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 ended March 31, 20212022
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________to ________________
Commission file number 000-56024
SUSGLOBAL ENERGY CORP.
(Exact name of registrant as specified in its charter)
Delaware | 38-4039116 |
(State or other jurisdiction of incorporation or organization) | (I. R. S. Employer Identification No.) |
200 Davenport Road | M5R 1J2 |
Toronto, ON | |
(Address of principal executive offices) | (Zip Code) |
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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
N/A | N/A | N/A |
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 [ ]
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| 1 |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [X] | Smaller reporting company |
Emerging growth company |
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]
The number of shares of the registrant's common stock outstanding as of May 21, 202120, 2022 was 89,584,951101,254,466 shares.
 |
| 2 |
| SusGlobal Energy Corp. |
INDEX TO FORM 10-Q |
For the Three-Month Periods Ended March 31, |
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| 3 |
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022 and 2021
(Expressed in United States Dollars)
(unaudited)
CONTENTS
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| 4 |
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Interim Condensed Consolidated Balance Sheets | ||||||
As at March 31, | ||||||
(Expressed in United States Dollars) | ||||||
(unaudited) | ||||||
| March 31, | December 31, | |||||
| 2021 | 2020 | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash | $ | 166,998 | $ | 6,457 | ||
| Trade receivables | 67,781 | 182,871 | ||||
| Government remittances receivable | 5,832 | 3,746 | ||||
| Other receivable | 52,559 | - | ||||
| Inventory | 45,923 | 24,740 | ||||
| Prepaid expenses and deposits | 442,500 | 94,131 | ||||
| Deferred assets (note 6) | 214,704 | 215,953 | ||||
| Total Current Assets | 996,297 | 527,898 | ||||
| Intangible Assets (note 5) | 193,158 | 188,180 | ||||
| Long-lived Assets, net (note 6) | 4,918,626 | 5,042,225 | ||||
| Long-Term Assets | 5,111,784 | 5,230,405 | ||||
| Total Assets | $ | 6,108,081 | $ | 5,758,303 | ||
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||
| Current Liabilities | ||||||
| Accounts payable (note 7) | $ | 1,111,461 | $ | 1,073,454 | ||
| Government remittances payable | 259,568 | 229,358 | ||||
| Accrued liabilities (notes 7, 9, 11 and 13) | 979,119 | 1,206.618 | ||||
| Advance (note 8) | - | 15,460 | ||||
| Deferred revenue | 2,756 | 4,790 | ||||
| Current portion of long-term debt (note 9) | 6,404,823 | 6,327,520 | ||||
| Current portion of obligations under capital lease (note 10) | 177,830 | 375,140 | ||||
| Convertible promissory notes (note 11) | 479,000 | 1,092,100 | ||||
| Loan payable to related party (note 12) | 18,290 | 33,772 | ||||
| Total Current Liabilities | 9,432,847 | 10,358,212 | ||||
| Long-term debt (note 9) | 79,520 | 78,540 | ||||
| Obligations under capital lease (note 10) | 176,427 | - | ||||
| Deferred tax liability | 83,530 | 82,501 | ||||
| Total Long-term Liabilities | 339,477 | 161,041 | ||||
| Total Liabilities | 9,772,324 | 10,519,253 | ||||
| Stockholders' Deficiency | ||||||
| Preferred stock, $.0001 par value, 10,000,000 authorized, none issued and outstanding Common stock, $.0001 par value, 150,000,000 authorized, 89,184,951 (2020- 82,860,619) shares issued and outstanding (note 13) | 8,920 | 8,288 | ||||
| Additional paid-in capital | 10,451,369 | 9,045,187 | ||||
| Shares to be issued | 66,000 | 8,580 | ||||
| Accumulated deficit | (13,775,129 | ) | (13,468,794 | ) | ||
| Accumulated other comprehensive loss | (415,403 | ) | (354,211 | ) | ||
| Stockholders' deficiency | (3,664,243 | ) | (4,760,950 | ) | ||
| Total Liabilities and Stockholders' Deficiency | $ | 6,108,081 | $ | 5,758,303 | ||
| Going concern (note 2) | ||||||
| Commitments (note 14) | ||||||
| Subsequent events (note 18) |
| March 31, | December 31, | |||||
| 2022 | 2021 | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash | $ | 36,058 | $ | 36,033 | ||
| Trade receivables | 47,380 | 59,665 | ||||
| Government remittances receivable | 82,028 | 13,265 | ||||
| Inventory | 16,806 | 20,582 | ||||
| Prepaid expenses and deposits | 756,936 | 163,343 | ||||
| Total Current Assets | 939,208 | 292,888 | ||||
| Long-lived Assets, net (note 6) | 9,027,664 | 8,278,833 | ||||
| Long-Term Assets | 9,027,664 | 8,278,833 | ||||
| Total Assets | $ | 9,966,872 | $ | 8,571,721 | ||
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||
| Current Liabilities | ||||||
| Accounts payable (note 7) | $ | 1,922,316 | $ | 1,085,235 | ||
| Government remittances payable | 285,573 | 262,047 | ||||
| Accrued liabilities (notes 7, 8, 9, 10 and 13) | 1,127,852 | 942,241 | ||||
| Current portion of long-term debt (note 8) | 7,876,242 | 7,765,421 | ||||
| Current portion of obligations under capital lease (note 9) | 89,953 | 91,047 | ||||
| Convertible promissory notes (note 10) | 6,063,926 | 3,798,516 | ||||
| Total Current Liabilities | 17,365,862 | 13,944,507 | ||||
| Long-term debt (note 8) | 1,767,933 | 1,752,271 | ||||
| Obligations under capital lease (note 9) | 116,670 | 130,086 | ||||
| Deferred tax liability | 75,003 | 73,925 | ||||
| Total Long-term Liabilities | 1,959,606 | 1,956,282 | ||||
| Total Liabilities | 19,325,468 | 15,900,789 | ||||
| Stockholders' Deficiency | ||||||
| Preferred stock, $.0001 par value, 10,000,000 authorized, NaN issued and outstanding Common stock, $.0001 par value, 150,000,000 authorized, 97,208,547 (2021- 92,983,547) shares issued and outstanding (note 12) | 9,725 | 9,302 | ||||
| Additional paid-in capital | 12,267,938 | 11,272,599 | ||||
| Shares to be issued | 40,100 | 59,640 | ||||
| Accumulated deficit | (21,197,875 | ) | (18,334,649 | ) | ||
| Accumulated other comprehensive loss | (478,484 | ) | (335,960 | ) | ||
| Stockholders' deficiency | (9,358,596 | ) | (7,329,068 | ) | ||
| Total Liabilities and Stockholders' Deficiency | $ | 9,966,872 | $ | 8,571,721 | ||
| Going concern (note 2) | ||||||
| Commitments (note 13) | ||||||
| Subsequent events (note 17) |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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| 5 |
| SusGlobal Energy Corp. | ||||||
| Interim Condensed Consolidated Statements of Operations and Comprehensive Loss | ||||||
| For the three-month periods ended March 31, 2021 and 2020 | ||||||
| (Expressed in United States Dollars) | ||||||
| (unaudited) | ||||||
| For the three-month periods ended | ||||||
| March 31, | March 31, | |||||
| 2021 | 2020 | |||||
| Revenue | $ | 192,660 | $ | 350,197 | ||
| Cost of Sales | ||||||
| Opening inventory | 24,740 | 5,389 | ||||
| Depreciation | 136,560 | 113,109 | ||||
| Direct wages and benefits | 71,059 | 76,183 | ||||
| Equipment rental, delivery, fuel and repairs and maintenance | 105,893 | 61,302 | ||||
| Utilities | 18,263 | 38,277 | ||||
| Outside contractors | - | 3,573 | ||||
| 356,515 | 297,833 | |||||
| Less: closing inventory | (45,923 | ) | (4,071 | ) | ||
| Total cost of sales | 310,592 | 293,762 | ||||
| Gross (loss) profit | (117,932 | ) | 56,435 | |||
| Operating expenses | ||||||
| Management compensation-stock- based | ||||||
| compensation (notes 7 and 13) | 54,259 | - | ||||
| Management compensation-fees (note 8) | 90,049 | 51,357 | ||||
| Marketing | 45,727 | 2,917 | ||||
| Professional fees | 64,402 | 81,448 | ||||
| Interest expense and default amounts (notes 7, 9, 10 and 11) | 163,874 | 312,291 | ||||
| Office and administration (note 5) | 75,215 | 55,685 | ||||
| Rent and occupancy (note 7) | 32,339 | 28,297 | ||||
| Insurance | 15,002 | 18,179 | ||||
| Filing fees | 18,959 | 13,880 | ||||
| Amortization of financing costs | 13,578 | 92,538 | ||||
| Directors' compensation (note 7) | 10,664 | (1,420 | ) | |||
| Stock-based compensation (note 13) | 8,073 | - | ||||
| Repairs and maintenance | 13,189 | 6,458 | ||||
| Foreign exchange (income) loss | (12,118 | ) | 150,095 | |||
| Total operating expenses | 593,212 | 811,725 | ||||
| Net loss from operating activities | (711,144 | ) | (755,290 | ) | ||
| Other income (note 15) | 404,809 | - | ||||
| Net loss | (306,335 | ) | (755,290 | ) | ||
| Other comprehensive (loss) income | ||||||
| Foreign exchange (loss) gain | (61,192 | ) | 301,639 | |||
| Comprehensive loss | $ | (367,527 | ) | $ | (453,651 | ) |
| Net loss per share-basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) |
| Weighted average number of common shares outstanding- basic and diluted | 86,818,361 | 57,441,740 | ||||
| SusGlobal Energy Corp. Interim Condensed Consolidated Statements of Operations and Comprehensive Loss | |||||
| For the three-month periods ended March 31, 2022 and 2021 | |||||
| (Expressed in United States Dollars) | |||||
| (unaudited) |
| For the three-month periods ended | ||||||
| March 31, 2022 | March 31, 2021 (correction-see note 5) | |||||
| Revenue | $ | 144,470 | $ | 192,660 | ||
| Cost of Sales | ||||||
| Opening inventory | 20,582 | 24,740 | ||||
| Depreciation | 116,203 | 136,560 | ||||
| Direct wages and benefits | 52,088 | 71,059 | ||||
| Equipment rental, delivery, fuel and repairs and maintenance | 170,188 | 105,893 | ||||
| Utilities | 38,812 | 18,263 | ||||
| Outside contractors | 24,568 | 0 | ||||
| 422,441 | 356,515 | |||||
| Less: closing inventory | (16,806 | ) | (45,923 | ) | ||
| Total cost of sales | 405,635 | 310,592 | ||||
| Gross (loss) | (261,165 | ) | (117,932 | ) | ||
| Operating expenses | ||||||
| Management compensation-stock- based | ||||||
| compensation (notes 7 and 12) | 60,113 | 54,259 | ||||
| Management compensation-fees (note 7) | 118,469 | 90,049 | ||||
| Marketing | 376,488 | 45,727 | ||||
| Professional fees | 261,652 | 69,402 | ||||
| Interest expense (notes 7, 8, 9 and 10) | 191,243 | 163,874 | ||||
| Office and administration (note 6) | 60,577 | 75,215 | ||||
| Rent and occupancy (note 7) | 50,925 | 32,339 | ||||
| Insurance | 28,838 | 15,002 | ||||
| Filing fees | 54,175 | 18,959 | ||||
| Amortization of financing costs | 33,532 | 13,578 | ||||
| Directors' compensation (note 7) | 14,809 | 10,664 | ||||
| Stock-based compensation (note 12) | 130,512 | 8,073 | ||||
| Repairs and maintenance | 2,329 | 13,189 | ||||
| Foreign exchange (income) | (77,749 | ) | (12,118 | ) | ||
| Total operating expenses | 1,305,913 | 598,212 | ||||
| Net loss from operating activities | (1,567,078 | ) | (716,144 | |||
