UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedJune 30, 2018March 31, 2019

or

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________________ to ________________

Commission file number333-209143

SUSGLOBAL ENERGY CORP.
(Exact name of registrant as specified in its charter)

416-223-8500

(Registrant’s telephone number, including area code)

Not applicable

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

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.
Yes [   ][X]         No [X[   ]

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 (§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 ][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 or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

pg. 1

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. [X]

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).
Yes [   ]         No [X]

Securities registered pursuant to Section 12(b) of the Act:

The number of shares of the registrant’s common stock outstanding as of August 13, 2018May 15, 2019 was 40,040,03142,484,531 shares.

Explanatory Note: The Company is not required to file reports under Section 13 or 15(d) of the Securities Exchange Act of 1934.

pg. 2

SusGlobal Energy Corp.
INDEX TO FORM 10-Q
For the Three-Month Periods Ended March 31, 2019 and 2018

pg. 3 SUSGLOBAL ENERGY CORP. CONSOLIDATED FINANCIAL STATEMENTS June 30, 2018 and 2017 (Expressed in United States Dollars) CONTENTS SUSGLOBAL ENERGY CORP. CONSOLIDATED FINANCIAL STATEMENTS March 31, 2019 and 2018 (Expressed in United States Dollars) CONTENTS Interim Condensed Consolidated Balance Sheets 5 Interim Condensed Consolidated Statements of Operations and Comprehensive Loss 6 Interim Condensed Consolidated Statements of Stockholders’ Deficit 7 Interim Condensed Consolidated Statements of Cash Flows 8 Notes to the Interim Condensed Consolidated Financial Statements 9-189-20 pg. 4 SusGlobal Energy Corp. Interim Condensed Consolidated Balance Sheets As at June 30, 2018 and December 31, 2017 (Expressed in United States Dollars) (unaudited) June 30, 2018 December 31, 2017 ASSETS             Current Assets     Cash and cash equivalents $  58,446   $  126,117   Trade receivables 103,968 192,194 Inventory   115,733     53,964   Prepaid expenses and deposits 9,092 53,719               Total Current Assets 287,239 425,994               Intangible Assets(note 6) 140,112 147,100               Long-lived Assets, net(note 7) 3,680,597 3,864,588 Total Assets $  4,107,948    $  4,437,682         LIABILITIES AND STOCKHOLDERS’             DEFICIENCY     Current Liabilities             Accounts payable (note 8) $  352,578  $  413,442 Accrued liabilities (notes 8 and 10)   340,343     347,417   Current portion of long-term debt (note 9) 1,747,810 1,828,900 Current portion of obligations under capital lease (note 10)   89,821     59,204   Loans payable to related parties (note 11) 208,835 15,942               Total Current Liabilities 2,739,387 2,664,905               Long-Term Liabilities     Long-term debt (note 9)   2,151,212     2,332,535   Obligations under capital lease (note 10) 257,725 160,580 Total Long-term Liabilities   2,408,937     2,493,115   Total Liabilities 5,148,324 5,158,020 Stockholders’ Deficiency             Preferred stock, $.0001 par value, 10,000,000 authorized, none issued and outstanding     Common stock, $.0001 par value, 150,000,000 authorized, 39,913,031 (2017- 37,393,031) shares issued and outstanding (note 12) 3,992 3,740 Additional paid-in capital 5,388,559 3,576,111 Subscriptions payable   -     178,200   Stock compensation reserve 665,000 330,000 Accumulated deficit   (6,970,848 )   (4,660,296 ) Accumulated other comprehensive loss (127,079 ) (148,093 )               Stockholders’ deficiency (1,040,376 ) (720,338 )               Total Liabilities and Stockholders’ Deficiency $  4,107,948 $  4,437,682                            Going concern(note 2)                  Commitments(note 13)             SusGlobal Energy Corp. Interim Condensed Consolidated Balance Sheets As at March 31, 2019 and December 31, 2018 (Expressed in United States Dollars) (unaudited)     March 31, 2019     December 31, 2018   ASSETS             Current Assets             Cash and cash equivalents $  -   $  42,711   Trade receivables   101,616     129,981   Inventory   26,409     18,550   Prepaid expenses and deposits   110,763     23,172                 Total Current Assets   238,788     214,414                 Intangible Assets(note 6)   148,655     135,189   Long-lived Assets, net(note 7)   3,334,072     3,361,110   Operating Lease Right-Of-Use Asset(note 8)   218,657     -   Long-Term Assets   3,701,384     3,496,299   Total Assets $  3,940,172   $  3,710,713                 LIABILITIES AND STOCKHOLDERS’ DEFICIENCY             Current Liabilities             Bank indebtedness $  3,933   $  -   Accounts payable (note 9)   398,125     353,728   Government remittances payable   5,904     35,169   Accrued liabilities (notes 9 and 14)   630,322     646,003   Current portion of long-term debt (note 10)   3,784,588     3,727,778   Current portion of obligations under capital lease (note 11)   87,717     81,109   Convertible promissory notes (note 12)   770,497     -   Current portion of operating lease liability (Note 13)   11,430     -   Loans payable to related parties (note 14)   112,245     201,575                 Total Current Liabilities   5,804,761     5,045,362                 Long-Term Liabilities             Obligations under capital lease (note 11)   190,438     207,599   Operating lease liability (note 13)   209,770       -   Total Long-term Liabilities   400,208     207,599   Total Liabilities   6,204,969     5,252,961   Stockholders’ Deficiency             Preferred stock, $.0001 par value, 10,000,000 authorized, none issued and outstanding Common stock, $.0001 par value, 150,000,000 authorized, 41,404,531 (2018- 40,299,531) shares issued and outstanding (note 15)   4,142     4,031   Additional paid-in capital   6,811,749     5,754,260   Subscriptions payable   -     4,600   Stock compensation reserve   662,500     1,330,000   Accumulated deficit   (9,634,856 )   (8,554,312 ) Accumulated other comprehensive loss   (108,332 )   (80,827 )               Stockholders’ deficiency   (2,264,797 )   (1,542,248 )               Total Liabilities and Stockholders’ Deficiency $  3,940,172   $  3,710,713                Going concern(note 2)                          Commitments(note 16)             The accompanying notes are an integral part of these interim condensed consolidated financial statements. pg. 5 pg. 5 SusGlobal Energy Corp. SusGlobal Energy Corp. Interim Condensed Consolidated Statements of Operations and Comprehensive Loss For the three and six-month periods ended June 30, 2018 and 2017 (Expressed in United States Dollars) (unaudited) Interim Condensed Consolidated Statements of Operations and Comprehensive Loss     For the three-month periodsended     For the six-month periodsended       June 30, 2018     June 30, 2017     June 30, 2018     June 30, 2017                             Revenue $  227,423   $  -   $  360,144    $  -                             Cost of Sales                                                   Opening inventory   67,210     -     53,964     -   Depreciation   98,268     -     192,311         Direct wages and benefits   44,049     -     84,108     -   Equipment rental, delivery and repairs and maintenance   26,158     -     61,198     -   Utilities   9,688     -     31,888     -   Outside contractors   12,837     -     16,681             258,210     -     440,150     -   Less: closing inventory   (115,733 )   -     (115,733 )   -   Total cost of sales   142,477     -     324,417     -                             Gross profit   84,946     -     35,727     -                             Operating expenses                                                   Financing costs   -     -     -     882,153   Management compensation-stock-based compensation (note 8)   1,582,500     82,500     1,665,000     165,000   Management compensation-fees (note 8)   83,584     40,149     173,758     80,946   Interest expense (note 8)   91,779     22,096     177,019     42,686   Professional fees (note 13(c))   76,220     36,374     137,042     88,359   Office and administration (note 13(c))   12,501     13,244     63,585     32,942   Rent and occupancy (note 8)   34,716     13,752     68,917     25,178   Insurance   15,466     21,983     30,585     36,949   Repairs and maintenance   10,760     -     18,769     -   Filing fees   3,581     5,467     10,039     9,356   Directors compensation   774     13,200     1,565     24,800   Contribution to Advanced Water Technology Program (note 13 (c))   -     -     -     71,017   Total operating expenses   1,911,881     248,765     2,346,279     1,459,386                             Net loss   (1,826,935 )   (248,765 )   (2,310,552 )   (1,459,386 ) Other comprehensive (loss) income                         Foreign exchange (loss) income   (7,300 )   (39,884 )   21,014     (47,727 )                           Comprehensive loss $  (1,834,235 ) $  (288,649 ) $  (2,289,538 )  $  (1,507,113 )                           Net loss per share-basic and diluted $  (0.05 ) $  (0.01 )  $  (0.06 ) $  (0.04 )                           Weighted average number of common shares outstanding-basic and diluted   39,090,613     36,190,291     38,824,909     36,042,945   For the three-month periods ended March 31, 2019 and 2018 (Expressed in United States Dollars) (unaudited)     For the three-month periods ended       March 31, 2019     March 31, 2018                 Revenue $  253,138   $  132,721                 Cost of Sales             Opening inventory   18,550     53,964   Depreciation   95,754     94,043   Direct wages and benefits   49,365     40,059   Equipment rental, delivery, fuel and repairs and maintenance   99,566     35,040   Utilities   27,531     22,200   Outside contractors   105     3,844       290,871     249,150   Less: closing inventory   (26,409 )   (67,210 ) Total cost of sales   264,462     181,940                 Gross loss   (11,324 )   (49,219 )               Operating expenses             Management compensation-stock- based             compensation (note 9)   332,500     82,500   Management compensation-fees (note 9)   81,238     90,174   Marketing   280,000     -   Professional fees   134,702     60,822   Interest expense (notes 9, 10, 11, 12, 13 and 14)   105,023     85,240   Office and administration   67,564     51,084   Rent and occupancy (note 9)   24,241     34,201   Insurance   14,059     15,119   Filing fees   12,683     6,458   Amortization of financing costs   11,997     -   Directors’ compensation (note 9)   2,952     791   Repairs and maintenance   2,261     8,009   Total operating expenses   1,069,220     434,398                 Net loss   (1,080,544 )   (483,617 ) Other comprehensive (loss) income             Foreign exchange (loss) gain   (27,505 )   28,314                 Comprehensive loss $  (1,108,049 ) $  (455,303 )               Net loss per share-basic and diluted $  (0.03 ) $  (0.01 )               Weighted average number of common sharesoutstanding- basic and diluted   41,291,864     38,556,254   The accompanying notes are an integral part of these interim condensed consolidated financial statements. pg. 6 pg. 6 SusGlobal Energy Corp. SusGlobal Energy Corp. Interim Condensed Consolidated Statements of Changes in Stockholders’ Deficiency For the six-month periods ended June 30, 2018 and year ended December 31, 2017 (Expressed in United States Dollars) (unaudited) Interim Condensed Consolidated Statements of Changes in Stockholders’ Deficiency     Number of     Common     Additional Paid-     Share     Stock     Accumulated     Accumulated Other     Stockholders’       Shares     Shares     in Capital     Subscriptions     Compensation     Deficit     Comprehensive     Deficiency                         Payable     Reserve           Loss                                                           Balance – December 31,2016   34,128,910   $  2,004,407    $ -    $ -    $ -    $ (2,447,815 ) $ (41,745 ) $  (485,153 ) Shares issued to directors   40,000     11,600     -     -     -     -     -     11,600   Shares issued to employee   5,000     1,450     -     -     -     -     -     1,450   Shares issued for consulting services   15,000     4,950     -     -     -     -     -     4,950   Shares issued on exercise of offer to acquire shares   115,000     11,500     -     -     -     -     -     11,500   Shares issued to agents on financing   1,620,000     469,800     -     -     -     -     -     469,800   Shares issued on private placement, net of share issue costs   329,176     98,048     -     -     -     -     -     98,048   Reallocation between common shares and additional paid-in capital   -     (2,598,130 )   2,598,130     -     -     -     -     -   Shares issued to directors   40,000     4     13,196     -     -     -     -     13,200   Shares issued as compensation for director nomination   20,000     2     6,598     -     -     -     -     6,600   Shares issued to employee   4,000     1     3,999     -     -     -     -     4,000   Shares issued for consulting services   20,000     2     19,998     -     -     -     -     20,000   Shares issued for private placement compensation   5,000     1     4,999     -     -     -     -     5,000   Shares issued on acquisition of assets   529,970     53     529,917                     529,970   Shares issued on private placement, net of share issue costs   520,975     52     399,274     -     -     -     -     399,326   Stock compensation expensed on vesting of stock award   -     -     -     -     330,000     -     -     330,000   Proceeds received on shares yet to be issued   -     -     -     178,200     -     -     -     178,200   Other comprehensive loss   -     -     -     -     -     -     (106,348 )   (106,348 ) Net loss   -     -     -     -     -     (2,212,481 )   -     (2,212,481 ) Balance – December 31,2017   37,393,031     3,740     3,576,111     178,200     330,000     (4,660,296 )   (148,093 )   (720,338 ) Shares issued for proceedspreviously received   190,000     19     178,181     (178,200 )   -     -     -     -   Shares issued on vesting of2017 stock award   2,000,000     200     1,329,800     -     (330,000 )   -     -     1,000,000   Shares issued for privateplacement, net of share issuecosts   330,000     33     304,467     -     -     -     -     304,500   Stock compensationexpensed on vesting of stockaward   -     -     -     -     665,000     -     -     665,000   Other comprehensiveincome   -     -     -     -     -     -     21,014     21,014   Net loss   -     -     -     -     -     (2,310,552 )   -     (2,310,552 ) Balance-June 30, 2018   39,913,031   $  3,992    $ 5,388,559   $  -    $ 665,000    $      (6,970,848 ) $                      (127,079 )  $ (1,040,376 ) For the three-month periods ended March 31, 2019 and year ended December 31, 2018 (Expressed in United States Dollars) (unaudited)                 Additional                       Accumulated             Number of     Common     Paid-     Share     Stock     Accumulated     Other     Stockholders’       Shares     Shares     in Capital     Subscriptions       Compensation     Deficit     Comprehensive     Deficiency                         Payable     Reserve           Loss         Balance – December31, 2017   37,393,031   $ 3,740   $  3,576,111   $ 178,200   $  330,000   $  (4,660,296 ) $ (148,093 ) $ (720,338 ) Shares issued forproceeds previously received   190,000     19     178,181     (178,200 )   -     -     -     -   Shares issued onvesting of 2017 stockaward   2,000,000     200     1,329,800     -     (330,000 )   -     -     1,000,000   Shares issued forprivate placement, netof share issue costs   696,500     70     650,170     -     -     -     -     650,240   Shares issued todirector   20,000     2     19,998     -     -     -     -     20,000   Stockcompensation expensedon vesting of stockaward   -     -     -     -     1,330,000     -     -     1,330,000   Proceeds received forshares yet to be issued   -         --     4,600     -     -     -     4,600   Other comprehensiveincome   -     -     -     -     -     -     67,266     67,266   Net loss   -     -     -     -     -     (3,894,016 )   -     (3,894,016 ) Balance – December 31,2018   40,299,531     4,031     5,754,260     4,600     1,330,000     (8,554,312 )   (80,827 )   (1,542,248 ) Shares issued forproceeds previouslyreceived   5,000     1     4599     (4,600 )   -     -     -     -   Shares issued onvesting of 2018 stock award   1,000,000     100     999,900     -     (1,000,000 )   -     -     -   Shares issued forprofessional services   100,000     10     52,990     -     -     -     -     53,000   Stockcompensation expensedon vesting of stockawards   -     -     -     -     332,500     -     -     332,500   Other comprehensiveloss   -     -     -     -     -     -     (27,505 )   (27,505 ) Net loss March 31, 2019   -     -     -     -     -     (1,080,544 )   -     (1,080,544 ) Balance-March 31, 2019   41,404,531   $ 4,142   $  6,811,749   $ -   $  662,500   $  (9,634,856 ) $ (108,332 ) $ (2,264,797 ) The accompanying notes are an integral part of these interim condensed consolidated financial statements. pg. 7 pg. 7 SusGlobal Energy Corp. SusGlobal Energy Corp. Interim Condensed Consolidated Statements of Cash Flows For the six-month periods ended June 30, 2018 and 2017 (Expressed in United States Dollars) (unaudited) Interim Condensed Consolidated Statements of Cash Flows   For the six-month For the six-month   period ended period ended   June 30, 2018 June 30, 2017       Cash flows from operating activities             Net loss $  (2,310,552 )  $  (1,459,386 ) Adjustments for:             Depreciation 196,491 292 Amortization of intangible asset   100     100   Non-cash financing fees - 469,800 Stock-based compensation   1,665,000     191,250   Interest capitalized 54,276 - Changes in non-cash working capital:             Trade receivables 81,565 20,646 Inventory   (66,295 )   -   Prepaid expenses and deposits 43,378 (28,396 ) Accounts payable   (50,177 )   (114,870 ) Accrued liabilities 9,646 (35,334 ) Net cash used in operating activities   (376,568 )   (955,898 )       Cash flows from investing activities             Disposal of term deposit - 151,100 Asset purchase commitment   -     (451,680 ) Purchase of long-lived assets (1,565 ) (2,119 ) Net cash used in investing activities   (1,565 )   (302,699 )       Cash flows from financing activities             Advances of long-term debt - 1,695,320 Repayment of long-term debt   (121,878 )   (451,680 ) Repayments of obligations under capital lease (51,283 ) - Repayments of loans payable to related parties   (15,654 )   (61,951 ) Advances of loans payable to related parties 215,243   Private placement proceeds (net of share issue costs)   304,500     138,894   Net cash provided by financing activities 330,928 1,320,583               Effect of exchange rate on cash (20,466 ) (31,762 ) (Decrease) increase in cash   (67,671 )   30,224   Cash and cash equivalents-beginning of period 126,117 1,774 Cash and cash equivalents-end of period $  58,446   $  31,998         Supplemental Cash Flow Disclosures:                   Interest paid $  137,782   $  35,253   Income taxes paid - - For the three-month periods ended March 31, 2019 and 2018 (Expressed in United States Dollars) (unaudited)     For the three-month     For the three-month       period ended     period ended       March 31, 2019     March 31, 2018   Cash flows from operating activities             Net loss $  (1,080,544 ) $  (483,617 ) Adjustments for:             Depreciation   97,701     94,354   Amortization of intangible asset   50     50   Amortization of operating right-of-use asset   3,663     -   Amortization of financing fees   11,997     -   Stock-based compensation   332,500     82,500   Shares issued for professional services   53,000     -   Changes in non-cash working capital:             Trade receivables   31,239     124,296   Inventory   (7,511 )   (14,994 ) Prepaid expenses and deposits   (87,561 )   45,156   Accounts payable   37,207     22,968   Government remittances payable   (30,156 )   -   Accrued liabilities   (29,316 )   45,499   Net cash used in operating activities   (667,731 )   (83,788 )               Cash flows from investing activities             Purchase of intangible assets   (10,777 )   -   Purchase of long-lived assets   -     -   Net cash used in investing activities   (10,777 )   -                 Cash flows from financing activities             Bank indebtedness   4,055     119   Repayment of long-term debt   (21,109 )   (40,441 ) Repayments of obligations under capital lease   (16,665 )   (32,173 ) Advances of convertible promissory notes   758,500     -   Repayments of operating lease liability   (1,107 )   -   Repayments of loans payable to related parties   (94,025 )   (15,820 ) Private placement proceeds (net of share issue costs)   -     45,000   Net cash provided by (used in) financingactivities   629,649     (43,315 )               Effect of exchange rate on cash   6,148     986   Decrease in cash   (42,711 )   (126,117 ) Cash and cash equivalents-beginning ofperiod   42,711     126,117                 Cash and cash equivalents-end of period $  -   $  -   Supplemental Cash Flow Disclosures:             Interest paid $  81,394   $  62,932   Income taxes paid   -     -   (i) Refer to note 10,11 for obligations under capital lease, for details on the non-cash purchase of certain long-lived assets and note 13 for the non-cash inception of the operating lease liability. The accompanying notes are an integral part of these interim condensed consolidated financial statements. pg. 8 pg. 8 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements June 30,March 31, 2019 and 2018 and 2017 (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, 23, 2017. SusGlobal is a renewable energy company focused on acquiring, developing and monetizing a global portfolio of proprietary technologies in the waste to energy application. These interim condensed consolidated financial statements of SusGlobal and its wholly-owned subsidiaries, SusGlobal Energy Canada Corp., SusGlobal Energy Canada I Ltd. (“SGECI”) and SusGlobal Energy Belleville Ltd. (“SGECI”) (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 (“CAD”). 