UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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The number of shares of the registrant's common stock outstanding as of November 14, 2024 was
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SusGlobal Energy Corp.
INDEX TO FORM 10-Q
For the Three and Nine-Month Periods Ended September 30, 2024 and 2023
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SUSGLOBAL ENERGY CORP.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024 and 2023
(Expressed in United States Dollars)
(unaudited)
CONTENTS
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| 4 |
SusGlobal Energy Corp.
Interim Condensed Consolidated Balance Sheets
As at September 30, 2024 and December 31, 2023
(Expressed in United States Dollars)
(unaudited)
| September 30, 2024 | December 31, 2023 | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash | $ | $ | ||||
| Trade receivables | ||||||
| Government remittances receivable | ||||||
| Prepaid expenses and deposits (note 6) | ||||||
| Total Current Assets | ||||||
| Long-lived Assets, net (note 7) | ||||||
| Long-lived Assets-held for sale (note 7) | ||||||
| Long-Term Assets | ||||||
| Total Assets | $ | $ | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||
| Current Liabilities | ||||||
| Accounts payable (note 8) | $ | $ | ||||
| Government remittances payable | ||||||
| Accrued liabilities (notes 8, 9, 10 and 13) | ||||||
| Current portion of long-term debt (note 9) | ||||||
| Current portion of obligations under capital lease (note 10)-in default | ||||||
| Convertible promissory notes (note 11)-in default | ||||||
| Loans payable to related parties (note 13) | ||||||
| Total Current Liabilities | ||||||
| Stockholders' Deficiency | ||||||
| Preferred stock, $ |
||||||
| Additional paid-in capital | ||||||
| Accumulated deficit | ( |
) | ( |
) | ||
| Accumulated other comprehensive income (loss) | ( |
) | ||||
| Stockholders' deficiency | ( |
) | ( |
) | ||
| Total Liabilities and Stockholders' Deficiency | $ | $ | ||||
| Going concern (note 2) | ||||||
| Commitments (note 15) | ||||||
| Subsequent events (note 19) |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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SusGlobal Energy Corp.
Interim Condensed Consolidated Statements of Operations and Comprehensive Loss
For the three and nine-month periods ended September 30, 2024 and 2023
(Expressed in United States Dollars)
(unaudited)
| For the three-month periods ended | For the nine-month periods ended | |||||||||||
| September 30, 2024 | September 30,2023 | September 30, 2024 | September 30, 2023 | |||||||||
| Revenue | $ | $ | $ | $ | ||||||||
| Cost of Sales | ||||||||||||
| Opening inventory | ||||||||||||
| Depreciation (note 7) | ||||||||||||
| Direct wages and benefits | ||||||||||||
| Equipment rental, delivery, fuel and repairs and maintenance | ||||||||||||
| Utilities | ( |
) | ||||||||||
| Outside contractors | ||||||||||||
| Less: closing inventory | ( |
) | ( |
) | ||||||||
| Total cost of sales | ||||||||||||
| Gross loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Operating expenses | ||||||||||||
| Management compensation-stock-based | ||||||||||||
| compensation (notes 8 and 14) | ||||||||||||
| Management compensation-fees (note 8) | ||||||||||||
| Marketing | ||||||||||||
| Professional fees | ||||||||||||
| Interest expense (notes 8, 9, 10 and 13) | ||||||||||||
| Office and administration (note 7) | ||||||||||||
| Rent and occupancy (note 8) | ||||||||||||
| Insurance | ( |
) | ||||||||||
| Filing fees | ||||||||||||
| Amortization of financing costs | ||||||||||||
| Directors' compensation (note 8) | ||||||||||||
| Stock-based compensation (note 14) | ||||||||||||
| Repairs and maintenance | ||||||||||||
| Foreign exchange (income) loss | ( |
) | ( |
) | ||||||||
| Total operating expenses | ||||||||||||
| Net loss from operating activities | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Other income (expense) (note 16) | ( |
) | ( |
) | ||||||||
| Net income (loss) | ( |
) | ( |
) | ( |
) | ||||||
| Other comprehensive loss | ||||||||||||
| Foreign exchange (loss) income | ( |
) | ( |
) | ||||||||
| Comprehensive loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Net income (loss) per share-basic and diluted | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||
| Weighted average number of common shares outstanding- basic and diluted |
||||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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SusGlobal Energy Corp.
