periods. Operating results for the three months ended April 2, 2022 are not necessarily indicative of the results that may be expected for the entire year or for any subsequent interim period.
The Company has adopted the period end dates conforming to the industry standards used by MM, the Company’s largest operating subsidiary. These period end dates follow a 52/53 week fiscal year which ends on the Saturday nearest to December 31. There was 13 weeks in each of the three months ended April 2, 2022 and April 3, 2021.
These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited financial statements included in the Company’s Independent Audit for Years Ended January 1, 2022 and January 2, 2021 filed with the OTC Markets on March 15, 2022.
Principles of Consolidation
The unaudited condensed consolidated financial statements are presented on a comparative basis. The unaudited condensed consolidated balance sheets at April 2, 2022 and January 2, 2022 includes the accounts of SGTM, NRS LLC, MM, DDP LLC, Rose, and SGMC.
The unaudited condensed consolidated statement of operations for the period ended April 2, 2022 includes the accounts of SGTM, NRS LLC, MM, DDP LLC, Rose, and SGMC. For the period ended April 3, 2021 includes the accounts of SGTM, NRS LLC, MM, Rose, and SGMC.
The unaudited condensed consolidated statement of changes in stockholders’ equity for the three months ended April 2, 2022, includes the account balances of SGTM, NRS LLC, MM, DDP LLC, Rose, and SGMC. The three months ended April 3, 2021, includes the account balances of SGTM, NRS LLC, MM, Rose, and SGMC.
The unaudited condensed consolidated statement of cash flows for the period ended April 2, 2022 includes the accounts of SGTM, NRS LLC, MM DDP LLC, and Rose. The three months ended April 3, 2021, includes the accounts of SGTM, NRS LLC, MM and Rose.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity-based transactions, revenue and expenses and disclosure of contingent liabilities at the date of the consolidated financial statements. The Company bases its estimates and assumptions on historical experience, known or expected trends and various other assumptions that it believes to be reasonable. As future events and their effects cannot be determined with precision, actual results could differ from these estimates which may cause the Company’s future results to be affected.
Revenue
8

The Company’s revenues are derived from two major types of services to clients: landscape recovery services and the manufacturing and sale of landscape mulch. With respect to landscape recovery services, the Company provides tree services, debris hauling and removal and biomass recycling.
The Company recognizes revenue when its performance obligations are satisfied. With respect to landscape recovery services, its performance obligation is satisfied upon the completion of the landscape services for its customers. With respect to the manufacturing and selling of landscape mulch, its performance obligation is satisfied upon delivery to its customers. Services are provided for cash or on credit terms. These credit terms, which are established in accordance with local and industry practices, require payment generally within 30 days of performance or end of season for qualifying orders. The Company estimates and reserves for its bad debt exposure based on its experience with past due accounts and collectability, the aging of accounts receivable and its analysis of customer data.
Disaggregated Revenues
Revenue consists of the following by service and product offering for the three months ended April 2, 2022 and April 3, 2021:
Landscaping Recovery Services Manufacturing and Sales of Mulch
Total
Three Months Ended
April 2, 2022 April 3, 2021
$ 936,474 $ 700,313 9,392,974 8,591,618 $ 10,329,448 $ 9,291,931
Cash
The Company considers all highly liquid short-term instruments that are purchased with an original maturity of three months or less to be cash equivalents. The Company did not have any cash equivalents as of April 2, 2022 and April 3, 2021.
Account Receivable
The Company periodically assesses its accounts receivable for collectability on a specific identification basis. If collectability of an account becomes unlikely, an allowance is recorded for that doubtful account. As of April 2, 2022 and January 1, 2022, the Company’s allowance for doubtful accounts was $60,000.
Receivable from Factor
As of April 2, 2022, there are $2,429,147 receivables from factor on the Company’s condensed consolidated balance sheet.
Inventories
Inventories are stated at the lower of cost or net realizable value, with cost determined by the weighted-average cost method using full absorption costing for manufactured goods.
Property and Equipment
Property and equipment are recorded at cost. Expenditures that enhance the useful lives of the assets are capitalized and depreciated.