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. As at June 30, 2018,March 31, 2019, the Company had a working capital deficit of $2,452,148$5,565,973 (December 31, 2017-2018-$2,238,911)4,830,948), incurred a net loss of $2,310,552 (2017-$1,080,544 (2018-$1,459,386)483,617) for the sixthree months ended June 30, 2018March 31, 2019 and had an accumulated deficit of $6,970,848$9,634,856 (December 31, 2017-2018-$4,660,296)8,554,312) and expects to incur further losses in the development of its business. 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 PACE Savings & Credit Union Limited (“PACE”) and upon achieving profitable operations. Management believes that the Company will be able to obtain the necessary funding by equity or debt; however, thereThere is no assurance of funding being available or available on acceptable terms. Subsequent to June 30, 2018, the long-term debt with PACE was refinanced (see note 15(a)). 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. pg. 9 pg. 9 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements June 30,March 31, 2019 and 2018 and 2017 (Expressed in United States Dollars) (unaudited) 3. Significant Accounting Policies These interim condensed consolidated financial statements do not include all of 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, 2018 and 2017 and 2016.their accompanying notes. Recently Adopted Accounting Pronouncements: On January 1, 2018,2019, the Company adopted accounting standardsAccounting Standards Update (“ASU”) update No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. The Company now includes restricted cash2016-02, Leases which is also known as part of cashAccounting Standard Codification (“ASC”) Topic 842, that requires lessees to recognize for all operating leases a right-of-use asset and cash equivalents. The Company has adopted this policy on a retrospective basis. The reference to restricted cash includedlease obligation in the interim condensed consolidated balance sheets. Expenses are recognized in the interim condensed consolidated statements of cash flow foroperations and comprehensive loss in a manner similar to previous accounting guidance. Lessor accounting under the three-month period ended March 31, 2017, has been reclassifiednew standard is substantially unchanged and is not relevant to cash and cash equivalents at the end of this prior period. On January 1 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers that supersedes most current revenue recognition guidance. The updated guidance, and subsequent clarifications, collectively referred to as accounting standards codification (“ASC”) 606, require an entity to recognize revenue when it transfers control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In addition, the guidance requires the disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.Company. The Company adopted thisthe accounting standard utilizingusing a prospective transition approach, which applies the modified retrospective approach,provisions of the new guidance at the effective date without adjusting the comparative periods presented, with certain practical expedients available to ease the cumulative effectburden of initiallyadoption. The Company elected the following practical expedients upon adoption: not to reassess whether any expired or existing contracts are or contain leases, not to reassess the lease classification for any expired or existing leases, not to reassess initial direct costs for any existing leases, not to separately identify lease and non-lease components (i.e. maintenance costs) except for fleet vehicles and real estate, and not to evaluate historical land easements under the new guidance. Additionally, the Company elected the short-term lease exemption policy, applying the requirements of ASC 842 to long-term leases (leases greater than 1 year) for which it only has one. Adoption of the new standard recognizedresulted in deficit. Accordingly, comparative prior period information has not been restated$217,755 ($297,074 CAD) of additional right-of-use lease asset and continues to be reported under that accounting standard. The adoption of ASC 606 had no impact on the Company’s interim condensed consolidated balance sheetslease liability as of January 1, 2018. On January 1, 2018, the Company adopted ASU No. 2017, Compensation-Stock Compensation:Topic 718:Scope of ModificationAccounting (ASU 2017-09) to provide clarity and reduce both the (1) diversity in practice and (2) cost and complexity when changing the terms or conditions of share-based payment awards. Under ASU 2017-09, modification accounting is required to be applied unless all of the following are the same immediately before and after the change: 1. The award’s fair value (or calculated value or intrinsic value if those measurement methods are used). 2. The award’s vesting conditions. 3. The award’s classification as an equity or liability instrument. 2019. The adoption of ASC 606 had nonew standard did not have a significant impact on the Company’s interim condensed consolidated balance sheets asstatements of January 1, 2018.operations and comprehensive loss. See note 8, operating lease right-of-use asset, for additional information. 4. Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the FASBfinancial accounting standards board (the “FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date or possibly early adopted, where permitted. Unless otherwise discussed, the impact of recently issued standards that are not yet effective willare not expected to have a material impact on the Company’s financial position, results of operations or cash flows. pg. 10 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements June 30, 2018 and 2017 (Expressed in United States Dollars) (unaudited) 4. Recent Accounting Pronouncements, (continued) In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842). The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. ASU 2016-02 requires the recognition on the balance sheet of a lease liability to make lease payments by lessees and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance will also require significant additional disclosure about the amount, timing and uncertainty of cash flows from leases. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018 (January 1, 2019 for the Company). The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. In March 2018, the FASB approved a new, optional transition method that will give companies the option to use the effective date as the date of initial application on transition. The Company plans to elect this transition method, and as a result, the Company will not adjust the comparative financial information or make the new required lease disclosures for periods before the effective date. The Company anticipates the adoption of this new standard will result in a significant increase in lease-related assets and liabilities in the consolidated balance sheet. As the impact of this standard is non-cash in nature, the Company does not anticipate its adoption having an impact on the Company’s consolidated statement of cash flows. The Company is currently evaluating the impact of adopting ASU No. 2016-02 on the consolidated statement of income. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350) - Simplifying the Test for GoodwillImpairment”. The new standard simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill quantitative impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is to be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The standard is to be effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU No. 2017-04. In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. ASU 2016-13 is effective for the Company beginning January 1, 2020 and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows. pg. 10 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements March 31, 2019 and 2018 (Expressed in United States Dollars) (unaudited) 5. Financial Instruments The carrying value of cash and cash equivalents, trade receivables, certain deposits under prepaid expenses and deposits,bank indebtedness, accounts payable, and accrued liabilities approximated their fair values as of June 30, 2018 and DecemberMarch 31, 20172019 due to their short-term nature. The carrying value of the long-term debt, obligations under capital lease, convertible promissory notes, operating lease obligation and loans payable to related parties approximated their fair valuevalues due to their market interest rates. Interest, Credit and Concentration Risk In the opinion of management, the Company is exposed to significant interest rate risk on its variable corporate term loanlong-term debt of $3,899,022$3,784,588 ($5,134,3455,057,581 CAD) (December 31, 2017-2018-$4,161,435; $5,220,7193,727,778; $5,085,645 CAD). As at June 30, 2018,March 31, 2019, the Company is exposed to concentration risk as it had six customers (December 31, 2017-four(2018-five customers) representing greater than 5% of total trade receivables and these six customers (December 31, 2017-four2018-five customers) represented 80% (December 31 2017-91%93% (2018-90%) of trade receivables. The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue. These customers accounted for 63% (25%90% (42%, 26%, 11% and 38%11%) (June 30, 2017-nil)(March 31, 2018-69%; 24%, 23% and 22%) of total revenue. Liquidity Risk Liquidity risk is the risk that the Company is 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. pg. 11 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements June 30, 2018 and 2017 (Expressed in United States Dollars) (unaudited) 5. Financial Instruments, (continued) The Company intends to continue to raise funds through the issuance of common shares under a private placement, to ensure it has sufficient access to cash to meet current and foreseeable financial requirements. 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. In order to continue operations, the Company will need to raise capital. There is no assurance of funding being available or available on acceptable terms. Realization values may be substantially different from carrying values as shown. Currency Risk Although the Company’s functional currency is the CAD, the Company realizes a portion of its expenses in USD. Consequently, certain assets and liabilities are exposed to foreign currency fluctuations. As at June 30, 2018, $7,002 (2017-March 31, 2019, $63,104 (December 31, 2018-$6,057)68,393) of the Company’s net monetary liabilities were denominated in USD. The Company has not entered into any hedging transactions to reduce the exposure to currency risk. 6. Intangible Assets   June 30, 2018     December 31, 2017     March 31, 2019     December 31, 2018   Technology license (net of accumulated amortization of $631 (2017- $531)) $  1,370   $  1,470   Technology license (net of accumulated amortization of $781 (2018- $731)) $  1,220   $  1,270   Trademarks-indefinite life-$14,327 CAD   10,721     -   Environmental compliance approvals-indefinite life- $182,700 CAD   138,742     145,630     136,714     133,919   $  140,112   $  147,100   $  148,655   $  135,189   On May 6, 2015, the Company acquired an exclusive license from Syngas SDN BHD (“Syngas”), a Malaysian company to use Syngas intellectual property within North America for a period of five years for $1 consideration, renewable every five years upon written request. Syngas manufactures equipment that produces liquid transportation fuel from plastic waste material. The Company issued 20,000 common shares of the Company to an introducing party, determined to be valued at $2,000. On March 14, 2019, the Company incurred fees to register various trademarks in the United States and Canada. On September 15, 2017, the Company acquired the environmental approvals on the purchase of certain assets of Astoria from BDO Canada Limited (‘BDO”) under an asset purchase agreement (the “APA”). 7.Long-lived Assets, net           June 30, 2018     December 31, 2017       Cost     Accumulated     Net book value     Net book value             depreciation               Composting buildings $  2,233,208   $  107,123   $  2,126,085   $  2,302,651   Gore cover system   890,017     70,460     819,557     906,953   Driveway and paving   351,982     22,292     329,690     360,835   Machinery and equipment   46,323     10,717     35,606     44,667   Equipment under capital lease   418,642     65,426     353,216     229,561   Office trailer   6,455     1,533     4,922     6,182   Computer equipment   6,712     2,840     3,872     3,368   Computer software   6,986     2,765     4,221     6,264   Automotive equipment   1,519     304     1,215     1,514   Signage   2,578     365     2,213     2,593     $  3,964,422   $  283,825   $  3,680,597   $  3,864,588   pg. 12 pg. 11 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements June 30,March 31, 2019 and 2018 and 2017 (Expressed in United States Dollars) (unaudited) 7.Long-lived Assets, net, continued     March 31, 2019     December 31, 2018       Cost     Accumulated     Net book value     Net book value             depreciation               Composting buildings $  2,200,566   $  202,956   $  1,997,610   $  1,988,144   Gore cover system   877,008     135,205     741,803     748,112   Driveway and paving   346,837     42,777     304,060     304,639   Machinery and equipment   58,502     26,777     31,725     27,661   Equipment under capital lease   399,667     151,341     248,326     280,323   Office trailer   6,361     2,942     3,419     3,817   Computer equipment   6,614     3,722     2,892     3,186   Computer software   6,884     5,307     1,577     2,389   Automotive equipment   1,497     636     861     953   Signage   2,540     741     1,799     1,886     $  3,906,476   $  572,404   $  3,334,072   $  3,361,110   Included above are certain assets of Astoria acquired from BDO under the APA, which closed on September 15, 2017. The purchase price for the purchased assets, described as an organic composting facility, including composting buildings, gore cover system, driveway and paving, certain machinery and equipment, an office trailer, certain computer equipment and computer software consisted of cash of $2,974,798$3,026,114 ($3,917,300 CAD) and 529,970 restricted common shares of the Company, determined to be valued at $529,970 ($700,000 CAD), based on recent private placement pricing. In addition, legal costs in connection with acquiring the assets of $22,215$22,598 ($29,253 CAD), are included in the cost of the composting buildings. The purchase price was allocated to the assets acquired based on their estimated relative fair value as at the date the assets were acquired. 8. Operating Lease Right-of-Use Asset The Company has one operating lease right-of-use asset and related operating leasae liability and has recognized as such, effective January 1, 2019, based on the present value of lease payments over the lease term that expires on March 31, 2034, calculated to be $217,755 ($297,074 CAD) which were included in the interim condensed consolidated balance sheet. The Company has used its estimated secured incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The operating lease right-of-use asset is being amortized on a straight-line basis over the lease term which expires March 31, 2034 and amortization expense is included under office and administration expense in the interim condensed consolidated statements of operations and comprehensive loss. The Company does not act as a lessor nor does it have any leases classified as financing leases. The operating lease right-of-use asset is periodically reviewed for impairment losses. The Company uses the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant and Equipment-Overall, to determine whether the operating lease right-of-use asset is impaired, and if so, the amount of the impairment loss to recognize. The Company monitors for events or changes in circumstances that require a reassessment of its operating lease right-of-use asset. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding operating lease right-of-use asset. For the three-month period ended March 31, 2019, the Company recorded $3,663 ($4,870 CAD (2018-$nil; $nil CAD) for the amortization of the operating lease right-of-use asset. The following summarizes quantitative information about the Company’s operating lease: Operating cash flow from operating lease $6,679 Right-of-use asset exchanged for operating lease liability $218,657 Weighted-average remaining lease term-operating lease 15 years Weighted average discount rate 12% pg. 12 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements March 31, 2019 and 2018 (Expressed in United States Dollars) (unaudited) 9. Related Party Transactions During the six-monththree-month period ended June 30, 2018,March 31, 2019, the Company incurred $70,443$33,849 ($90,00045,000 CAD) (2017-(2018-$22,484; $30,00035,595; $45,000 CAD) in management fees expense with Travellers International Inc. (“Travellers”), an Ontario company controlled by a director and president of the Company (the “President”); $70,443$33,849 ($90,00045,000 CAD) (2017-(2018-$22,484; $30,00035,595; $45,000 CAD) in management fees expense with Landfill Gas Canada Ltd. (“LFGC”), an Ontario company controlled by a director and chief executive officer of the Company (the “CEO”); $ 23,481$13,540 ($30,00018,000 CAD) (2017-(2018-$17,987; $24,0009,492; $12,000 CAD) in management fees expense with the Company’s chief financial officer (the “CFO”); and $9,391$nil ($12,000nil CAD) (2017-(2018-$17,987; $24,0009,492; $12,000 CAD) in management fees expense with the Company’s vice-president of corporate development (the “VPCD”). As at June 30, 2018,March 31, 2019, unpaid remuneration and unpaid expenses in the amount of $72,544$80,759 ($95,528107,923 CAD) (December 31, 2017-2018-$111,426; $139,78948,691; $66,426 CAD) is included in accounts payable and $202,969$177,347 ($267,275237,000 CAD) (December 31, 2017-2018-$102,935; $129,137184,714; $251,997 CAD) is included in accrued liabilities. In addition, during the six-monththree-month period ended June 30, 2018,March 31, 2019, the Company incurred interest expense of $4,818$3,802 ($6,1565,055 CAD) (2017-(2018-$10,154; $13,548293; $371 CAD) on the outstanding loans from Travellers and $1,544$1,669 ($1,9732,219 CAD) (2017-(2018-$nil; $nil CAD) on the outstanding loans from the directors. As at June 30, 2018,March 31, 2019, interest of $5,892$23,698 ($7,75931,669 CAD) (December 31, 2017-2018-$22,120; $27,75017,882; $24,395 CAD) on these loans is included in accrued liabilities. During the six-monththree-month period ended June 30, 2018,March 31, 2019, the Company incurred $32,499$16,998 ($41,52122,598 CAD) (2017-(2018-$11,426; $15,12415,500; $19,595 CAD) in rent paid under a rental agreement to Haute Inc. (“Haute”), an Ontario company controlled by the President. And, duringThe Company accrued directors’ compensation for its five independent directors for services provided for the six-monththree-month period ended June 30, 2018,March 31, 2019 in the Company sold $15,728 ($20,095 CAD)amount of compost product$2,952 (2018-$791). As at March 31, 2019, $54,200 (December 31, 2018-$52,000) of outstanding fees to LFGC.the directors is included in accrued liabilities. Furthermore, the Company granted the CEO 3,000,000 restricted stock units (“RSU”), under a consulting agreement effective January 1, 2017, determined to be valued at $990,000 based on recent private placement.placement pricing at the time. On January 1,each of February 25, 2018 and April 2, 2019, 1,000,000 RSUs were exchanged into 1,000,000 common stock.stock of the Company. The RSUs for the remaining two installmentsinstallment are expected to vest annually on January 1, 2019 and 2020.2020, subject to meeting certain performance objectives. On May 17, 2018, at a meeting of the board of directors (the “Board”), the Board approved an amendment to the President’s consulting agreement, to include the granting of 3,000,000 RSUs to the President, determined to be valued at $3,000,000, based on private placement pricing at the time, on the same terms and conditions as those granted to the CEO. Effective May 17, 2018,Immediately thereafter, 1,000,000 of the President’s RSUs were exchanged for 1,000,000 common stock of the Company. On January 9, 2019, 1,000,000 of the President’s RSUs were exchanged into 1,000,000 common stock.stock of the Company. Based on recent private placement pricing at the time, the common stock issued to the President on each exchange forof the RSUs, werewas determined to be valued at $1,000,000, disclosed as management compensation expense.$1,000,000. The RSUs for the remaining installment are expected to vest annually on January 1, 2020, subject to meeting certain performance objectives. For the six-monththree-month period ended June 30, 2018,March 31, 2019, the Company recognized management compensation expense of $665,000 (2017-$332,500 (2018-$165,000)82,500 on thesethe award to the CEO) on the awards to the President and the CEO, representing one sixthone-sixth of the total value of the awards of $3,990,000, based on recent private placement pricing onat the dates of the awards.time. 9. Long-Term Debt     Credit     Credit     Credit     Corporate     June 30, 2018     December 31, 2017       Facility     Facility     Facility     Term     Total     Total                         Loan                   (a)     (b)     (c)     (d)               Long-Term Debt $  779,247   $  435,793   $  37,970   $  2,646,012   $  3,899,022   $  4,161,435   Current portion   (779,247 )   (435,793 )   (37,970 )   (494,800 )   (1,747,810 )   (1,828,900 ) Long-term Debt $  -   $  -   $  -   $  2,151,212   $  2,151,212   $  2,332,535   pg. 13 pg. 13 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements June 30,March 31, 2019 and 2018 and 2017 (Expressed in United States Dollars) (unaudited) 9.10. Long-Term Debt, continued                             March     December       Credit     Credit     Credit     Corporate     31, 2019     31, 2018       Facility     Facility     Facility     Term     Total     Total                         Loan                   (a)     (b)     (c)     (d)               Long-Term Debt $  757,258   $  423,490   $  36,898   $  2,566,942   $  3,784,588   $  3,727,778   Current portion   (757,258 )   (423,490 )   (36,898 )   (2,566,942 )   (3,784,588 )   (3,727,778 ) Long-term Debt $  -   $  -   $  -   $  -   $  -   $  -   (a) The credit facility bears interest at the PACE base rate of 6.75%7.00% plus 1.25% per annum, currently 8.25%. The credit facility due on demand, but until a demand is made, is payable in monthly blended installments of principal and interest of $6,558 ($8,764 CAD), and matures on a monthly basis, interestSeptember 2, 2022. The first and only dueadvance on the credit facility on February 2, 2019. The credit facility2017, in the amount of $1,197,280 ($1,600,000 CAD), is secured by a business loan general security agreement, a $1,215,040$1,197,280 ($1,600,000 CAD) personal guarantee from the President and a charge against the Company’s premises lease. Also pledged as security are the shares of the wholly-owned subsidiaries, a pledge of 3,300,000 of the Company’s shares held by LFGC, 500,000 of the Company’s shares held by the CFO, 2,000,000 of the Company’s shares held by a director’s company and a limited recourse guarantee by each of these parties. The credit facility is fully open for prepayment at any time without notice or bonus.     (b) OnThe credit facility advanced on June 15, 2017, PACE loanedin the Company $455,640amount of $448,980 ($600,000 CAD) under, bears interest at the PACE base of 7.00% plus 1.25% per annum, currently 8.25%. The credit facility is due on demand, but until a demand is made, is payable in monthly blended installments of principal and interest of $3,667 ($4,901 CAD), and matures on September 2, 2022. The credit facility is secured by a variable rate business loan agreement for its bid for the purchase of the assets of Astoria on the same terms, conditions and security as noted above, except that the loan is due February 2, 2019.above.     (c) OnThe credit facility advanced on August 4, 2017, PACE loanedin the Company $37,970amount of $37,415 ($50,000 CAD) under, bears interest at the PACE base of 7.00% plus 1.25% per annum, currently 8.25%. The credit facility is due on demand, but until a demand is made, is payable in monthly blended installments of principal and interest of $320 ($427 CAD), and matures on September 4, 2022. The credit facility is secured by a variable rate business loan agreement to satisfy an outstanding liability on the same terms, conditions and security as noted above, except that the loan is due February 4, 2019.above.     (d) On September 13, 2017, PACE loaned the Company $2,828,117 ($3,724,147 CAD) under a corporate term loan. The funds were used for the purpose of acquiring certain assets of Astoria from the court appointed receiver on September 15, 2017. The corporate term loan advanced on September 13, 2017, in the amount of $2,786,779 ($3,724,147 CAD), bears interest at the PACE base rate of 6.75%7.00% plus 1.25% per annum, currently 8.25%. The corporate term loan is due on demand, but until a demand is made, is payable in monthly blended instalmentsinstallments of principal and interest of $57,383$22,233 ($75,56429,711 CAD), dueand matures September 13, 2022. The corporate term loan is secured by a business loan general security agreement representing a floating charge over the assets and undertakings of the Company, a first priority charge under a registered debenture and a lien registered under the Personal Property Security Act in the amount of $3,038,343$2,993,932 ($4,000,978 CAD) against the assets including inventory, accounts receivable and equipment. The corporate term loan also included an assignment of existing contracts included in the APA. The unpaid and previously deferred interest on the corporate term loan for the period from March 13, 2018 to June 13, 2018, in the amount of $52,659 ($69,343 CAD), has been capitalized and included in the principal balance of the corporate term loan.     The shares of the wholly-owned subsidiaries and those shares held by the companies and the CFO noted under (a) above, also represent security for the corporate term loan. See subsequent events note 15(a) for details on the refinancing of all the outstanding long-term debt with PACE. Repayments are as follows: ForIn the six months ending December 31, 2018 $  242,469 For the yearnine-month period ending December 31, 2019 1,767,935 $ 61,424 ForIn the year ending December 31, 2020 557,664 88,637 ForIn the year ending December 31, 2021 603,949 97,124 ForIn the year ending December 31, 2022 485,636 For the year ending December 31, 2023 241,369 3,537,403 Total $  3,899,022 3,784,588 For the six-monththree-month period ended June 30, 2018, $158,433March 31, 2019, $77,619 ($202,419103,189 CAD) (2017-(2018-$32,532; $43,40580,775; $102,118 CAD) in interest was charged. pg. 14 pg. 14 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements June 30,March 31, 2019 and 2018 and 2017 (Expressed in United States Dollars) (unaudited) 10.11. Obligations under Capital Lease                     June 30,     December 31,                 March 31,     December 31,                       2018     2017                 2019     2018     (a)     (b)     (c)     Total     Total     (a)     (b)     Total     Total   Obligations under Capital Lease $  4,746   $  178,187   $  164,613   $  347,546   $  219,784   $  143,493   $  134,662   $  278,155   $  288,708   Less: current portion   (4,746 )   (47,513 )   (37,562 )   (89,821 )   (59,204 )   (48,961 )   (38,756 )   (87,717 )   (81,109 ) Obligations under Capital Lease $  -   $  130,674   $  127,051   $  257,725   $  160,580   Obligations under Capital Lease-Long-term $  94,532   $  95,906   $  190,438   $ 207,599   (a) On September 21, 2017, the Company finalized aThe lease agreement for certain equipment for itsthe Company’s organic composting facility in the amountat a cost of $13,046$214,500 ($17,180286,650 CAD). The lease agreement, is payable in monthly blended instalmentsinstallments of principal and interest of $983 ($1,268 CAD) at a monthly interest rate of 5.95%, due November 10, 2018. (b) On October 30, 2017, the Company finalized a lease agreement for certain equipment, which commenced on October 30, 2017, in the amount of $217,682 ($286,650 CAD). The lease agreement matures on September 30, 2021, with monthly blended instalments of principal and interest of $4,435$4,370 ($5,840 CAD), plus applicable harmonized sales taxes and an option to purchase the equipment for a final payment of $21,719$21,401 ($28,600 CAD), plus applicable harmonized sales taxes on October 31, 2021. The leasinglease agreement bears interest at the rate of 5.982% annually, compounded monthly.monthly, due September 30, 2021.     (c)(b) On February 16, 2018, the Company finalized aThe lease agreement onfor certain equipment which was on monthly rental. The leasefor the Company’s organic composting facility at a cost of $185,167 ($247,450 CAD), is for a period of forty-eight months, with the first two monthly instalments of $7,594 ($10,000 CAD), plus applicable harmonized sales taxes, followed by forty-sixpayable in monthly blended instalmentsinstallments of principal and interest of $3,887$3,830 ($5,118 CAD), plus applicable harmonized sales taxes. The Company hastaxes for a period of forty-six months plus the first two monthly blended installments of $7,483 ($10,000 CAD) plus applicable harmonized sales taxes and an option to purchase the equipment on the forty-ninth month for an amounta final payment of $18,742$ 18,468 ($24,680 CAD), plus applicable harmonized sales taxes.taxes on February 27, 2022. The leasing agreement bears interest at the rate of 6.15% annually, compounded monthly, due January 27, 2022. The lease liabilities are secured by the equipment under capital lease as described in note 7. Minimum lease payments are as follows: ForIn the six-monthnine-month period ending December 31, 20182019 $  59,18178,171   For the year ending December 31, 2019 99,860 ForIn the year ending December 31, 2020   99,86098,400   ForIn the year ending December 31, 2021   108,275106,691   ForIn the year ending December 31, 2022   22,62922,298       389,805305,560   Less: imputed interest   (42,25927,405 ) Total $  347,546278,155   For the six-monththree-month period ended June 30, 2018, $9,738 (12,441March 31, 2019, $3,670 ($4,879 CAD) (December 31, 2017-(2018-$nil; ($nil4,172; $5,274 CAD)) in interest was charged. 11. Loans Payable12. Convertible Promissory Notes       March 31,     December 31,         2019     2018                   (a) Convertible promissory notes-January 28, 2019 (net of unamortized financing costs of $29,055 (2018- $nil)) $  308,445   $  -   (b) Convertible promissory notes-March 7 and March 8, 2019 (net of unamortized financing costs of $87,948) (2018- $nil))   462,052     -       $  770,497   $  -   (a)      On January 28, 2019, the Company entered into securities purchase agreements (the “January 2019 SPAs”) with three investors (the “January 2019 Investors”) pursuant to Related Parties     June 30, 2018     December 31, 2017                 Travellers International Inc. $  151,880   $  15,942   Directors   56,955     -     $  208,835   $  15,942   Loan payablewhich the Company issued to the January 2019 Investors 12% unsecured convertible promissory notes (the “January 2019 Notes”) in the aggregate principal amount of $151,880 ($200,000 CAD) (December 31, 2017-$15,942; $20,000 CAD), owing to Travellers$337,500, with such principal and bearingthe interest thereon convertible into shares of the Company’s common stock (the “Common Stock”) at the rateJanuary 2019 Investors’ option. Although the January 2019 SPAs are dated January 28, 2019 (the “January 2019 Effective Date”), they became effective upon the receipt in cash of 12% per annum, is due on demand and unsecured. As at June 30, 2018, $4,394 ($5,786 CAD) (December 31, 2017-$22,120; $27,750 CAD) in interest is included in accrued liabilities.the issue price by the January 2019 Investors. pg. 15 pg. 15 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements June 30,March 31, 2019 and 2018 and 2017 (Expressed in United States Dollars) (unaudited) 11.12. Convertible Promissory Notes, (continued) The amounts of $102,500, $100,000, and $100,000, totaling $302,500, represented the proceeds to the Company, net of transaction-related expenses, for the January 2019 Notes from the January 2019 Investors and were received in cash from February 1 through February 4, 2019. The maturity date of each of the January 2019 Notes is January 28, 2020 (the “January 2019 Maturity Dates”). The Notes bear interest at a rate of twelve percent (12%) per annum (the “January 2019 Interest Rate”), which interest shall be paid by the Company to the January 2019 Investors in Common Stock at any time the January 2019 Investors send a notice of conversion to the Company. The January 2019 Investors are entitled to, at their option, convert all or any amount of the principal face amount and any accrued but unpaid interest of the January 2019 Notes into Common Stock, at any time, at a conversion price for each share of Common Stock equal to 65% multiplied by the lowest trading price (as defined in the January 2019 Notes) of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange upon which the Company’s shares are traded during the twenty (20) consecutive Trading Day period immediately preceding (i) the January 2019 Effective Date; or (ii) the conversion date. The January 2019 Notes may be prepaid until 180 days from the January 2019 Effective Date with the following penalties: (i) if the January 2019 Notes are prepaid within sixty (60) days following the January 2019 Effective Date, then the prepayment premium shall be 125% of the face amount plus any accrued interest; (ii) if the January 2019 Notes are prepaid during the period beginning on the date which is sixty-one (61) days following the January 2019 Effective Date, and ending on the date which is ninety (90) days following the January 2019 Effective Date, then the prepayment premium shall be 135% of the face amount plus any accrued interest; (iii) if the January 2019 Notes are prepaid during the period beginning on the date which is ninety-one (91) days following the January 2019 Effective Date, and ending on the date which is one hundred eighty (180) days following the January 2019 Effective Date, then the prepayment premium shall be 145% of the face amount plus any accrued interest. Such prepayment redemptions must be closed and funded within three days of giving notice of prepayment or the right to prepay shall be forfeited. The Company has reserved a minimum of eight (8) times the number of its authorized and unissued Common Stock (the “January 2019 Reserved Amounts”), free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of the January 2019 Notes. Upon full conversion of the January 2019 Notes, any shares remaining in such reserve shall be cancelled. The Company increases the January 2019 Reserved Amount in accordance with the Company’s obligations under the January 2019 Notes. Pursuant to the terms of the January 2019 SPAs, for so long as the Investors own any shares of Common Stock issued upon the conversion of the January 2019 Notes (the “January 2019 Conversion Shares”), the Company has covenanted to secure and maintain the listing of such shares of Common Stock. The Company is also subject to certain customary negative covenants under the January 2019 Notes and the January 2019 SPAs, including but not limited to the requirement to maintain its corporate existence and assets, subject to certain exceptions, and not to make any offers or sales of any security under circumstances that would require registration of or stockholder approval for the January 2019 Notes or the January 2019 Conversion Shares. The January 2019 Notes also contain certain representations, warranties, covenants and events of default including if the Company is delinquent in its periodic report filings with the Securities and Exchange Commission and increases in the amount of the principal and interest rates under the January 2019 Notes in the event of such defaults. In the event of default, at the option of the January 2019 Investors and in the January 2019 Investors’ sole discretion, the January 2019 Investors may consider the January 2019 Notes immediately due and payable. (b)        On March 7 and March 8, 2019, the Company entered into two securities purchase agreements (the “March 2019 SPAs”) with two investors (the “March 2019 Investors”) pursuant to which the Company issued to each March 2019 Investor two 12% unsecured convertible promissory notes comprised of the first notes (the “First Notes”) being in the amount of $275,000 each, and the remaining notes in the amount of $275,000 each (the “Back-End Notes,” and, together with the First Notes, the “March 2019 Notes”) in the aggregate principal amount of $1,100,000, with such principal and the interest thereon convertible into Common Stock at the March 2019 Investors’ option. Each First Note contains a $25,000 Original Issue Discount such that the issue price of each First Note was $250,000. The proceeds on the issuance of the First Notes were received from the March 2019 Investors upon the signing of the March 2019 SPAs. pg. 16 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements March 31, 2019 and 2018 (Expressed in United States Dollars) (unaudited) 12. Convertible Promissory Notes, (continued) The proceeds on the issuance of the Back-End Notes were initially received by the issuance of two offsetting $250,000 secured notes to the Company by the March 2019 Investors (the “Buyer Notes”), provided that prior to conversion of the Back-End Notes, the March 2019 Investors must have paid back the Back-End Notes in cash. Although the March 2019 SPAs are dated March 7, 2019 or March 8, 2019 (each, a “March 2019 Effective Date”), they became effective upon the receipt in cash of the issue price by the March 2019 Investors. On March 11, 2019, the Company received cash of $456,000, net of transaction-related expenses, for the First Notes from the March 2019 Investors. The maturity dates of the March 2019 Investor Notes are March 7, 2020 or March 8, 2020. The March 2019 Investor Notes bear interest at a rate of twelve percent (12%) per annum (the “March 2019 Interest Rate”), which interest shall be paid by the Company to the March 2019 Investors in Common Stock at any time the March 2019 Investors send a notice of conversion to the Company. The March 2019 Investors are entitled to, at their option, convert all or any amount of the principal face amount and any accrued but unpaid interest of the March 2019 Investor Notes into Common Stock, at any time, at a conversion price for each share of Common Stock equal to 65% multiplied by the lowest trading price (as defined in the Notes) of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange upon which the Company’s shares are traded during the twenty (20) consecutive Trading Day period immediately preceding (i) the applicable March 2019 Effective Date; or (ii) the conversion date. The March 2019 Investor Notes may be prepaid until 180 days from the applicable March 2019 Effective Date with the following penalties: (i) if the March 2019 Investor Notes are prepaid within sixty (60) days following the applicable March 2019 Effective Date, then the prepayment premium shall be 125% of the face amount plus any accrued interest; (ii) if the March 2019 Investor Notes are prepaid during the period beginning on the date which is sixty-one (61) days following the applicable March 2019 Effective Date, and ending on the date which is ninety (90) days following the applicable March 2019 Effective Date, then the prepayment premium shall be 135% of the face amount plus any accrued interest; (iii) if the March 2019 Investor Notes are prepaid during the period beginning on the date which is ninety-one (91) days following the applicable March 2019 Effective Date, and ending on the date which is one hundred eighty (180) days following the applicable March 2019 Effective Date, then the prepayment premium shall be 145% of the face amount plus any accrued interest. Such prepayment redemptions must be closed and funded within three days of giving notice of prepayment or the right to prepay shall be forfeited. The Company reserved a minimum of eight (8) times the number of its authorized and unissued Common Stock (the “March 2019 Reserved Amounts”), free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of the March 2019 Investor Notes. Upon full conversion of the March 2019 Investor Notes, any shares remaining in such reserve shall be cancelled. The Company increases the March 2019 Reserved Amount in accordance with the Company’s obligations under the March 2019 Investor Notes. Pursuant to the terms of the March 2019 SPAs, for so long as the March 2019 Investors own any shares of Common Stock issued upon the conversion of the March 2019 Investor Notes (the “March 2019 Conversion Shares”), the Company has covenanted to secure and maintain the listing of such shares of Common Stock. The Company is also subject to certain customary negative covenants under the March 2019 Investor Notes and the March 2019 SPAs, including but not limited to the requirement to maintain its corporate existence and assets, subject to certain exceptions, and not to make any offers or sales of any security under circumstances that would require registration of or stockholder approval for the March 2019 Investor Notes or the March 2019 Conversion Shares. The March 2019 Investor Notes contain certain representations, warranties, covenants and events of default including if the Company is delinquent in its periodic report filings with the Securities and Exchange Commission which would increase the amount of the principal and interest rates under the Notes in the event of such defaults. In the event of default, at the option of the March 2019 Investors and in the March 2019 Investors’ sole discretion, the March 2019 Investors may consider the March 2019 Investor Notes immediately due and payable. During the three-month period ending March 31, 2019, the Company accrued interest of $11,039 (2018-$nil) on the outstanding promissory notes. pg. 17 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements March 31, 2019 and 2018 (Expressed in United States Dollars) (unaudited) 13. Operating lease liability As noted under note 8, Operating lease right-of-use asset, the Company has recognized an operating lease right-of-use asset and a related operating lease liability, effective January 1, 2019, based on the present value of lease payments over the lease term that expires on March 31, 2034, calculated to be $217,755 ($297,074 CAD) which were included in the interim condensed consolidated balance sheet. As at March 31, 2019, the minimum lease payments, as calculated under the new lease guidance and reconciled to the operating lease liability are as follows: In the nine-month period ending December 31, 2019 $  27,687 In the year ending December 31, 2020 34,422 In the year ending December 31, 2021 34,422 In the year ending December 31, 2022 34,422 In the year ending December 31, 2023 34,422 Thereafter 291,089 456,464 Less: imputed interest (235,264 ) Present value of minimum lease payments 221,200 Less: current portion of operating lease liability (11,430 ) Long-term portion of operating lease liability $  209,770 During the three-month period ending March 31, 2019, the Company incurred interest of $6,679 ($8,879 CAD) (2018-$nil; $nil CAD) on the operating lease liability. 14. Loans Payable to Related Parties     March 31, 2019     December 31, 2018                 Travellers International Inc. $  56,123   $ 146,500   Directors   56,122     54,975     $  112,245   $ 201,575   Loan payable in the amount of $56,123 ($75,000 CAD) (December 31, 2018-$146,500; $200,000 CAD), continued During the six-month period ended June 30, 2018, three directors each loaned the Company $18,985 ($25,000 CAD). The loans bearowing to Travellers bears interest at the rate of 12% per annum, areis due on demand and is unsecured. As at June 30, 2018, $1,498March 31, 2019 $17,196 ($1,97322,980 CAD) (December 31, 2017-2018-$nil; $nil13,110; $17,885 CAD) in interest is included in accrued liabilities. Loans payable to directors in the amount of $56,122 ($75,000 CAD) (December 31, 2018-$54,975; $75,000 CAD), owing to three directors bears interest at the rate of 12% per annum, is due on demand and is unsecured. As at March 31, 2019, $6,532 ($8,729 CAD) (December 31, 2018-$4,772; $6,510 CAD) in interest is included in accrued liabilities. During the six-monththree-month period ended June 30, 2018, $6,362March 31, 2019, $5,472 ($8,1297,274 CAD) (2017-(2018-$10,154; $13,548293; $371 CAD) in interest was charged on the loans payable to related parties. 