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 endedSeptember 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________________ 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 [   ]      No [X] *

Indicate by check mark whether the registrant has submitted electronically 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]         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.

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 November 13, 2018May 15, 2019 was 40,247,53142,484,531 shares.

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

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

SUSGLOBAL ENERGY CORP.

SUSGLOBAL ENERGY CORP.

CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 and 2017

(Expressed in United States Dollars)

CONTENTS

CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019 and 2018

(Expressed in United States Dollars)

CONTENTS

SusGlobal Energy Corp.

SusGlobal Energy Corp.

Interim Condensed Consolidated Balance Sheets

As at September 30, 2018 and December 31, 2017

(Expressed in United States Dollars)

(unaudited)

Interim Condensed Consolidated Balance Sheets

		September 30, 2018			December 31, 2017
					(refer to note 16)
ASSETS
Current Assets
Cash and cash equivalents	$	-		$	126,117
Trade receivables		137,544			183,254
Government remittances receivable		-			3,671
Inventory		73,795			53,964
Prepaid expenses and deposits		15,442			53,719
Total Current Assets		226,781			420,725
Intangible Assets(note 6)		142,456			147,100
Long-lived Assets, net (note 7)		3,642,408			3,864,588
Long-Term Assets		3,784,864			4,011,688
Total Assets	$	4,011,645		$	4,432,413
LIABILITIES AND STOCKHOLDERS’DEFICIENCY
Current Liabilities
Bank indebtedness	$	820		$	-
Accounts payable (note 8)		396,753			408,173
Government remittances payable		22,343			-
Accrued liabilities (notes 8 and 11)		531,860			347,417
Current portion of long-term debt (note 9)		3,949,053			1,828,900
Current portion of obligations under capital lease (note 10)		91,967			59,204
Loans payable to related parties (note 11)		212,438			15,942
Total Current Liabilities		5,205,234			2,659,636
Long-Term Liabilities
Long-term debt (note 9)		-			2,332,535
Obligations under capital lease (note 10)		240,627			160,580
Total Long-term Liabilities		240,627			2,493,115
Total Liabilities		5,445,861			5,152,751
Stockholders’ Deficiency
Preferred stock, $.0001 par value, 10,000,000 authorized, none issued and outstanding
Common stock, $.0001 par value, 150,000,000 authorized, 40,050,031 (2017- 37,393,031) shares issued and outstanding (note 12)		4,006			3,740
Additional paid-in capital		5,520,585			3,576,111
Subscriptions payable		-			178,200
Stock compensation reserve		997,500			330,000
Accumulated deficit		(7,802,121	)		(4,660,296	)
Accumulated other comprehensive loss		(154,186	)		(148,093	)
Stockholders’ deficiency		(1,434,216	)		(720,338	)
Total Liabilities and Stockholders’ Deficiency	$	4,011,645		$	4,432,413
Going concern(note 2)
Commitments(note 13)

As at March 31, 2019 and December 31, 2018
(Expressed in United States Dollars)
(unaudited)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

SusGlobal Energy Corp.

SusGlobal Energy Corp.

Interim Condensed Consolidated Statements of Operations and Comprehensive Loss

For the three and nine-month periods ended September 30, 2018 and 2017

(Expressed in United States Dollars)

(unaudited)