| Other (expense) income (note 14) | (1,296,148 | ) | 323,612 | |||
| Net loss | (2,863,226 | ) | (392,532 | ) | ||
| Other comprehensive (loss) | ||||||
| Foreign exchange (loss) | (142,524 | ) | (61,192 | ) | ||
| Comprehensive loss | $ | (3,005,750 | ) | $ | (453,724 | ) |
| Net loss per share-basic and diluted | $ | (0.03 | ) | $ | (0.01 | ) |
| Weighted average number of common shares outstanding- basic and diluted | 95,990,936 | 86,818,361 | ||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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| 6 |
SusGlobal Energy Corp. | ||||||||||||||||||||||||
Interim Condensed Consolidated Statements of Changes in Stockholders' Deficiency | ||||||||||||||||||||||||
For the three-month periods ended March 31, | ||||||||||||||||||||||||
(Expressed in United States Dollars) | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
| Number of Shares | Common Shares | Additional Paid- in Capital | Shares to be Issued | Stock Compensation Reserve | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Stockholders' Deficiency | |||||||||||||||||
| Balance-December 31, 2020 | 82,860,619 | $ | 8,288 | $ | 9,045,187 | $ | 8,580 | $ | - | $ | (13,468,794 | ) | $ | (354,211 | ) | $ | (4,760,950 | ) | ||||||
| Shares issued for proceeds previously received | 400,000 | 40 | 8,540 | (8,580 | ) | - | - | - | - | |||||||||||||||
| Shares issued to officers | 1,050,000 | 105 | 216,930 | - | - | - | - | 217,035 | ||||||||||||||||
| Shares issued on conversion of related party debt and accounts payable to equity | 1,005,728 | 100 | 285,544 | - | - | - | - | 285,644 | ||||||||||||||||
| Shares issued for conversion of debt to equity | 3,175,124 | 318 | 713,398 | - | - | - | - | 713,716 | ||||||||||||||||
| Shares issued for professional services | 63,000 | 6 | 24,213 | - | - | - | - | �� | 24,219 | |||||||||||||||
| Shares yet to be issued on issuance of convertible debt | - | - | - | 66,000 | - | - | - | 66,000 | ||||||||||||||||
| Shares issued on private placement | 630,480 | 63 | 157,557 | - | - | - | - | 157,620 | ||||||||||||||||
| Other comprehensive loss | - | - | - | - | - | - | (61,192 | ) | (61,192 | ) | ||||||||||||||
| Net loss | - | - | - | - | - | (306,335 | ) | - | (306,335 | ) | ||||||||||||||
| Balance-March 31, 2021 | 89,184,951 | $ | 8,920 | $ | 10,451,369 | $ | 66,000 | $ | - | $ | (13,775,129 | ) | $ | (415,403 | ) | $ | (3,664,243 | ) | ||||||
| Balance-December 31, 2019 | 51,784,504 | 5,180 | 7,450,091 | - | 1,000,000 | (11,449,497 | ) | (209,792 | ) | (3,204,018 | ) | |||||||||||||
| Shares issued on vesting of 2019 stock award | 1,000,000 | 100 | 999,900 | - | (1,000,000 | ) | - | - | - | |||||||||||||||
| Shares issued for conversion of debt to equity | 7,717,326 | 772 | 75,955 | - | - | - | - | 76,727 | ||||||||||||||||
| Conversion of debt to equity on shares yet to be issued | - | - | - | 7,250 | - | - | - | 7,250 | ||||||||||||||||
| Other comprehensive income | - | - | - | - | - | - | 301,639 | 301,639 | ||||||||||||||||
| Net loss | - | - | - | - | - | (755,290 | ) | - | (755,290 | ) | ||||||||||||||
| Balance-March 31, 2020 | 60,501,830 | $ | 6,052 | $ | 8,525,946 | $ | 7,250 | $ | - | $ | (12,204,787 | ) | $ | 91,847 | $ | (3,573,692 | ) |
| Number of Shares | Common Shares | Additional Paid- in Capital | Shares to be Issued | Stock Compensation Reserve | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Stockholders' Deficiency | |||||||||||||||||
| Balance-December 31, 2021 | 92,983,547 | 9,302 | 11,272,599 | 59,640 | 0 | (18,334,649 | ) | (335,960 | ) | (7,329,068 | ) | |||||||||||||
| Shares issued for proceeds previously received | 230,000 | 23 | 48,967 | (48,990 | ) | - | - | - | - | |||||||||||||||
| Shares issued to officers | 1,050,000 | 105 | 240,345 | - | - | - | - | 240,450 | ||||||||||||||||
| Shares issued to employee | 10,000 | 1 | 1,989 | - | - | - | - | 1,990 | ||||||||||||||||
| Shares issued for professional services | 895,000 | 90 | 223,820 | - | - | - | 223,910 | |||||||||||||||||
| Shares issued on conversion of debt to equity | 2,000,000 | 200 | 463,662 | - | - | - | 463,862 | |||||||||||||||||
| Shares issued on private placement | 40,000 | 4 | 16,556 | - | - | - | 16,560 | |||||||||||||||||
| Shares yet to be issued | - | - | - | 29,450 | - | - | - | 29,450 | ||||||||||||||||
| Other comprehensive income | - | - | - | - | - | - | (142,524 | ) | (142,524 | ) | ||||||||||||||
| Net loss | - | - | - | - | - | (2,863,226 | ) | - | (2,863,226 | ) | ||||||||||||||
| Balance-March 31, 2022 | 97,208,547 | $ | 9,725 | $ | 12,267,938 | $ | 40,100 | $ | - | $ | (21,197,875 | ) | $ | (478,484 | ) | $ | (9,358,596 | ) | ||||||
| (correction-see note 5) | ||||||||||||||||||||||||
| Balance-December 31, 2020 | 82,860,619 | $ | 8,288 | $ | 9,045,187 | $ | 8,580 | $ | - | $ | (13,468,794 | ) | $ | (354,211 | ) | $ | (4,760,950 | ) | ||||||
| Shares issued for proceeds previously received | 400,000 | 40 | 8,540 | (8,580 | ) | - | - | - | - | |||||||||||||||
| Shares issued to officers | 1,050,000 | 105 | 216,930 | - | - | - | - | 217,035 | ||||||||||||||||
| Shares issued on conversion of related party debt and accounts payable to equity | 1,005,728 | 100 | 285,544 | - | - | - | - | 285,644 | ||||||||||||||||
| Shares issued for conversion of debt to equity | 3,175,124 | 318 | 713,398 | - | - | - | - | 713,716 | ||||||||||||||||
| Shares issued for professional services | 63,000 | 6 | 24,213 | - | - | - | - | 24,219 | ||||||||||||||||
| Shares issued on private placement | 630,480 | 63 | 157,557 | - | - | - | - | 157,620 | ||||||||||||||||
| Other comprehensive loss | - | - | - | - | - | - | (61,192 | (61,192 | ||||||||||||||||
| Net loss | - | - | - | - | - | (392,532 | ) | - | (392,532 | ) | ||||||||||||||
| Balance-March 31, 2021 | 89,184,951 | $ | 8,920 | $ | 10,451,369 | $ | - | $ | - | $ | (13,861,326 | ) | $ | (415,403 | ) | $ | (3,816,440 | ) |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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| 7 |
| SusGlobal Energy Corp. | |||||||
| Interim Condensed Consolidated Statements of Cash Flows | |||||||
| For the three-month periods ended March 31, 2021 and 2020 | |||||||
| (Expressed in United States Dollars) | |||||||
| (unaudited) | |||||||
| For the three-month period ended March 31, 2021 | For the three-month period ended March 31, 2020 | ||||||
| Cash flows from operating activities | |||||||
| Net loss | $ | (306,335 | ) | $ | (755,290 | ) | |
| Adjustments for: | |||||||
| Depreciation | 137,751 | 114,374 | |||||
| Amortization of intangible assets | 979 | 551 | |||||
| Non-cash professional fees on conversion of debt | 275 | 1,416 | |||||
| Non-cash interest expense on conversion of debt | (32,444 | ) | - | ||||
| Amortization of financing fees | 13,578 | 92,538 | |||||
| Stock-based compensation | 62,332 | - | |||||
| Gain on forgiveness of convertible promissory notes and accrued interest | (359,460 | ) | - | ||||
| Gain on disposal of long-lived assets | (45,349 | ) | - | ||||
| Changes in non-cash working capital: | |||||||
| Trade receivables | 116,589 | (66,262 | ) | ||||
| Government remittances receivable | (2,027 | ) | 3,777 | ||||
| Other receivables | (52,208 | ) | 5,358 | ||||
| Inventory | (20,735 | ) | 912 | ||||
| Prepaid expenses and deposits | (165,959 | ) | 12,179 | ||||
| Deferred assets | 3,916 | - | |||||
| Accounts payable | 104,781 | 78,407 | |||||
| Government remittances payable | 27,166 | 38,518 | |||||
| Accrued liabilities | 89,613 | 218,222 | |||||
| Deferred revenue | (2,080 | ) | 8,188 | ||||
| Net cash used in operating activities | (429,617 | ) | (247,112 | ) | |||
| Cash flows from investing activities | |||||||
| Purchase of intangible assets | (3,593 | ) | (2,574 | ) | |||
| Proceeds on disposal of long-lived assets | 47,394 | - | |||||
| Adjustments (purchase) of long-lived assets | 45,475 | (50,352 | ) | ||||
| Net cash provided by (used in) investing activities | 89,276 | (52,926 | ) | ||||
| Cash flows from financing activities | |||||||
| Repayments of advance | (15,548 | ) | (3,147 | ) | |||
| Repayment/advance of long-term debt | (15,217 | ) | 3,686 | ||||
| Repayments of obligations under capital lease | (25,393 | ) | (35,856 | ) | |||
| Advances and penalties on convertible promissory notes (ii) | 245,000 | 103,441 | |||||
| Repayment of convertible promissory notes | (50,000 | ) | - | ||||
| Advances of loans payable to related parties(i) | 206,654 | 74,430 | |||||
| Repayment of loans payable to related parties | (15,798 | ) | - | ||||
| Proceeds on private placement | 157,620 | - | |||||
| Net cash provided by financing activities | 487,318 | 142,554 | |||||
| Effect of exchange rate on cash | 13,564 | 86,900 | |||||
| Increase (decrease) in cash | 160,541 | (70,584 | ) | ||||
| Cash and cash equivalents-beginning of period | 6,457 | 7,926 | |||||
| Restricted cash-beginning of period | - | 467,798 | |||||
| Cash and cash equivalents and restricted cash-beginning of period | 6,457 | 475,724 | |||||
| Cash and cash equivalents and restricted cash-end of period | $ | 166,998 | $ | 405,140 | |||
| Supplemental Cash Flow Disclosure: | |||||||
| Interest paid | $ | 104,705 | $ | 51,620 | |||
| SusGlobal Energy Corp. | |||||
| Interim Condensed Consolidated Statements of Cash Flows | |||||
| For the three-month periods ended March 31, 2022 and 2021 | |||||
| (Expressed in United States Dollars) | |||||
| (unaudited) |
| For the three-month period ended March 31, 2022 | For the three-month period ended March 31, 2021 (correction-see note 5) | |||||
| Cash flows from operating activities | ||||||
| Net loss | $ | (2,863,226 | ) | $ | (392,532 | ) |
| Adjustments for: | ||||||
| Depreciation | 116,529 | 137,751 | ||||
| Amortization of intangible assets | 0 | 979 | ||||
| Non-cash professional fees on conversion of debt | 0 | 275 | ||||
| Non-cash interest expense on conversion of debt | 0 | (32,444 | ) | |||
| Amortization of financing fees | 33,532 | 13,578 | ||||
| Stock-based compensation | 190,625 | 62,332 | ||||
| Loss on revaluation of convertible promissory notes | 1,296,148 | 81,197 | ||||
| Gain on forgiveness of convertible promissory notes and accrued interest | 0 | (359,460 | ) | |||
| Gain on disposal of long-lived assets | 0 | (45,349 | ) | |||
| Changes in non-cash working capital: | ||||||
| Trade receivables | 12,983 | 116,589 | ||||
| Government remittances receivable | (67,671 | ) | (2,027 | ) | ||
| Other receivables | 0 | (52,208 | ) | |||
| Inventory | 4,022 | (20,735 | ) | |||