12.15. Capital Stock At June 30, 2018,As at March 31, 2019, the Company had 150,000,000 of common shares authorized with a par value of $.0001 per share and 39,913,031 (2017-37,393,031)41,404,531 (2018-40,299,531) common shares issued and outstanding. During the six-monththree-month period ended June 30, 2018,March 31, 2019, the Company raised $304,500$nil (December 31, 2017-2018-$497,374)650,240) cash on a private placement, net of share issue costs of $25,800 (2017-$nil (2018-$48,100)46,260), on the issuance of 330,000nil (December 31, 2017-850,151)2018-696,500) common shares of the Company. The Company issued 1,000,000 common shares on the exchange of the President’s 1,000,000 2018 RSUs; 5,000 common shares for proceeds received prior to December 31, 2018 of $4,600, net of share issue costs of $400; and 100,000 common shares for professional services in the amount of $53,000, based on the closing trading price on the day immediately before issuance. pg. 18 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements March 31, 2019 and 2018 (Expressed in United States Dollars) (unaudited) 15. Capital Stock, (continued) In addition, during the six-month period ended June 30, 2018,prior year, the Company issued 190,000 common shares of the Company, onin regard to the $178,200 cashproceeds received onfrom a private placement received prior to December 31, 2017, net of share issue costs of $11,800. During the prior year, on January 5, 2017$11,800 and January 30, 2017, the Company issued in total, 1,620,00020,000 common shares of the Company to a new director, determined to be valued at $469,800,$20,000, based on recent private placement pricing to agents for their services in assisting in establishingat the first credit facility with PACE. On each of January 30, 2017 and June 8, 2017, the Company issued a total of 40,000 common shares to two new directors, determined to be valued at $11,600 and $13,200 respectively, based on recent private placement pricing.For the six-month period ended June 30, 2018, the services provided by the directors was disclosed under directors’ compensation in the interim condensed consolidated statements of operations and comprehensive loss. On February 6, 2017, the Company issued 5,000 common shares and on August 23, 2017, the Company issued 4,000 common shares to a current employee for services and a new employee as an incentive to join the Company, respectively, determined to be valued at $1,450 and $4,000, respectively, based on recent private placement pricing and disclosed under office and administration in the interim condensed consolidated statements of operations and comprehensive loss. On May 9, 2017, the Company issued 15,000 common shares, on June 8, 2017, another 20,000 common shares and then on August 23, 2017, a further 20,000 common shares to consultants for their services, determined to be valued at $4,950, $6,600 and $20,000 respectively, based on recent private placement pricing. These services were disclosed under professional fees in the interim condensed consolidated statements of operations and comprehensive loss. On May 9, 2017, the Company issued 115,000 common shares on the exercise of the offer to acquire common shares at a price of $0.10 per common share by the VPCD. On September 5, 2017, the Company issued 5,000 common shares as compensation for a private placement, determined to be valued at $5,000. In addition, on September 11, 2017, the Company issued 529,970 common shares on the acquisition of assets, determined to be valued at $529,970 ($700,000 CAD), based on recent private placement pricing (see note 7).time. All non-cash transactions were valued based on the proceeds of a recent private placement. The Company also granted the CEO 3,000,000 restricted stock units (“RSU”),RSUs under a new consulting agreement effective January 1, 2017. The RSUs are expected to vest in three equal installments annually on January 1, 2018, 2019 and 2020. On January 1,February 25, 2018, the Company issued 1,000,000 common shares in exchange for 1,000,000 RSUs and recorded management compensation expense of $165,000 onto the vesting of the RSUs.CEO. In addition, on May 17, 2018, at a meeting of the board of directors (the “Board”),Board, the Board approved an amendment to the President’s consulting agreement, to include the granting of 3,000,000 RSUs to the President, determined to be valued at $3,000,000, based on private placement pricing at the time on the same terms and conditions as those granted to the CEO. Effective May 17, 2018, 1,000,000 RSUs were exchanged into 1,000,000 common stock. Based on recent private placement pricing at the time, the common stock issued onin exchange for the RSUs, werewas determined to be valued at $1,000,000. For the six-month period ended June 30, 2018, this management compensation of $1,000,000 and the vesting of the RSUs for the President in the amount of $500,000 are disclosed under management compensation expense totaling $ 1,500,000. pg. 16 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements June 30, 2018 and 2017 (Expressed in United States Dollars) (unaudited) 13.Commitments a) Effective January 1, 2017, new consulting agreements were finalized for the services of the President and for the CEO. The consulting agreements are for a period of three years, commencing January 1, 2017. For each of these two executive officers, the monthly fees are as follows: $3,797$3,742 ($5,000 CAD) for 2017 and $11,391$11,225 ($15,000 CAD) for 2018 and 2019. In addition, the CEO was granted 3,000,000 RSUs on January 1, 2017. On January 1, 2018, 1,000,000 RSUs were exchanged into 1,000,000 common stock. The RSUs of the remaining two installments are to vest annually on January 1, 2019 and 2020.2020, respectively, upon meeting certain performance objectives. On May 17, 2018, the President’s consulting agreement was amended by the Board to add the granting of 3,000,000 RSUs, on the same terms and conditions as those of the CEO. On this date, the President was issued 1,000,000 common stock on the exchange of 1,000,000 RSUs. The future minimum commitment under these consulting agreements, is as follows:   For the six-monthnine-month period ending December 31, 20182019 $  136,692 For the year ending December 31, 2019 273,384 $  410,076202,041   b) Effective January 1, 2017, the Company entered into a new three-year premises lease agreement with Haute at a monthly amount of $3,038$2,993 ($4,000 CAD) for 2017, $ 3,7973,742 ($5,000 CAD) for 2018 and $4,556$4,490 ($6,000 CAD) for 2019. The Company is also responsible for all expenses and outlays in connection with its occupancy of the leased premises, including, but not limited to utilities, realty taxes and maintenance. The future minimum commitment under this premises lease agreement is as follows:   For the six-monthnine-month period ending December 31, 20182019 $  22,782 For the year ending December 31, 2019 54,677 $  77,45940,408   c) The Company is a partner in a business led collaboration in the water sector, a program known as the Advanced Water Technologies (“AWT”) Program. This program is administered by the Southern Ontario Water Consortium to assist small and medium sized business in the Province of Ontario, Canada, leverage world-class research facility and academic expertise to develop and demonstrate water technologies for successful introduction to market. The Company’s commitment under this program is as follows: For the six-month period ending December 31, 2018 $  18,117 The Company has already completed and provided its commitment for the first year of the program which ended March 31, 2017, which consisted of professional fees of $7,217 ($9,432 CAD) and a contribution to the capital requirements of the program, totaling $71,017 ($94,000 CAD), for equipment to be used in the AWT Program and to be retained by Fleming College, an academic institution. The Company’s commitment in the amount of $19,947 ($25,217 CAD) for the second year of the program which ended March 31, 2018, is included under accounts payable in the interim condensed consolidated balance sheets and under office and administration in the amount of $12,006 ($15,178 CAD) and professional fees in the amount of $7,941 ($10,039 CAD) in the interim condensed statements of operations and comprehensive loss. d) The Company was assigned the land lease on the purchase of certain assets of Astoria. The land lease, which comprises 13.88 acres in Roslin, Ontario, Canada, has a term expiring March 31, 2034. The basic monthly rent on the net lease is $2,278$2,245 ($3,000 CAD) and is subject to adjustment based on the consumer price index as published by Statistics Canada (“CPI”). To date, no adjustment for CPI has been charged by the landlord. The Company is also responsible for any property taxes, maintenance, insurance and utilities. In addition, the Company has the right to extend the lease for five further terms of five years each and one further term of five years less one day. Effective January 1, 2019, this right-of-use operating lease has been reported as an operating lease right-of-use asset and an operating lease liability on the interim condensed consolidated balance sheets. In addition, the Company was recently informed that, through a special provision of the site plan agreement with the City of Belleville (the “City”), Ontario, the Company is required to fund certain road maintenance required by the City for the years 2017 through to 2025 at an annual rate of $7,483 ($10,000 CAD). The future minimum commitment under this land lease (excluding any CPIadjustment) isfirst year of the special provision was 2016, approximately one year before the Company acquired certain assets of Astoria. This special provision was not addressed in the APA and as follows:a result, the Company may be liable for both the 2016 and 2017 assessments. pg. 17 pg. 19 SusGlobal Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements June 30,March 31, 2019 and 2018 and 2017 (Expressed in United States Dollars) (unaudited) 16. 13. Commitments, (continued) For the six-month period ending December 31, 2018 $  13,669 For The payments are due each September 30th. The Company’s estimates that its portion for the year ending December 31,ended September 30, 2017, would be equal to the 15 days the Company owned the organic composting facility, after it was acquired on September 15, 2017. The amounts for 2016 and 2017 have not been paid and unless this can be resolved with the operator for the period prior to September 15, 2017, the Company may be liable for both these years. Effective January 1, 2019, 27,338 For the year ending December 31, 2020 27,338 Forassessments due for the year ending December 31, 2021 27,338 Foryears 2019 through to 2025 have been included with the year ending December 31, 2022 27,338 Foroperating right-of-use asset and operating lease liability on the year ending December 31, 2023 27,338 Thereafter 280,219 interim condensed consolidated balance sheets.     $  430,578 e) On April 9, 2018, a new one-year consulting agreement was finalized for the services of the Company’s CFO, effective April 1, 2018, at a monthly rate of $4,556 ($6,000 CAD). The future minimum commitment under this agreement is as follows: For the six-month period ending December 31, 2018 $  27,336 For the year ending December 31, 2019 13,668 $  41,004 f)d) PACE has provided the Company a letter of credit in favor of the Ministry of the Environment, Conservation and Parks (the “MOECP”), (formerly the Ministry of the Environment and Climate Change (“MOECC”)Change) in the amount of $210,225$207,153 ($276,831 CAD) and, as a security, has registered a charge of lease over the premises, located at 704 Phillipston Road, Roslin, Ontario, Canada. The Company is required to provide for environmental remediation and clean-up costs for its organic composting facility. The letter of credit is a requirement of the MOECCMOECP and is in connection with the financial assurance provided by the Company for it to be in compliance with the MOECCsMOECPs environmental objectives. The MOECCMOECP regularly evaluates the Company’s organic composting facility to ensure compliance is adhered to and the letter of credit is subject to change by the MOECC.MOECP. Since the fair value of the environmental remediation costs cannot be determined at this time, no estimate of such costs has been recorded in the accounts. As of June 30, 2018,March 31, 2019, the MOECC has not drawn on the letter of creditcredit. 14.17. Economic Dependence The Company generated 63%90% of its revenue from two customers. The Company’s ability to continue operations is dependent on continuing to generate a similar amount of revenue from thesefour customers. 15.18. Subsequent Events The Company’s management has evaluated subsequent events up to the date the interim condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following to be material subsequent events:   (a) On July 26Subsequent to March 31, 2019, the Company issued 1,000,000 common shares to the CEO in exchange for his 2018 RSUs determined to be valued at $330,000, based on private placement pricing at the time and 27,expensed during the year ended December 31, 2018 and 80,000 common shares to four directors for their 2018 services, based on the outstanding long-term debt with PACE was re-financed. The re-financing will result in eachclosing trading price of the credit facilities and the corporate term loan having termsCompany’s common shares immediately before issuance, a total of five years and a twenty-year amortization period, resulting in monthly repayment amounts totaling $33,264 ($43,803 CAD).$39,200.         (b) Subsequent to June 30, 2018,On April 24 ,2019, the Company raised $116,840 on a private placement,received one of the Back-End Notes from the March 2019 Investors in the principal amount of $275,000. The proceeds received by the Company was $228,000, net of share issue costsfinancing costs. (c) On May 2, 2019, the Company received a commitment in the form of $10,160,a one year $1,346,940 ($1,800,000 CAD) mortgage, to finance the Company’s purchase of the shares of 1684567 Ontario Inc. The Company anticipates closing this transaction on May 17, 2019. The assets of 1684567 Ontario Inc. include the issuanceproperty that the Company leases for its organic composting facility. Included under prepaid expenses and deposits in the interim condensed consolidated balance sheets, is a deposit of 127,000 common shares.$14,966 ($20,000 CAD) the Company paid in connection with this commitment. 16. Comparative Figures Certain of the prior period’s comparative figures have been reclassified to conform to the current period’s presentation. pg. 18 pg. 20 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Certain statements in this Management's Discussion and Analysis ("MD&A"), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "would," "expect," "intend," "could," "estimate," "should," "anticipate," or "believe," and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers should carefully review the risk factors and related notes included onin our Registration StatementAnnual Report on Form S-410-K for the fiscal year ended December 31, 2018 filed with the Securities and Exchange Commission on April 5, 2017.1, 2019. The following MD&A is intended to help readers understand the results of our operation and financial condition, and is provided as a supplement to, and should be read in conjunction with, our Interim Unaudited Financial Statements and the accompanying Notes to Interim Unaudited Financial Statements under Part 1, Item 1 of this Quarterly Report on Form 10-Q. Growth and percentage comparisons made herein generally refer to the six-monththree-month period ended June 30, 2018March 31, 2019 compared with the six-monththree-month period ended June 30, 2017March 31, 2019 unless otherwise noted. Unless otherwise indicated or unless the context otherwise requires, all references in this document to "we, "us, "our," the "Company," and similar expressions refer to SusGlobal Energy Corp., and depending on the context, its subsidiaries. SPECIAL NOTICE ABOUT GOING CONCERN AUDIT OPINION OUR AUDITOR ISSUED AN OPINION EXPRESSING SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE IN BUSINESS AS A GOING CONCERN FOR THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 20172018 AND 2016.2017. YOU SHOULD READ THIS QUARTERLY REPORT ON FORM 10-Q WITH THE “GOING CONCERN” ISSUES IN MIND. This Management’s Discussion and Analysis should be read in conjunction with the unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (the “Financial Statements”). The financial statements have been prepared in accordance with generally accepted accounting policies in the United States (“GAAP”). Except as otherwise disclosed, all dollar figures included therein and in the following management discussion and analysis are quoted in United States dollars. pg. 19 pg. 21 OVERVIEW The following organization chart sets forth our wholly-owned subsidiaries: 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, 23, 2017. When the terms “the Company,” “we,” “us” or “our” are used in this document, those terms refer to SusGlobal Energy Corp., and its wholly-owned subsidiaries, SusGlobal Energy Canada Corp., SusGlobal Energy Canada I Ltd. and SusGlobal Energy Belleville Ltd. SusGlobal is a renewable energy company focused on acquiring, developing and monetizing a global portfolio of proprietary technologies in the waste to energy application. With the growing amount of organic wastes being produced by society as a whole, a solution for sustainable global management of these wastes must be achieved. SusGlobal through its proprietary technology and processes is equipped and confident to deliver this objective. Management believes renewable energy is the energy of the future. Sources of this type of energy are more evenly distributed over the earth’s surface than finite energy sources, making it an attractive alternative to petroleum-based energy. Biomass, one of the renewable resources, is derived from organic material such as forestry, food, plant and animal residuals. SusGlobal can therefore help you turn what many consider waste into precious energy. The portfolio will be comprised of four distinct types of technologies: (a) Process Source Separated Organics (“SSO”) in anaerobic digesters to divert from landfills and recover biogas. This biogas can be converted to gaseous fuel for industrial processes, electricity to the grid or cleaned for compressed renewable gas. (b) Increasing the capacity of existing infrastructure (anaerobic digesters) to allow processing of SSO to increase biogas yield. (c) Utilize recycled plastics to produce liquid fuels and (d) process digestate to produce a pathogen free organic fertilizer. pg. 22 The convertibility of organic material into valuable end products such as biogas, liquid biofuels, organic fertilizers and compost shows the utility of renewable energy. These products can be converted into electricity, fuels and marketed to agricultural operations that are looking for an increase in crop yields, soil amendment and environmentally-sound practices. This practice also diverts these materials from landfills and reduces greenhouse gas emissions that result from landfilling organic wastes. The Company can provide peace of mind that the full lifecycle of organic material is achieved, global benefits are realized and stewardship for total sustainability is upheld. It is management's objective to grow SusGlobal into a significant sustainable waste to energy and regenerative products provider, as Leaders in The Circular Economy™. TheWe believe the project and services offered can benefit both the public and private markets. The following includes some of our work managing organic waste streams: Anaerobic Digestion, Dry Digestion, Biogas Production, Wastewater Treatment, In- VesselIn-Vessel Composting, SSO Treatment, Biosolids Heat Treatment and Composting. The Company can provide a full range of services for handling organic residuals in a period where innovation and sustainability are paramount. From start to finish we offer in-depth knowledge, a wealth of experience and cutting-edge technology for handling organic waste. pg. 20 The primary focus of the services SusGlobal provides includes identifying idle or underutilized anaerobic digesters and integrating our technologies with capital investment to optimizing the operation of the existing digesters to reach their full capacity for processing SSO. Our processes not only divert significant organic waste from landfills, but also result in methane avoidance, with significant Greenhouse Gas (“GHG”) reductions from waste disposal. The processes also produce renewable energy through the conversion of wastewater biosolids and organic wastes in the same equipment (co-digestion) and valuable end products such as biogas, electricity and organic fertilizer, considered Class AA organic fertilizer. Currently, the primary customers are municipalities in both rural and urban centers throughout southern and central Ontario, Canada. Much of the research and development that has been carried out has been completed by our CEO through multiple projects carried out on projects prior to the formation of SusGlobal. Where necessary, to be in compliance with provincial and local environmental laws and regulations, SusGlobal submits applications to the respective authorities for approval prior to any necessary engineering being carried out. RECENT BUSINESS DEVELOPMENTS Trademark Applications On March 13, 2019, the Company filed trademark applications with the Canadian and US trademark offices to register the SusGlobal logo, Earth’s Journey, SusGro, Leaders in the Circular Economy and Caring for Earth’s Journey. Treatment of Organic Waste and Septage On February 28, 2019, the Company announced that it had received the project completion report titled: Development Optimization and Validation of an Innovative Integrated Anaerobic Thermophilic Digester Treatment of Organic Waste and Septage. The report was written by a research team at Fleming College’s Centre for Advancement of Water and Wastewater Technologies, located in Lindsay, Ontario, Canada. The collaborative project was supported by the Advancing Water Technologies Program (the “AWT Program”) of Southern Ontario Water Consortium. The project focused on the development of a new and innovative technology for handling and processing organic