Interim Condensed Consolidated Statements of Operations and Comprehensive Loss

		For the three-month periods ended						For the nine-month periods ended
		September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
					(refer to note 16)						(refer to note 16)
Revenue	$	279,394		$	25,608		$	639,538		$	25,608
Cost of Sales
Opening inventory		115,733			-			53,964			-
Depreciation		98,823			14,415			291,134			14,415
Direct wages and benefits		41,526			15,380			125,634			15,380
Equipment rental, delivery and
repairs and maintenance		41,354			10,304			102,552			10,304
Utilities		22,755			3,826			54,643			3,826
Outside contractors		(27	)		-			16,654			-
		320,164			43,925			644,581			43,925
Less: closing inventory		(73,795	)		-			(73,795	)		-
Total cost of sales		246,369			43,925			570,786			43,925
Gross profit (loss)		33,025			(18,317	)		68,752			(18,317	)
Operating expenses
Management compensation-stock- based compensation (note 8)		332,500			82,500			1,997,500			247,500
Management compensation-fees (note 8)		82,619			43,016			256,377			123,962
Professional fees		246,245			92,434			383,287			180,793
Interest expense (note 8)		90,939			40,363			267,958			83,049
Rent and occupancy (note 8)		54,925			25,170			123,842			50,348
Insurance		14,172			16,717			44,757			53,666
Office and administration (note 13(c))		39,182			21,751			102,767			54,693
Filing fees		1,479			5,499			11,518			14,855
Repairs and maintenance		1,471			-			20,240			-
Directors compensation		766			-			2,331			24,800
Financing costs		-			-			-			882,153
AWT Program		-			-			-			71,017
Total operating expenses		864,298			327,450			3,210,577			1,786,836
Net loss before other income		(831,273	)		(345,767	)		(3,141,825	)		(1,805,153	)
Other income-insuranceproceeds		-			48,208			-			48,208
Net loss after other incomeOther comprehensive (loss)income		(831,273	)		(297,559	)		(3,141,825	)		(1,756,945	)
Foreign exchange translation		(27,107	)		86,420			(6,093	)		38,693
Comprehensive loss	$	(858,380	)	$	(211,139	)	$	(3,147,918	)	$	(1,718,252	)
Net loss per share-basic anddiluted	$	(0.02	)	$	(0.01	)	$	(0.08	)	$	(0.05	)
Weighted average number ofcommon shares outstanding-basic and diluted		40,003,672			36,658,490			39,222,148			36,185,790

For the three-month periods ended March 31, 2019 and 2018
(Expressed in United States Dollars)
(unaudited)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

SusGlobal Energy Corp.

SusGlobal Energy Corp.

Interim Condensed Consolidated Statements of Changes in Stockholders’ Deficiency

For the nine-month periods ended September 30, 2018 and year ended December 31, 2017

(Expressed in United States Dollars)

(unaudited)

Interim Condensed Consolidated Statements of Changes in Stockholders’ Deficiency
For the three-month periods ended March 31, 2019 and year ended December 31, 2018
(Expressed in United States Dollars)
(unaudited)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

SusGlobal Energy Corp.

SusGlobal Energy Corp.

Interim Condensed Consolidated Statements of Cash Flows

For the nine-month periods ended September 30, 2018 and 2017

(Expressed in United States Dollars)

(unaudited)

Interim Condensed Consolidated Statements of Cash Flows

		For the nine-month			For the nine-month
		period ended			period ended
		September 30, 2018			September 30, 2017
					(refer to note 16)
Cash flows from operating activities
Net loss	$	(3,141,825	)	$	(1,756,945	)
Adjustments for:
Depreciation		297,294			15,108
Amortization of intangible asset		150			150
Non-cash financing fees costs and professional fees		-			501,350
Stock-based compensation		1,997,500			277,750
Interest capitalized		53,873			-
Changes in non-cash working capital:		-			-
Trade receivables		40,282			6,812
Government remittances receivable		3,578
Other receivable-insurance proceeds		-			(48,208	)
Inventory		(21,620	)		-
Prepaid expenses and deposits		36,829			(12,273	)
Accounts payable		1,186			(88,742	)
Government remittances payable		22,470			-
Accrued liabilities		196,276			16,797
Net cash used in operating activities		(514,007	)		(1,088,201	)
Cash flows from investing activities
Disposal of term deposit		-			152,400
Purchase of trade receivables		-			(132,701	)
Purchase of deposit		-			(38,100	)
Purchase of long-lived assets		(1,553	)		(3,019,281	)
Purchase of intangible assets		-			(140,625	)
Net cash used in investing activities		(1,553	)		(3,178,307	)
Cash flows from financing activities
Bank indebtedness		820			-
Advances of long-term debt		-			4,584,564
Repayment of long-term debt		(138,303	)		(459,120	)
Repayments of obligations under capital lease		(71,970	)		-
Advances of loans payable to related parties		213,648			-
Repayments of loans payable to related parties		(15,538	)		(169,874	)
Private placement proceeds (net of share issue costs)		436,540			386,874
Subscription payable proceeds		-			23,000
Net cash provided by financing activities		425,197			4,365,444
Effect of exchange rate on cash		(35,754	)		(63,313	)
(Decrease) increase in cash		(126,117	)		35,623
Cash and cash equivalents-beginning of period		126,117			1,774
Cash and cash equivalents-end of period	$	-		$	37,397
Supplemental Cash Flow Disclosures:
Interest paid	$	279,320		$	64,156
Income taxes paid		-			-

