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 June 30, 2019March 31, 2020
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to________________to ________________
Commission file 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 | 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 [ ]
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 | [X] |
| Emerging growth company | [X] |
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 August 14, 2019May 15, 2020 was 43,218,94864,859,127 shares.
SusGlobal Energy Corp.INDEX TO FORM 10-QFor the Three and Six-Month Periods Ended June 30, 2019 and 2018
SusGlobal Energy Corp. |
INDEX TO FORM 10-Q |
For the Three-Month Periods Ended March 31, 2020 and 2019 |
SUSGLOBAL ENERGY CORP.CONSOLIDATED FINANCIAL STATEMENTSJune 30, 2019 and 2018
(Expressed in United States Dollars)
CONTENTS
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2020 and 2019 |
(Expressed in United States Dollars) |
CONTENTS |
SusGlobal Energy Corp.Interim Condensed Consolidated Balance Sheets
SusGlobal Energy Corp. |
Interim Condensed Consolidated Balance Sheets |
As at March 31, 2020 and December 31, 2019 |
(Expressed in United States Dollars) |
(unaudited) |
| March 31, |
|
| December 31, |
| |||||||
| June 30, 2019 |
|
| December 31, 2018 |
|
| 2020 |
|
| 2019 |
| |
ASSETS |
|
|
|
|
|
|
|
| ||||
Current Assets |
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents | $ | 25,140 |
| $ | 42,711 |
| $ | 15,002 |
| $ | 7,926 |
|
Restricted cash-funds held in trust (note 6) |
| 390,138 |
|
| 467,798 |
| ||||||
Trade receivables |
| 157,322 |
|
| 129,981 |
|
| 173,791 |
|
| 121,276 |
|
Government remittances receivable |
| 17,925 |
|
| - |
|
| 31,745 |
|
| 38,578 |
|
Other receivables |
| 13,808 |
|
| 20,624 |
| ||||||
Inventory |
| 24,738 |
|
| 18,550 |
|
| 4,071 |
|
| 5,389 |
|
Prepaid expenses and deposits |
| 33,109 |
|
| 23,172 |
|
| 30,609 |
|
| 46,028 |
|
|
|
|
|
|
|
|
| |||||
Total Current Assets |
| 258,234 |
|
| 214,414 |
|
| 659,164 |
|
| 707,619 |
|
|
|
|
|
|
|
|
| |||||
Intangible Assets (note 7) |
| 235,926 |
|
| 135,189 |
|
| 219,237 |
|
| 237,271 |
|
Long-lived Assets, net (note 8) |
| 4,906,405 |
|
| 3,361,110 |
|
| 4,574,406 |
|
| 4,762,453 |
|
Long-Term Assets |
| 5,142,331 |
|
| 3,496,299 |
|
| 4,793,643 |
|
| 4,999,724 |
|
Total Assets | $ | 5,400,565 |
| $ | 3,710,713 |
| $ | 5,452,807 |
| $ | 5,707,343 |
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY |
|
|
|
| ||||||||
Current Liabilities | $ | 951,664 |
| $ | 958,313 |
| ||||||
Government remittances payable |
| 68,695 |
|
| 35,187 |
| ||||||
Accrued liabilities (notes 9, 10, 12, 13 and 14) |
| 648,165 |
|
| 487,592 |
| ||||||
Advance |
| - |
|
| 3,255 |
| ||||||
Deferred revenue |
| 16,214 |
|
| 9,239 |
| ||||||
Current portion of long-term debt (note 10) |
| 3,533,565 |
|
| 3,859,401 |
| ||||||
Current portion of obligations under capital lease (note 11) |
| 440,364 |
|
| 218,069 |
| ||||||
Convertible promissory notes (note 12) |
| 1,485,673 |
|
| 1,406,029 |
| ||||||
Mortgage payable (note 13) |
| 1,811,669 |
|
| 1,934,276 |
| ||||||
Loans payable to related party (note 14) |
| 70,490 |
|
| - |
| ||||||
|
|
|
|
|
|
|
| |||||
LIABILITIES AND STOCKHOLDERS' DEFICIENCY |
|
|
|
| ||||||||
Current Liabilities |
|
|
|
| ||||||||
Accounts payable (note 10) | $ | 618,956 |
| $ | 353,728 |
| ||||||
Government remittances payable |
| - |
|
| 35,169 |
| ||||||