Interim Condensed Consolidated Statements of Changes in Stockholders' Deficiency
For the three and nine-month periods ended September 30, 2024 and 2023
(Expressed in United States Dollars)
(unaudited)
| Number of Shares |
Common Shares |
Additional Paid- in Capital |
Shares to be Issued |
Accumulated Deficit |
Accumulated Other Comprehensive Income (Loss) |
Stockholders' Deficiency |
|||||||||||||||
| Balance-December 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||
| Shares issued on conversion of related party accounts payable | - | - | - | ||||||||||||||||||
| Cancellation of shares for professional services | ( |
) | ( |
) | - | - | - | ||||||||||||||
| Other comprehensive loss | - | - | - | - | - | ||||||||||||||||
| Net loss | - | - | - | - | ( |
) | - | ( |
) | ||||||||||||
| Balance-March 31, 2024 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||
| Other comprehensive income | - | - | - | - | - | ||||||||||||||||
| Net income | - | - | - | - | ( |
) | - | ( |
) | ||||||||||||
| Balance-June 30, 2024 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||
| Shares issued on private placement | - | - | - | ||||||||||||||||||
| Other comprehensive loss | - | - | - | - | - | ( |
( |
) | |||||||||||||
| Net income | - | - | - | - | - | ||||||||||||||||
| Balance-September 30, 2024 | ( |
( |
|||||||||||||||||||
| Balance-December 31, 2022 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||
| Shares issued for proceeds previously received | ( |
) | - | - | |||||||||||||||||
| Shares issued to officers | - | - | - | ||||||||||||||||||
| Shares issued to employee | - | - | - | ||||||||||||||||||
| Shares issued to director | - | - | - | ||||||||||||||||||
| Shares issued on conversion of debt to equity | - | - | - | ||||||||||||||||||
| Shares issued for professional services | - | - | - | ||||||||||||||||||
| Other comprehensive loss | - | - | - | - | - | ( |
) | ( |
) | ||||||||||||
| Net loss | - | - | - | - | ( |
) | - | ( |
) | ||||||||||||
| Balance-March 31, 2023 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||
| Shares issued on conversion of debt | - | - | - | ||||||||||||||||||
| Shares issued on conversion of related party debt | - | - | - |
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SusGlobal Energy Corp.
Interim Condensed Consolidated Statements of Changes in Stockholders' Deficiency
For the three and nine-month periods ended September 30, 2024 and 2023
(Expressed in United States Dollars)
(unaudited)
| Number of Shares |
Common Shares |
Additional Paid- in Capital |
Shares to be Issued |
Accumulated Deficit |
Accumulated Other Comprehensive Income (Loss) |
Stockholders' Deficiency |
|||||||||||||||
| Shares issued on private placement | - | - | - | ||||||||||||||||||
| Shares issued for professional services | - | - | - | ||||||||||||||||||
| Shares yet to be issued on private placement received | - | - | - | - | |||||||||||||||||
| Other comprehensive loss | - | - | - | - | - | ( |
) | ( |
) | ||||||||||||
| Net Loss | - | - | - | - | ( |
) | - | ( |
) | ||||||||||||
| Balance-June 30, 2023 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||
| Shares issued for proceeds previously received | ( |
) | - | - | |||||||||||||||||
| Shares issued on conversion of related party debt and accounts payable | - | - | - | ||||||||||||||||||
| Shares issued on private placement | - | - | - | ||||||||||||||||||
| Shares issued for professional services | - | - | - | ||||||||||||||||||
| Shares issued for other services | - | - | - | ||||||||||||||||||
| Other comprehensive loss | - | - | - | - | - | ||||||||||||||||
| Net loss | - | - | - | - | ( |
) | - | ( |
) | ||||||||||||
| Balance-September 30, 2023 | ( |
) | ( |
) |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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SusGlobal Energy Corp.