Depreciation is computed using the straight-line method over the estimated useful lives of the related capitalized assets. Machinery and equipment is generally depreciated over 7 years. Vehicles are generally depreciated over 5 years.
Maintenance and repairs are charged to expense as incurred. At the time of retirement or other disposition of property and equipment, its cost and accumulated depreciation is removed from the accounts and the resulting gain or loss, if any, is reflected in operations.
The Company has entered into a Receivables Facility on March 2, 2022. Under the Receivables Facility, we may sell a portfolio of available and eligible outstanding customer accounts receivable to the purchasers. The eligible accounts receivable consists of accounts receivable generated by sales to certain customers. The eligible amount of customer accounts receivables which may be sold under the Receivables Facility is $5,000,000. The Receivables Facility expires on July 2, 2023.
9

Impairment of Long-Lived Assets and Right of Use Asset
Intangible Assets
The Company records its intangible assets at cost in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other. Finite lived intangible assets are amortized over their estimated useful life using the straight-line method, which is determined by identifying the period over which the cash flows from the asset are expected to be generated. During the three months ended April 2, 2022 and April 3, 2021, the Company did not record a loss on impairment.
Goodwill
Goodwill represents the excess of the purchase price of the acquired business over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least annually at year end, at the reporting unit level or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested for impairment at the reporting level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit. No impairment of goodwill was recorded by the Company for the three months ended April 2, 2022 and April 3, 2021.
Advertising and Marketing Costs
The Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expenses were approximately $73,000 and $73,000 for the three months ended April 2, 2022 and April 3, 2021, respectively, and are recorded in selling, general and administrative expenses on the statement of operations.
Fair Value Measurements
ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.
The Company’s financial assets and liabilities carried at fair value measured on a recurring basis as of April 2, 2022 and January 1, 2022, consisted of the following:
The Company reviews long-lived assets, including finite-lived intangible assets and right of use (“ROU”) lease assets, for
impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on
discounted cash flows or appraised values, depending on the nature of the assets.
Investment in mutual funds
$
(Level 2)
- $
-
Total fair value at April 2, 2022
$ 52
Quoted prices in active markets for identical Assets (Level 1) $ 52
Quoted prices in active markets
for identical
Significant other Observable inputs
Significant other Unobservable inputs (Level 3)
Total fair value at
Significant other Observable inputs
Significant other Unobservable inputs
10

January 1, 2022 Assets (Level 1) (Level 2)
Investment in mutual funds $ 52 $ 52 $
Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed by dividing the net income by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share includes the effect of Common Stock equivalents (stock options, unvested restricted stock, and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive.
Three Months Ended
- $
(Level 3)
-
Numerator for basic and diluted earnings (loss) per share:
Net income (loss) $
Denominator for basic earnings (loss) per share – weighted average shares outstanding
Stock warrants
Denominator for diluted earnings (loss) per share –
weighted average and assumed conversion Net income (loss) per share:
Basic net income (loss) per share Diluted net income (loss) per share
Income Taxes
April 3, 2021
$ (121,435)
89,014,501
5,640,004 -
April 2, 2022
76,161
89,440,108
$ $
94,654,505
0.00 0.00
89,440,108
$ (0.00) $ (0.00)
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company utilizes ASC Topic 740, “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 consolidated financial statements or tax returns. The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely- than-not” that a deferred tax asset will not be realized. For tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit in the consolidated financial statements.
For the three months ended April 2, 2022 and April 3, 2021, the Company recognized approximately $22,000 and $97.000 tax expense, respectively. These tax provisions were based on a 27% effective rate for federal and state income taxes after accounting for permanent differences between book and taxable income.
The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the consolidated statements of operations.
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, simplifying the Accounting for Income Taxes (Topic 740) as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. This guidance is effective for interim and annual reporting periods beginning within 2021.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these leases on the
11

income statement will be dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term. Costs for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest on the lease liability). This standard was effective for the Company’s interim and annual periods beginning January 1, 2019 and was applied on a modified retrospective basis to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The adoption of ASU 2016 - 02 had a material impact on the Company’s consolidated financial statements and related disclosures.