Accrued liabilities (notes 10, 13 and 15) |
| 713,443 |
|
| 646,003 |
| ||||||
Current portion of long-term debt (note 11) |
| 3,844,309 |
|
| 3,727,778 |
| ||||||
Current portion of obligations under capital lease (note 12) |
| 90,933 |
|
| 81,109 |
| ||||||
Convertible promissory notes (note 13) |
| 1,248,299 |
|
| - |
| ||||||
Mortgage payable (note 14) |
| 1,301,161 |
|
| - |
| ||||||
Loans payable to related parties (note 15) |
| 57,308 |
|
| 201,575 |
| ||||||
Total Liabilities |
| 9,026,499 |
|
| 8,911,361 |
| ||||||
|
|
|
|
|
|
|
| |||||
Total Current Liabilities |
| 7,874,409 |
|
| 5,045,362 |
| ||||||
|
|
|
| |||||||||
Long-Term Liabilities |
|
|
|
| ||||||||
Obligations under capital lease (note 12) |
| 172,176 |
|
| 207,599 |
| ||||||
|
|
|
|
|
|
| ||||||
Total Long-term Liabilities |
| 172,176 |
|
| 207,599 |
| ||||||
Total Liabilities |
| 8,046,585 |
|
| 5,252,961 |
| ||||||
Stockholders' Deficiency |
|
|
|
|
|
|
|
| ||||
Preferred stock, $.0001 par value, 10,000,000 authorized, none issued and outstanding |
| 4,250 |
|
| 4,031 |
| ||||||
Preferred stock, $.0001 par value, 10,000,000 authorized, none issued and outstanding |
|
|
|
|
|
| ||||||
Additional paid-in capital |
| 7,180,841 |
|
| 5,754,260 |
|
| 8,525,946 |
|
| 7,450,091 |
|
Subscriptions payable |
| - |
|
| 4,600 |
| ||||||
Subscription payable |
| 7,250 |
|
| - |
| ||||||
Stock compensation reserve |
| 665,000 |
|
| 1,330,000 |
|
| - |
|
| 1,000,000 |
|
Accumulated deficit |
| (10,337,807 | ) |
| (8,554,312 | ) |
| (12,204,787 | ) |
| (11,449,497 | ) |
Accumulated other comprehensive loss |
| (158,304 | ) |
| (80,827 | ) | ||||||
Accumulated other comprehensive income (loss) |
| 91,847 |
|
| (209,792 | ) | ||||||
|
|
|
|
|
|
|
| |||||
Stockholders' deficiency |
| (2,646,020 | ) |
| (1,542,248 | ) |
| (3,573,692 | ) |
| (3,204,018 | ) |
|
|
|
|
|
|
|
| |||||
Total Liabilities and Stockholders' Deficiency | $ | 5,400,565 |
| $ | 3,710,713 |
| $ | 5,452,807 |
| $ | 5,707,343 |
|
Going concern (note 2) |
|
|
|
|
|
|
|
| ||||
Commitments (note 17) |
|
|
|
| ||||||||
Commitments (note 16) |
|
|
|
| ||||||||
Subsequent events (note 18) |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
SusGlobal Energy Corp.Interim Condensed Consolidated Statements of Operations and Comprehensive LossFor the three and six-month periods ended June 30, 2019 and 2018(Expressed in United States Dollars)(unaudited)
| For the three-month periods ended |
|
| For the six-month periods ended | |||||||
| June 30, 2019 |
|
| June 30, 2018 |
|
| June 30, 2019 |
| June 30, 2018 |
| |
|
|
|
|
|
|
|
|
|
|
| |
Revenue | $ | 381,834 |
| $ | 227,423 | $ |
| 634,972 | $ | 360,144 |
|
|
|
|
|
|
|
|
|
|
|
| |
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
|
Opening inventory |
| 26,409 |
|
| 67,210 |
|
| 18,550 |
| 53,964 |
|
Depreciation |
| 101,072 |
|
| 98,268 |
|
| 196,826 |
| 192,311 |
|
Direct wages and benefits |
| 59,667 |
|
| 44,049 |
|
| 109,032 |
| 84,108 |
|
Equipment rental, delivery, fuel and repairs and maintenance |
| 104,916 |
|
| 26,158 |
|
| 204,482 |
| 61,198 |
|
Utilities |
| 32,695 |
|
| 9,688 |
|
| 60,226 |
| 31,888 |
|
Outside contractors |
| 4,597 |
|
| 12,837 |
|
| 4,702 |
| 16,681 |
|
| 329,356 |
|
| 258,210 |
|
| 593,818 |
| 440,150 |
| |
Less: closing inventory |
| (24,738 | ) |
| (115,733 | ) |
| (24,738 | ) | (115,733 | ) |
Total cost of sales |
| 304,618 |
|
| 142,477 |
|
| 569,080 |
| 324,417 |
|
|
|
|