Interim Condensed Consolidated Statements of Cash Flows
For the nine-month periods ended September 30, 2024 and 2023
(Expressed in United States Dollars)
(unaudited)
| For the nine-month period ended September 30, 2024 |
For the nine-month period ended September 30, 2023 |
|||||
| Cash flows from operating activities | ||||||
| Net loss | $ | ( |
) | $ | ( |
) |
| Adjustments for: | ||||||
| Depreciation | ||||||
| Amortization of financing fees | ||||||
| Stock-based compensation | ||||||
| Loss on conversion of convertible promissory notes | ||||||
| Loss on revaluation of convertible promissory notes | ||||||
| Provision for loss | ( |
) | ||||
| Loss on settlement of claim | ||||||
| Gain on forgiveness of long-term debt | ( |
) | ||||
| Changes in non-cash working capital: | - | |||||
| Trade receivables | ( |
) | ||||
| Government remittances receivable | ||||||
| Inventory | ||||||
| Prepaid expenses and deposits | ( |
) | ( |
) | ||
| Accounts payable | ||||||
| Government remittances payable | ||||||
| Accrued liabilities | ||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||
| Cash flows from financing activities | ||||||
| Advances of long-term debt | ||||||
| Repayment of long-term debt | ( |
) | ( |
) | ||
| Financing fee on long-term debt | ( |
) | ( |
) | ||
| Repayments of obligations under capital lease | ( |
) | ( |
) | ||
| Advances on convertible promissory notes | ||||||
| Financing fee on loans payable to related parties | ( |
) | ||||
| Advances of loans payable to related parties | ||||||
| Repayment of loans payable to related parties | ( |
) | ( |
) | ||
| Proceeds on private placement | ||||||
| Net cash provided by financing activities | ||||||
| Effect of exchange rate on cash | ||||||
| Increase in cash | ||||||
| Cash and cash equivalents-beginning of period | ||||||
| Cash and cash equivalents and restricted cash-end of period | $ | $ | ||||
| Supplemental Cash Flow Disclosure: | ||||||
| Interest paid | $ | $ | ||||
| Supplemental Non-Cash Disclosure: | ||||||
| Common stock issued at fair value for conversion of debt | $ | $ | ||||
| Common stock issued at fair value for conversion of related party debt | $ | $ | ||||
| Cancellation of common stock | $ | $ | ||||
| Shares issued for prepaid services | $ | $ |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2024 and 2023
(Expressed in United States Dollars)
(unaudited)
1. Nature of Business and Basis of Presentation
SusGlobal Energy Corp. ("SusGlobal") was formed by articles of amalgamation on December 3, 2014, in the Province of Ontario, Canada and its executive office is in Toronto, Ontario, Canada. SusGlobal, a company in the start-up stages and Commandcredit Corp. ("Commandcredit"), an inactive Canadian public company, amalgamated to continue business under the name of SusGlobal Energy Corp.
On May 23, 2017, SusGlobal filed an Application for Authorization to continue in another Jurisdiction with the Ministry of Government Services in Ontario and a certificate of corporate domestication and certificate of incorporation with the Secretary of State of the State of Delaware under which it changed its jurisdiction of incorporation from Ontario to the State of Delaware (the "Domestication"). In connection with the Domestication each of the currently issued and outstanding common shares were automatically converted on a one-for-one basis into common shares compliant with the laws of the state of Delaware (the "Shares"). As a result of the Domestication, pursuant to Section 388 of the General Corporation Law of the State of Delaware (the "DGCL"), SusGlobal continued its existence under the DGCL as a corporation incorporated in the State of Delaware. The business, assets and liabilities of SusGlobal and its subsidiaries on a consolidated basis, as well as its principal location and fiscal year, were the same immediately after the Domestication as they were immediately prior to the Domestication. SusGlobal filed a Registration Statement on Form S-4 to register the Shares and this registration statement was declared effective by the Securities and Exchange Commission on May 12, 2017.