NOTE 3 – INVENTORIES
Inventories are stated at the lower of cost or net realizable value, with cost determined by the weighted-average cost method. The Company’s inventories are comprised of the following for the periods ended April 2, 2022 and January 1, 2022:
April 2, 2022 3,498,795
January 1, 2022
$ $
April 2, 2022
Machinery and equipment $
Vehicles 4,405,512 Land 7,633,048 Buildings 6,234,718
$ $
4,453,785 1,155,439 1,978,861
7,588,085
Raw Materials Work in process Finished goods
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
1,329,660 2,252,685 7,081,140
Leasehold improvements Construction in process
Less: accumulated depreciation Property and equipment, net
$
283,268 22,524,747 62,373,757 (6,872,643) 55,501,114
21,292,464
$
$
January 1, 2022
20,777,465 4,383,043 6,807,573 6,234,718
283,268 19,599,106 58,085,173 (6,036,027) 52,049,146
Total depreciation expense between cost of revenue and operating expenses for the three months ended April 2, 2022 and April 3, 2021 was $836,616 and $800,616, respectively.
NOTE 5 – ACQUISITIONS
Mulch Manufacturing, Inc. Acquisition
On January 31, 2020, the Company entered into a Business Combination Agreement (the “Mulch Acquisition”) with MM and its sole shareholder, Ralph Spencer (“Spencer”) (collectively the “MM Parties”), pursuant to which the Company acquired all of the shares of MM. Upon closing, MM became a wholly-owned subsidiary of SGTM.
Pursuant to the Mulch Acquisition, at the effective time of the acquisition:
• All of MM’s outstanding common stock was exchanged for an aggregate of 40,000,000 shares of SGTM’s common stock.
• One million shares previously issued to the MM shareholder in connection with the sale of equipment by MM to NSR LLC in November 2019 were cancelled.
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• There were specific excluded assets that were retained by Spencer and treated as transferred to Spencer prior to the acquisition consisting of cash, real estate, and certain vehicles and equipment. Spencer agreed to allow the Company to use some of the real estate rent-free until January 31, 2022, at which time the Company has the option of either leasing or purchasing it at the fair market value (see Note 11).
• All of the existing MM notes, notes, accounts receivable, and inventory at the date of the Mulch Acquisition are included in the acquisition and the Company has immediate possession of them by its ownership of MM. However, the 40 million shares of the Company’s common stock that was issued as consideration was based on these assets being removed from MM prior to the acquisition. The value of these assets are valued separately from the share exchange and that certain demand promissory note payable to Spencer in the amount of approximately $14 million was adjusted to reflect the value of the inventory, accounts receivable, and any other sums lent by Spencer to MM.
The Company accounted for these transactions in accordance with the acquisition method of accounting for business combinations. An independent appraisal, made in February 2020, determined the fair market value of MM’s property and equipment to be $17,228,295. Assets and liabilities of the acquired business were included in the unaudited condensed consolidated balance sheets as of April 2, 2022 and January 1, 2022, based on their respective estimated fair values on the date of acquisition. Based on a closing market price of $0.15 per share on the January 31, 2020, business combination date, the assumption of net liabilities plus a bargain purchase recognition and asset write-up, the Company is recognizing the allocation to the accounts of MM as follows:
Appraised fair market value of property and equipment
Less: Net book value of just MM's property and equipment on January 31, 2020
Excess of fair market over net book value of MM property and equipment
$
17,228,295 1,883,657
15,344,638
Value of common stock issued for MM
Net book value of MM on January 31, 2020: Property and equipment
Investments
Prepaid expenses and other assets
Supply agreement
Accounts payable and accrued expenses
Notes payable
$ 6,000,000
Net book value (assumed) of MM on January 31, 2020
Total purchase price, including assumed net liabilities, of MM
Excess of fair value over net book value plus
purchase price of MM property and equipment (bargain purchase gain)
Purchase price of MM
Bargain purchase gain and property and equipment write-up Net book value of MM on January 31, 2020
Total to be allocated
Allocation of MM purchase price and bargain purchase gain: Property and equipment
Investments
Prepaid expenses and other assets
Supply agreement
Accounts payable and accrued expenses
(1,856,052)
$
1,883,657 830,000 192,361 453,750
(1,215,820) (4,000,000)
$ $ $ $
7,856,052 7,488,586
7,856,052
7,488,586 (1,856,052) 13,488,586
17,228,295 830,000 192,361 453,750
(1,215,820)
13

Notes payable (4,000,000) $ 13,488,586
Day Dreamer Productions LLC Acquisition
The Company entered into an agreement to acquire 100% of the membership interest of Day Dreamer Productions, LLC around January 18, 2021, in exchange for 200,000 shares of the Company’s stock. This transaction was closed on December 30, 2021, when the Company issued the shares to its sole member. This member was also retained as an employee with responsibility for managing the activities of Day Dreamer Productions, LLC.