|
|
|
|
|
|
|
| |
Gross profit |
| 77,216 |
|
| 84,946 |
|
| 65,892 |
| 35,727 |
|
|
|
|
|
|
|
|
|
|
|
| |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
Management compensation-stock- based |
|
|
|
|
|
|
|
|
|
|
|
compensation (note 10) |
| 332,500 |
|
| 1,582,500 |
|
| 665,000 |
| 1,665,000 |
|
Management compensation-fees (note 10) |
| 80,740 |
|
| 83,584 |
|
| 161,978 |
| 173,758 |
|
Marketing |
| (33,323 | ) |
| - |
|
| 246,677 |
| - |
|
Professional fees |
| 72,269 |
|
| 76,220 |
|
| 206,971 |
| 137,042 |
|
Interest expense (notes 9, 10, 11, 12, 13, 14 and 15) |
| 150,407 |
|
| 91,779 |
|
| 255.430 |
| 177,019 |
|
Office and administration |
| 46,380 |
|
| 12,501 |
|
| 113,944 |
| 63,585 |
|
Rent and occupancy (note 10) |
| 34,820 |
|
| 34,716 |
|
| 59,061 |
| 68,917 |
|
Insurance |
| 13,951 |
|
| 15,466 |
|
| 28,010 |
| 30,585 |
|
Filing fees |
| 16,414 |
|
| 3,581 |
|
| 29,097 |
| 10,039 |
|
Amortization of financing costs |
| 53,768 |
|
| - |
|
| 65,765 |
| - |
|
Directors' compensation (note 10) |
| 9,748 |
|
| 774 |
|
| 12,700 |
| 1,565 |
|
Repairs and maintenance |
| 2,493 |
|
| 10,760 |
|
| 4,754 |
| 18,769 |
|
Total operating expenses |
| 780,167 |
|
| 1,911,881 |
|
| 1,849,387 |
| 2,346,279 |
|
|
|
|
|
|
|
|
|
|
|
| |
Net loss |
| (702,951 | ) |
| (1,826,935 | ) |
| (1,783,495 | ) | (2,310,552 | ) |
Other comprehensive (loss) income |
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange (loss) gain |
| (49,972 | ) |
| (7,300 | ) |
| (77,477 | ) | 21,014 |
|
|
|
|
|
|
|
|
|
|
|
| |
Comprehensive loss | $ | (752,923 | ) | $ | (1,834,235 | ) $ |
| (1,860,972 | ) $ | (2,289,538 | ) |
|
|
|
|
|
|
|
|
|
|
| |
Net loss per share-basic and diluted | $ | (0.02 | ) | $ | (0.05 | ) $ |
| (0.04 | ) $ | (0.06 | ) |
|
|
|
|
|
|
|
|
|
|
| |
Weighted average number of common shares outstanding- basic and diluted |
| 42,460,795 |
|
| 39,090,613 |
|
| 41,879,559 |
| 38,824,909 |
|
SusGlobal Energy Corp. |
Interim Condensed Consolidated Statements of Operations and Comprehensive Loss |
For the three-month periods ended March 31, 2020 and 2019 |
(Expressed in United States Dollars) |
(unaudited) |
For the three-month periods ended | ||||||
March 31, | March 31, | |||||
2020 | 2019 | |||||
Revenue | $ | 350,197 | $ | 253,138 | ||
Cost of Sales | ||||||
Opening inventory | 5,389 | 18,550 | ||||
Depreciation | 113,109 | 95,754 | ||||
Direct wages and benefits | 76,183 | 49,365 | ||||
Equipment rental, delivery, fuel and repairs and maintenance | 61,302 | 99,566 | ||||
Utilities | 38,277 | 27,531 | ||||
Outside contractors | 3,573 | 105 | ||||
297,833 | 290,871 | |||||
Less: closing inventory | (4,071 | ) | (26,409 | ) | ||
Total cost of sales | 293,762 | 264,462 | ||||
Gross profit (loss) | 56,435 | (11,324)) | ||||
Operating expenses | ||||||
Management compensation-stock- based | ||||||
compensation (note 9) | - | 332,500 | ||||
Management compensation-fees (note 9) | 51,357 | 81,238 | ||||
Marketing | 2,917 | 280,000 | ||||
Professional fees | 81,448 | 134,702 | ||||
Interest expense and default amounts (notes 9, 10, 11, 12, 13 and 14) | 312,291 | 105,023 | ||||
Office and administration | 55,685 | 58,182 | ||||
Rent and occupancy (note 9) | 28,297 | 24,241 | ||||
Insurance | 18,179 | 14,059 | ||||
Filing fees | 13,880 | 12,683 | ||||
Amortization of financing costs | 92,538 | 11,997 | ||||
Directors' compensation (note 9) | (1,420 | ) | 2,952 | |||