On December 11, 2018, the Company began trading on the OTCQB® Venture Market, under the ticker symbol SNRG.
SusGlobal is a renewables company focused on acquiring, developing and monetizing a global portfolio of proprietary technologies in the waste to energy and regenerative products application.
These interim condensed consolidated financial statements of SusGlobal and its wholly-owned subsidiaries, SusGlobal Energy Canada Corp. ("SECC"), SusGlobal Energy Canada I Ltd. ("SGECI"), SusGlobal Energy Belleville Ltd. ("SGEBL"), SusGlobal Energy Hamilton Ltd. ("SEHL") and 1684567 Ontario Inc. ("1684567") (together, the "Company"), have been prepared following generally accepted accounting principles in the United States ("US GAAP") for interim financial information and the Securities Exchange Commission ("SEC") instructions to Form 10-Q and Article 8 of SEC Regulation S-X, and are expressed in United States Dollars. The Company's functional currency is the Canadian Dollar ("C$"). In the opinion of management, all adjustments necessary for a fair presentation have been included.
2. Going Concern
The interim condensed consolidated financial statements have been prepared in accordance with US GAAP, which assumes that the Company will be able to meet its obligations and continue its operations for the next twelve months.
The Company incurred a net loss of $
On November 3, 2023, the funds previously held in escrow, which related to a full and final mutual release of all obligations owing to PACE, including accrued interest, in the amount of $
SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2024 and 2023
(Expressed in United States Dollars)
(unaudited)
2. Going Concern, (continued)
These factors cast substantial doubt as to the Company's ability to continue as a going concern, which is dependent upon its ability to obtain the necessary financing to further the development of its business, satisfy its obligations to its creditors, and upon achieving profitable operations through revenue growth. There is no assurance of funding being available or available on acceptable terms. Realization values may be substantially different from carrying values as shown.
These interim condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result if the Company was unable to continue as a going concern.
3. Significant Accounting Policies
These interim condensed consolidated financial statements do not include all the information and footnotes required by US GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements of the Company for the years ended December 31, 2023 and 2022 and their accompanying notes.
4. Recently Issued Accounting Pronouncements
Accounting Pronouncements Recently Adopted
The following section provides a description of new accounting pronouncements ("Accounting Standard Update" or "ASU") issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company.
There was no new accounting pronouncements issued and not yet adopted that were expected to have a material impact on the Company's interim condensed consolidated financial position or results of operations in the current or future periods.
5. Financial Instruments
The carrying value of the Company's financial instruments, such as cash, trade receivables, accounts payable and accrued liabilities approximate fair value due to the short-term nature of these instruments. The carrying amounts of the long-term debt, obligations under capital lease, convertible promissory notes and loans payable to related parties also approximates fair value due to their market interest rate.
Interest, Credit and Concentration Risk
Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk.
The Company is not exposed to significant interest rate risk on its long-term debt as at September 30, 2024 and December 31, 2023.
Credit risk is the risk of loss associated with a counterparty's inability to perform its payment obligations. As at September 30, 2024, the Company's credit risk is primarily attributable to cash and trade receivables. As at September 30, 2024, the Company's cash was held with a reputable Canadian chartered bank and a United States of America bank.
With regards to credit risk with customers, the customers' credit evaluation is reviewed by management and account monitoring procedures are used to minimize the risk of loss. The Company believes that no additional credit risk beyond the amounts provided for by the allowance for doubtful accounts is inherent in accounts receivable. As at September 30, 2024 and December 31, 2023, there was no allowance for doubtful accounts.
SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2024 and 2023
(Expressed in United States Dollars)
(unaudited)
5. Financial Instruments, (continued)
As at September 30, 2024, the Company is not exposed to concentration risk as it had no customers (December 31, 2023-
Liquidity Risk
Liquidity risk is the risk that the Company will be unable to meet its obligations as they fall due. The Company takes steps to ensure it has sufficient working capital and available sources of financing to meet future cash requirements for capital programs and operations. Management is considering all its options to repay its creditors. Refer also to going concern, note 2.