Beaver, Washington Real Estate Acquisition
On March 18, 2022, the Company acquired the Beaver, Washington real estate property for $1,025,475, of which, $200,000 was previously put down as deposits, and $825,475 was paid at closing. The acquisition of the Beaver, Washington sawmill was closed in December 2021. We expect to begin producing pine bark and marketable lumber at the Beaver mill in 2024.
NOTE 6 – INTANGIBLE ASSETS
The below table summarizes the identifiable intangible assets as of April 2, 2022 and January 1, 2022:
Useful April 2, 2022 January 1, 2022 life
Supply contract (1) Less:
Total
(1)
Accumulated amortization Impairment
10 $
453,750 $ (54,450)
(317,500)
81,800 $
453,750 (51,810) (317,500) 84,440
$
These intangible assets were acquired in the acquisition of MM on January 31, 2020.
The weighted average useful life remaining on identifiable intangible assets is 7.75 years.
Amortization of identifiable intangible assets for the three months ended April 2, 2022 and April 3, 2021 was $2,640 and
$1,760, respectively.
The below table summarizes the future amortization expense for the next five years:
2022 $ 2023
2024
2025
2026 Thereafter
$
7,920 10,560 10,560 10,560 10,560 31,640 81,800
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following amounts:
Accounts payable Accrued interest Accrued expenses
$ $
April 2, 2022
1,956,104 $ 25,104
388,771 2,369,979 $
January 1, 2022
2,350,056 8,076 313,644 2,671,776
NOTE 8 –NOTES PAYABLE
14

Apr 2, 2022
Jan 1, 2022
Seller note payable bearing interest at 6.0%, monthly payments of principal and interest of $76,300 beginning October 2021 with a $9,819,606 balloon due September 2024, secured by mortgaged real estate
Various third-party obligations secured by assets the Company
acquired subject to this indebtedness to various third-party creditors, bearing interest at a 5% average rate. Monthly payments of $122,881 principal and interest beginning January 2022 through December 2024
Unsecured note payable to seller on bulk equipment purchase, bearing 4.0% interest. First $300,000 payment of principal and interest due March 2022, $200,000 payments of principal and interest due quarterly thereafter until paid in full
Note payable to a bank, secured by equipment, bearing interest at 2.95%. Monthly payments of principal and interest in the amount of $28,698 beginning January 2021 and due through December 2025
Unsecured note payable to a financial institution under the SBA Paycheck Protection Program for MM bearing interest at 1.0%. Monthly payments of principal and interest in the amount of $82,061 beginning August 2022 are due through April 2023.
Note payable to an equipment financing company bearing interest
at 3.95%. Monthly payments of principal and interest of $8,750 due August 2020 through July 2025.
Note payable to an equipment financing company bearing interest
at 3.95%. Monthly payments of principal and interest of $8,316 due August 2020 through July 2025.
Note payable to an equipment financing company bearing interest
at 3.95%. Monthly payments of principal and interest of $7,034 due August 2020 through July 2025.
Note payable to an equipment financing company bearing interest
at 3.95%. Monthly payments of principal and interest of $7,392 due February 2021 through January 2026.