Repairs and maintenance | 6,458 | 2,261 | ||||
Foreign exchange loss | 150,095 | 9,382 | ||||
Total operating expenses | 811,725 | 1,069,220 | ||||
Net loss | (755,290 | ) | (1,080,544 | ) | ||
Other comprehensive income (loss) | ||||||
Foreign exchange gain (loss) | 301,639 | (27,505 | ) | |||
Comprehensive loss | $ | (453,651 | ) | $ | (1,108,049 | ) |
Net loss per share-basic and diluted | $ | (0.01 | ) | $ | (0.03 | ) |
Weighted average number of common shares outstanding- basic and diluted | 57,441,740 | 41,291,864 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
SusGlobal Energy Corp.Interim Condensed Consolidated Statements of Changes in Stockholders' Deficiency
SusGlobal Energy Corp. |
Interim Condensed Consolidated Statements of Changes in Stockholders' Deficiency |
For the three-month periods ended March 31, 2020 and 2019 |
(Expressed in United States Dollars) |
(unaudited) |
|
|
|
|
| Additional |
|
|
|
|
|
|
|
| Accumulated |
|
|
| |||||||
| Number of |
|
| Common |
|
| Paid- |
|
| Share |
|
| Stock |
|
| Accumulated |
|
| Other |
|
| Stockholders' |
| |
| Shares |
|
| Shares |
|
| in Capital |
|
| Subscriptions |
|
| Compensation |
|
| Deficit |
|
| Comprehensive |
|
| Deficiency |
| |
|
|
|
|
|
|
|
| Payable |
|
| Reserve |
|
|
|
| Loss |
|
|
| |||||
Balance - December 31, 2017 |
| 37,393,031 |
| $ | 3,740 |
| $ | 3,576,111 |
| $ | 178,200 |
| $ | 330,000 |
| $ | (4,660,296 | ) | $ | (148,093 | ) | $ | (720,338 | ) |
Shares issued for proceeds previously received |
| 190,000 |
|
| 19 |
|
| 178,181 |
|
| (178,200 | ) |
| - |
|
| - |
|
| - |
|
| - |
|
Shares issued on vesting of 2017 stock award |
| 2,000,000 |
|
| 200 |
|
| 1,329,800 |
|
| - |
|
| (330,000 | ) |
| - |
|
| - |
|
| 1,000,000 |
|
Shares issued for private placement, net of share issue costs |
| 696,500 |
|
| 70 |
|
| 650,170 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 650,240 |
|
Shares issued to director |
| 20,000 |
|
| 2 |
|
| 19,998 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 20,000 |
|
Stock compensation expensed on vesting of stock award |
| - |
|
| - |
|
| - |
|
| - |
|
| 1,330,000 |
|
| - |
|
| - |
|
| 1,330,000 |
|
Proceeds received for shares yet to be issued |
| - |
|
|
|
|
| - - |
|
| 4,600 |
|
| - |
|
| - |
|
| - |
|
| 4,600 |
|
Other comprehensive income |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 67,266 |
|
| 67,266 |
|
Net loss |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (3,894,016 | ) |
| - |
|
| (3,894,016 | ) |
Balance - December 31, 2018 |
| 40,299,531 |
|
| 4,031 |
|
| 5,754,260 |
|
| 4,600 |
|
| 1,330,000 |
|
| (8,554,312 | ) |
| (80,827 | ) |
| (1,542,248 | ) |
Shares issued for proceeds previously received |
| 5,000 |
|
| 1 |
|
| 4,599 |
|
| (4,600 | ) |
| - |
|
| - |
|
| - |
|
| - |
|
Shares issued on vesting of 2018 stock award |
| 2,000,000 |
|
| 200 |
|
| 1,329,800 |
|
| - |
|
| (1,330,000 | ) |
| - |
|
| - |
|
| - |
|
Shares issued for professional services |
| 100,000 |
|
| 10 |
|
| 52,990 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 53,000 |
|
Shares issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to directors |
| 80,000 |
|
| 8 |
|
| 39,192 |
|
|
| - |
| - |
|
|
| - |
|
| - |
| 39,200 |
|
Stock compensation expensed on vesting of stock awards |
| - |
|
| - |
|
| - |
|
| - |
|
| 665,000 |
|
| - |
|
| - |
|
| 665,000 |
|
Other comprehensive loss |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (77,477 | ) |