| Prepaid expenses and deposits | (295,664 | ) | (165,959 | ) | ||
| Deferred assets | 0 | 3,916 | ||||
| Accounts payable | 800,629 | 104,781 | ||||
| Government remittances payable | 19,447 | 27,166 | ||||
| Accrued liabilities | 169,619 | 89,613 | ||||
| Deferred revenue | 0 | (2,080 | ) | |||
| Net cash used in operating activities | (583,027 | ) | (434,617 | ) | ||
| Cash flows from investing activities | ||||||
| Purchase of intangible assets | 0 | (3,593 | ) | |||
| Proceeds on disposal of long-lived assets | 0 | 47,394 | ||||
| Adjustments (purchase) of long-lived assets | (736,421 | ) | 45,475 | |||
| Net cash provided by (used in) investing activities | (736,421 | ) | 89,276 | |||
| Cash flows from financing activities | ||||||
| Repayments of advance | 0 | (15,548 | ) | |||
| Repayment/advance of long-term debt | (45,647 | ) | (15,217 | ) | ||
| Repayments of obligations under capital lease | (17,502 | ) | (25,393 | ) | ||
| Advances on convertible promissory notes (ii) | 1,425,000 | 245,000 | ||||
| Repayment of convertible promissory notes | (42,660 | ) | (50,000 | ) | ||
| Advances of loans payable to related parties(i) | 28,828 | 206,654 | ||||
| Repayment of loans payable to related parties | (28,828 | ) | (15,798 | ) | ||
| Proceeds on private placement | 16,560 | 157,620 | ||||
| Net cash provided by financing activities | 1,335,751 | 487,318 | ||||
| Effect of exchange rate on cash | (16,278 | ) | 18,564 | |||
| Increase (decrease) in cash | 25 | 160,541 | ||||
| Cash and cash equivalents-beginning of period | 36,033 | 6,457 | ||||
| Cash and cash equivalents -end of period | $ | 36,058 | $ | 166,998 | ||
| Supplemental Cash Flow Disclosure: | ||||||
| Interest paid | $ | 207,548 | $ | 104,705 |
| (i) | Refer to note |
| (ii) | Refer to note 12, |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
|
| 8 |
| |
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2022 and 2021
(Expressed in United States Dollars)
(unaudited)
1. Nature of Business and Basis of Presentation
SusGlobal Energy Corp. ("SusGlobal") was formed by articles of amalgamation on December 3, 2014, in the Province of Ontario, Canada and its executive office is in Toronto, Ontario, Canada. SusGlobal, a company in the start-up stages and Commandcredit Corp. ("Commandcredit"), an inactive Canadian public company, amalgamated to continue business under the name of SusGlobal Energy Corp.
On May 23, 2017, SusGlobal filed an Application for Authorization to continue in another Jurisdiction with the Ministry of Government Services in Ontario and a certificate of corporate domestication and certificate of incorporation with the Secretary of State of the State of Delaware under which it changed its jurisdiction of incorporation from Ontario to the State of Delaware (the "Domestication"). In connection with the Domestication each of the currently issued and outstanding common shares were automatically converted on a one-for-one basis into common shares compliant with the laws of the state of Delaware (the "Shares"). As a result of the Domestication, pursuant to Section 388 of the General Corporation Law of the State of Delaware (the "DGCL"), SusGlobal continued its existence under the DGCL as a corporation incorporated in the State of Delaware. The business, assets and liabilities of SusGlobal and its subsidiaries on a consolidated basis, as well as its principal location and fiscal year, were the same immediately after the Domestication as they were immediately prior to the Domestication. SusGlobal filed a Registration Statement on Form S-4 to register the Shares and this registration statement was declared effective by the Securities and Exchange Commission on May 23,12, 2017.
On December 11, 2018, the Company began trading on the OTCQB venture market exchange, under the ticker symbol SNRG.
SusGlobal is a renewables company focused on acquiring, developing and monetizing a global portfolio of proprietary technologies in the waste to energy and regenerative products application.
These interim condensed consolidated financial statements of SusGlobal and its wholly-owned subsidiaries, SusGlobal Energy Canada Corp. (“SECC”("SECC"), SusGlobal Energy Canada I Ltd. ("SGECI"), SusGlobal Energy Belleville Ltd. ("SGEBL"), SusGlobal Energy Hamilton Ltd. ("SEHL") and 1684567 Ontario Inc. ("1684567") (together, the "Company"), have been prepared following generally accepted accounting principles in the United States ("US GAAP") for interim financial information and the Securities Exchange Commission ("SEC") instructions to Form 10-Q and Article 8 of SEC Regulation S-X, and are expressed in United States Dollars. The Company's functional currency is the Canadian Dollar ("C$"). In the opinion of management, all adjustments necessary for a fair presentation have been included.
2. Going Concern
The interim condensed consolidated financial statements have been prepared in accordance with US GAAP, which assumes that the Company will be able to meet its obligations and continue its operations for the next twelve months.
The Company incurred a net loss of $306,335 (2020-$2,863,226 (2021-$755,290)392,532) for the three months ended March 31, 20212022 and as at that date had a working capital deficit of $8,436,550$16,426,654 (December 31, 2020-2021-$9,830,314)13,651,619) and an accumulated deficit of $13,775,129$21,197,875 (December 31, 2020-2021-$13,468,794)18,334,649) and expects to incur further losses in the development of its business.
|
| 9 |
SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 20212022 and 2020
2021
(Expressed in United States Dollars)
(unaudited)
2. Going Concern, (continued)
On February 18, 2021, PACE and the Company reached a new agreement to repay all amounts owing to PACE on or before July 30, 2021. Management was not able to meet the July 30, 2021 deadline. On August 13, 2021, PACE agreed to allow the Company until August 31, 2021 to bring the arrears current and continue to September 2022, the original maturity date. Management was not able to meet the August 31, 2021 deadline. On November 15, 2021, the Company paid all arrears to PACE and PACE agreed to allow the Company to continue payments to the end of the terms of each obligation, September 2022. Management continues discussions with equity investors and a Canadian chartered bank to re-finance its remaining obligations to PACE, and repay other creditors. creditors and has had discussions with the appropriate party to extend the repayment date on the 1st mortgage which currently matures September 1, 2022. One of the Company's significant customer contracts expired at the end of the prior year and one customer contract was terminated by the Company at the end of this year's third quarter. The Company is also anticipating a successful underwritten offering in connection with its filed registration statement although there can be no assurance that the underwritten offering will be completed.
These factors cast substantial doubt as to the Company's ability to continue as a going concern, which is dependent upon its ability to obtain the necessary financing to further the development of its business, satisfy its obligations to PACE and its other creditors, whose debts are also in default, and upon achieving profitable operations.operations through revenue growth. There is no assurance of funding being available or available on acceptable terms. Realization values may be substantially different from carrying values as shown.
Beginning in March 2020 the Governments of Canada and Ontario, as well as foreign governments, instituted emergency measures as a result of the novel strain of coronavirus ("COVID-19"). The virus has had a major impact on Canadian and international securities and currency markets and consumer activity which may impact the Company's financial position, its results of operations and its cash flows significantly. The situation is constantly evolving, however, so the extent to which the COVID-19 outbreak will impact businesses and the economy is highly uncertain and cannot be predicted. Accordingly, the Company cannot predict the extent to which its financial position, results of operations and cash flows will be affected in the future.
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, 20202021 and 20192020 and their accompanying notes.
|
| 10 |
SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2022 and 2021
(Expressed in United States Dollars)
(unaudited)
4. Financial Instruments
The carrying value of cash, trade receivables, other receivables, accounts payable, accrued liabilities and deferred revenue approximated their fair values as of March 31, 2021 and December 31, 2020, due to their short-term nature. The carrying value of the advance,Company's financial instruments, such as cash, trade receivables, accounts payable and accrued liabilities approximate fair value due to the short-term nature of these instruments. The carrying amounts of the long-term debt, obligations under capital lease and convertible promissory notes and loan payable to related party approximated theiralso approximates fair valuesvalue due to their market interest rates.rate.
Interest, Credit and Concentration Risk
Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk.
|
SusGlobal Energy Corp.Notes to the Interim Condensed Consolidated Financial StatementsMarch 31, 2021 and 2020(Expressed in United States Dollars)(unaudited)
4. Financial Instruments, (continued)
The Company is exposed to significant interest rate risk on the current portion of its long-term debt and a portion of its convertible promissory notes of $6,583,823$7,837,423 (C$8,279,455) (2020-9,793,106) (December 31,2021-$6,327,520;7,727,628; C$8,056,430)9,796,689).
Credit risk is the risk of loss associated with a counterparty's inability to perform its payment obligations. As at March 31, 2021,2022, the Company's credit risk is primarily attributable to cash and trade receivables. As at March 31, 2021, 2021,2022, the Company's cash was held with reputable Canadian chartered banks, a credit union and a United States of America bank.
With regards to credit risk with customers, the customers' credit evaluation is reviewed by management and account monitoring procedures are used to minimize the risk of loss. The Company believes that no additional credit risk beyond amounts provided for by the allowance for doubtful accounts are inherent in accounts receivable. As at March 31, 2021,2022, the allowance for doubtful accounts was $nil$nil (C$nil)nil) (December 31, 2020-2021-$nil;nil; C$nil)nil).