Note payable to an equipment financing company bearing interest
at 3.95%. Monthly payments of principal and interest of $5,230 due December 2020 through November 2025.
Note payable to an equipment financing company bearing interest
at 3.95%. Monthly payments of principal and interest of $5,201 due November 2020 through October 2025.
Note payable to an equipment financing company bearing interest
at 3.95%. Monthly payments of principal and interest of $5,201 due October 2020 through September 2025.
Note payable to an equipment financing company bearing interest
at 3.95%. Monthly payments of principal and interest of $5,341 due August 2020 through July 2025.
Note payable to an equipment financing company bearing interest
at 3.95%. Monthly payments of principal and interest of $5,201 due August 2020 through July 2025.
$
10,509,960
4,067,282 1,114,000 1,221,108
1,236,080 327,412 311,206 335,653 329,033 213,879 208,226 203,710 199,879 199,179
$
10,580,504
4,100,000 1,400,000 1,297,817
1,236,080 342,680 325,718 347,452 334,000 222,887 217,213 212,727 209,200 208,226
15

Note payable to the individual seller of the landscaping and recovery services business to NSR LLC bearing interest at 5%. Monthly payments of $5,000 are due through October 2023 with a $100,000 balloon due November 2023
Non-interest bearing note payable to an equipment financing company with monthly principal payments of $5,842 due December 2021 through November 2023
Non-interest bearing note payable to an equipment financing company with monthly principal payments of $16,460 due May 2021 through April 2022.
Note payable to an equipment financing company bearing interest
at 0.00%. Monthly payments of principal of $6,993 beginning November 2020 are due through October 2022
Note payable to an equipment financing company bearing interest
at 9%. Due to three month COVID-19 payment suspension, monthly payments
of principal and interest increased from $3,933 to $3,993 and extended three months through December 2023
Note payable to an equipment financing company bearing interest at 5.94%. Monthly payments of principal and interest of $1,174 beginning January 2022 through March 2028
Note payable to an equipment financing company bearing interest
at 8%. Due to three month COVID-19 payment suspension, monthly payments
of principal and interest increased from $2,410 to $2,452 and extended three months through December 2023
Note payable to an equipment financing company bearing interest
at 9%. Due to three month COVID-19 payment suspension, monthly payments
of principal and interest increased from $1,861 to $1,890 and extended three months through December 2023
Note payable to an equipment financing company bearing interest
at 8%. Due to three month COVID-19 payment suspension, monthly payments
of principal and interest increased from $1,808 to $1,840 and extended three months through December 2023
Note payable to an equipment financing company bearing interest
at 11%. Due to five month COVID-19 payment suspension, monthly payments of principal and interest of $1,692 due from August through July 2023 with a $10,152 balloon payment in August 2023
Note payable to an equipment financing company bearing interest
at 12%. Due to five month COVID-19 payment suspension, monthly payments of principal and interest of $1,749 due from August 2020 through June 2023 with a $10,496 balloon payment in July 2023
Note payable to an equipment financing company bearing interest
at 8%. Monthly payments of principal and interest of $977 due through August 2024
Note payable to an equipment financing company bearing interest
at 8%. Monthly payments of principal and interest of $932 due through September 2024
Note payable to an equipment financing company bearing interest
at 8%. Monthly payments of principal and interest of $766 due through August 2024
Note payable to an equipment financing company bearing interest 16
183,174 195,779 122,671 134,353 32,919 65,838
55,943 69,928
77,478 87,611 70,119 73,217
48,044 54,397
36,671 41,466
36,007 40,764
32,346 36,446
33,086 37,220 25,685 28,071 24,547 27,581 20,476 22,395

at 8%. Due to three month COVID-19 payment suspension, monthly payments of
principal and interest increased from $751 to $765 and extended three months
through January 2024 15,565
Note payable to an equipment financing company bearing interest
at 10.64%. Monthly payments of principal and interest of $1,060 due through
February 2027 48,365
Note payable to an individual bearing interest at 12%. Monthly payments of interest
of $5,000 starting on March 17, 2022 and due through February 2023. The principal
is due no later than February 17, 2023, with no penalty for prepayment 500,000
Note payable to a financing company bearing interest
at 25.0%. Weekly payments of principal and interest of $54,348 due through