| (77,477 | ) |
Net loss |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (1,783,495 | ) |
| - |
|
| (1,783,495 | ) |
Balance-June 30, 2019 |
| 42,484,531 |
| $ | 4,250 |
| $ | 7,180,841 |
| $ | - |
| $ | 665,000 |
| $ | (10,337,807 | ) | $ | (158,304 | ) | $ | (2,646,020 | ) |
Number of Shares | Common Shares | Additional Paid- in Capital | Share Subscriptions Payable | Stock Compensation Reserve | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Stockholders' Deficiency | |||||||||||||||||
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 loss | - | - | - | - | - | - | 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 | ) | |||||||
Balance-December 31, 2018 | 40,299,531 | 4,031 | 5,754,260 | 4,600 | 1,330,000 | (8,554,312)) | (80,827)) | (1,542,248)) | ||||||||||||||||
Shares issued for proceeds previously received | 5,000 | 1 | 4,599 | (4,600 | ) | - | - | - | - | |||||||||||||||
Shares issued on vesting of 2018 stock award | 1,000,000 | 100 | 999,900 | - | (1,000,000 | ) | - | - | - | |||||||||||||||
Shares issued for professional services | 100,000 | 10 | 52,990 | - | - | - | - | 53,000 | ||||||||||||||||
Stock compensation expensed on vesting of stock awards | - | - | - | - | 332,500 | - | - | 332,500 | ||||||||||||||||
Other comprehensive loss | - | - | - | - | - | - | (27,505 | (27,505 | ) | |||||||||||||||
Net loss | - | - | - | - | - | (1,080,544 | ) | - | (1,080,544 | ) | ||||||||||||||
Balance-March 31, 2019 | 41,404,531 | $ | 4,142 | $ | 6,811,749 | $ | - | $ | 662,500 | $ | (9,634,856 | ) | $ | (108,332 | ) | $ | (2,264,797 | ) |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
SusGlobal Energy Corp.Interim Condensed Consolidated Statements of Cash FlowsSusGlobal Energy Corp. Interim Condensed Consolidated Statements of Cash Flows For the three-month periods ended March 31, 2020 and 2019 (Expressed in United States Dollars) (unaudited) For the three-month period ended
March 31, 2020 For the three-month period ended
March 31, 2019 Cash flows from operating activities Net loss $ (755,290 ) $ (1,080,544 ) Adjustments for: Depreciation 114,374 97,701 Amortization of intangible assets 551 50 Amortization of operating right-of-use asset - 3,663 Non-cash professional fees on conversion of debt 1,416 - Amortization of financing fees 92,538 11,997 Stock-based compensation - 332,500 Shares issued for professional services - 53,000 Changes in non-cash working capital: Trade receivables (66,262 ) 31,239 Government remittances receivable 3,777 4,435 Other receivables 5,358 - Inventory 912 (7,511 ) Prepaid expenses and deposits 12,179 (87,561 ) Accounts payable 78,407 37,207 Government remittances payable 38,518 (34,591 ) Accrued liabilities 218,222 (29,316 ) Deferred revenue 8,188 - Net cash used in operating activities (247,112 ) (667,731 ) Cash flows from investing activities Purchase of intangible assets (2,574 ) (10,777 Purchase of long-lived assets (i) (50,352 ) Net cash used in investing activities (52,926 ) (10,777 ) Cash flows from financing activities Bank indebtedness - 4,055 Repayments of advance (3,147 ) - Repayment of long-term debt - (21,109 ) Repayments of obligations under capital lease (35,856 ) (16,665 ) Advances of convertible promissory notes (ii) 103,441 758,500 Repayments of operating lease liability - (1,107 ) Advances of mortgage payable 3,686 - Advances of loans payable to related parties 74,430 - Repayment of loans payable to