For the three-month periods ended March 31, 2019 and 2018
(Expressed in United States Dollars)
(unaudited)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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. (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 September 30, 2018,March 31, 2019, the Company had a working capital deficit of $4,978,453$5,565,973 (December 31, 2017-2018-$2,238,911)4,830,948), incurred a net loss of $3,141,825 (2017-$1,080,544 (2018-$1,756,945)483,617) for the ninethree months ended September 30, 2018March 31, 2019 and had an accumulated deficit of $7,802,121$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. There is no assurance of funding being available or available on acceptable terms. Realization values may be substantially different from carrying values as shown.

These interim condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result if the Company was unable to continue as a going concern.

3. Significant Accounting Policies

These interim condensed consolidated financial statements do not include all 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, 20172018 and 20162017 and 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:Topic718: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:

2019. The adoption of this pronouncement 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.

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.

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 September 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 values 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 long-term debt of $3,949,053$3,784,588 ($5,112,0435,057,581 CAD) (December 31, 2017-2018-$4,161,435; $5,220,7193,727,778; $5,085,645 CAD). As at September 30, 2018,March 31, 2019, the Company is exposed to concentration risk as it had foursix customers (December 31, 2017-four(2018-five customers) each representing greater than 5% of total trade receivables that add to 88%and these six customers (December 31, 2017-91%2018-five customers) represented 93% (2018-90%) in total.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 67% (10%90% (42%, 26%, 11% and 31%11%) (September 30, 2017-78%(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.

5. Financial Instruments, (continued)

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 September 30, 2018, $35,034 (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

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

7.Long-lived Assets, net, continued

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 $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 $22,598 ($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:

9. Related Party Transactions

During the nine-monththree-month period ended September 30, 2018,March 31, 2019, the Company incurred $104,881$33,849 ($135,00045,000 CAD) (2017-(2018-$34,434;35,595; $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”); $104,881$33,849 ($135,00045,000 CAD) (2017-(2018-$34,434;35,595; $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”); $37,291$13,540 ($48,00018,000 CAD) (2017-(2018-$27,547; $36,0009,492; $12,000 CAD) in management fees expense with the Company’s chief financial officer (the “CFO”); and $9,324$nil ($12,000nil CAD) (2017-(2018-$27,547; $36,0009,492; $12,000 CAD) in management fees expense with the Company’s vice-president of corporate development (the “VPCD”). As at September 30, 2018,March 31, 2019, unpaid remuneration and unpaid expenses in the amount of $109,075$80,759 ($141,198107,923 CAD) (December 31, 2017-2018-$111,426; $139,78948,691; $66,426 CAD) is included in accounts payable and $166,860$177,347 ($216,000237,000 CAD) (December 31, 2017-2018-$102,935; $129,137184,714; $251,997 CAD) is included in accrued liabilities.

In addition, during the nine-monththree-month period ended September 30, 2018,March 31, 2019, the Company incurred interest expense of $9,482$3,802 ($12,2055,055 CAD) (2017-(2018-$14,052; $18,363293; $371 CAD) on the outstanding loans from Travellers and $3,295$1,669 ($4,2412,219 CAD) (2017-(2018-$nil; $nil CAD) on the outstanding loans from the directors. As at September 30, 2018,March 31, 2019, interest of $12,419$23,698 ($16,07731,669 CAD) (December 31, 2017-2018-$22,120; $27,75017,882; $24,395 CAD) on these loans is included in accrued liabilities.