residuals. This new technology utilizes the anaerobic mesophilic digestion process coupled with thermophilic digestion to maximize biogas yields and produce organic fertilizer through optimal operations. pg. 23 Deposits on Acquisition of Shares and Assets On March 19, 2019, the Company paid a deposit of $14,966 ($20,000 CAD) in connection with the financing commitment in the form of a one-year mortgage in the amount of $1,346,940 ($1,800,000 CAD), in connection with the offer to purchase the shares of 168457 Ontario Inc., described below. On February 5, 2019, the Company advanced a non-refundable deposit of $52,776 ($72,000 CAD) in connection with an executed non-binding letter of intent in the amount of $1,295,394 ($1,767,250 CAD) to acquire 100% of the shares of a company, whose primary asset includes the 39.44 acres of property in Roslin (near Belleville), Ontario, Canada which includes the site the Company currently leases for its organic composting facility. On January 31, 2019, the Company advanced a deposit of $36,650 ($50,000 CAD) in connection with a $1,905,800 ($2,600,000 CAD) offer to purchase certain property located in Hamilton, Ontario, Canada, from the court appointed receiver for future operations. Asset Purchase On September 15, 2017, the Company closed theentered into an asset purchase of certain assets fromagreement (the “APA) with Astoria Organic Matters Ltd., and Astoria Organic Matters Canada LP (“Astoria”), underpursuant to which the asset purchase agreement (the “APA”)Company purchased certain assets of Astoria from the court appointed receiver of Astoria, BDO Canada Limited (“BDO”(the “Receiver”). The purchase price for the composting buildings, Gore cover system, driveway and paving, office trailer, certain machinery and equipment, computer equipment, computer software and intangible assets (the “Assets”) consisted of cash of $3,113,540$3,005,300 ($4,100,000 CAD), funded by PACE Savings and Credit Union Limited (“PACE”) and 529,970 restricted common shares of the Company, determined to be valued at $529,970 ($700,000 CAD) based on recent private placement pricing.pricing at the time. In addition, legal costs of $21,442 ($29,253 CAD) in connection with acquiring the assets of $22,215 ($29,253 CAD)Assets are included in the cost of the organic composting facility. In addition, the Company purchased certain accounts receivable which it was required to collect, totaling $132,247$127,650 ($174,147 CAD) and a deposit with a local municipality in the amount of $37,970$36,650 ($50,000 CAD). Financing Agreement with PACE Effective January 1, 2017, the Company obtained a Line of Credit of up to $4,176,700 ($5,500,000 CAD) with PACE. The Line of Credit was to be advanced in tranches to allow for the funding of engineering, permitting, construction costs and equipment purchases for a project located near Owen Sound, Ontario, Canada, (the “BioGrid Project”). On February 2, 2017, the company received the first and only advance in the amount of $1,215,040 ($1,600,000 CAD). The Line of Credit is due on February 2, 2019. The Line of Credit is now one of multiple credit facilities with PACE. The funds advanced on this Line of Credit, $1,215,040 ($1,600,000) bear interest at the PACE base rate of 6.75% plus 1.25% per annum, payable on a monthly basis, interest only. The Line of Credit is secured by a business loan general security agreement, a $1,215,040 ($1,600,000 CAD) personal guarantee from the President and a charge against the Company’s premises lease. Also pledged as security are the shares of the wholly-owned subsidiaries and a pledge of 3,300,000 shares of the Company held by Landfill Gas Canada Ltd. (“LFGC”), an Ontario company controlled by a director and chief executive officer of the Company (the “CEO”), 500,000 shares of the Company held by the chief financial officer (the “CFO”) and 2,000,000 shares of the Company held by a director’s company, and a limited recourse guarantee by each. The Line of Credit is fully open for prepayment at any time without notice or bonus. A total commitment fee of $83,534 ($110,000 CAD) was paid to PACE. In addition, the agents who assisted in establishing the Line of Credit received 1,620,000 common shares of the Company determined to be valued at $469,800, based on the pricing of a recent private placement offering and cash of $300,000, on closing, for their services. Other closing costs in connection with the Line of Credit included legal fees of $29,399 ($38,713 CAD). As at June 30, 2018, $779,247 ($1,026,135 CAD) remains outstanding (December 31, 2017-$817,932; $1,026,135 CAD). During the six months ended June 30, 2018, the Company incurred interest charges of $31,862 ($40,708 CAD) (2017-$30,981; $41,336 CAD) on this Line of Credit. On July 27, 2018, the Company refinanced this credit facility at the PACE base rate of 7% plus 1.25% per annum, payable in monthly blended instalments of principal and interest of $6,655 ($8,764), commencing August 2, 2018, amortized over a twenty-year period and due September 2, 2022. pg. 21 On June 15, 2017, PACE loaned the Company $455,640 ($600,000 CAD) under a variable rate business loan agreement, for its bid for the purchase of certain assets of Astoria on the same terms and conditions to the Line of Credit above, except that the loan is due February 2, 2019. As at June 30, 2018, $435,793 ($573,865 CAD) (December 31, 2017-$457,428; $573,865 CAD) remains outstanding. During the six months ended June 30, 2018, the Company incurred interest charges of $17,819 ($22,766 CAD) (2017-$1,550; $2,069 CAD) on this credit facility. On July 27, 2018, the Company refinanced this credit facility at the PACE base rate of 7% plus 1.25% per annum, payable in monthly blended instalments of principal and interest of $3,722 ($4,901 CAD), commencing August 2, 2018, amortized over a twenty-year period and due September 2, 2022. On August 4, 2017, PACE loaned the Company $37,970 ($50,000 CAD) under a variable business loan agreement, to satisfy an outstanding liability on the same terms and conditions to the Line of Credit above, except that the loan is due February 4, 2019. As at June 30, 2018, $37,970 ($50,000 CAD) (December 31, 2017-$39,855; $50,000 CAD) remains outstanding. During the six months ended June 30, 2018, the Company incurred interest charges of $1,553 ($1,984 CAD) (2017-$nil; $nil CAD) on this credit facility. On July 27, 2018, the Company refinanced this credit facility at the PACE base rate of 7% plus 1.25% per annum, payable in monthly blended instalments of principal and interest of $324 ($427 CAD), commencing August 4, 2018, amortized over a twenty-year period and due September 4, 2022. On September 13, 2017, PACE loaned the Company $2,828,117 ($3,724,147) under a corporate term loan. The funds were used for the purpose of acquiring certain assets of Astoria from the court appointed receiver on September 15, 2017. The corporate term loan bears interest at the PACE base rate of 6.75% plus 1.25% per annum, payable in monthly blended instalments of principal and interest of $57,383 ($75,564 CAD), due September 13, 2022. The corporate term loan is secured by a business loan general security agreement representing a floating charge over the assets and undertakings of the Company, a first priority charge under a registered debenture and a lien registered under the Personal Property Securities Act in the amount of $3,38,343 ($4,000,978 CAD) against the assets, including accounts receivable, inventory and equipment. PACE has also provided the Company with a letter of credit in the favor of the Ministry of the Environment and Climate Change (“MOECC”) in the amount of $210,226 ($276,831 CAD) and, as security, has registered a charge of lease over the premises, located at 704 Phillipston Road, Roslin, Ontario, Canada. The corporate term loan also includes an assignment of existing contracts included in the APA. On June 13, 2018, the unpaid and previously deferred interest on the corporate term loan for the period from March 13, 2018 to June 13, 2018, in the amount of $52,659 ($69,343 CAD), has been capitalized and included in the principal balance of the corporate term loan. As at June 30, 2018, $2,646,012 ($3,484,345 CAD) remains outstanding. During the six months ended June 30, 2018, the Company incurred interest charges of $107,1199 ($136,961 CAD) on this corporate term loan. As of June 30, 2018, and the date of this filing, the MOECC has not drawn on the letter of credit. The shares pledged as security for the Line of Credit and the other credit facility also pertain to this corporate term loan. On July 26, 2018, the Company refinanced this corporate term loan. The first and only blended instalment of principal and interest of $22,147 ($29,164 CAD) due August 1, 2018 will be at the PACE base rate of 6.75% plus 1.25% per annum, for this payment, amortized over a twenty-year period. This will be followed, commencing August 13, 2018, by monthly blended instalments of principal and interest of $22,562 ($29,711 CAD) at the PACE base rate of 7% plus 1.25% per annum, amortized over a twenty-year period. This refinanced corporate term loan is due September 13, 2022. Other On April 11, 2018, three directors each loaned the Company $18,985 ($25,000 CAD). The loans bear interest at the rate of 12% per annum, are due on demand and unsecured. During the six-month period ended June 30, 2018, $1,544 ($1,973 CAD) of interest was charged on this loan. As at June 30, 2018, $1,498 ($1,973 CAD) (December 31, 2017-$nil; $nil CAD) in interest is included in accrued liabilities and the loans remain outstanding. On April 3, 2018, a new loan was provided by Travellers International Inc. (“Travellers”), an Ontario company controlled by the Executive Chairman and President (the “President”), who is also a director of the Company, in the amount of $151,880 ($200,000 CAD). A portion of the funds, $114,766 ($151,128 CAD), was used to pay two overdue monthly principal and interest instalments on the Company’s corporate term loan with PACE. This new loan is due on demand, unsecured and bears interest at the rate of 12% per annum. During the six-month period ended June 30, 2018, $4,529 ($5,786 CAD) of interest was charged on this loan. As at June 30, 2018, $4,394 ($5,786 CAD) (December 31, 2017-$nil; $nil CAD) in interest is included in accrued liabilities and the loans remain outstanding. pg. 22 On February 16, 2018, the Company finalized a lease agreement for certain equipment for its organic composting facility, which was previously on monthly rental, in the amount of $187,914$185,167 ($247,450)247,450 CAD) (the “2018 Equipment Lease Agreement”). The lease2018 Equipment Lease Agreement is for a period of forty-eight months, with two initial monthly instalmentsinstallments of $7,594$7,483 ($10,000 CAD) each, plus the applicable harmonized sales taxes, followed by forty-six monthly blended instalmentsinstallments of principal and interest of $3,887$3,830 ($5,118 CAD), plus the applicable harmonized sales taxes. The Company has the option to purchase the equipment on the forty ninth month for an amount of $18,742$18,468 ($24,680 CAD), plus the applicable harmonized sales taxes. The leasing agreement2018 Equipment Lease Agreement bears interest at the rate of 6.15% annually, compounded monthly, due January 27, 2022. During the three-month period ending March 31, 2019 $2,178 ($2,895 CAD) (2018-$963; $1,217 CAD) of interest was charged on the 2018 Equipment Lease Agreement. On October 30, 2017, the Company finalized a lease agreement for certain equipment for its organic composting facility, which commenced on October 30, 2017, in the amount of $217,682$214,500 ($286,650 CAD) (the “October 2017 Equipment Lease Agreement”). The lease agreementOctober 2017 Equipment Lease Agreement requires monthly blended instalmentsinstallments of principal and interest of $4,435$4,370 ($5,840 CAD), plus applicable harmonized sales taxes and a final balloon payment of $21,719$21,401 ($28,600 CAD), plus applicable harmonized sales taxes on October 31, 2021. The lease agreementOctober 2017 Equipment Lease Agreement bears interest at the rate of 5.982% annually, compounded monthly, due September 30, 2021. During the three-month period ending March 31, 2019, $1,492 ($1,984 CAD) (2018-$2,994; $3,785 CCAD) of interest was charged on the October 2017 Equipment Lease Agreement. On September 21, 2017, the company finalized a lease agreement for the lease of certain equipment for its organic composting facility, in the amount of $13,046$12,856 ($17,180 CAD) (the “September 2017 Equipment Lease Agreement”). The lease agreementSeptember 2017 Equipment Lease Agreement requires monthly blended instalmentsinstallments of principal and interest of $983$949 ($1,268 CAD) at a monthly interest rate of 5.95%, due and fully paid on November 10, 2018. During the three-month period ending March 31, 2019, $nil ($nil CAD) (2018-$209; $264 CAD) of interest was charged under the September 2017 Equipment Lease Agreement. On May 11, 2017, the Company signed a posting agreement with CrowdVest, a Tennessee limited liability company (“CrowdVest”), to act as the Company’s online intermediary technology platform in connection with the Company’s offering of common stock undershares of Common Stock pursuant to Rule 506 of Regulation D under the Securities Act of 1933. As compensation, CrowdVest received 20,000 restricted common shares of Common Stock of the Company, based on an issueissuance price of $5 per share, once the 506(c)-general solicitation offering commenced. The offering terminated on October 27, 2017 and was not extended. pg. 24 On May 9, 2017, the company signed a memorandum of agreement (the “Agreement”) with Kentech (the “Kentech Agreement”), a corporation existing under the laws of the province of Ontario, Canada.Canada (“Kentech”). The Kentech Agreement provides the Company the right to acquire and the right to use the equipment and innovative processes of Kentech in relation to the production of liquid fertilizer from organic waste material. The Kentech Agreement is for a period of five years, commencing on the date of the Kentech Agreement. The Kentech Agreement may be terminated by either party onupon providing six months’ notice. Effective January 1, 2017, new consulting agreements were finalized for the services of the “President”President and for the chief executive officerCEO (the “CEO”“Consulting Agreements”). The consulting agreementsConsulting Agreements are for a period of three years, commencing January 1, 2017. For each of these two executive officers,the President and the CEO, the monthly fees are to be as follows: $3,797$3,742 ($5,000 CAD) plus applicable taxes for 2017 and $11,391$11,225 ($15,000 CAD) plus applicable taxes for 2018 and 2019. In addition, the CEO was granted 3,000,000 Restricted Stock Units (“RSU”). The RSUs are to vest in three equal installments annually on January 1, 2017, determined to be valued at $990,000, based on private placement pricing at the time. On each of February 25, 2018 and April 2, 2019, and 2020. At a meeting1,000,000 RSUs were exchanged into 1,000,000 shares of common stock of the boardCompany. The RSUs of directorsthe remaining installment are expected to vest on January 1, 2020, upon meeting certain performance objectives. On May 17, 2018, the President’s Consulting Agreement was amended by the Board of Directors’ (the “Board”) on May 17, 2017, the Board approved an amendment, to the President’s consulting agreement, to includeadd the granting of 3,000,000 RSUs, determined to be valued at $3,000,000 based on private placement pricing at the Presidenttime on the same terms and conditions as those grantedof the CEO. On this date, the President was issued 1,000,000 shares of common stock of the Company in exchange for 1,000,000 RSUs. On January 9, 2019, 1,000,000 RSUs were exchanged for 1,000,000 common stock of the Company. The RSUs of the remaining installment are expected to the CEO.vest on January 1, 2020, upon meeting certain performance objectives. On December 7, 2016, the Company was awarded funding for the Advanced Water TechnologiesAWT Program, (the “AWT”), a program for business led collaborations in the water sector. The AWT Program is administered by the Southern Ontario Water Consortium to assist small and medium sized businesses in the Province of Ontario, Canada, to leverage world-class research facilities and academic expertise to develop and demonstrate water technologies for successful introduction to market. In addition, the programAWT Program is designed to enhance the Ontario water cluster and continue to build Ontario’s reputation for water excellence around the world. The Company’s academic partner is the CAWT at Fleming College in Lindsay, Ontario, Canada. The programoriginal AWT Program budget iswas for $607,520$586,400 ($800,000 CAD), of which the Company contributes 50% in cash and in-kind contributions and CAWT contributes 50%. CAWT revised its budget for the second and third years of the AWT Program. As a result, the cash commitments for 2017 and 2018, the second and third years of the AWT Program were cancelled. The Company hashad already completed and provided its commitment for the first year of the programAWT Program which ended March 31, 2017, which consistedconsisting of professional fees of $7,217 ($9,432 CAD) and a contribution to the capital requirements of the program,AWT Program, totaling $71,017 ($94,000 CAD), for equipment to be used in the AWT Program and to be retained by Fleming College, the academic institution. The Company’s commitment in the amount of $19,150 ($25,217 CAD) for the second year of the program which ended March 31, 2018, is included under accounts payable in the interim condensed consolidated balance sheets.CAWT. On October 21, 2016, the Company hired the services of a contractor to assume the role of vice-president of corporate development (“VPCD”), effective November 1, 2016, for a period of fourteen months, at the rate of $3,038$2,993 ($4,000 CAD) per month, plus applicable taxes. In addition, the contractor was offered up to 115,000 common shares of Common Stock of the Company, at a price of $0.10 per common share, exercisable within 180 days of the effective date of the contract. On April 30, 2017, the contractor exercised the offer to purchase 115,000 common shares of Common Stock of the Company. Effective January 1, 2018,At the end of the fourteen-month term, the VPCD performed hercontinued to provide services on a month to monthmonthly basis atfor the same monthly rate and completed her services on March 31,first three months of 2018. pg. 23 On November 4, 2016, the Company’s BioGrid Project, a project described in the expansion and operation agreement (the “BioGrid Agreement”) with the Township of Georgian Bluffs and the Township of Chatsworth (the “Municipalities”), was terminated. On August 19, 2016, Travellers provided a furtheran unsecured loan bearing interest at an annual rate of 12% in the amount of 159,474157,143 ($210,000 CAD) which was required to initiate a letter of credit in the amount of $151,880$149,660 ($200,000 CAD), in favor of the Municipalities. As at. This loan was repaid in full, during the three months ended March 31, 2018. During the six months ended June 30, 2018, the Company incurredwith accrued interest charges of $290 ($371 CAD) on this loan. On April 3, 2018, the Company fully repaid the accrued interest outstanding on this loan. The letter of credit was a requirement of the BioGrid Agreement noted above.2018. Fees for the letter of credit included $7,594$7,483 ($10,000 CAD) incurred and charged by Travellers and $2,278$2,245 ($3,000 CAD) charged by the Company’s chartered bank. There is no written agreement evidencing this loan orand the previous loan with Travellers. The interest-bearing loans with Travellers are due on demand and werewas approved by the Board of Directors of the Company. On August 3, 2016, the Company signed an agreement with Grimsby Energy Inc. from Grimsby, Ontario, Canada, to allow hydrolyzed and pasteurized organic wastes to be processed at their Anaerobic Biodigester. The agreement commenced November 1, 2016 and can be terminated by either party within three hundred and sixty-five days minimum written notice. Up to the date of this filing, there has been no activity under this agreement. On May 14, 2015, the Ontario Ministry of the Environment, Conservation and Parks (the “MOECP”) formerly the Ontario Ministry of the Environment and Climate Change, announced formal targets to be met to satisfy a commitment necessary to join the WCIWestern Climate Initiative (the “WCI”) along with Quebec and California, who are in the WCI with Cap and Trade commitments since 2014. The Ontario emission targets are very ambitious, with greenhouse gas (“GHG”)GHG emission reductions of 15% by 2020, 37% by 2030 and 80% by 2050, all from a 1990 baseline. Ontario achieved a 6% reduction in GHG emissions from 1990 levels in 2014, mainly by closing all coal-fired power plants. The targets announced will require a focused program to reduce GHG emissions. pg. 25 The Company’s activities all contribute to GHG reductions, so we will be a key part of Ontario’s initiative. The Company has also contacted counterparties in Quebec and California to explore opportunities for relevant projects. SusGlobal is committed to making all its commercial activities carbon neutral. The newNew Cap and Trade regulations werebecame effective on January 2017. Subsequently, on July 3, 2018, the new premier of the Province of Ontario announced the end of the Cap and Trade program in Ontario. On May 6, 2015, the Company finalized an agreement with Syngas, a company incorporated under the laws of Malaysia (“Syngas”), providing an exclusive license for the Company to use Syngas Intellectual Property within North America for a period of five years from the date of this agreement, for a consideration of $1, consideration, renewable every five years upon written request.request (the “Syngas License Agreement”). Syngas produces equipment that uses an innovative process to produce liquid transportation fuel from plastic waste material. The Company issued 20,000 common shares of Common Stock of the Company to an introducing party, determined to be valued at $2,000. The technology licenseSyngas License Agreement is being amortized on a straight-line basis, over a period of 10 years. There are no other obligations under this agreement.the Syngas License Agreement. The Company and