March 2023 2,010,000
Note payable to an equipment financing company bearing interest
at 11.45%. Monthly payments of principal and interest of $18,121 due through
March 2027 825,000
17,512 -0-
-0- -0- -0- -0-
21,967,082 4,486,461 $ 17,480,621
Note payable to an equipment financing company bearing interest
at 11.45%. Monthly payments of principal and interest of $11,312 due through March 2027
515,000 25,189,703 7,311,207 $ 17,878,496
Total notes payable to unrelated parties
Short-term portion of notes payable
Long-term portion of notes payable
The schedule of future maturities on the above notes are as follows:
Year 2022 2023 2024 2025 2026 2027
$
Amount 5,565,138 5,065,953
& after
12,924,481 1,116,033 372,493 145,605 $ 25,189,703
The above notes include three Paycheck Protection Program (PPP) loans between MM and NSR LLC totaling $2,849,208, of which the $1,458,200 and $154,928 loans were forgiven during the year ended January 1, 2022. Under the PPP, to the extent the Company uses the loan proceeds on qualifying disbursements, these loans may be forgiven. Although the Company believes that the majority of the proceeds under the remaining loan of $1,236,080 has been spent on qualifying expenditures, it has not recorded any gain on forgiveness of this indebtedness for the period ended April 2, 2022
Related Party
On the January 31, 2020, date of the Mulch Acquisition, there was a balance on a note payable to MM’s sole shareholder in the amount of $14,223,046. This note was adjusted for the receivables and inventory of MM that was excluded from the share exchange resulting in a restated and amended $15,402,355 promissory note bearing 4% interest. Also on January 31, 2020, this shareholder placed a $6,240,670 deposit with the Company. To the extent the Company consumed this cash deposit for operations, this shareholder was paid 4% interest. In August 2021 the outstanding balance on these two obligations plus accrued interest as of January 2, 2021, totaled $17,484,728, which was contributed to the capital of the Company. Interest accrued on these obligations for 2021 was credited against interest expense. Accordingly, the balance on the shareholder deposit as of April 2, 2022 and January 1, 2022 was $-0- and $-0-, respectively. The balance on the restated and amended promissory note was $-0- and $-0- as of April 2, 2022 and January 1, 2022, respectively.
17

In January 2019, MM issued a promissory note to an employee in the amount of $6,000,000, $2,000,000 of which was paid during the year ended December 28, 2019. The note bore interest at 3% per annum payable quarterly, required semi-annual principal payments of $300,000 starting on June 1, 2021 and had no maturity date. As part of the Mulch Acquisition, this note was assumed by the Company. In August 2021, the holder of this note exchanged his, at that time, $3,700,000 balance in the note for 6,000,000 Company shares. As of April 2, 2022 and January 1, 2022, the balance on this note was $-0- and $-0-, respectively.
Total interest expense (credit) on the above related party notes and deposit was approximately $-0- and $188,000 for the three months ended April 2, 2022 and April 3, 2021, respectively.
NOTE 9 - STOCKHOLDERS’ EQUITY
Preferred Stock
On December 31, 2019, the Company’s Board of Directors adopted articles of incorporation in the state of Delaware authorizing, without further vote or action by the stockholders, to create out of the unissued shares of the Company’s common stock, $0.0001 par value Preferred Stock. The Board of Directors is authorized to establish, from the authorized and unissued shares of Preferred Stock, one or more classes or series of shares, to designate each such class and series, and fix the rights and preferences of each such class of Preferred Stock; which class or series shall have such voting powers, such preferences, relative, participating, optional or other special rights, and such qualifications, limitations or restrictions as shall be stated and expressed in the resolution or resolutions providing for the issuance of such class or series of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof. The articles of incorporation and designation authorizes the issuance of 5,000,000 shares of Preferred Stock, of which 100 shares have been designated as Series A Preferred Stock, of which 90 of Series A are issued and outstanding as of October 2, 2021. Each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Series A Preferred Stock held by such holder as of the record date for determining stockholders entitled to vote on such matter, with each share casting a vote equal to: the quotient of the sum of all outstanding shares of common stock together with any and all other securities of the Company that provide for voting on an “as converted” basis divided by 0.99.