During the nine-monththree-month period ended September 30, 2018,March 31, 2019, the Company incurred $53,565$16,998 ($68,94722,598 CAD) (2017-(2018-$50,348; $65,79715,500; $19,595 CAD) in rent paid under a rental agreement to Haute Inc. (“Haute”), an Ontario company controlled by the President.

DuringThe Company accrued directors’ compensation for its five independent directors for services provided for the nine-monththree-month period ended September 30, 2018,March 31, 2019 in the Company sold $15,612 ($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”), 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. This grant was valued at $3,000,000 based on recent private placement pricing. Effective May 17, 2018,Immediately thereafter, 1,000,000 of the President’s RSUs vested immediately andwere 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 private placement pricing at the time, the common stock issued to the President on each exchange of the RSUs, was determined to be valued at $1,000,000. The cost of both RSU grants is presented as management compensation expense.RSUs for the remaining installment are expected to vest annually on January 1, 2020, subject to meeting certain performance objectives.

For the nine-monththree-month period ended September 30, 2018,March 31, 2019, the Company recognized management compensation expense of $997,500 (2017-$332,500 (2018-$247,500)82,500 on thesethe award to the CEO) on the awards to the President and the CEO, representing one quarterone-sixth of the total value of the awards of $3,990,000.$3,990,000, based on private placement pricing at the time.

9.10. Long-Term Debt

Repayments are as follows:

For the nine-monththree-month period ended September 30, 2018, $241,153March 31, 2019, $77,619 ($310,403103,189 CAD) (2017-(2018-$68,997; $90,16980,775; $102,118 CAD) in interest was charged.

10.11. Obligations under Capital Lease

The lease liabilities are secured by the equipment under capital lease as described in note 7.

Minimum lease payments are as follows:

For the nine-monththree-month period ended September 30, 2018, $14,028March 31, 2019, $3,670 ($18,0564,879 CAD) (2017-(2018-$nil; ($nil4,172; $5,274 CAD)) in interest was charged.

11.12. Convertible Promissory Notes

(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 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.

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.

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.

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:

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

Loan payable in the amount of $154,500$56,123 ($200,00075,000 CAD) (December 31, 2017-2018-$15,942; $20,000146,500; $200,000 CAD), owing to Travellers and bears interest at the rate of 12% per annum, is due on demand and is unsecured. As at September 30, 2018, $9,143March 31, 2019 $17,196 ($11,83622,980 CAD) (December 31, 2017-2018-$22,120; $27,75013,110; $17,885 CAD) in interest is included in accrued liabilities.

11. Loans Payable to Related Parties, continued

During the nine-month period ended September 30, 2018, three directors each loaned the Company $19,313 ($25,000 CAD). The loans bearbears interest at the rate of 12% per annum, areis due on demand and is unsecured. As at September 30, 2018, $3,276March 31, 2019, $6,532 ($4,2418,729 CAD) (December 31, 2017-2018-$nil; $nil4,772; $6,510 CAD) in interest is included in accrued liabilities.

During the nine-monththree-month period ended September 30, 2018, $12,777March 31, 2019, $5,472 ($16,4467,274 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 September 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 40,050,031 (2017-37,393,031)41,404,531 (2018-40,299,531) common shares issued and outstanding.

During the nine-monththree-month period ended September 30, 2018,March 31, 2019, the Company raised $436,540$nil (December 31, 2017-2018-$497,374)650,240) cash on a private placement, net of share issue costs of $30,460 (2017-$nil (2018-$48,100)46,260), on the issuance of 467,000nil (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.

15. Capital Stock, (continued)

In addition, during the nine-month period ended September 30, 2018,prior year, the Company issued 190,000 common shares of the Company, in 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 nine-month period ended September 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.

Furthermore, theThe Company also granted the CEO 3,000,000 restricted stock units (“RSU”),RSUs under a new consulting agreement effective January 1, 2017, determined to be valued at $990,000 based on recent private placement. On January 1, 2018, 1,000,000 RSUs were exchanged into 1,000,000 common stock.2017. The RSUs for the remaining two installments are expected to vest in three equal installments annually on January 1, 2018, 2019 and 2020. On February 25, 2018, the Company issued 1,000,000 common shares in exchange for 1,000,000 RSUs to the CEO. In addition, on May 17, 2018, at a meeting of 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. This grant was valued at $3,000,000 based on recent private placement pricing. Effective May 17, 2018, 1,000,000 RSUs vested immediately and were exchanged into 1,000,000 common stock. The cost of both RSU grants is presented as management compensation expense.Based on private placement pricing at the time, the common stock issued in exchange for the RSUs, was determined to be valued at $1,000,000.