Syngas intend to collaborate and cooperate with a view to achieving economic and financial success for their respective businesses. The Company will continue to pursue other similar intellectual property around the world as we combine this and other technologies in innovative configurations to monetize the portfolio of proprietary technologies and processes to deliver value to our customers and shareholders. Operations Waste Transfer Station: The Company owns the Environmental Compliance Approvals (the “ECAs”) issued by the Ministry of the Environment and Climate Change (the “MOECC”),MOECP, from the Province of Ontario, in place to accept up to 70,000 metric tonnes of waste annually from the provinces of Ontario and Quebec and from western New York state, and to operate a waste transfer station with the capacity to process up to 50,000 metric tonnes of waste annually. The Company is reviewing plans to construct and equipOnce built, the waste transfer station. The location of the waste transfer station once built, will be alongside ourthe organic composting facility noted below,which is currently in operation near Belleville, Ontario, Canada. Waste Transfer Station:Access to the waste transfer stations is critical to haulers who collect waste in areas not in close proximity to disposal facilities where such disposal continues to be permitted. Tipping fees charged to third parties at waste transfer stations are usually based on the type and volume or weight of the waste deposited at the waste transfer station, the distance to the disposal site, market rates for disposal costs and other general market factors. pg. 24 Organic Composting Facility.OurThe Company’s organic composting facility, located near Belleville, Ontario Canada, has ECAs in place to accept up to 70,000 metric tonnes of waste annually and is currently in operation. Certain assets of the organic composting facility, including the ECAs for the waste transfer station, were acquired by the Company on September 15, 2017, from the court appointed receiver, BDO, for Astoria, under the APA. The Company charges tipping fees for the waste accepted at the organic composting facility based on arrangements in place with the customers and the type of waste accepted. Typical waste accepted includes, leaf and yard, biosolids, food, liquid, paper sludge and paper sludge.source separated organics. During 2018,the three-month period ending March 31, 2019, tipping fees ranged from $23$19 ($3025 CAD) to $63$64 ($8085 CAD) per metric tonne. Compost Sales.The Company also sells organic compost (screened and unscreened) to local customers. During 2018,the three-month period ending March 31, 2019, the average selling price of the compost per metric tonne was approximately $16$8 ($2111 CAD). LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2018,March 31, 2019, the Company had a cash balance (bank indebtedness) of $58,446$3,933 (December 31, 2017-2018-$126,117)42,711) and current debt obligations in the amount of $2,739,387$5,804,761 (December 31, 2017-2018-$2,664,905)5,045,362). As at June 30, 2018,March 31, 2019, the Company had a working capital deficit of $2,452,148$5,565,973 (December 31, 2017-2018-$2,238,911)4,830,948). The Company does not currently have sufficient funds to satisfy the current debt obligations. Should the Company’s creditors seek or demand payment, the Company does not have the resources to pay or satisfy any such claims currently. Subsequent to June 30, 2018, PACE and the Company agreed to re-finance the outstanding debt and to amortize such debt over a period of twenty years. The Company’s total assets at June 30, 2018March 31, 2019 were $4,107,948and$3,940,172 (December 31, 2018-$3,710,713) and total current liabilities were $2,739,387.$5,804,761 (December 31, 2018-$5,045,362). Significant losses from operations have been incurred since inception and there is an accumulated deficit of $6,970,848$9,634,856 as of June 30, 2018.March 31, 2019 (December 31, 2018 -$8,554,312). Continuation as a going concern is dependent upon generating significant new revenue and generating external capital and securing debt to achieve profitable operations while maintaining current fixed expense levels. pg. 26 To pay current debt obligations and to fund any future operations, the Company requires significant new funds, which the Company may not be able to obtain. In addition to the funds required to liquidate the $2,739,387$5,804,761 in current liabilities,debt obligations, the Company estimates that approximately $5,000,000$13,000,000 must be raised to fund capital requirements and general corporate expenses for the next 12 months. In the normal course of business, we are exposed to market risks, including changes in interest rates, certain commodity prices and Canadian currency rates. The Company does not use derivatives to manage these risks. On March 7 and March 8, 2019, the Company entered into two securities purchase agreements (the “March 2019 SPAs”) with two investors (the “March 2019 Investors”) pursuant to which the Company issued to each March 2019 Investor two 12% unsecured convertible promissory notes comprised of the first notes (the “First Notes”) being in the amount of $275,000 each, and the remaining notes in the amount of $275,000 each (the “Back-End Notes,” and, together with the First Notes, the “March 2019 Notes”) in the aggregate principal amount of $1,100,000, with such principal and the interest thereon convertible into Common Stock at the March 2019 Investors’ option. Each First Note contains a $25,000 Original Issue Discount such that the issue price of each First Note was $250,000. The proceeds on the issuance of the First Notes were received from the March 2019 Investors upon the signing of the March 2019 SPAs. Although the March 2019 SPAs are dated March 7, 2019 or March 8, 2019 (each, a “March 2019 Effective Date”), they became effective upon the receipt in cash of the issue price by the March 2019 Investors. On March 11, 2019, the Company received cash of $456,000, net of transaction-related expenses, for the First Notes from the March 2019 Investors. The maturity dates of the March 2019 Investor Notes are March 7, 2020 or March 8, 2020. The March 2019 Investor Notes bear interest at a rate of twelve percent (12%) per annum (the “March 2019 Interest Rate”), which interest shall be paid by the Company to the March 2019 Investors in Common Stock at any time the March 2019 Investors send a notice of conversion to the Company. The March 2019 Investors are entitled to, at their option, convert all or any amount of the principal face amount and any accrued but unpaid interest of the March 2019 Investor Notes into Common Stock, at any time, at a conversion price for each share of Common Stock equal to 65% multiplied by the lowest trading price (as defined in the Notes) of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange upon which the Company’s shares are traded during the twenty (20) consecutive Trading Day period immediately preceding (i) the applicable March 2019 Effective Date; or (ii) the conversion date. The March 2019 Investor Notes may be prepaid until 180 days from the applicable March 2019 Effective Date with the following penalties: (i) if the March 2019 Investor Notes are prepaid within sixty (60) days following the applicable March 2019 Effective Date, then the prepayment premium shall be 125% of the face amount plus any accrued interest; (ii) if the March 2019 Investor Notes are prepaid during the period beginning on the date which is sixty-one (61) days following the applicable March 2019 Effective Date, and ending on the date which is ninety (90) days following the applicable March 2019 Effective Date, then the prepayment premium shall be 135% of the face amount plus any accrued interest; (iii) if the March 2019 Investor Notes are prepaid during the period beginning on the date which is ninety-one (91) days following the applicable March 2019 Effective Date, and ending on the date which is one hundred eighty (180) days following the applicable March 2019 Effective Date, then the prepayment premium shall be 145% of the face amount plus any accrued interest. Such prepayment redemptions must be closed and funded within three days of giving notice of prepayment or the right to prepay shall be forfeited. The Company reserved a minimum of eight (8) times the number of its authorized and unissued Common Stock (the “March 2019 Reserved Amounts”), free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of the March 2019 Investor Notes. Upon full conversion of the March 2019 Investor Notes, any shares remaining in such reserve shall be cancelled. The Company increases the March 2019 Reserved Amount in accordance with the Company’s obligations under the March 2019 Investor Notes. Pursuant to the terms of the March 2019 SPAs, for so long as the March 2019 Investors own any shares of Common Stock issued upon the conversion of the March 2019 Investor Notes (the “March 2019 Conversion Shares”), the Company has covenanted to secure and maintain the listing of such shares of Common Stock. The Company is also subject to certain customary negative covenants under the March 2019 Investor Notes and the March 2019 SPAs, including but not limited to the requirement to maintain its corporate existence and assets, subject to certain exceptions, and not to make any offers or sales of any security under circumstances that would require registration of or stockholder approval for the March 2019 Investor Notes or the March 2019 Conversion Shares. The March 2019 Investor Notes contain certain representations, warranties, covenants and events of default including if the Company is delinquent in its periodic report filings with the Securities and Exchange Commission which would increase the amount of the principal and interest rates under the Notes in the event of such defaults. In the event of default, at the option of the March 2019 Investors and in the March 2019 Investors’ sole discretion, the March 2019 Investors may consider the March 2019 Investor Notes immediately due and payable. pg. 27 On April 24, 2019, the Company received one of the Back-End Notes from the March 2019 Investors in the principal amount of $275,000. The cash proceeds received by the Company was $228,000, net of financing costs. On January 28, 2019, the Company entered into securities purchase agreements (the “January 2019 SPAs”) with three investors (the “January 2019 Investors”) pursuant to which the Company issued to the January 2019 Investors 12% unsecured convertible promissory notes (the “January 2019 Notes”) in the aggregate principal amount of $337,500, with such principal and the interest thereon convertible into shares of the Company’s common stock (the “Common Stock”) at the January 2019 Investors’ option. Although the January 2019 SPAs are dated January 28, 2019 (the “January 2019 Effective Date”), they became effective upon the receipt in cash of the issue price by the January 2019 Investors. The amounts of $102,500, $100,000, and $100,000, totaling $302,500, represented the proceeds to the Company, net of transaction-related expenses, for the January 2019 Notes from the January 2019 Investors and were received in cash from February 1 through February 4, 2019. The maturity date of each of the January 2019 Notes is January 28, 2020 (the “January 2019 Maturity Dates”). The Notes bear interest at a rate of twelve percent (12%) per annum (the “January 2019 Interest Rate”), which interest shall be paid by the Company to the January 2019 Investors in Common Stock at any time the January 2019 Investors send a notice of conversion to the Company. The January 2019 Investors are entitled to, at their option, convert all or any amount of the principal face amount and any accrued but unpaid interest of the January 2019 Notes into Common Stock, at any time, at a conversion price for each share of Common Stock equal to 65% multiplied by the lowest trading price (as defined in the January 2019 Notes) of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange upon which the Company’s shares are traded during the twenty (20) consecutive Trading Day period immediately preceding (i) the January 2019 Effective Date; or (ii) the conversion date. The January 2019 Notes may be prepaid until 180 days from the January 2019 Effective Date with the following penalties: (i) if the January 2019 Notes are prepaid within sixty (60) days following the January 2019 Effective Date, then the prepayment premium shall be 125% of the face amount plus any accrued interest; (ii) if the January 2019 Notes are prepaid during the period beginning on the date which is sixty-one (61) days following the January 2019 Effective Date, and ending on the date which is ninety (90) days following the January 2019 Effective Date, then the prepayment premium shall be 135% of the face amount plus any accrued interest; (iii) if the January 2019 Notes are prepaid during the period beginning on the date which is ninety-one (91) days following the January 2019 Effective Date, and ending on the date which is one hundred eighty (180) days following the January 2019 Effective Date, then the prepayment premium shall be 145% of the face amount plus any accrued interest. Such prepayment redemptions must be closed and funded within three days of giving notice of prepayment or the right to prepay shall be forfeited. The Company has reserved a minimum of eight (8) times the number of its authorized and unissued Common Stock (the “January 2019 Reserved Amounts”), free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of the January 2019 Notes. Upon full conversion of the January 2019 Notes, any shares remaining in such reserve shall be cancelled. The Company increases the January 2019 Reserved Amount in accordance with the Company’s obligations under the January 2019 Notes. Pursuant to the terms of the January 2019 SPAs, for so long as the Investors own any shares of Common Stock issued upon the conversion of the January 2019 Notes (the “January 2019 Conversion Shares”), the Company has covenanted to secure and maintain the listing of such shares of Common Stock. The Company is also subject to certain customary negative covenants under the January 2019 Notes and the January 2019 SPAs, including but not limited to the requirement to maintain its corporate existence and assets, subject to certain exceptions, and not to make any offers or sales of any security under circumstances that would require registration of or stockholder approval for the January 2019 Notes or the January 2019 Conversion Shares. The January 2019 Notes also contain certain representations, warranties, covenants and events of default including if the Company is delinquent in its periodic report filings with the Securities and Exchange Commission and increases in the amount of the principal and interest rates under the January 2019 Notes in the event of such defaults. In the event of default, at the option of the January 2019 Investors and in the January 2019 Investors’ sole discretion, the January 2019 Investors may consider the January 2019 Notes immediately due and payable. During the three-month period ending March 31, 2019, the Company accrued interest of $11,039 (2018-$nil) on the outstanding promissory notes. On April 11, 2018, three directors each loaned the Company $19,928 ($25,000 CAD) for working capital purposes (the “Director Loans”). The Director Loans bear interest at the rate of 12% per annum, are due on demand and unsecured. There are no written agreements evidencing the Director Loans. During the three-month period ending March 31, 2019 $1,669 ($2,219 CAD) (2018-$nil; $nil CAD) of interest was charged on the Director Loans. As at March 31, 2019, 2018, $6,521 ($8,729 CAD) (December 31, 2018-$4,772; $6,510 CAD) in interest is included in accrued liabilities and the Director Loans remain outstanding in the amount of $56,123 ($75,000 CAD) (December 31, 2018-$54,975; $75,000 CAD). pg. 28 On April 3, 2018, a new loan was provided by Travellers International Inc. (“Travellers”), an Ontario company controlled by the Executive Chairman and President, who is also a director of the Company, in the amount of $159,420 ($200,000 CAD) (the “Travellers Loan”). A portion of the funds, $110,777 ($151,128 CAD), was used to pay two overdue monthly principal and interest instalments on the Company’s PACE Corporate Term Loan. This new loan is due on demand, unsecured and bears interest at the rate of 12% per annum. There is no written agreement evidencing the Travellers Loan. During the three-month period ending March 31, 2019, $3,802 ($5,055 CAD) (2018-$293,094; $371 CAD) in interest was charged on the Travellers Loan and other loans repaid to Travellers during the year. As at March 31, 2019, $17,166 ($22,940 CAD) (December 31, 2018-$13,110; $17,885 CAD) in interest is included in accrued liabilities and the Travellers Loan remains outstanding in the amount of $56,123 ($75,000 CAD) (December 31, 2018-$146,600; $200,000 CAD). As of March 31, 2019, the current and long-term portions of our long-term debt balance and our obligations under capital lease were $3,784,588 ($5,057,588 CAD) and $278,155 ($371,716 CAD) respectively of $4,062,743 ($5,429,297 CAD) in total. In addition, at March 31, 2019, the Company had an outstanding letter of credit prepared by PACE, in the amount of $207,153 ($276,831 CAD), in favor of the MOECP. The letter of credit is a requirement of the MOECP and is in connection with the financial assurance provided by the Company, for it to be in compliance with the MOECPs environmental objectives. The MOECP regularly evaluates the Company’s organic composting facility to ensure compliance is adhered to and the letter of credit is subject to change by the MOECP. As of March 31, 2019, and the date of this filing, the MOECP has not drawn on this letter of credit. Effective January 1, 2017, the Company obtained a Line of Credit of up to $4,176,700$4,031,500 ($5,500,000 CAD) with PACE. ThePACE (the “PACE Line of Credit was to be advanced in tranches to allow for the funding of engineering, permitting, construction costs and equipment purchases for its BioGrid Project.Credit”). On February 2, 2017, the companyCompany received the first and only advance in the amount of $1,215,040$1,172,800 ($1,600,000 CAD). on the PACE Line of Credit. The PACE Line of Credit iswas due on February 2, 2019. The Line of Credit2019 and is now one of multiple credit facilities with PACE.PACE, as noted below. The funds advanced on thisthe PACE Line of Credit $1,215,040of $1,172,800 ($1,600,000) bear1,600,000 CAD) bore interest at the PACE base rate of 6.75% plus 1.25% per annum, at the time 8%, and was payable on a monthly basis, interest only.only, until refinanced, as noted below. The PACE Line of Credit is secured by a business loan general security agreement, a $1,215,040$1,172,800 ($1,600,000 CAD) personal guarantee from the Presidentpresident of the Company (the “President”) and a charge against the Company’s office premises lease. Also pledged as security are the shares of the wholly-owned subsidiaries and a pledge of 3,300,000 shares of Common Stock of the Company held by Landfill Gas Canada Ltd. (“LFGC”), an Ontario company controlled by a director and chief executive officer of the Company (the “CEO”), 500,000 shares of Common Stock of the Company held by the chief financial officer (the “CFO”) and 2,000,000 shares of Common Stock of the Company held by a director’s company, and a limited recourse guarantee by each. The PACE Line of Credit is fully open for prepayment at any time without notice or bonus. A total commitment fee of $83,534$80,630 ($110,000 CAD) was paid to PACE. In addition, the agents who assisted in establishing the PACE Line of Credit received 1,620,000 common shares of Common Stock of the Company determined to be valued at $469,800, based on the pricing of a recent private placement offeringpricing at the time and cash of $300,000, on closing, for their services. Other closing costs in connection with the PACE Line of Credit included legal fees of $29,399$28,377 ($38,713 CAD). As at June 30, 2018, $779,247March 31, 2019, $757,258 ($1,026,1351,011,971 CAD) (December 31, 2018-$745,897; $1,017,595 CAD) remains outstanding (December 31, 2017-$817,932; $1,026,135 CAD).outstanding. During the six months ended June 30, 2018,three-month period ending March 31, 2019, the Company incurred interest charges of $31,862$15,502 ($40,70820,609 CAD) (2017-(2018-$30,981; $41,33616,011; $20,242 CAD) on thisthe PACE Line of Credit. On July 27, 2018, the Company refinanced this credit facility at the PACE base rate of 7% plus 1.25% per annum, currently 8.25%. The credit facility is due on demand, but until a demand is made, is payable in monthly blended instalmentsinstallments of principal and interest of $6,655$6,558 ($8,764)8,764 CAD), commencing August 2, 2018, amortized over a twenty-year period and duematures on September 2, 2022. pg. 25 On June 15, 2017, PACE loaned the Company $455,640$439,800 ($600,000 CAD) under a variable rate business loan agreement (the “PACE Business Loan Agreement”), for its bid for the purchase of certain assets of Astoria on the same terms and conditions similar to the abovementioned PACE Line of Credit above, except that the loan is due February 2, 2019.Credit. As at June 30, 2018, $435,793March 31, 2019, $423,490 ($573,865565,936 CAD) (December 31, 2017-2018-$457,428; $573,865417,137; $559,081 CAD) remains outstanding.outstanding under the PACE Business Loan Agreement. During the six months ended June 30, 2018,three-month period ending March 31, 2019, the Company incurred interest charges of $17,819$8,695 ($22,76611,559 CAD) (2017- $1,550; $2,069(2018-$8,780; $11,320 CAD) in connection with the PACE Business Loan Agreement. On July 27, 2018, the Company refinanced this credit facility at the PACE base rate of 7% plus 1.25% per annum, currently 8.25%. The credit facility is due on demand, but until a demand is made, is payable in monthly blended installments of principal and interest of $3,667 ($4,901 CAD), commencing August 2, 2018, amortized over a twenty-year period and matures on September 2, 2022. pg. 29 On August 4, 2017, PACE loaned the Company $36,665 ($50,000 CAD) under a variable business loan agreement, to satisfy an outstanding liability on terms and conditions similar to the abovementioned PACE Line of Credit, except that the loan was due February 4, 2019. As at March 31, 2019, $36,898 ($49,309 CAD) (December 