The Company actively monitors its liquidity to ensure that its cash flows and working capital are adequate to support its financial obligations and the Company's capital programs. To continue operations, the Company will need to raise capital and complete the refinancing of its real property and organic waste processing and composting facility located at 704 Phillipston Road, Roslin, Ontario, Canada (the "Belleville Facility"). There is no assurance of funding being available or available on acceptable terms. Realization values may be substantially different from carrying values as shown. Refer also to going concern, note 2.
Currency Risk
Although the Company's functional currency is the C$, the Company realizes a portion of its expenses in United States Dollars ("$"). Consequently, certain assets and liabilities are exposed to foreign currency fluctuations. As at September 30, 2024, $
6. Prepaid Expenses and Deposits
Included in prepaid expenses and deposits are costs, primarily for professional services to be expensed as stock-based compensation after September 30, 2024, in the amount of $
7. Long-lived Assets, net
| September 30, 2024 | December 31, 2023 | |||||||||||
| Cost | Accumulated depreciation |
Net book value | Net book value | |||||||||
| Land | $ | $ | $ | $ | ||||||||
| Property under construction | ||||||||||||
| Composting buildings | ||||||||||||
| Gore cover system | ||||||||||||
| Driveway and paving | ||||||||||||
| Signage | ||||||||||||
| Automotive equipment | ||||||||||||
| $ | $ | $ | $ |
SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2024 and 2023
(Expressed in United States Dollars)
(unaudited)
7. Long-lived Assets, net, (continued)
Depreciation for the three and nine-month periods ended September 30, 2024, is disclosed in cost of sales in the amount of $
Long-lived Assets-held for sale
On July 28, 2024, the Company's real estate broker listed the Company's two properties located in Hamilton, Ontario, Canada, (the "Hamilton Facility") for sale. On the recommendation of the real estate broker, there was no selling price noted.
In accordance with ASC 205-20, a disposal of a component or a group of components should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when a component of or group of components meets the initial criteria for classification of held for sale to be classified as held for sale. Per the initial criteria for classification of held for sale, a component or a group of components, or a business or nonprofit activity (the entity to be sold), should be classified as held for sale in the period in which all of the following criteria are met:
-
Management, having the authority to approve the action, commits to a plan to sell the long-lived assets to be sold.
-
The long-lived assets to be sold are available for immediate sale in their present condition subject only to terms that are usual and customary for sales of such long-lived assets to be sold.
-
An active program to locate a buyer or buyers and other actions required to complete the plan to sell the long-lived assets to be sold have been initiated.
-
The sale of the long-lived assets to be sold is probable (the future event or events are likely to occur), and transfer of the long-lived assets to be sold is expected to qualify for recognition as a completed sale, within one year, unless events or circumstances beyond an entity's control extend the period required to complete the sale as discussed below.
-
The long-lived assets to be sold are being actively marketed for sale at a price that is reasonable in relation to its current fair value.
-
Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
8. Related Party Transactions
For the three and nine-month periods ended September 30, 2024, the Company incurred $
SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2024 and 2023
(Expressed in United States Dollars)
(unaudited)
8. Related Party Transactions, (continued)
For the three and nine-month periods ended September 30, 2024, the Company incurred $
In addition, on January 11, 2024, Travellers converted $
For the independent directors, the Company recorded directors' compensation during the three and nine-month periods ended September 30, 2024 of $
Pursuant to the terms of the CEO's Consulting Agreement, for his services as the CEO, the compensation is at a rate of $
Pursuant to the terms of the CFO's Consulting Agreement for his services as the CFO, the compensation is at a rate of $
Furthermore, for the three and nine-month periods ended September 30, 2024, the Company recognized management stock-based compensation expense of $
9. Long-Term Debt
| September 30, 2024 | December 31, 2023 | ||||||
| (a)i) | Mortgage Payable-due June 1, 2024 | $ |