Equity Transactions During the Period
The following issuances of common stock affected the Company’s Stockholders’ Equity:
On January 13, 2021, the Company issued 300,000 shares in satisfaction of a 2020 accrual for debt financing cost.
On March 5, 2021, the Company issued 25,000 shares to an employee as compensation.
On August 16, 2021, the Company recognized a $17,484,728 capital contribution from the extinguishment of debt.
On August 25, 2021, the Company issued 6,000,000 shares in exchange for a $3,400,000 note.
On October 4, 2021, the Company issued 125,000 shares for consulting service compensation.
Between October 15, and December 15, 2021, the Company redeemed 11,397,984 shares pursuant to a stock repurchase agreement (see Note 11).
Between October and December 15, 2021, the Company issued 5,640,004 shares pursuant to subscription agreements at a price of $0.75 per share. These agreements provided for piggyback registration rights on a potential future registration of Company stock. The agreements also provided stock warrants equal to the number of subscribed shares. These warrants can be exercised at a price of $1.50 per share and expire after one year. No allocation of proceeds was made to the warrants since the subscribed shares of common stock were issued at a price below that of the publicly traded shares.
On December 30, 2021, the Company issued 200,000 shares pursuant to an agreement to acquire 100% of the membership interest in Day Dreamer Production, LLC.
On December 31, 2021, the Company issued 400,000 shares to acquire equipment in Beaver, WA.
On January 16, 2022, we issued 266,667 shares of Common Stock based on a subscription price of $0.75 per share with an aggregate value of $200,000. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On January 20, 2022, we issued 200,000 shares of Common Stock based on a subscription price of $0.75 per share with an aggregate value of $150,000. These shares were issued in reliance on Section 4(a)(2) of the Securities Act
18

On March 23, 2022, we issued 1,000,000 shares of Common Stock based on a subscription price of $0.75 per share with an aggregate value of $750,000. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
NOTE 10 – LEASES
A lease is defined as a contract that conveys the right to control the use of identified tangible property for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASC Topic 842 which primarily affected the accounting treatment for operating and finance lease agreements in which the Company is the lessee including Company leases of vehicles and equipment for use in the storm and disaster recovery work. The Company elected to not recognize ROU assets and lease liabilities arising from short-term leases with initial lease terms of twelve months or less (deemed immaterial) on the accompanying consolidated balance sheets.
ROU assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on the effective interest plus: for finance type leases, straight-line amortization of the asset’s original ROU over its lease term; or, for operating leases, the effective amortization on the lease liability. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option.
When measuring lease liabilities for leases that were classified as operating and financing leases as of January 1, 2019, NSR LLC discounted lease payments using its estimated incremental borrowing rate of 10% at January 1, 2019. Since April 1, 2020, MM has entered into operating leases using its incremental borrowing rate of 4% to discount lease payments.