As at March 31, 2021,2022, the Company is exposed to concentration risk as it had three4 customers (December 31, 2020-five2021-5 customers) representing greater than 5% of total trade receivables and three3 customers (December 31, 2020-five2021-5 customers) represented 82%90% (December 31, 2020-96%2021-74%) 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 82% (39%67% (22% and 45%) (March 31, 2021-82%; 39%, 26% and 17%) (March 31, 2020-86%; 27%, 14%, 12%, 12%, 11% and 10%) 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. Management is in discussions with a Canadian chartered bankconsidering all its options to refinance its obligations to PACE and repay other creditors. Refer also to going concern, note 2.
|
| 11 |
SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2022 and 2021
(Expressed in United States Dollars)
(unaudited)
4. 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, repay PACE for all of its outstanding obligations by July 30, 2021September 2022 and complete the refinancing of its real property and organic waste processing and composting facility. There is no assurance of funding being available or available on acceptable terms. Realization values may be substantially different from carrying values as shown. Refer also to going concern, note 2.
Currency Risk
Although the Company's functional currency is the C$, the Company realizes a portion of its expenses in United States Dollars ("$"). Consequently, certain assets and liabilities are exposed to foreign currency fluctuations. As at March 31, 2021, $61,8492022, $181,345, net monetary assets (December 31, 2020-2021-$527,847,175,790, net monetary liabilities) of the Company's net monetary assets were denominated in $. The Company has not entered into any hedging transactions to reduce the exposure to currency risk.
5. Correction for Fair Value Option Election
Subsequent to the issuance of our Quarterly Report on Form 10-Q for the period ended March 31, 2021, we identified an error in our historical financial statements related to the measurement of convertible promissory notes. The Company elected the fair value option to account for certain of its convertible promissory notes and should have recorded the convertible promissory notes subsequently at fair value instead of amortized cost.
In accordance with FASB Accounting Standards Codification 250, Accounting Changes and Error Corrections, we evaluated the materiality of the error from both a quantitative and qualitative perspective, and concluded that the error was immaterial to our prior period interim condensed consolidated financial statements. Since the error was not material, no amendments to previously filed interim reports are required. Consequently, we have adjusted for these errors by revising our historical Interim Condensed Consolidated Financial Statements presented herein.
The effects of the corrections to each of the individual affected line items were as follows:
| Interim Condensed Consolidated Balance Sheets | ||||||||||||
| March 31, | Adjustments | March 31, | Notes | |||||||||
| 2021 | 2021 | |||||||||||
| As Previously | As | |||||||||||
| Reported | Adjusted | |||||||||||
| $ | $ | $ | ||||||||||
| Convertible promissory notes | 479,000 | 152,197 | 631,197 | (a) | ||||||||
| Total Current Liabilities | 9,432,847 | 152,197 | 9,585,044 | (a) | ||||||||
| Total Liabilities | 9,772,324 | 152,197 | 9,924,521 | (a) | ||||||||
| Shares to be issued | 66,000 | (66,000 | ) | 0 | (b) | |||||||
| Accumulated deficit | (13,775,129 | ) | (86,197 | ) | (13,861,326 | ) | (c) | |||||
| Stockholders' deficiency | (3,664,243 | ) | (152,197 | ) | (3,816,440 | ) | (a) | |||||
| Total Liabilities and Stockholders' Deficiency | 6,108,081 | 0 | 6,108,081 | |||||||||
|
SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 20212022 and 2020
2021
(Expressed in United States Dollars)
(unaudited)
5. IntangibleCorrection for Fair Value Option Election, (continued)
Interim Condensed Statements of Operations and Comprehensive Loss
| March 31, | Adjustments | March 31, | Notes | |||||||||
| 2021 | 2021 | |||||||||||
| As Previously | As | |||||||||||
| Reported | Adjusted | |||||||||||
| $ | $ | $ | ||||||||||
| Professional fees | 64,402 | 5,000 | 69,402 | (c) | ||||||||
| Total operating expenses | 593,212 | 5,000 | 598,212 | (c) | ||||||||
| Net Loss From Operating Activities | (711,144 | ) | (5,000 | ) | (716,144 | ) | (c) | |||||
| Other income | 404,809 | (81,197 | ) | 323,612 | (c) | |||||||
| Net Loss | (306,335 | ) | (86,197 | ) | (392,532 | ) | (c) | |||||
The adjustments did not have an impact on loss per share, basic and diluted, due to rounding. |
|
|
Interim Condensed Consolidated Statements of Cash Flows
| March 31, | Adjustments | March 31, | Notes | |||||||||
| 2021 | 2021 | |||||||||||
| As Previously | As | |||||||||||
| Reported | Adjusted | |||||||||||
| $ | $ | $ | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net Loss | (306,335 | ) | (86,197 | ) | (392,532 | ) | (c) | |||||
| Adjustments for: | ||||||||||||
| Loss on revaluation | 0 | 81,197 | 81,197 | (c) | ||||||||
| Net cash used in operating activities | (429,617 | ) | (5,000 | ) | (434,617 | ) | (c) |
(a)The Company elected fair the fair value option to account for its convertible promissory notes issued in 2021. In accordance with ASC 825, the convertible promissory notes are mark-to-market at each reporting date with changes in fair value recorded as a component of other (expense) income. As a result, there was a mark-to-market adjustment of$152,197 in the interim condensed consolidated statements of operations and comprehensive loss as of March 31, 2021.
(b)The Company used the with-and-without method to allocate the proceeds between the convertible promissory note and the common shares. As a result, all the proceeds were allocated to the convertible promissory note and $nil to the common shares. The previously recognized amount of $66,000 in shares to be issued was adjusted to $NaN.
(c) The transaction costs of $5,000 were previously capitalized against the convertible promissory note. The transaction costs were expensed, and a day one revaluation loss of $81,197 was recognized.
|
| 13 |
SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2022 and 2021
(Expressed in United States Dollars)
(unaudited)
6. Long-lived Assets, net
| March 31, 2021 | December 31, 2020 | |||||
| Customer lists-limited life-C$12,524) (net of accumulated amortization of $7,298) (C$12,798) (2020-$10,809 (C$13,763) (net of accumulated amortization of $9,078 (C$11,559)) | $ | 9,959 | $ | 10,809 | ||
| Trademarks-indefinite life-C$47,682 | 37,916 | 33,878 | ||||
| Environmental compliance approvals-indefinite life- C$182,700 | 145,283 | 143,493 | ||||
| $ | 193,158 | $ | 188,180 |
| March 31, | December 31, | |||||||||||
| 2022 | 2021 | |||||||||||
| Cost | Accumulated depreciation | Net book value | Net book value | |||||||||
| Land | $ | 3,429,638 | $ | 0 | $ | 3,429,638 | $ | 3,380,356 | ||||
| Property under construction | 2,648,438 | 0 | 2,648,438 | 1,874,892 | ||||||||
| Composting buildings | 2,426,605 | 652,792 | 1,773,813 | 1,784,200 | ||||||||
| Gore cover system | 1,126,840 | 484,832 | 642,008 | 660,549 | ||||||||
| Driveway and paving | 370,939 | 134,774 | 236,165 | 240,083 | ||||||||
| Machinery and equipment | 416,536 | 360,023 | 56,513 | 64,282 | ||||||||
| Equipment under capital lease | 509,871 | 396,811 | 113,060 | 134,487 | ||||||||
| Office trailer | 9,604 | 9,604 | 0 | 0 | ||||||||
| Vacuum trailer | 6,002 | 4,952 | 1,050 | 1,479 | ||||||||
| Computer equipment | 7,073 | 7,073 | 0 | 0 | ||||||||
| Signage | 6,614 | 2,970 | 3,644 | 3,918 | ||||||||
| Automotive equipment | 176,193 | 52,858 | 123,335 | 134,587 | ||||||||
| $ | 11,134,353 | $ | 2,106,689 | $ | 9,027,664 | $ | 8,278,833 |
ForAlso included under property under construction, are construction costs incurred subsequent to the acquisition in the amount of $1,097,724 (C$1,371,641).
|
| 14 |
SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2022 and 2021
(Expressed in United States Dollars)
(unaudited)
6. Long-lived Assets, net, (continued)
Depreciation for the three-month period ended March 31, 2021, the Company incurred fees in connection with various trademarks in the United States and Canada, in the amount $3,616 (C$4,547) (December 31, 2020-$21,723; C$27,658).
On September 15, 2017, the Company acquired the environmental compliance approvals, having an indefinite life, on the purchase of certain assets from BDO Canada Limited ("BDO") under an asset purchase agreement (the "APA").
Effective May 24, 2019, the Company acquired customer lists of $22,608 (C$30,400) relating to certain municipal contracts. These customer lists are being amortized over terms ranging from forty-five to sixty-six months. During the three -month period ended March 31, 2021, amortization of $979 (C$1,239) (2020-$506; $C680), disclosed under office and administration in the statements of operations and comprehensive loss and under amortization of intangible assets in the statements of cash flows.
6. Long-lived Assets, net
| March 31, | December 31, | |||||||||||
| 2021 | 2020 | |||||||||||
| Cost | Accumulated | Net book value | Net book value | |||||||||
| depreciation | ||||||||||||
| Land | $ | 1,676,282 | $ | - | $ | 1,676,282 | $ | 1,655,623 | ||||
| Composting buildings | 2,411,141 | 503,964 | 1,907,177 | 1,965,959 | ||||||||
| Gore cover system | 1,119,659 | 369,777 | 749,882 | 771,622 | ||||||||
| Driveway and paving | 368,576 | 104,430 | 264,146 | 268,171 | ||||||||
| Machinery and equipment | 180,172 | 89,414 | 90,758 | 99,227 | ||||||||
| Equipment under capital lease | 740,331 | 520,278 | 220,053 | 269,116 | ||||||||
| Office trailer | 9,542 | 8,712 | 830 | 1,527 | ||||||||
| Vacuum trailer | 5,964 | 3,131 | 2,833 | 3,240 | ||||||||
| Computer equipment | 7,029 | 6,909 | 120 | 385 | ||||||||
| Automotive equipment | 9,168 | 5,043 | 4,125 | 4,754 | ||||||||
| Signage | 4,250 | 1,830 | 2,420 | 2,601 | ||||||||
| $ | 6,532,114 | $ | 1,613,488 | $ | 4,918,626 | $ | 5,042,225 |
Depreciation2022, is disclosed in cost of sales in the amount of $136,560$116,203 (C$147,130) (2021-$136,560; C$172,883) (2020-$113,109; C$151,966) and in office and administration in the amount of $1,191$326 (C$413) (2021-$1,191; C$1,508) (2020-$1,267; C$1,702), in the interim condensed consolidated statements of operations and comprehensive loss.