1316.Commitments

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 $7,725 ($10,000 CAD). The payments are due each September 30^th. The Company’s portion for the year ended September 30, 2017, would be equal to the 15 days, as the Company owned the organic composting facility since September 15, 2017. Included in accrued liabilities, is the balance owing to September 30, 2018, totaling $8,043 ($10,411).

14.17. Economic Dependence

The Company generated 67%90% of its revenue from three 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:

16. Comparative Figures

Certain of the prior period’s comparative figures have been reclassified to conform to the current period’s presentation.

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 in our Annual Report on Form 10-K for the fiscal year ended December 31, 20172018 filed with the Securities and Exchange Commission on April 16, 2018.1, 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 nine-monththree-month period ended September 30, 2018March 31, 2019 compared with the nine-monththree-month period ended September 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.

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.

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.

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.

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 $3,167,250$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 $22,598 ($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 $134,529$127,650 ($174,147 CAD) and a deposit with a local municipality in the amount of $38,625$36,650 ($50,000 CAD).

Financing Agreement with PACE

Effective January 1, 2017, the Company obtained a Line of Credit of up to $4,248,750 ($5,500,000 CAD) with PACE. On February 2, 2017, the company received the first and only advance in the amount of $1,236,000 ($1,600,000 CAD). The Line of Credit was due February 2, 2019 and is now one of multiple credit facilities with PACE, as noted below.

The funds advanced on this Line of Credit of $1,236,000 ($1,600,000 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, until refinanced, as noted below. The Line of Credit is secured by a business loan general security agreement, a $1,236,000 ($1,600,000 CAD) personal guarantee from the president of the Company (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 $84,975 ($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 recent private placement pricing and cash of $300,000, on closing, for their services. Other closing costs in connection with the Line of Credit included legal fees of $29,906 ($38,713 CAD). As at September 30, 2018, $790,151 ($1,022,849 CAD) remains outstanding (December 31, 2017-$817,932; $1,026,135 CAD). During the nine months ended September 30, 2018, the Company incurred interest charges of $48,043 ($61,840 CAD) (2017-$47,463; $62,027 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, 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 $6,770 ($8,764 CAD), commencing August 2, 2018, amortized over a twenty-year period and matures on September 2, 2022.

On June 15, 2017, PACE loaned the Company $463,500 ($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. As at September 30, 2018, $441,891 ($572,027 CAD) (December 31, 2017-$457,428; $573,865 CAD) remains outstanding. During the nine months ended September 30, 2018, the Company incurred interest charges of $26,883 ($34,602 CAD) (2017-$10,438; $13,641 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 due on demand, but until a demand is made, is payable in monthly blended installments of principal and interest of $3,786 ($4,901 CAD), commencing August 2, 2018, amortized over a twenty-year period and matures on September 2, 2022.

On August 4, 2017, PACE loaned the Company $38,625 ($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 was due February 4, 2019. As at September 30, 2018, $38,502 ($49,841 CAD) (December 31, 2017-$39,855; $50,000 CAD) remains outstanding. During the nine months ended September 30, 2018, the Company incurred interest charges of $2,342 ($3,015 CAD) (2017-$478; $625 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 installments of principal and interest of $330 ($427 CAD), commencing August 4, 2018, amortized over a twenty-year period and matures on September 4, 2022.