The following table presents supplemental lease information:
Lease cost Finance lease cost
Three Months Ended
April 2, 2022
April 3, 2021
$ 17,792 5,506 38,293 _111,801 $173,392
$ 23,366 $ 38,293
2.6 years 1.8 years
10.0% 4.5%
April 2, 2022
801,752 $ 110,722 912,474 $
Amortization on ROU assets $ 17,792
Interest on lease liabilities 3,635 Operating lease cost 69,598 Short-term lease cost 44,220 Total lease cost $135,245
Cash paid for amounts included in the measurement of lease liabilities for:
Finance leases:
Financing cash flows $ 23,366
Operating leases:
Operating cash flows $ 46,932
Weighted-average remaining lease term:
Finance leases 1.6 years Operating leases 4.1 years
Weighted-average discount rate:
Finance leases 10.0%
Operating leases
Supplemental balance sheet information related to leases is as follows:
4.3%
Assets:
Operating lease assets Finance lease assets Total leased assets
Liabilities:
Financial Statement Line Item
ROU asset
$ $
Jan 1, 2022
848,840 128,515 977,355
19

Current:
Operating lease assets Finance lease assets
Non-current
Operating lease assets Finance lease assets
$
176,976 57,053 234,029
624,776 75,168 699,944 933,973
$
$
183,874 65,312 249,186
664,966 86,639 751,605 1,000,791
Total lease liabilities
$
Finance 53,727
Current portion of lease liability
Lease liabilities, net of current portion
As of April 2, 2022, remaining maturities of lease liabilities were as follows:
2022
2023
2024
2025
2026
2027
Total
Amount representing interest Lease liability
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Legal Claims
$
$
$ $
Operating 160,502
168,570 139,469 107,969 106,553 220,235 903,298
(101,546) 801,752
and thereafter
54,172 40,629 - - - $ 148,528 (16,308) $ 132,220
The Sustainable Green Team, LTD is currently involved in arbitration with Emerging Markets Consulting, LLC (“EMC”), a former service provider of the Company. On October 21, 2020, EMC initiated arbitration against the Company, alleging, among other things, breach of contract related to an agreement entered into between the Company (via NSR LLC) and EMC, in which the Company engaged EMC to provide it with consulting services related to the Company’s capital structure, investor relations strategies, and fundraising plans, including the filing of an S-1 registration statement at some point in the future, in exchange for equity compensation in the Company. EMC seeks relief against the Company in the form of the equity compensation pursuant to the agreement (2,000,000 shares of the Company’s Common Stock) and damages. The Company denies EMC’s allegations, and has also initiated counterclaims against EMC for breach of the agreement by EMC, in which it is seeking damages resulting from EMC’s breach of its duties under the agreement.
In addition, the Company named in its counterclaim to EMC’s claim another similar service provider, Rainmaker Group Consulting, LLC (“Rainmaker”), as a pre-emptive defense against any actions brought by Rainmaker against the Company. Rainmaker engaged by the Company in 2019 to provide similar consulting services as EMC was engaged to provide in exchange for the same compensation (2,000,000 shares of the Company’s Common Stock). The Company alleges that Rainmaker breached its agreement with the Company by not providing the services provided in the agreement between the Company and Rainmaker, and therefore Rainmaker is not entitled to any equity compensation by the Company. The Company has taken this action as a defensive measure against potential (in the Company’s opinion) frivolous lawsuits brought by Rainmaker against the Company.
The Company is confident it will prevail in the ongoing arbitration described above being overseen by the American Arbitration Association.
On March 25, 2021, the Company filed a civil complaint in the Ninth Judicial Circuit Court in Orange County, Florida against Ralph Spencer, the former owner and CEO of Mulch Manufacturing, Inc., alleging certain tortious interference with the Company’s business operations and dealings. On April 1, 2021, the Company was granted an Emergency Temporary Injunction by the Ninth Judicial Circuit Court in Orange County, Florida enjoining Mr. Spencer from, among other things, further attempts to interfere with the Company’s business operations. On August 16, 2021, the Company settled this dispute and has released Ralph Spencer from the Emergency Temporary Injunction.
Stock Redemptions
20

The Company is committed to buying back 40,000,000 shares of its common stock over 24 months beginning in October, 2021, at a price of $0.375 per share.
NOTE 12 – CONCENTRATION OF CREDIT RISK
Cash Deposits
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. As of April 2, 2022, the Company did not have any deposit amounts in excess of the FDIC insured limit.
Revenues
For the three months ending April 2, 2022 and April 3, 2021, one customer accounted for 19% and 25% of revenue, respectively.
Accounts Receivable
As of April 2, 2022, one customer accounted for 28% of the Company’s accounts receivable. As of January 1, 2022, one customer accounted for 24% of the accounts receivable.
NOTE 13 – SUBSEQUENT EVENTS
There are no material subsequent events.
21