In addition, under deferred assets in the interim condensed consolidated balance sheets is an accrual in the amount of $214,704 ($C270,000) (December 31, 2020-$215,953; C$274,959), for certain long-lived assets not received by March 31, 2021.
|
SusGlobal Energy Corp.Notes to the Interim Condensed Consolidated Financial StatementsMarch 31, 2021 and 2020(Expressed in United States Dollars)(unaudited)
7. Related Party Transactions
For three-month period ended March 31, 2021,2022, the Company incurred $71,091$94,776 (C$120,000) (2021-$71,091; C$90,000) (2020-$33,494; C$45,000), in management fees expense with Travellers International Inc. ("Travellers"), an Ontario company controlled by a director and the president and chief executive officer (the "CEO"); and $18,958$23,693 (C$24,000) (2020-30,000) (2021-$17,863;18,958; C$24,000) in management fees expense with the Company's chief financial officer (the "CFO"). As at March 31, 2021,2022, unpaid remuneration and unpaid expenses in the amount of $388,948$33,533 (C$489,120)41,901) (December 31, 2020-2021-$396,160;14,755; C$504,405)18,706) is included in accounts payable in the interim condensed consolidated balance sheets.This balance includes amounts owing to the former chief executive officer in the amount of $314,502 (C$395,500).
In addition, during the three-month period ended March 31, 2021, the Company incurred interest expense of $nil (C$nil) (2020-$441; C$592), on outstanding loans from Travellers.
For the three-month period ended March 31, 2021,2022, the Company incurred $21,165$23,506 (C$29,762) (2021-$21,165; C$26,795) (2020-$17,523; C$23,543) in rent expense paid under a lease agreement with Haute Inc. ("Haute"), an Ontario company controlled by the CEO.
During the three-month period ended March 31, 2022, Travellers converted a total of $0 (C$0) (December 31, 2021-$371,001 (C$461,620) of loans provided during the period and $0 (C$0) (December 31, 2021-$80,323; C$101,700) of accounts payable owing to Travellers for nil common shares (December 31, 2021-1,726,076 common shares).
In addition, during the three-month period ended March 31, 2022, the Company paid the CFO interest of $504 (C$638) on loans totaling $29,211 (C$36,000) provided to the Company and repaid during the period.
For those independent directors providing their services throughout 2021,2022, the Company accrued directors' compensation to each director in the amount of $4,937$4,936 (C$6,250), in total, $9,874$14,808 (C$18,750) (2021-$9,874; C$12,500) (2020-($2,164)). Also included in directors' compensation for the three-month period ended March 31, 2021,2022, is the audit committee chairman's fees, in the amount of $790$0 (C$1,000) (2020-0) (2021-$744;790; C$1,000). As at March 31, 2021,2022, outstanding directors' compensation of $24,991$86,389 (C$31,427)107,946) (December 31, 2020-2021-$2,663;70,358; C$3,390) is included in accounts payable and $28,714 (C$36,109) (December 31, 2020-$37,244; C$47,421)89,196) is included in accrued liabilities, in the interim condensed consolidated balance sheets.
Pursuant to the terms of the CEO's Consulting Agreement, for his services as the CEO, the compensation is at a rate of $24,009 (C$30,000) per month for twelve (12) months, beginning on the Effective Date, January 1, 2021, and at a rate of $32,012 (C$40,000) per month for twelve (12) months, beginning January 1, 2022. In addition, the Company agreed to grant the CEO 1,000,000 restricted shares of the Company's Common Stock, par value of $0.0001 per share (the "Common Stock") on the Effective Date, and 1,000,000 shares of Common Stock on January 1, 2022. The Company has also agreed to reimburse the CEO for certain out-of-pocket expenses incurred by the CEO.
|
| 15 |
SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2022 and 2021
(Expressed in United States Dollars)
(unaudited)
7. Related Party Transactions, (continued)
Pursuant to the terms of the CFO's Consulting Agreement for his services as the CFO, the compensation is at a rate of $6,402 (C$8,000) per month for twelve (12) months, beginning on the Effective Date, January 1, 2021. In addition, the Company agreed to grant the CFO 50,000 restricted shares of the Company's Common Stock, par value of $0.0001 per share (the "Common Stock") on the Effective Date. The Company has also agreed to reimburse the CFO for certain out-of-pocket expenses incurred by the CFO.
Pursuant to the terms of the CFO's Consulting Agreement for his services as the CFO, the compensation is at a rate of $8,003 (C$10,000) per month for twelve (12) months, beginning on the Effective Date, January 1, 2022. In addition, the Company agreed to grant the CFO 50,000 restricted shares of the Company's Common Stock, par value of $0.0001 per share (the "Common Stock") on the Effective Date. The Company has also agreed to reimburse the CFO for certain out-of-pocket expenses incurred by the CFO.
Furthermore, for the three-month period ended March 31, 2021,2022, the Company recognized management stock-based compensation expense of $54,259,$60,113 (2021-$54,259), on the common stock issued to the CEO and the CFO, 1,000,000 and 50,000 common stock, respectively, on commencement ofas stipulated in their new executive consulting agreements, effective January 1, 2021.2022. The total stock-based compensation on the issuance of the common stock totaled $217,035.$240,450 (2021-$217,035). The portion to be expensed for the balance of the year, $162,776$180,337 (2021-$162,776 is included in prepaid expenses and deposits in the interim condensed consolidated balance sheets.
| March 31, 2022 | December 31, 2021 | ||||||
| (a) | PACE Credit Facility-Due September 2, 2022 | $ | 753,970 | $ | 750,465 | ||
| (b) | PACE Credit Facility-Due September 2, 2022 | 421,620 | 419,661 | ||||
| (c) | PACE Corporate Term Loan-Due September 13, 2022 | 2,558,413 | 2,546,536 | ||||
| (d)i.) | Mortgage Payable-Due September 1, 2022 | 4,103,420 | 4,010,966 | ||||
| (d)ii.) | Mortgage Payable-Due August 17, 2023 | 1,600,600 | 1,577,600 | ||||
| (e) | Canada Emergency Business Account-Due December 31, 2023 | 80,030 | 78,880 | ||||
| (f) | Corporate Term Loan-Due April 7, 2025 | 126,122 | 133,584 | ||||
| 9,644,175 | 9,517,692 | ||||||
| Current portion | (7,876,242 | ) | (7,765,421 | ) | |||
| Long-Term portion | $ | 1,767,933 | $ | 1,752,271 | |||
On August 4, 2020, the Company received an advance in the amount of $82,992 (C$110,700) from a private lender. The advance was repayable weekly at an amount of $4,881 (C$6,138). The amount was paid in full on January 26, 2021. For the three-month period ended March 31,November 15, 2021, the Company incurred interest charges of $697 (C$883) (2020-$nil; C$nil).
9. Long-Term Debt
|
| Credit |
|
| Credit |
|
| Corporate |
|
| Mortgage |
|
| Canada Emergency |
|
| March 31, |
|
| December 31, |
|
|
| Facility |
|
| Facility |
|
| Term Loan |
|
| Payable |
|
| Business Account |
|
| 2021 Total |
|
| 2020 Total |
|
|
| (a) |
|
| (b) |
|
| (c) |
|
| (d) |
|
| (e) |
|
|
|
|
|
|
|
Long-Term Debt | $ | 771,593 |
| $ | 431,478 |
| $ | 2,614,803 |
| $ | 2,586,949 |
| $ | 79,520 |
| $ | 6,484,343 |
| $ | 6,406,060 |
|
Current portion |
| (771,593 | ) |
| (431,478 | ) |
| (2,614,803 | ) |
| (2,586,949 | ) |
| - |
| $ | (6,404,823 | ) |
| (6,327,520 | ) |
Long-term portion | $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | 79,520 |
| $ | 79,520 |
| $ | 78,540 |
|
|
SusGlobal Energy Corp.Notespaid all arrears to PACE and PACE agreed to allow the Company to continue payments to the Interim Condensed Consolidated Financial StatementsMarch 31, 2021 and 2020(Expressed in United States Dollars)(unaudited)
9. Long-Term Debt, (continued)
On February 18, 2021, PACE andend of the Company reached a new agreement to repay all amounts owing to PACE on or before July 30, 2021.terms of each obligation, September 2022. Management continues discussions with equity investors and a Canadian chartered bank to re-finance its remaining obligations to PACE and repay other creditors. In addition, the existing letter of credit, in the amount of $221,548 (C$276,831) was renewed by PACE to the termination of the Company's obligations to PACE, September 2022. The Company hasis in the process of obtaining a letter of credit for the new financial assurance with PACE in favor of the Ministry of the Environment, Conservation and Parks (the "MECP") in the amount of $510,301 (C$637,637).
|
| 16 |
SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2022 and 2021
(Expressed in United States Dollars)
(unaudited)
8. Long-Term Debt, was renewed and will remain in effect to September 30, 2021, unless terminated by PACE. On April 3, 2020, the shares previously pledged as security to PACE, were released and are currently held as security for the personal guarantee from the CEO and charge against the Haute leased premises.(continued)
Refer also to going concern, note 2.
The remaining PACE long-term debt was initially payable as noted below:
(a) | The credit facility bears interest at the PACE base rate of 7.00% plus 1.25% per annum, currently 8.25%, is payable in monthly blended installments of principal and interest of |
(b) | The credit facility advanced on June 15, 2017, in the amount of |
(c) | The corporate term loan advanced on September 13, 2017, in the amount of |
For the three-month period ended March 31, 2021, $77,2652022, $75,525 (C$95,625) (2021-$77,265; C$97,816) (2020-$76,749; C$103,116) in interest was incurred on the PACE long-term debt. As at March 31, 2021 $42,6862022 $18,139 (C$53,680)22,967) (December 31, 2020-2021-$18,319;42,686; C$23,325)53,680) in accrued interest is included in accrued liabilities in the interim condensed consolidated balance sheets.
|
(d)i)The Company obtained a 1st mortgage provided by private lenders to finance the acquisition of the shares of 1684567 and to provide funds for additional financing needs, including additional lands, received in four tranches totaling $4,161,560 (C$5,200,000) (December 31, 2021-$4,101,760; C$5,200,000). The fourth tranche was received on August 13, 2021 in the amount of $1,520,570 (C$1,900,000) and a portion of this fourth tranche, $1,483,703 (C$1,853,933), was used to fund a portion of the purchase of the Hamilton Property, described under long-lived assets, net (note 6). The 1st mortgage is repayable interest only on a monthly basis at an annual rate of the higher of the Royal Bank of Canada's prime rate plus 6.05% per annum (currently 8.50%) and 10% per annum with a maturity date of September 1, 2022. The 1st mortgage payable is secured by the shares held of 1684567, a 1st mortgage on the premises located at 704 Phillipston Road, Roslin, Ontario, Canada and a general assignment of rents.
SusGlobal Energy Corp. 8. Long-Term Debt, (continued)
SusGlobal Energy Corp. 8. Long-Term Debt, (continued)
9. Obligations under Capital Lease
Refer also to going concern, note 2.
SusGlobal Energy Corp.