On September 13, 2017, PACE loaned the Company $2,876,904 ($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 bore interest at the PACE base rate of 6.75% plus 1.25% per annum, 8% at the time, payable in monthly blended installments of principal and interest of $58,373 ($75,564 CAD), and matures on 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 $3,090,756 ($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 $213,852 ($276,831 CAD) and, as security, has registered a charge of lease over the premises, located at 704 Phillipston Road, Roslin, Ontario, Canada. As of September 30, 2018, and the date of this filing, the MOECC has not drawn on the letter of credit. 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 $53,873 ($69,343 CAD), was capitalized and included in the principal balance of the corporate term loan. As at September 30, 2018, $2,678,509 ($3,467,326 CAD) remains outstanding. During the nine months ended September 30, 2018, the Company incurred interest charges of $163,884 ($210,946 CAD) (2017-$10,618; $13,876 CAD) on this corporate term loan. The shares pledged as security for the Line of Credit and the other credit facilities also pertain to this corporate term loan.

On July 26, 2018, the Company refinanced this corporate term loan. The first and only blended installment of principal and interest of $22,529 ($29,164 CAD) was due August 1, 2018 at the rate of 8% per annum, and amortized over a twenty-year period. The corporate term loan is due on demand, but until a demand is made, is payable in monthly blended installments of principal and interest of $22,952 ($29,711 CAD), commencing August 13, 2018, at the PACE base rate of 7% plus 1.25% per annum, currently 8.25%. The corporate term loan continues to be amortized over a twenty-year period and matures on September 13, 2022.

Other

On April 11, 2018, three directors each loaned the Company $19,313 ($25,000 CAD) for working capital purposes. The loans bear interest at the rate of 12% per annum, are due on demand and unsecured. There are no written agreements evidencing these loans. During the nine-month period ended September 30, 2018, $3,295 ($4,241 CAD) of interest was charged on these loans. As at September 30, 2018, $3,276 ($4,241 CAD) (December 31, 2017-$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 $154,500 ($200,000 CAD). A portion of the funds, $116,746 ($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. There is no written agreement evidencing this loan. During the nine-month period ended September 30, 2018, $9,482 ($12,205 CAD) of interest was charged on this loan and other loans repaid to Travellers during the nine-months ended September 30, 2018. As at September 30, 2018, $9,143 ($11,836 CAD) (December 31, 2017-$nil; $nil CAD) in interest is included in accrued liabilities and the loan remains outstanding.

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 $191,155$185,167 ($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 installments of $7,725$7,483 ($10,000 CAD) each, plus the applicable harmonized sales taxes, followed by forty-six monthly blended installments of principal and interest of $3,954$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 $19,065$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 $221,437$214,500 ($286,650 CAD) (the “October 2017 Equipment Lease Agreement”). The lease agreementOctober 2017 Equipment Lease Agreement requires monthly blended installments of principal and interest of $4,511$4,370 ($5,840 CAD), plus applicable harmonized sales taxes and a final balloon payment of $22,094$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 $13,272$12,856 ($17,180 CAD) (the “September 2017 Equipment Lease Agreement”). The lease agreementSeptember 2017 Equipment Lease Agreement requires monthly blended installments of principal and interest of $980$949 ($1,268 CAD) at a monthly interest rate of 5.95%, due and fully paid on November 10, 2018.

During the nine months endedthree-month period ending March 31, 2019, $nil ($nil CAD) (2018-$209; $264 CAD) of interest was charged under the September 30, 2018, the Company incurred interest charges of $14,028 ($18,056 CAD) (2017-$nil; $nil CAD) on these leases.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.

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: $3,863$3,742 ($5,000 CAD) plus applicable taxes for 2017 and $11,588$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 2020.1,000,000 RSUs were exchanged into 1,000,000 shares of common stock of the Company. The RSUs of the remaining installment are expected to vest on January 1, 2020, upon meeting certain performance objectives. On May 17, 2018, the boardPresident’s Consulting Agreement was amended by the Board of directorsDirectors’ (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 time 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 Technologies (“AWT”)AWT Program, 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, 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 original programAWT Program budget was for $618,000$586,400 ($800,000 CAD), of which the Company contributes 50% in cash and in-kind contributions and CAWT contributes 50%. The academic institutionCAWT 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 yearand third years of the AWT Program previously noted as $19,947 ($25,217 CAD) and for the third year, were cancelled.

The Company hashad already completed and provided its commitment for the first year of the programAWT Program which ended March 31, 2017, consisting of professional fees of $7,217 ($9,432 CAD) and a contribution to the capital requirements of the 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.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 $3,090$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 ratefirst three months of 2018.