31, 2018-$36,344; $49,583 CAD) remains outstanding. During the three-month period ending March 31 2019, the Company incurred interest charges of $757 ($1,007 CAD) (2018-$780; $986 CAD) on this credit facility. On July 27, 2018, the Company refinanced this credit facility at the PACE base rate of 7% plus 1.25% per annum, currently 8.25%. The credit facility is payable on demand, but until a demand is made, is payable in monthly blended instalmentsinstallments of principal and interest of $3,722 ($4,901 CAD), commencing August 2, 2018, amortized over a twenty-year period and due September 2, 2022. On August 4, 2017, PACE loaned the Company $37,970 ($50,000 CAD) under a variable business loan agreement, to satisfy an outstanding liability on the same terms and conditions to the Line of Credit above, except that the loan is due February 4, 2019. As at June 30, 2018, $37,970 ($50,000 CAD) (December 31, 2017-$39,855; $50,000 CAD) remains outstanding. During the six months ended June 30, 2018, the Company incurred interest charges of $1,553 ($1,984 CAD) (2017-$nil; $nil CAD) on this credit facility. On July 27, 2018, the Company refinanced this credit facility at the PACE base rate of 7% plus 1.25% per annum, payable in monthly blended instalments of principal and interest of $324$320 ($427 CAD), commencing August 4, 2018, amortized over a twenty-year period and duematures on September 4, 2022. On September 13, 2017, PACE loaned the Company $2,828,117$2,729,800 ($3,724,147)3,724,147 CAD) under a corporate term loan.loan (the “PACE Corporate Term Loan”). The funds were used for the purpose of acquiring certain assets of Astoria from the court appointed receiver on September 15, 2017. The corporate term loan bearsPACE Corporate Term Loan bore interest at the PACE base rate of 6.75% plus 1.25% per annum, 8% at the time, payable in monthly blended instalmentsinstallments of principal and interest of $57,383$56,545 ($75,564 CAD), dueand matures on September 13, 2022. The corporate term loanPACE Corporate Term Loan is secured by a business loan general security agreement representing a floating charge over the assets and undertakings of the Company, a first priority charge under a registered debenture and a lien registered under the Personal Property Securities Act in the amount of $3,38,343$2,993,932 ($4,000,978 CAD) against the Company’s assets, including accounts receivable, inventory and equipment. PACE has also provided the Company with a letter of credit in the favor of the Ministry of the Environment and Climate Change (“MOECC”)MOECP in the amount of $210,226$207,153 ($276,831 CAD) and, as security, has registered a charge of lease over the premises, located at 704 Phillipston Road, Roslin (near Belleville), Ontario, Canada. As at March 31, 2019, and the date of this filing, the MOECC has not drawn on this letter of credit. The corporate term loanPACE Corporate Term Loan also includes an assignment of existing contracts included inunder the APA. On June 13, 2018, the unpaid and previously deferred interest on the corporate term loanPACE Corporate Term Loan for the period frombeginning on March 13, 2018 toand ending June 13, 2018, in the amount of $52,659$51,889 ($69,343 CAD), has beenwas capitalized and included in the principal balance of the corporate term loan.PACE Corporate Term Loan. As at June 30, 2018, $2,646,012March 31, 2019 $2,566,942 ($3,484,3453,430,365 CAD) (December 31, 2018-$2,528,400; $3,449,387 CAD) remains outstanding.outstanding under the PACE Corporate Term Loan. During the six monthsthree-month period ended June 30, 2018,March 31, 2019, the Company incurred interest charges of $107,1199$52,665 ($136,96170,014 CAD) on this corporate term loan. As of June 30, 2018, and the date of this filing, the MOECC has not drawn on the letter of credit. (2018-$55,030; $69,570 CAD) under PACE Corporate Term Loan. The shares pledged as security for the Line of Credit and the other credit facilityfacilities also pertain to this corporate term loan. On July 26, 2018, the Company refinanced this corporate term loan.the PACE Corporate Term Loan. The first and only blended instalmentinstallment of principal and interest of $22,147$21,377 ($29,164 CAD) was due August 1, 2018 will be at the PACE base rate of 6.75% plus 1.25%8% per annum, for this payment,and amortized over a twenty-year period. This will be followed, commencing August 13, 2018, byThe PACE Corporate Term Loan is due on demand, but until a demand is made, is payable in monthly blended instalmentsinstallments of principal and interest of $22,562$21,823 ($29,711 CAD), commencing August 13, 2018, at the PACE base rate of 7% plus 1.25% per annum, currently 8.25%. The PACE Corporate Term Loan continues to be amortized over a twenty-year period. This refinanced corporate term loan is dueperiod and matures on September 13, 2022. On April 3, 2018, a new loan was provided by Travellers International Inc. (“Travellers”), an Ontario company controlled by the Executive Chairman and President (the “President”), who is also a director of the Company, in the amount of $151,880 ($200,000 CAD). A portion of the funds, $114,766 ($151,128 CAD), was used to pay two overdue monthly principal and interest instalments on the Company’s corporate term loan with PACE. This new loan is due on demand, unsecured and bears interest at the rate of 12% per annum. During the six-month period ended June 30, 2018, $4,529 ($5,786 CAD) of interest was charged on this loan. As at June 30, 2018, $4,394 ($5,786 CAD) (December 31, 2017-$nil; $nil CAD) in interest is included in accrued liabilities and the loans remain outstanding. On April 11, 2018, three directors each loaned the Company $18,985 ($25,000 CAD). The loans bear interest at the rate of 12% per annum, are due on demand and unsecured. During the six-month period ended June 30, 2018, $1,544 ($1,973 CAD) of interest was charged on this loan. As at June 30, 2018, $1,498 ($1,973 CAD) (December 31, 2017-$nil; $nil CAD) in interest is included in accrued liabilities and the loans remain outstanding. pg. 26 Refer to notes 9, 10, 11, 12, 13 and 1314 to the interim condensed consolidated financial statements for details on the long-term debt, obligations under capital lease and commitments, respectively,convertible promissory notes, operating lease liability and loans payable to related parties, as at June 30, 2018.March 31, 2019. pg. 30 CONSOLIDATEDCONSOLIDATED RESULTS OF OPERATIONS – FOR THE THREE-MONTH PERIOD ENDED JUNE 30, 2018 MARCH 31, 2019COMPARED TO THE THREE-MONTH PERIOD ENDED JUNE 30, 2017MARCH 31, 2018   For the three-month periods ended     March 31, 2019     March 31, 2018     2018     2017               Revenue $  227,423   $  -   $  253,138   $  132,721   Cost of sales   142,477     -               Cost of Sales             Opening inventory   18,550     53,964   Depreciation   95,754     94,043   Direct wages and benefits   49,365     40,059   Equipment rental, delivery, fuel and             repairs and maintenance   99,566     35,040   Utilities   27,531     22,200   Outside contractors   105     3,844     290,871     249,150   Less: closing inventory   (26,409 )   (67,210 ) Total cost of sales   264,462     181,940               Gross loss   (11,324 )   (49,219 )             Operating expenses                         Management compensation-stock-based compensation   1,582,500     82,500   Management compensation-stock- based             compensation   332,500     82,500   Management compensation-fees   83,584     40,149     81,238     90,174   Marketing   280,000     -   Professional fees   134,702     60,822   Interest expense   91,779     22,096     105,023     85,240   Professional fees   76,220     36,374   Office and administration   67,564     51,084   Rent and occupancy   34,716     13,752     24,241     34,201   Insurance   15,466     21,983     14,059     15,119   Office and administration   12,501     13,244   Filing fees   12,683     6,458   Amortization of financing costs   11,997     -   Directors’ compensation   2,952     791   Repairs and maintenance   10,760     -     2,261     8,009   Filing fees   3,581     5,467   Directors compensation   774     13,200   Total operating expenses   1,911,881     248,765     1,069,220     434,398                           Net loss $  (1,826,935 ) $  (248,765 )   (1,080,544 )   (483,617 ) During the three-month period ended June 30, 2018,March 31, 2019, the Company generated $227,423$253,138 of revenue from its organic composting facility. No revenue was generated infacility compared to $132,721for the prior three-month period ended June 30, 2017.TheMarch 31, 2018. The Company’s cost of sales in connection with this revenue totaled $142,477, primarily$264,462 in the three-month period ended March 31, 2019 compared to 181,940 for the three-month period ended March 31, 2018. These costs consisted of depreciation, direct wages and benefits, equipment rental, delivery, fuel, repairs and maintenance, utilities and utilities.outside contractors. The significant increase in both the revenue and the cost of sales in the current period was primarily due to new business and the related cost of processing the waste from this new business. The opening inventory for the three months ended March 31, 2019 in the amount of $18,550 was significantly lower than the closing inventory of $26,409 due primarily to the production of compost during the current period. The net loss for the three-month period ended June 30, 2018March 31, 2019 was $1,826,935,$1,080,544, significantly higher than the net loss of $248,765$483,617 in the prior three-month period ended June 30, 2017,March 31, 2018, primarily due to the increase in management compensation interest expenserelating to stock-based compensation, the start of the new marketing campaign and professional fees, explained further below, offset by the increase in gross profit from the organic composting facility operations.fees. Operating expenses increased by $1,663,116,$634,822, from $248,765$434,398 in the prior three-month period ended June 30, 2017March 31, 2018 to $1,911,881$1,069,220 for the current three-month period ended June 30, 2018. This wasMarch 31, 2019, primarily due to the increase in management compensation, interest expense and professional fees.various expenses, explained further below. Management compensation related to stock-based compensation increased by $1,543,435,$250,000, from $122,649$82,500 in the prior three-month period ended June 30, 2017March 31, 2018 to $1,666,084$332,500 in the current three-month period ended June 30, 2018,March 31, 2019, as a result of both an increase in the management compensation charged by the President and the CEO, beginning January 1, 2018, the recognitionvesting of the executive compensation for the President on the issuance of 1,000,000 common shares of the Company in exchange for 1,000,000President’s RSUs totaling $1,000,000, as approved by the Board on May 17, 2018 and the recognition of the executive compensation for the 1,000,000 RSUs which are to vest January 1, 2019, in the amount of $500,000$250,000. The compensation relating to fee charged by management reduced by $8,936, as a result of not incurring any fees charged by the Company’s VPCD in the current period as her services terminated on March 31, 2018. pg. 31 During the three-month period ended March 31, 2019, the Company incurred marketing fees for its marketing campaign in the amount of $280,000 with no comparable prior period amount. Professional fees increased by $73,880, from $60,822 in the three-month period ended March 31, 2018 to $134,702 in the three-month period ended March 31, 2019, primarily due to the following; an increase in legal services on the Company’s claim against a third party represented by BDO in the amount of $8,747 related to the costs awarded BDO on the Court’s dismissal of the Company’s motions, an increase in audit and review fees of $8,433, the issuance of shares for legal services provided by the Company’s legal counsel valued at $53,000 based on the closing trading price on the day prior to issuance and other legal expenses incurred of $3,700. Interest expense increased by $69,683$19,783 from $22,096$85,240 in the prior three-month period ended June 30, 2017March 31, 2018 to $91,779$105,023 for the current three-month period ended June 30, 2018,March 31, 2019, primarily as a result of the accrued interest on the new corporate term loan obtainedconvertible promissory notes in the amount of $11,039 and the operating lease liability in the amount of $6,679 and the increase in the borrowing rate from 8% to 8.25%. Rent and occupancy increased by $29,755, from $25,170 in the three-month period ended September 30, 2017 to $54,925 for the three-month period ended September 30, 2018, primarily due to the new rent and occupancy costs associated with the Company’s organic composting facility which operated for three months in the current three-month period versus only fifteen days in the prior year’s three-month period. Also included is an estimate of the additional rent for road maintenance levied by the Company on September 15, 2017, for itsCity of Belleville at the Company’s organic composting facility. Office and administration increased by $16,480, from $51,084 in the three-month period ended March 31, 2018 to $67,564 for the three-month period ended March 31, 2019, as a result of an increase in foreign exchange losses of $9,335, an increase in laboratory testing of $5,366 and various other office and administrative expenses of $1,779. Rent and occupancy reduced by $9,960, from $34,201 for the three-month period ending March 31, 2018 to $24,241 for the three-month period ending March 31,2019, primarily due to the presentation of the operating lease liability and related interest expense of $6,679 as opposed to rent expense of a similar amount and the absence of the apartment and trailer rentals. Insurance decreased by $6,517$1,060 from $21,983$15,119 in the prior three-month period ended June 30, 2017March 31, 2018 to $15,466$14,059 for the current three-month period ended June 30, 2018,March 31, 2019, primarily due to a lower premium for directors’ and officers’ insurance. ProfessionalFiling fees increasedwere higher by $39,846, from $36,374 in the prior three-month period ended June 30, 2017 to $76,2209,177 in the current three-month period ended June 30,March 31, 2019 versus the prior year’s three-month period ended March 31, 2018, primarily from increasesas a result of fees for an investor communications service in audit and accounting servicesthe amount of $37,103, an increase for legal$9,995 offset by lower overall filing fees charges. During the three-month period ended March 31, 2019, the Company amortized the financing costs incurred on the new security purchase agreements in the amount of $13,649 incurred$11,997. The financing costs are being amortized over the life of the new securities purchase agreements which expire prior to March 31, 2020. Directors’ compensation increased by $2,161 in connection with the Company’s claim it launched against a third party, relatedthree-month period ended March 31, 2019 compared to the purchase of certain assets ofthree-month period ended March 31, 2018 due to an estimate for directors’ compensation for the organic composting facility on September 15, 2017, an increase in legal fees of $815 in connectioncurrent period with the Advances Water Technology Program offset by the absence of legal fees in connection with the Company’s Form S-4 filingsno comparative amount in the prior year’s three-month period ended June 30, 2017.March 31, 2018. pg. 27 RentRepairs and occupancy increasedmaintenance expenses were lower by $20,964, from $13,752$5,748 in the prior three-month period ended June 30, 2017 to $34,716 for the current three-month period ended June 30, 2018, dueMarch 31, 2019 compared to the rent and occupancy costs associated with the Company’s new organic composting facility of $14,021 and additional rent and occupancy costs of $6,943 for the Company’s Toronto office location. Office and administration decreased insignificantly by $743. Repairs and maintenance of $10,760, is primarily related to costs associated with the premises of the Company’s organic composting facility. Director’s compensation decreased by $12,426, from $13,200 for the prior three-month period ended June 30, 2017 to $774 for the current three-month period ended June 30, 2018. The current expense relates to fees charged by the Company’s audit committee chairman and the prior period’s charge relates to the Company’s issuance of 20,000 common shares each to two new directors, determined to be valued at $13,200, based on recent private placement. CONSOLIDATED RESULTS OF OPERATIONS – FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2018 COMPARED TO THE SIX-MONTH PERIOD ENDED JUNE 30, 2017     2018     2017   Revenue $  360,144   $  -   Cost of sales   324,417     -   Operating expenses             Financing costs   -     882,153   Management compensation-stock-based compensation   1,665,000     165,000   Management compensation-fees   173,758     80,946   Interest expense   177,019     42,686   Professional fees   137,042     88,359   Rent and occupancy   68,917     25,178   Office and administration   63,585     32,942   Insurance   30,585     36,949   Repairs and maintenance   18,769     -   Filing fees   10,039     9,356   Directors compensation   1,565     24,800   Contribution to Advanced Water Technology Program   -     71,017   Total operating expenses   2,346,279     1,459,386                 Net loss $  (2,310,552 ) $   (1,459,386 ) During the six-month period ended June 30, 2018, the Company generated $360,144 of revenue from its organic composting facility. No revenue was generated in the prior six-month period ended June 30, 2017. The Company’s cost of sales in connection with this revenue totaled $324,417, primarily depreciation, direct wages and benefits, equipment rental, delivery, repairs and maintenance and utilities. The net loss for the six-month period ended June 30, 2018 was $2,310,552, significantly higher than the net loss of $1,459,386 in the prior six-month period ended June 30, 2017, primarily due to the increase in management compensation, interest expense, professional fees, rent and occupancy and office and administration, offset by reductions in financing costs, directors’ compensation and the contribution to the Advanced Water Technology Program, explained further below. The Company also generated a gross profit of $35,727 from its organic composting facility operations. Operating expenses increased by $886,893, from $1,459,386 in the prior six-month period ended June 30, 2017 to $2,346,279 in the current six-month period ended June 30, 2018. This was primarily due to the increase in management compensation, interest expense, professional fees, rent and occupancy and office and administration, offset by reductions in financing costs, directors’ compensation and the contribution to the Advanced Water Technology Program, explained further below. Management compensation increased by $1,592,812, from $245,946 in the prior six-month period ended June 30, 2017 to $1,838,758 in the current six-month period ended June 30, 2018, as a result of both an increase in the management compensation charged by the President and the CEO, beginning January 1, 2018, the recognition of the executive compensation for the President on the issuance of 1,000,000 common shares of the Company in exchange for 1,000,000 RSUs totaling $1,000,000, as approved by the Board on May 17, 2018 and the recognition of the executive compensation for the 1,000,000 RSUs which are to vest January 1, 2019, in the amount of $500,000. Interest expense increased by $134,333 from $42,686 in the prior six-month period ended June 30, 2017 to $177,019 in the current six-month period ended June 30, 2018, primarily as a result of the new corporate term loan obtained by the Company on September 15, 2017, for its organic composting facility. pg. 28 Professional fees increased by $48,683, from $88,359 in the prior six-month period ended June 30, 2017 to $137,042 in the current six-month period ended June 30, 2018, primarily from increases in audit and accounting services of $42,336, an increase for legal fees of $34,848 incurred in connection with the Company’s claim it launched against a third party, related to the purchase of certain assets of the organic composting facility on September 15, 2017, an increase in legal fees of $872 in connection with the Advanced Water Technology Program offset by the absence of legal fees in connection with the Company’s Form S-4 filings and other consulting fees of $29,373 in the prior six-month period ended June 30, 2017. Rent and occupancy increased by $43,739, from $25,178 in the prior six-month period ended June 30, 2017 to $68,917 in the current six-month period ended June 30, 2018, due to the rent and occupancy costs associated with the Company’s new organic composting facility of $36,420 and additional rent and occupancy costs of $7,319 for the Company’s Toronto location. Office and administration increased by $30,643 from $32,942 in the prior six-month period ended June 30, 2017 to $63,585 in the current six-month period ended March 31, 2018. The increase is primarily the result of new2018 due to lower overall expenses incurred at the Company’s organic composting facility, including administrative wages of $12,818, automotive expenses and travel of $6,937, depreciation of $3,897 and other various expenses. Insurance decreased by $6,364, from $36,949 for the prior six-month period ended June 30, 2017 to $30,585 in the current six-month period ended June 30, 2018, primarily due to a reduction in the premium for the Company’s directors’ and officers’ liability insurance. The Company’s premiums for the pollution coverage and the general and equipment liability for the organic composting facility was comparable to the premium paid for similar coverage for the Company’s BioGrid Project which it continued to incur in the prior period. Repairs and maintenance of $18,769 related primarily to costs associated with the premises of the Company’s new organic composting facility. Director’s compensation decreased by $23,235, from $24,800 in the prior six-month period ended June 30, 2017 to $1,565 in the current six-month period ended June 30, 2018. The current expense relates to fees charged by the Company’s audit committee chairman and the prior period’s charge relates to the Company’s issuance of 20,000 common shares each to four new directors, determined to be valued at $24,800, based on recent private placement. The Contribution to the Advanced Water Technology Program in the prior six-month period ended June 30, 2017 was not repeated in the current six-month period ended June 30, 2018. The Company’s 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. As at June 30, 2018,March 31, 2019, the Company had a working capital deficit of $2,452,148$5,565,973 (December 31, 2017-2018-$2,238,911)4,830,948), incurred a net loss of $2,310,552 (2017-$1,080,544 (2018-$1,459,386)483,617) for the six monthsthree-month period ended June 30, 2018March 31, 2019 and had an accumulated deficit of $6,970,848$9,634,856 (December 31, 2017-2018-$4,660,296)8,554,312) and expects to incur further losses in the development of its business. 