Minimum lease payments as per the original terms of the obligations under capital lease are as follows:
SusGlobal Energy Corp. 10. Convertible Promissory Notes, (continued) The maturity date of the March 2021 Investor Note was September 30, 2021. The March 2021 Investor Note bears interest at a rate of 10% per annum (the "March 2021 Interest Rate"). The March 2021 Investor is entitled to, at its option, at any time after issuance of the March 2021 Investor Note, convert all or any amount of the principal amount and any accrued but unpaid interest of the March 2021 Investor Note into Common Stock, at a conversion price of $0.20 per share. Under the original terms of the March 2021 Investor Note may be prepaid until 180 days from its issue date at a prepayment premium of 120%. Any portion of the March 2021 Investor Note which is not repaid by the maturity date will bear interest at the default interest rate of 18% per annum. On November 22, 2021, the March 2021 Investor extended the maturity date to March 31, 2022 in exchange for a payment of $486,474. On April 7, 2022, the March 2021 Investor extended the maturity date of the March 2021 Investor Note to April 30, 2022. Refer to note 17(b), subsequent events for details on a conversion and forgiveness of the March 2021 Investor Note. The Company initially reserved 5,000,000 of its authorized and unissued Common Stock (the "March 2021 Reserved Amount"), free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of the March 2021 Investor Note. b)On April 1, 2021, the Company entered into a securities purchase agreement (the "April 2021 SPA") with one investor (the "April 2021 Investor") pursuant to which the Company issued to the April 2021 Investor one 10% unsecured convertible promissory note (the "April 2021 Investor Note") in the principal amount of $275,000. The April 2021 Investor Note includes an OID of $25,000. In addition, the April 2021 Investor was issued 200,000 common shares immediately subsequent to the issue date The Company used the with-and-without method to allocate the proceeds between the convertible promissory note and the common shares. As a result, all of the proceeds were allocated to the convertible promissory note and $nil to the common shares. The maturity date of the April 2021 Investor Note was September 30, 2021. The April 2021 Investor Note bears interest at a rate of 10% per annum (the "April 2021 Interest Rate"). The April 2021 Investor is entitled to, at its option, at any time after issuance of the April 2021 Investor Note, convert all or any amount of the principal amount and any accrued but unpaid interest of the April 2021 Investor Note into Common Stock, at a conversion price of $0.20 per share. The original terms of the April 2021 Investor Note may be prepaid until 180 days from its issue date at a prepayment premium of 120%. Any portion of the April 2021 Investor Note which is not repaid by the maturity date will bear interest at the default interest rate of 18% per annum.
SusGlobal Energy Corp. 10. Convertible Promissory Notes, (continued) On December 9, 2021, the April 2021 Investor agreed to adjust the balance of the note, as it was past due, to $400,000. On January 4, 2022, the April 2021 Investor provided the Company with a request to convert the April 2021 Investor Note into 2,000,000 common shares of the Company issued on January 17, 2022, at a conversion price of $0.20 per share, as stipulated in the April 2021 SPA. On conversion, the fair value of the April 2021 Investor Note was $8,790 higher than the balance at December 31, 2021. This increase is included in the loss on revaluation of convertible promissory notes in the interim condensed consolidated statements of operations and comprehensive loss under other (expense) income. c)On June 16, 2021, the Company entered into a securities purchase agreement (the "June 2021 SPA") with one investor (the "June 2021 Investor") pursuant to which the Company issued to the June 2021 Investor one 10% unsecured convertible promissory note (the "June 2021 Investor Note") in the principal amount of $450,000. The June 2021 Investor Note includes an OID of $35,000. In addition, the June 2021 Investor was issued 1,000,000 common shares of the Company. The Company used the with-and-without method to allocate the proceeds between the convertible promissory note and the common shares. As a result, all of the proceeds were allocated to the convertible promissory note and $nil to the common shares The maturity date of the June 2021 Investor Note is June 16, 2022. The June 2021 Investor Note bears interest at a rate of 10% per annum (the "June 2021 Interest Rate"), which shall be paid by the Company to the June 2021 Investor on a monthly basis, commencing on the first of the month following issuance. The June 2021 Investor may convert the principal amount and any accrued but unpaid interest into the Company's common stock from time to time following an event of default (as defined in the June 2021 Investor Note), with interest accruing at the default interest rate of 15% per annum from an event of default, at a conversion price (the "Conversion Price") equal to the lesser of 90% (representing a 10% discount) multiplied by the lowest trading price (i) during the previous 20 (20) trading day (as defined in the June 2021 Investor Note) period ending on the issuance date of the June 2021 Investor Note, or (ii) during the previous twenty (20) trading day period ending on date of conversion of the June 2021 Investor Note. The June 2021 Investor Note may be prepaid at any time in cash equal to the sum of (a) the then outstanding principal amount of the June 2021 Investor Note plus (b) accrued and unpaid interest on the unpaid principal balance of the June 2021 Investor Note plus (c) default interest (as defined in the June 2021 Investor note on the occurrence of a default), if any. The Company initially reserved 7,000,000 of its authorized and unissued Common Stock (the "June 2021 Reserved Amount"), free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of the June 2021 Investor Note. d)On August 26, 2021, the Company entered into a securities purchase agreement (the "August 2021 SPA") with one investor (the "August 2021 Investor") pursuant to which the Company issued to the August 2021 Investor one 10% unsecured convertible promissory note (the "August 2021 Investor Note") in the principal amount of $142,200. The August 2021 Investor Note included an OID of $13,450. In addition, the August 2021 Investor was issued 80,000 common shares of the Company. The Company used the with-and-without method to allocate the proceeds between the convertible promissory note and the common shares. As a result, all of the proceeds were allocated to the convertible promissory note and $nil to the common shares
SusGlobal Energy Corp. 10. Convertible Promissory Notes, (continued) The maturity date of the August 2021 Investor Note is August 26, 2022. The August 2021 Investor Note bears interest at a rate of 10% per annum (the "August 2021 Interest Rate"). The August 2021 Investor Note will include a one-time interest charge of $14,220, which shall be at repayable by the Company in 10 equal monthly amounts of $15,642 (including principal and interest) commencing October 15, 2021. The August 2021 Investor may convert the principal amount and any accrued but unpaid interest into the Company's common stock from time to time following an event of default (as defined in the August 2021 Investor Note), with default interest accruing at the default interest rate of 22% per annum, at a conversion price (the "Conversion Price") equal to 75% (representing a 25% discount) multiplied by the lowest trading price (i) during the previous 5 (5) trading day (as defined in the August 2021 Investor Note), period prior to conversion. The Company has the right to accelerate the monthly payments or prepay the August 2021 Investor Note at any time without penalty. The Company initially reserved 2,972,951 of its authorized and unissued Common Stock (the "August 2021 Reserved Amount"), free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of the August 2021 Investor Note. Refer to note 17(b), subsequent events, for details on the conversion of the August 2021 Investor Note. e)On October 28 and 29, 2021, the Company entered into two securities purchase agreement (the "October 2021 SPAs) with 2 investors (the "October 2021 Investors") pursuant to which the Company issued to the October 2021 Investors two 15% OID unsecured convertible promissory notes (the "October 2021 Investor Notes") in the principal amount of $1,765,118. The October 2021 Investor Notes are convertible, with accrued interest, from time to time on notice of a liquidity event (a "Liquidity Event"). A Liquidity Event is defined as a public offering of the Company's common stock resulting in the listing for trading of the common stock on any one of a number of exchanges. The October 2021 Investor Notes can be prepaid prior to maturity for an amount of 120% of the prepayment amount. The maturity date of the October 2021 Investor Notes is the earlier of (i) July 28 and 29, 2022 and (ii) the occurrence of a Liquidity Event, as described above (the "Maturity Date"). Upon the occurrence of a Liquidity Event, the October 2021 Investors are entitled to convert all or a portion of their October 2021 Investor Notes including any accrued and unpaid interest at a conversion price (the "Conversion Price") equal to 70% (representing a 30% discount) multiplied by the price per share of the Common Stock at the public offering associated with the Liquidity Event.
SusGlobal Energy Corp. 10. Convertible Promissory Notes, (continued) Upon the occurrence of an event of default, the interest rate on the October 2021 Investor Notes will immediately accrue at 24% per annum and be paid in cash monthly to the October 2021 Investors, until the default is cured. And, the Conversion Price will be reset to 85% of the lowest volume weighted average price for the ten consecutive trading days ending on the trading day that is immediately prior to the applicable conversion date. Refer to note 17 (d), subsequent events, for an amendment to the conversion terms on the October 29, 2021 investor note.
SusGlobal Energy Corp. 10. Convertible Promissory Notes, (continued) The Pursuant to the terms of the security purchase agreements for the convertible promissory notes described above, for so long as the noted investors own any shares of Common Stock issued upon the conversion of the applicable investor notes, 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 investor notes and the security purchase agreements, including but not limited to the requirement to maintain its corporate existence and assets, require registration of or stockholder approval for the investor notes or the Common Stock upon the conversion of the applicable investor notes.
The convertible promissory notes described above, 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 convertible promissory notes in the event of such defaults. In the event of a default, at the option of the applicable investor and in their sole discretion, the applicable investor may consider any of their convertible promissory notes immediately due and payable. For the three-month period ended March 31, 2022, the Company issued 2,000,000 common shares on the conversion of a convertible promissory note, having a fair value on conversion in the amount of $463,862 at a conversion price of $0.20 per share. And, for the three-month period ended March 31, 2021, the Company For the three-month period ended March 31, 2022, the Company incurred interest of Refer to note 17(d) and Refer also to going concern, note 2.
SusGlobal Energy Corp. 10. Convertible Promissory Notes, (continued) Fair value option for the 2021 The Company is eligible to elect the fair value option under ASC 825, Financial Instruments and bypass analysis of Gains and losses attributable to changes in credit risk were insignificant during all periods presented. The Company recognized a loss of $659,525 at the time of issuance of the convertible promissory notes, and an additional loss of $636,623 attributed to the change in fair value of the convertible promissory notes for the three-month period ended March 31, 2022. The Company incurred debt issuance costs of $75,000 (December 31, 2021-$159,250) which were expensed as incurred. 11. Fair Value Measurement The following table presents information about the Company's financial assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation:
During each of the three-month periods ended March 31, 2022 and 2021, there were no transfers between Level 1, Level 2, or Level 3. There were no financial assets or liabilities measured at fair value on a recurring basis as of March 31, 2022. The following table summarizes the change in Level 3 financial instruments during the three-month period ended March 31, 2022.
SusGlobal Energy Corp. 11. Fair Value Measurement, (continued) Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The fair value of the convertible promissory notes at issuance and subsequent financial reporting dates was estimated based on significant inputs not observable in the market, which represent level 3 measurements within the fair value hierarchy. The fair value of the convertible promissory notes at issuance and at each reporting period was estimated based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company used a scenario-based binomial model to estimate the fair value of the convertible promissory notes. The model determines the fair value from a market participant's perspective by evaluating the payouts under hold, convert, or call decisions. The most significant estimates and assumptions used as inputs are those concerning type, timing and probability of specific scenario outcomes. Specifically, the Company assigned a probability of default, which would increase the required payout as described in note 9 and calculated the fair value under each scenario. At the issuance dates of the convertible promissory notes, the probability of default ("PD") was assumed to be 50%, except for the convertible promissory notes issued in the last quarter of the 2021 Other significant unobservable inputs include the expected volatility, discount for lack of marketability and the credit spread. The expected volatility was based on the historical volatility over a look-back period that was consistent with the balance-remaining term of the instruments. A range of 95% to 160% was used for the expected volatility. The discount for lack of marketability was determined using a range of option pricing methodologies using the remaining restriction term corresponding to each instrument on the relevant valuation date. A range of 0% to 40% was used for the discount for lack of marketability. The credit spread was determined in reference to credit yields of companies with similar credit risk at the date of valuation. A premium of 10% was added to the credit spread as an instrument specific adjustment to reflect the Company's risk of default. A range of 15.25% to 18.39% was used for the credit spread. Refer also to going concern, note 2. 12.