On November 4, 2016, the Company’s BioGrid Project, a project described in the expansion and completed her services on March 31, 2018.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 162,225157,143 ($210,000 CAD) which was required to initiate a letter of credit in the amount of $154,500$149,660 ($200,000 CAD). This loan was repaid in full, with accrued interest on April 3, 2018. Fees for the letter of credit included $7,725$7,483 ($10,000 CAD) incurred and charged by Travellers and $2,318$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. Any outstanding 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.

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 the 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.

Organic Composting Facility.The 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 source separated organics. During the nine-monththree-month period ended September 30, 2018,ending March 31, 2019, tipping fees ranged from $19 ($25 CAD) to $66$64 ($85 CAD) per metric tonne.

Compost Sales.The Company also sells organic compost (screened and unscreened) to local customers. During the nine-monththree-month period ended September 30 2018,ending March 31, 2019, the average selling price of the compost per metric tonne was approximately $13$8 ($1711 CAD).

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2018,March 31, 2019, the Company had bank indebtednessa cash balance (bank indebtedness) of $820$3,933 (December 31, 2017-cash balance of $126,117)2018-$42,711) and current debt obligations in the amount of $5,205,234$5,804,761 (December 31, 2017-2018-$2,659,636)5,045,362). As at September 30, 2018,March 31, 2019, the Company had a working capital deficit of $4,978,453$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. The credit facilities and corporate term loan with PACE are due on demand, and as such, are disclosed as current liabilities, but each of the credit facilities and corporate term loan are repayable in monthly blended instalments of principal and interest, mature in September 2022 and are amortized over a twenty-year period.

The Company’s total assets at September 30, 2018March 31, 2019 were $4,011,645and$3,940,172 (December 31, 2018-$3,710,713) and total current liabilities were $5,205,234.$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 $7,802,121$9,634,856 as of September 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.

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 $5,205,234$5,804,761 in current liabilities, which includes all the credit facilities and corporate term loan with PACE,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.

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).

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 $4,248,750$4,031,500 ($5,500,000 CAD) with PACE.PACE (the “PACE Line of Credit”). On February 2, 2017, the companyCompany received the first and only advance in the amount of $1,236,000$1,172,800 ($1,600,000 CAD). on the PACE Line of Credit. The PACE Line of Credit was due February 2, 2019 and is now one of multiple credit facilities with PACE.PACE, as noted below.

The funds advanced on thisthe PACE Line of Credit of $1,236,000$1,172,800 ($1,600,000 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, until refinanced, as noted below. The PACE Line of Credit is secured by a business loan general security agreement, a $1,236,000$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 $84,975$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 recent private placement pricing 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 $29,906$28,377 ($38,713 CAD). As at September 30, 2018, $790,151March 31, 2019, $757,258 ($1,022,8491,011,971 CAD) (December 31, 2018-$745,897; $1,017,595 CAD) remains outstanding (December 31, 2017-$817,932; $1,026,135 CAD).outstanding. During the nine months ended September 30, 2018,three-month period ending March 31, 2019, the Company incurred interest charges of $48,043$15,502 ($61,84020,609 CAD) (2017-(2018-$47,463; $62,02716,011; $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 installments of principal and interest of $6,770$6,558 ($8,764 CAD), commencing August 2, 2018, amortized over a twenty-year period and matures on September 2, 2022.

On June 15, 2017, PACE loaned the Company $463,500$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.Credit. As at September 30, 2018, $441,891March 31, 2019, $423,490 ($572,027565,936 CAD) (December 31, 2017-2018-$457,428; $573,865417,137; $559,081 CAD) remains outstanding.outstanding under the PACE Business Loan Agreement. During the nine months ended September 30, 2018,three-month period ending March 31, 2019, the Company incurred interest charges of $26,883$8,695 ($34,60211,559 CAD) (2017-(2018-$10,438; $13,6418,780; $11,320 CAD) on this credit facility.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 $3,786$3,667 ($4,901 CAD), commencing August 2, 2018, amortized over a twenty-year period and matures on September 2, 2022.