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 PACE and upon achieving profitable operations. Management believes that the Company will be able to obtain the necessary funding by equity or debt; however, thereThere is no assurance of funding being available or available on acceptable terms. Subsequent to June 30, 2018, the long-term debt with PACE was refinanced. Realization values may be substantially different from carrying values as shown. The 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. pg. 29 pg. 32 CRITICAL ACCOUNTING ESTIMATES Use of estimates The preparation of the Company’s consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Areas involving significant estimates and assumptions include: the allowance for doubtful accounts, inventory valuation, useful lives of long-lived and intangible assets, valuation of asset acquisition, impairments of long-lived and intangible assets, deferred income tax assets and related valuation allowance, accruals, environmental remediation costs and stock-based compensation. Actual results could differ from these estimates. These estimates are reviewed periodically and as adjustments become necessary, they are reported in earnings in the period in which they become available. Stock-based compensation From time to time the Company may grant options and/or warrants to management, directors, employees and consultants. The Company recognizes compensation expense at fair value. Under this method, the fair value of each warrant is estimated on the date of the grant and amortized over the vesting period, with the resulting amortization credited to paid in capital. The fair value ofeach grant is determined using the Black-Scholes option-pricing model. Consideration paid upon exercise of stock options and/or warrants is recorded in equity as share capital. Long-Lived Asset Impairments We assess our long-lived assets for impairment as required under the applicable accounting standards. If necessary, impairments are recorded in (income) expense from divestitures, asset impairments and unusual items, net in our Consolidated Statements of Operations and Comprehensive Loss. Indefinite-Lived Intangible Assets — At least annually, and more frequently if warranted, we assess the indefinite-lived intangible assets, including the goodwill of our reporting units for impairment using Level 3 inputs. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS On January 1, 2018,2019, the Company adopted accounting standardsAccounting Standards Update (“ASU”) update No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. The Company now includes restricted cash2016-02, Leases which is also known as part of cashAccounting Standard Codification (“ASC”) Topic 842, that requires lessees to recognize for all operating leases a right-of-use asset and cash equivalents. The Company has adopted this policy on a retrospective basis. The reference to restricted cash includedlease obligation in the interim condensed consolidated balance sheets. Expenses are recognized in the interim condensed consolidated statements of cash flow foroperations and comprehensive loss in a manner similar to previous accounting guidance. Lessor accounting under the three-month period ended March 31, 2017, has been reclassifiednew standard is substantially unchanged and is not relevant to cash and cash equivalents at the end of this prior period. On January 1 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers that supersedes most current revenue recognition guidance. The updated guidance, and subsequent clarifications, collectively referred to as accounting standards codification (“ASC”) 606, require an entity to recognize revenue when it transfers control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In addition, the guidance requires the disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.Company. The Company adopted thisthe accounting standard utilizingusing a prospective transition approach, which applies the modified retrospective approach,provisions of the new guidance at the effective date without adjusting the comparative periods presented, with certain practical expedients available to ease the cumulative effectburden of initiallyadoption. The Company elected the following practical expedients upon adoption: not to reassess whether any expired or existing contracts are or contain leases, not to reassess the lease classification for any expired or existing leases, not to reassess initial direct costs for any existing leases, not to separately identify lease and non-lease components (i.e. maintenance costs) except for fleet vehicles and real estate, and not to evaluate historical land easements under the new guidance. Additionally, the Company elected the short-term lease exemption policy, applying the requirements of ASC 842 to long-term leases (leases greater than 1 year) for which it only has one. Adoption of the new standard recognizedresulted in deficit. Accordingly, comparative prior period information has not been restated$217,755 ($297,074 CAD) of additional right-of-use lease asset and continues to be reported under that accounting standards. The adoption of ASC 606 had no impact on the Company’s interim condensed consolidated balance sheetslease liability as of January 1, 2018. pg. 30 On January 1, 2018, the Company adopted ASU No. 2017, Compensation-Stock Compensation:Topic 718:Scope of ModificationAccounting (ASU 2017-09) to provide clarity and reduce both the (1) diversity in practice and (2) cost and complexity when changing the terms or conditions of share-based payment awards. Under ASU 2017-09, modification accounting is required to be applied unless all of the following are the same immediately before and after the change: 1. The award’s fair value (or calculated value or intrinsic value if those measurement methods are used). 2. The award’s vesting conditions. 3. The award’s classification as an equity or liability instrument. 2019. The adoption of ASC 606 had nonew standard did not have a significant impact on the Company’s interim condensed consolidated balance sheets asstatements of January 1, 2018.operations and comprehensive loss. See note 8, Operating lease right-of-use asset, contained in the interim condensed consolidated financial statements for additional information. pg. 33 RECENT ACCOUNTING PRONOUNCEMENTS From time to time, new accounting pronouncements are issued by FASB or other standard setting bodies and adopted by the Company as of the specified effective date or possibly early adopted, where permitted. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position, results of operations or cash flows. In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842). The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. ASU 2016-02 requires the recognition on the balance sheet of a lease liability to make lease payments by lessees and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance will also require significant additional disclosure about the amount, timing and uncertainty of cash flows from leases. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018 (January 1, 2019 for the Company). The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. In March 2018, the FASB approved a new, optional transition method that will give companies the option to use the effective date as the date of initial application on transition. The Company plans to elect this transition method, and as a result, the Company will not adjust the comparative financial information or make the new required lease disclosures for periods before the effective date. The Company anticipates the adoption of this new standard will result in a significant increase in lease-related assets and liabilities in the consolidated balance sheet. As the impact of this standard is non-cash in nature, the Company does not anticipate its adoption having an impact on the Company’s consolidated statement of cash flows. The Company is currently evaluating the impact of adopting ASU No. 2016-02 on the consolidated statement of income. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350) - Simplifying the Test for GoodwillImpairment”. The new standard simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill quantitative impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is to be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The standard is to be effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU No. 2017-04. In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. ASU 2016-13 is effective for the Company beginning January 1, 2020 and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows. EQUITY As at June 30, 2018,March 31, 2019, the Company had 39,913,03141,404,531 common shares issued and outstanding. At the date of this filing, the Company had 40,040,03142,484,531 common shares issued and outstanding. STOCK OPTIONS, WARRANTS AND WARRANTSRESTRICTED STOCK UNITS Effective January 1, 2017, the Company’sCompany granted the CEO was granted 3,000,000 RSUs. Onrestricted stock units (“RSU”), under a consulting agreement effective January 1, 2017, determined to be valued at $990,000 based on private placement pricing at the time. On each of February 25, 2018, and April 2, 2019, 1,000,000 RSUs were exchanged into 1,000,000 common stock.stock of the Company. The RSUs for the CEOs remaining installment are expected to vest on January 1, 2020, subject to meeting certain performance objectives. On May 17, 2018, at a meeting of the Board, the Boardboard of directors (the “Board”), approved an amendment to the President’s consulting agreement, to include the granting of 3,000,000 RSUs to the President, determined to be valued at $3,000,000, based on private placement pricing at the time, on the same terms and conditions as those granted to the CEO. Effective May 17, 2018,On January 9, 2019 1,000,000 of the President’s RSUs were exchanged into 1,000,000 common stock. Based on recent private placement pricing, the common stock issued on exchange for the RSUs, were determined to be valued at $1,000,000. The RSUs for the remaining two installments are to vest annually on January 1, 2019 and 2020. The Company has recorded a stock compensation reserve of $665,000 as at June 30, 2018, representing one sixth of the total value of the RSUs of $3,990,000, basedCompany. Based on private placement pricing at the time, of the grantcommon stock issued to the President in exchange for each of the RSUs.RSUs, was determined to be valued at $1,000,000. The RSUs for the President’s remaining installment are expected to vest on January 1, 2020, subject to meeting certain performance objectives. pg. 31 The Company has no other stock options, warrants or warrantsrestricted stock units outstanding as at June 30, 2018March 31, 2019 and as of the date of this filing. RELATED PARTY TRANSACTIONS The Company transacts with related parties in the normal course of business. During the six-monththree-month period ended June 30, 2018,March 31, 2019, the Company incurred $70,443$33,849 ($90,00045,000 CAD) (2017-(2018-$22,484; $30,00035,595; $45,000 CAD) in management fees expense with Travellers International Inc. (“Travellers”), an Ontario company controlled by a director and president of the Company (the “President”); $70,443$33,849 ($90,00045,000 CAD) (2017-(2018-$22,484; $30,00035,595; $45,000 CAD) in management fees expense with Landfill Gas Canada Ltd. (“LFGC”), an Ontario company controlled by a director and chief executive officer of the Company (the “CEO”); $ 23,481$13,540 ($30,00018,000 CAD) (2017-(2018-$17,987; $24,0009,492; $12,000 CAD) in management fees expense with the Company’s chief financial officer (the “CFO”); and $9,391$nil ($12,000nil CAD) (2017-(2018-$17,987; $24,0009,492; $12,000 CAD) in management fees expense with the Company’s vice-president of corporate development (the “VPCD”). As at June 30, 2018,March 31, 2019, unpaid remuneration and unpaid expenses in the amount of $72,544$80,759 ($95,528107,923 CAD) (December 31, 2017-2018-$111,426; $139,78948,691; $66,426 CAD) is included in accounts payable and $202,969$177,347 ($267,275237,000 CAD) (December 31, 2017-2018-$102,935; $129,137184,714; $251,997 CAD) is included in accrued liabilities. In addition, during the six-monththree-month period ended June 30, 2018,March 31, 2019, the Company incurred interest expense of $4,818$3,802 ($6,1565,055 CAD) (2017-(2018-$10,154; $13,548293; $371 CAD) on the outstanding loans from Travellers and $1,544$1,669 ($1,9732,219 CAD) (2017-(2018-$nil; $nil CAD) on the outstanding loans from the directors. As at June 30, 2018,March 31, 2019, interest of $5,892$23,698 ($7,75931,669 CAD) (December 31, 2017-2018-$22,120; $27,75017,882; $24,395 CAD) on these loans is included in accrued liabilities. During the six-monththree-month period ended June 30, 2018,March 31, 2019, the Company incurred $32,499$16,998 ($41,52122,598 CAD) (2017-(2018-$11,426; $15,12415,500; $19,595 CAD) in rent paid under a rental agreement to Haute Inc. (“Haute”), an Ontario company controlled by the President. pg. 34 And, duringThe Company accrued directors’ compensation for its five independent directors for services provided for the six-monththree-month period ended June 30, 2018,March 31, 2019 in the Company sold $15,728 ($20,095 CAD)amount of compost product$2,952 (2018-$791). As at March 31, 2019, $54,200 (December 31, 2018-$52,000) of outstanding fees to LFGC.the directors is included in accrued liabilities. Furthermore, the Company granted the CEO 3,000,000 restricted stock units (“RSU”), under a consulting agreement effective January 1, 2017, determined to be valued at $990,000 based on recent private placement.placement pricing at the time. On January 1,each of February 25, 2018 and April 2, 2019, 1,000,000 RSUs were exchanged into 1,000,000 common stock.stock of the Company. The RSUs for the CEOs remaining two installmentsinstallment are expected to vest annually on January 1, 2019 and 2020.2020, subject to meeting certain performance objectives. On May 17, 2018, at a meeting of the board of directors (the “Board”), the Board approved an amendment to the President’s consulting agreement, to include the granting of 3,000,000 RSUs to the President, determined to be valued at $3,000,000, based on private placement pricing at the time, on the same terms and conditions as those granted to the CEO. Effective May 17, 2018,Immediately thereafter, 1,000,000 of the President’s RSUs were exchanged for 1,000,000 common stock of the Company. And, on January 9, 2019, 1,000,000 of the President’s RSUs were exchanged into 1,000,000 common stock.of the Company. Based on recent private placement pricing at the time, the common stock issued to the President on each exchange forof the RSUs, werewas determined to be valued at $1,000,000. The RSUs for the remaining installment are expected to vest annually on January 1, 2020, subject to meeting certain performance objectives. For the six-monththree-month period ended June 30, 2018,March 31, 2019, the Company recognized management compensation expense of $665,000 (2017-$332,500 (2018-$165,000)82,500 on thisthe award to the CEO) on the awards to the President and the CEO, representing one sixthone-sixth of the total value of the awards of $3,990,000, based on recent private placement pricing, on the dates of the awards.$3,990,000. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. Item 3. Quantitative and Qualitative Disclosures about Market Risk. As a smaller reporting company, as that term is defined in Item 10(f)(1) of Regulation S-K, we are not required to provide information required by this Item. Item 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. pg. 32 Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because ofDue to inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Based on our evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective due primarily to the small size of the Company and the lack of a segregation of duties. Notwithstanding this material weakness, management has concluded that the unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q present fairly, in all material respects, the financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting during our most recently completed fiscal quarterthe three-month period ended March 31, 2019 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting. pg. 35 PART II: OTHER INFORMATION Item 1A. Legal Proceedings. From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Except as set forth in this Form 10-Q, we are not currently aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results. On December 15, 2017, the Company filed a motion record in the Ontario Superior Court of Justice (the “Court”) against the Business Development Bank of Canada the applicant and Astoria, Organic Matters Ltd. and Astoria Organic Matters Canada LP, together the respondents, in the amount of $573,651$565,267 ($755,400 CAD) in connection with the Company’s purchase of certain assets from the court appointed receiver for Astoria, BDO, Canada Limited on September 15, 2017. The basis for the claim is for the Company’s costs to process biosolids stored onsite that amounted to approximately more than 10 times the amount permitted to be stored by conditions set in the Environmental Compliance Approval for the site. The processing costs are paid when the biosolids are received onsite. Costs to process are incurred over the 12 weeks it takes to incorporate the biosolids into a compost product. The Court ruled against the Company’s motion. Subsequently, on June 12, 2018, the Company, upon unanimous approval by the Board, filed an appeal. The motion is scheduled to beon the appeal was heard before the Court on September 21, 2018. On November 8, 2018, The Court dismissed the motion and awarded BDO its costs in the amount of $118,305 ($158,099 CAD). The Company appealed the Court’s decision and filed an appeal which was heard by a panel of three judges. On April 8, 2019, the Company was informed that the appeal was rejected by the panel of three judges. Item 1B. Risk Factors. As a smaller reporting company, we are not required to provide the information required by this item. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. DuringAll of the sixCompany’s unregistered sales of equity securities during the three months ended June 30, 2018,March 31, 2019 have been previously disclosed in Form 8-Ks or the Company issued 330,000 common shares for net proceeds of $304,500 and 190,000 common shares on a private placement received prior to December 31, 2017, for working capital purposes. In addition,Form 10-K filed by the Company issued a total of 2,000,000 common stock to executive officers on the exchange of 2,000,000 restricted stock units. The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since, among other things, the transactions did not involve a public offering.Company. Item 3. Defaults upon Senior Securities. None. Item 4. Mine Safety Disclosures. Not Applicable. pg. 33 Item 5. Other Information.               None.Not Applicable. pg. 36 Item 6. Exhibits. The following exhibits are filed as part of this quarterly report on Form 10-Q: Exhibit No. Description 4.1 Form 12% Convertible Redeemable Note (filed as Exhibit 4.1 to the Registrant’s Form 8-K filed with the SEC on February 8, 2019 and incorporated by reference herein by reference). 4,2 Form of 12% Convertible Promissory Note Issued by the Company (filed as Exhibit 4.1 to the Registrant’s Form 8-K filed with the SEC on March 15, 2019 and incorporated herein by reference). 4.3 Form of 12% Convertible Redeemable Note (Back End Note) Issued by the Company (filed as Exhibit 4.2 to the Registrant’s Form 8-K filed with the SEC on March 15, 2019 and incorporated herein by reference). 4.4 Form of Collateralized Secured Promissory Note Issued by the Investor (filed as Exhibit 4.3 to the Registrant’s Form 8- K filed with the SEC on March 15, 2019 and incorporated herein by reference). 10.1 Form Securities Purchase Agreement dated January 28, 2019 (filed as Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on February 8, 2019 and incorporated herein by reference). 10.2 Letter of Intent, dated January 8, 2019, from David Moore and Kim Moore to SusGlobal Energy Belleville Ltd. (filed as Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on February 20, 2019 and incorporated herein by reference). 10.3 Form Securities Purchase Agreement dated March 7, 2019 (filed as Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on March 15, 2019 and incorporated herein by reference). 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1 Certification of the Chief Executive Officer and thepursuant to 18 U.S.C. Section 1350 (Section 906 of Sarbanes-Oxley Act of 2002)+ 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section(Section 906 of the Sarbanes-Oxley Act of 2002.*2002)+ 101.INS XBRL Instance Document* 101.SCH XBRL Taxonomy Extension Schema Document* 101.CAL XBRL Taxonomy Calculation Linkbase Document* 101.DEF XBRL Taxonomy Extension Definition Linkbase Document* 101.LAB XBRL Taxonomy Label Linkbase Document* 101.PRE XBRL Taxonomy Presentation Linkbase Document* *Filed herewith. **Furnished herewith.+ In accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed. pg. 34 pg. 37 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.   SUSGLOBAL ENERGY CORP. August 13, 2018May 15, 2019 By: /s/ Gerald Hamaliuk     Gerald Hamaliuk     Chief Executive Officer             August 13, 2018May 15, 2019 By: /s/ Ike Makrimichalos     Ike Makrimichalos     Chief Financial Officer (Principal Financial and Accounting     Officer) pg. 35 pg. 38