As at March 31, For the three-month period ended March 31, 2022, the Company issued 2,000,000 common shares on the conversion of a convertible promissory note, having a fair value on conversion in the amount of $463,862 at a conversion price of $0.20 per share. On conversion, the fair value of the April 2021 Investor Note was $8,790 higher than the balance at December 31, 2021. This increase is included in the loss on revaluation of convertible promissory notes under other (expense) income in the interim condensed consolidated statements of operations and comprehensive loss. For the three-month period ended March 31, 2021, the Company issued 3,175,124 common shares on the conversion of convertible promissory notes, in the amount of $713,716, including accrued interest and related costs of $32,716. The share conversion prices ranged from $0.156 to $0.26 per share.
SusGlobal Energy Corp. 12. Capital Stock, (continued) In addition, the Company raised $16,560, net of share issue costs of $1,440, on a private placement for 40,000 common shares at an issue price of $0.45 per share. Further, 895,000 common shares of the Company were issued for professional services valued at $223,910, based on the closing trading prices on issuance. The portion relating to the three-month period ended March 31, 2022, $74,398 is included in the amount disclosed as stock-based compensation in the interim condensed consolidated statements of operations and comprehensive loss and the balance is included in prepaid expenses and deposits in the interim condensed consolidated balance sheets. On January 3, 2022, the Company issued 1,000,000 common shares to the CEO and on February 7, 2022 50,000 common shares to the CFO in connection with their executive consulting agreements, valued at $240,450, based on the closing trading price on the effective date of their executive consulting agreements. Included under management stock-based compensation in the interim condensed consolidated statements of operations and comprehensive loss, is an amount of $60,113, representing that portion of the stock-based compensation for the period. Also, on January 17, 2022 and March 22, 2022, the Company issued 230,000 common shares on proceeds previously received. And, on February 7, 2022, the Company issued 10,000 common shares to an employee valued at $0.199, the trading price on closing, disclosed under office and administration in the interim condensed consolidated statements of operations and comprehensive loss. At March 31, 2022, the Company recorded in total, $40,100, for shares to be issued relating to a consulting agreement with a service provider for professional services, valued on the effective dates stipulated in the consulting agreement. The professional services are included under stock-based compensation in the interim condensed consolidated statements of operations and comprehensive loss. During the year ended December 31, 2021, the Company issued 3,767,029 common shares on the conversion of convertible promissory notes, in the amount of $756,000, including accrued interest and related costs of $53,901, for a total of $809,901. The shareconversion prices ranged from $0.156 to $0.26 per share. The Company also issued In addition, the Company raised
On March 31, 2021, the Company issued
SusGlobal Energy Corp. 12. Capital Stock, (continued) On April 1, 2021, the Company issued the April 2021 Investor Note to the April 2021 Investor, and subsequently issued 200,000 common shares disclosed under note 10(b), convertible promissory notes. On June 16, 2021, the Company issued the June 2021 Investor Note to the June 2021 Investor, and subsequently issued 1,000,000 common shares. disclosed under note 10(c), convertible promissory notes. On August 26, 2021, the Company issued the August 2021 Investor Note to the August 2021 Investor and subsequently issued 80,000 common shares., disclosed under note 10(d), convertible promissory notes. On October 28 and 29, 2021, the Company issued a total of 72,500 common shares to two consultants representing On January 4, 2021, the Company issued 1,000,000 common shares to the CEO and 50,000 common shares to the CFO in connection with their executive consulting agreements, valued at $217,035, based on the closing trading price on
SusGlobal Energy Corp.
e)On November 5, 2021, the Company committed to the design and construction of its Hamilton, Ontario, Canada facility, including architectural and general consulting fees in the amount of $7,303,385 ($9,125,809). f)The Company was assigned the land lease on the purchase of certain assets of Astoria Organic Matters Ltd., and Astoria Organic Matters Canada LP. The land lease, which comprises 13.88 acres in Roslin, Ontario, Canada, has a term expiring March 31, 2034. The basic monthly rent on the net lease is $2,401 (C$3,000) and is subject to adjustment based on the consumer price index as published by Statistics Canada ("CPI"). To date, no adjustment for CPI has been charged. The Company is also responsible for any property taxes, maintenance, insurance and utilities. In addition, the Company has the right to extend the lease for five further terms of five years each and one further term of five years less one day. As the Company acquired the business of 1684567, the previous landlord, in 2019, there are no future commitments for this lease. The Company is responsible through a special provision of the site plan agreement with the City of Belleville (the "City"), Ontario, Canada, that it is required to fund road maintenance required by the City through to September 30, 2025 at an annual rate of $8,003 (C$10,000). The future minimum commitment is as follows:
g)PACE has provided the Company a letter of credit in favor of the MECP in the amount of The letter of credit is a requirement of the MECP and is in connection with the financial assurance provided by the Company for it to be in compliance with the MECPs environmental objectives. The MECP regularly evaluates the Company's organic waste processing and composting facility to ensure compliance is adhered to and the letter of credit is subject to change by the MECP. The Company is currently updating its financial assurance with the MECP. As a result of audits conducted by the MECP in December of 2020, the Company has accrued estimated and actual costs for corrective measures as a result of the MECP's audits totaling As at March 31,
SusGlobal Energy Corp. 14. Other (Expense) Income
(a)During the prior three-month period ended March 31, 2021, the settlement of the March 2019 Investor Notes resulted in a forgiveness of $135,641, including accrued interest and related costs and on the settlement of the May 2019 Investor Note, the July 2019 Investor Note and the October 2019 Investor Note, $223,819, including accrued and related costs.
(b)
15. Economic Dependence The Company generated
From time to time, the Company may become involved in litigation relating to claims arising from the ordinary course of business. Management believes that there are currently no claims or actions pending against us, the ultimate disposition of which would have a material adverse effect on our results of operations, financial condition or cash flows. The Company has a claim against it for unpaid legal fees in the amount
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:
SusGlobal Energy Corp.
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, 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 three-month period ended March 31, 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, 2020 AND 2019. 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, 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,
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 Energy Hamilton Ltd., and 1684567 Ontario Inc.
As the global
We believe the 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 Currently, the primary customers are municipalities in both rural and urban centers
The Coronavirus Outbreak In
The Company is fortunate that its operations have not been forced to close as we're considered an essential service.
To date, there has been no material impact on the Company's workforce, operations, financial performance, liquidity, or supply chain as a result of COVID-19. However, the The Company will continue to monitor health orders issued by applicable governments to ensure compliance with evolving domestic and global COVID-19
Financings (a)Securities Purchase Agreements On March 3 and 7, 2022, the Company executed two unsecured convertible promissory notes with two investors (the "March 2022 Investors"), who purchased 25% original issue discount (the "OID") unsecured convertible promissory notes (the "The March 2022 Investor Notes") in the aggregate principal amount totaling $2,000,000 (the "Principal Amount") with such Principal Amount convertible into shares of the Company's common stock (the "Common Stock") from time to time triggered by the occurrence of certain events. The March 2022 Investor Notes carried an OID totaling $500,000 which is included in the principal balance of the Notes. The funds were received on March 7, 2022 and March 11, 2022 in the total amount of $1,425,000, net of the OID and professional fees. The Company used the with-and-without method to allocate the proceeds between the convertible promissory note and the common shares. As a result, all of the proceeds were allocated to the convertible promissory note and $nil to the common shares. The maturity date of the Notes is the earlier of (i) June 3 and 7, 2022, and (ii) the occurrence of a Liquidity Event (as defined in the Notes) (the "Maturity Date"). The final payment of the Principal Amount (and default interest, if any) shall be paid by the Company to the Investors on the
On May 11, 2022, the holder of the March 3, 2022 investor note, provided an amendment for an optional conversion of his investor note. The conversion price was amended to be the lower of (1) the product of the Liquidity Event price multiplied by the discount of 35% (previously 30%) or (2) the greater of (i) the product of the closing price per share of the Company’s Common Stock as reported by the applicable trading market on the trading day immediately prior to the conversion date multiplied by the discount (35%) or (ii) $1.70 multiplied by the discount (35%), provided that in the event of a conversion, of this investor note, at a time that a Liquidity Event shall not have previously occurred and be continuing, the conversion price for such conversion shall be as provided in (2)(i) above. On May 13, 2022, the holder of the March 7, 2022 investor note, provided an amendment for an optional conversion of his investor note. The conversion price was amended to be the lower of (1) the product of the Liquidity Event price multiplied by the discount of 35% (previously 30%) or (2) the greater of (i) the product of the closing price per share of the Company’s Common Stock as reported by the applicable trading market on the trading day immediately prior to the conversion date multiplied by the discount (35%) or (ii) $1.70 multiplied by the discount (35%), provided that in the event of a conversion, of this investor note, at a time that a Liquidity Event shall not have previously occurred and be continuing, the conversion price for such conversion shall be as provided in (2)(i) above. On December 2, 2021, the Company
The Company initially reserved 5,000,000 of its authorized and unissued Common Stock (the "December 2021 Reserved Amount"), free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of the December 2021 Investor Note. On The maturity date of the October 2021 Investor Notes is the earlier of (i) July 28 and The Company initially reserved 1,585,000 of its authorized and unissued Common Stock (the "October 2021 Reserved Amount"), free from pre-emptive rights, to be issued upon conversion of the October 2021 Investor Notes. On May 11, 2022, the holder of the October 29, 2021 investor note provided an amendment for an optional conversion of his investor note. The conversion price was amended to be the lower of (1) the product of the Liquidity Event price multiplied by the discount of 35% (previously 30%) or (2) the greater of (i) the product of the closing price per share of the Company’s Common Stock as reported by the applicable trading market on the trading day immediately prior to the conversion date
On The maturity date of the The August 2021 Investor may convert the principal amount
The Company initially reserved 2,972,951 of its authorized and unissued Common Stock (the "August 2021 Reserved Amount"), free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of the
On June 16, 2021, the Company
On April 1, 2021, the Company entered into a securities purchase agreement (the "April 2021 SPA") with The maturity date of the April 2021 Investor Note was September 30, 2021. The April 2021 Investor Note bears interest at a rate of 10% per annum (the "April 2021 Interest Rate"). The April 2021 Investor is entitled to, at its option, at any time after issuance of the April 2021 Investor Note, convert all or any amount of the principal amount and any accrued but unpaid interest of the April 2021 Investor Note into Common Stock, at a conversion price of $0.20 per share. The original terms of the April 2021 Investor Note may be prepaid until 180 days from its issue date at a prepayment premium of 120%. Any portion of the April 2021 Investor Note which is not repaid by the maturity date will bear interest at the default interest rate of 18% per annum.
The Company initially reserved 5,000,000 of its authorized and unissued Common Stock (the "April 2021 Reserved Amount"), free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of the April 2021 Investor Note. On On March 31, 2021, the Company entered into a securities purchase agreement (the "March 2021 SPA") with The maturity date of the March 2021 Investor Note was September 30, 2021. The March 2021 On November 22, 2021, the March 2021 Investor extended the maturity date to March 31, 2022 in exchange for a payment of $486,474. On April 7, 2022, the March 2021 Investor extended the
The Company initially reserved 5,000,000 of its authorized and
For the three-month period ended March 31, 2022, the Company For the three-month period ended March 31, 2022, the Company incurred interest of $nil (2021-$14,756 on the 2019 convertible promissory notes)
(b)Pace Savings & Credit Union Limited ("PACE") On The remaining PACE long-term debt was initially payable as noted below:
For the three-month period ended March 31, (c)Other Financings On April 21, 2022, the Company received proceeds from an employee of $28,000 on a private placement for 70,708 common shares of the Company, at a price of $0.396 per share. On May 5 and 6, 2022, the Company received proceeds of $700,000, on two private placements for 2,333,333 common shares of the Company, at a price of $0.30 per share.
(ii)On August 17, 2021, the Company obtained a vendor take-back 1st mortgage in the amount of $1,600,600 (C$2,000,000), on the purchase of the Hamilton Property. The 1st mortgage bears interest at an annual rate of 2% per annum, repayable monthly interest only with a maturity date of August 17, 2023, secured by the assets on the Hamilton Property. For the three-month period ended March 31, 2022, $111,853 (C$141,622) (2021-$62,530; C$79,162) in interest was incurred on the 1st mortgages payable.
(d)Financings Related to Obligations Under Capital Lease There were no new capital leases entered into by the Company during the three-month period ended March 31,
For the three-month period ended March 31,
The Company owns the Environmental Compliance Approvals (the "ECAs") issued by the MECP from the Province of Ontario, in place to accept up to 70,000 metric tonnes ("MT") of waste annually from the provinces of Ontario, Quebec and from New York state, and to operate a waste transfer station with the capacity to process up to an additional 50,000 MT of waste annually. Once built, the location of the waste transfer station will be alongside the organic waste processing and composting facility which is currently operating in Belleville, Ontario, Canada.
Waste Transfer Station- Access to the waste transfer station 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- As noted above, the Company's organic waste processing and composting facility, located in Belleville, Ontario Canada, has ECAs in place to accept up to 70,000 MT of waste annually and is currently in operation. Certain assets of the organic waste processing and composting facility, including the ECAs for the waste transfer station (not yet built), were acquired by the Company on September 15, 2017, from the Receiver for Astoria, under the APA. The Company charges tipping fees for the waste accepted at the organic waste 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 three-month period ended March 31,
LIQUIDITY AND CAPITAL RESOURCES As of March 31, On On April 3, 2020, the shares previously pledged as security to PACE, were released and are currently held as security for the personal guarantee from the CEO and charge against the Haute leased premises. The Company's total assets as at March 31, To pay current liabilities 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 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. During the three-month period ended March 31, 2022, the April 2021
As at March 31, In addition, as at March 31,
CONSOLIDATED RESULTS OF OPERATIONS - FOR THE THREE-MONTH PERIOD ENDED MARCH 31,
During the three-month period ended March 31,
In the operation of the organic waste processing and composting facility, the Company processes organic and other waste received and produces the end product, compost. The cost of producing the compost totaled Operating expenses Management compensation related to stock-based compensation increased by
Professional fees increased by $192,250, from $69,402 in the three-month period ended March 31, 2021
Interest expense increased by $27,369 from $163,874 in the three-month period ended March 31,
Office and administration expenses reduced by $14,638, from $75,215 in the three-month period ended March 31, 2021
Rent and occupancy increased by $18,586, from $32,339 in the three-month period ended March 31, 2021 to $50,925 in the three-month period ended March 31, 2022, primarily due to an increase in the monthly rent for the Company's Toronto, Ontario, Canada Insurance
Filing fees increased by $35,216, from $18,959 in the three-month period ended March 31, 2021
The amortization of financing costs increased by $19,954, from $13,578 in the three-month period ended March 31, 2021
Directors' compensation increased nominally from $10,664 in the three-month period ended March 31, 2021
Stock-based compensation increased by $122,439, from $8,073 in the three-month period ended March 31, 2021 to $130,512 in the three-month period ended March 31, 2022, as a result of significant new consulting services provided by several new service providers. Repairs and maintenance decreased by $10,860, from $13,189 in the three-month period ended March 31, 2021 to $2,329 in the three-month period ended March 31, 2022, due to The foreign exchange income increased by
During the current three-month period ended March 31, 2022, the Company recorded an expense for the revaluation of the convertible promissory notes in the amount of $1,296,148 compared to $81,197 in the prior period ended March 31, 2021. In addition, during the three-month period ended March 31, As at March 31, These factors cast substantial doubt as to the Company's ability to continue as a going concern, which is dependent upon its ability to obtain the necessary financing to further the development of its business, satisfy its obligations to PACE and its other creditors 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. Beginning in March 2020 the Governments of Canada and Ontario, as well as foreign governments instituted emergency measures as a result of COVID-19. The virus has had a major impact on Canadian and international securities and currency markets and consumer activity which may impact the Company's financial position, its results of operations and its cash flows significantly. The situation is constantly evolving, however, so the extent to which the COVID-19 outbreak will impact businesses and the economy is highly uncertain and cannot be predicted. Accordingly, the Company cannot predict the extent to which its financial position, results of operations and cash flows will be affected in the future.
The interim condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result if the Company was unable to continue as a going concern. CRITICAL ACCOUNTING ESTIMATES Use of estimates The preparation of the Company's consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on management's best knowledge of current events and actions the Company may undertake in the future. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Areas involving significant estimates and assumptions include: the allowance for doubtful accounts, inventory valuation, useful lives of long-lived and intangible assets, impairment of long-lived assets and intangible assets, valuation of asset acquisition, accruals, fair value of convertible promissory notes, deferred income tax assets and related valuation allowance, environmental remediation costs, stock-based compensation and going concern. Actual results could differ from these estimates. These estimates are reviewed periodically and as adjustments become necessary, they are reported in earnings in the period in which they become available. Stock-based compensation
Long-Lived Asset Impairments In accordance with ASC 360, "Property, Plant and Equipment", long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events or circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the carrying amounts are recoverable. In the event that such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Convertible Promissory Notes The Company has elected the fair value option to account for its convertible promissory notes issued during 2021 and 2022. In accordance with ASC 825, the convertible promissory notes are marked-to-market at each reporting date with changes in fair value recorded as a component of other income (expense), in the interim condensed consolidated statements of operations and comprehensive loss. The Company has elected to include interest expense in the changes in fair value. Transaction costs are incurred as expensed. The Company did not elect the fair value option for the convertible promissory notes issued in 2019. These notes are measured at amortized cost. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS From time to time, new accounting pronouncements are issued by the financial 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 are not expected to have a material impact on the Company's financial position, results of operations or cash flows. There were no new accounting pronouncements adopted during the three months ended March 31,
EQUITY As at March 31, STOCK OPTIONS, WARRANTS AND RESTRICTED STOCK UNITS The Company has no stock options, warrants or restricted stock units outstanding as at March 31, RELATED PARTY TRANSACTIONS For three-month period ended March 31,
For the three-month period ended March 31, For those independent directors providing their services throughout Furthermore, for the three-month period ended March 31, During the three-month period ended March 31, In addition, during the three-month period ended March 31, 2022, the Company paid the CFO interest of $504 (C$638) on loans totaling $29,211 (C$36,000) provided to the Company and repaid during the period. There are no written agreements evidencing these loans from Travellers other than resolutions of the Board with attached loan schedules. On December 17, 2020, the Company entered into an Executive Chairman Consulting Agreement (the "CEO's Consulting Agreement"), by and among the Company, Travellers International Inc. ("Travellers"), and the CEO, who is also a director, the Executive Chairman and President of the Company, effective January 1, 2021 (the "Effective Date"). The CEO's Consulting Agreement replaced the consulting agreement which expired on December 31, 2020.
Pursuant to the terms of the CEO's Consulting Agreement, for his services as the CEO, the compensation is at a rate of The CEO's Consulting Agreement is for a term of twenty-four (24) months. Upon a Constructive Discharge (as defined in the CEO's Consulting Agreement) and subject to certain notification requirements and the Company's opportunity to cure the Constructive Discharge, the CEO will be entitled to a compensation of twelve (12) months' fees, as well as any bonus compensation owing.
On December 17, 2020, the Company entered into an Executive Consulting Agreement (the "CFO Consulting Agreement"), by and between the Company and the CFO of the Company, effective January 1, 2021. Pursuant to the terms of the CFO Consulting Agreement, the CFO is entitled to fees of The CFO's Consulting Agreement is for a term of twelve (12) months. Upon a Constructive Discharge (as defined in the CFO's Consulting Agreement) and subject to certain notification requirements and the Company's opportunity to cure the Constructive Discharge, the CFO will be entitled to a compensation of two (2) months' fees, as well as any bonus compensation owing. On January 26, 2022, SusGlobal Energy Corp. (the "Company") entered into a CFO Consulting Agreement (the "Makrimichalos Consulting Agreement"), by and between the Company and Ike Makrimichalos, Chief Financial Officer of the Company ("Makrimichalos "), effective January 1, 2022. Pursuant to the terms of the Makrimichalos Consulting Agreement, Makrimichalos will be entitled to fees of $8,003 C$10,000 per month, plus the applicable Harmonized Sales Tax, for his services as Chief Financial Officer of the Company. The Company has also agreed to reimburse Makrimichalos for certain out-of-pocket expenses incurred by Makrimichalos. In addition to the monthly fees, Makrimichalos was awarded 50,000 restricted shares of the Company's Common Stock, par value of $0.0001 per share on the Effective Date. The Makrimichalos Consulting Agreement will replace the consulting agreement currently in effect by and between the Company and Makrimichalos. The Makrimichalos Consulting Agreement is for a term of twelve (12) months. Upon a Constructive Discharge (as defined in the Makrimichalos Consulting Agreements) and subject to certain notification requirements and the Company's opportunity to cure the Constructive Discharge, Makrimichalos will be entitled to a compensation of two (2) months' fees, as well as any bonus compensation owing. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
As a smaller reporting company, as that term is defined in Item 10(f)(1) of Regulation S-K, we are not required to provide information required by this Item. Item 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period covered by this Quarterly Report on Form 10-Q.
Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Due to inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Based on our evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not
Notwithstanding Changes in Internal Control over Financial Reporting
PART II: OTHER INFORMATION Item 1A. Legal Proceedings. From time to time, the Company may become involved in litigation relating to claims arising from the ordinary course of business. Management believes that there are currently no claims or actions pending against us, the ultimate disposition of which would have a material adverse effect on our results of operations, financial condition or cash flows. The Company has a claim against it for unpaid legal fees in the amount
Item 1A. Risk Factors. As a smaller reporting company, we are not required to provide the information required by this item.
During the three-month period ended March 31,
The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since, among other things, the transactions did not involve a public offering.
None.
Item 4. Mine Safety Disclosures. Not Applicable.
Not Applicable.
The following exhibits are filed as part of this quarterly report on Form 10-Q:
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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