related parties - (94,025 ) Net cash provided by financing activities 142,554 629,649 Effect of exchange rate on cash 86,900 6,148 Decrease in cash (70,584 ) (42,711 ) Cash and cash equivalents-beginning of period 475,724 42,711 Cash and cash equivalents-end of period $ 405,140 $ - Cash and cash equivalents 15,002 - Restricted cash 390,138 - Cash, and cash equivalents and restricted cash $ 405,140 $ - Supplemental Cash Flow Disclosures: Interest paid $ 51,620 $ 81,394 Income taxes paid - - For the three and six-month periods ended June 30, 2019 and 2018(Expressed in United States Dollars)(unaudited)
| For the six-month |
|
| For the six-month |
| ||
| period ended |
|
| period ended |
| ||
| June 30, 2019 |
|
| June 30, 2018 |
| ||
Cash flows from operating activities |
|
|
|
| |||
Net loss | $ | (1,783,495 | ) | $ | (2,310,552 | ) | |
Adjustments for: |
|
|
|
| |||
Depreciation |
| 200,774 |
|
| 196,491 |
| |
Amortization of intangible asset |
| 100 |
|
| 100 |
| |
Amortization of operating right-of-use asset |
| 6,087 |
|
| - |
| |
Amortization of financing fees |
| 65,765 |
|
| - |
| |
Stock-based compensation |
| 665,000 |
|
| 1,665,000 |
| |
Shares issued for professional services |
| 53,000 |
|
| - |
| |
Shares issued to directors |
| 39,200 |
|
| - |
| |
Interest capitalized |
| - |
|
| 54,276 |
| |
Changes in non-cash working capital: |
|
|
|
| |||
Trade receivables |
| (15,742 | ) |
| 81,565 |
| |
Government remittances receivable |
| (17,591 | ) |
| - |
| |
Inventory |
| (5,300 | ) |
| (66,295 | ) | |
Prepaid expenses and deposits |
| (8,787 | ) |
| 43,378 |
| |
Accounts payable |
| 237,338 |
|
| (50,177 | ) | |
Government remittances payable |
| (35,980 | ) |
| - |
| |
Accrued liabilities |
| 39,288 |
|
| 9,646 |
| |
Net cash used in operating activities |
| (560,343 | ) |
| (376,568 | ) | |
|
|
|
| ||||
Cash flows from investing activities |
|
|
|
| |||
Business acquisition |
| (1,458,675 | ) |
| - |
| |
Purchase of intangible assets |
| (10,745 | ) |
| - |
| |
Purchase of long-lived assets |
| (186,649 | ) |
| (1,565 | ) | |
Net cash used in investing activities |
| (1,656,069 | ) |
| (1,565 | ) | |
|
|
|
| ||||
Cash flows from financing activities |
|
|
|
| |||
Repayment of long-term debt |
| (40,859 | ) |
| (121,878 | ) | |
Repayments of obligations under capital lease |
| (37,145 | ) |
| (51,283 | ) | |
Advances of convertible promissory notes |
| 1,190,750 |
|
| - |
| |
Repayments of operating lease liability |
| (1,858 | ) |
| - |
| |
Advance of mortgage payable | 1,258,273 | - | |||||
Repayments of loans payable to related parties |
| (149,980 | ) |
| (15,654 | ) | |
Advances of loans payable to related parties |
| - |
|
| 215,243 |
| |
Private placement proceeds (net of share issue costs) |
| - |
|
| 304,500 |
| |
Net cash provided by financing activities |
| 2,219,181 |
|
| 330,928 |
| |
|
|
|
| ||||
Effect of exchange rate on cash |
| (20,340 | ) |
| (20,466 | ) | |
Decrease in cash |
| (17,571 | ) |
| (67,671 | ) | |
Cash and cash equivalents-beginning of period |
| 42,711 |
|
| 126,117 |
| |
|
|
|
| ||||
Cash and cash equivalents-end of period | $ | 25,140 |
| $ | 58,446 |
| |
Supplemental Cash Flow Disclosures: |
|
|
|
| |||
Interest paid | $ | 171,675 |
| $ | 137,782 |
| |
Income taxes paid |
| - |
|
| - |
| |
(i) | Refer to note 12 for obligations under capital lease, note 11 for details on the non-cash purchase of certain long-lived assets. |
(i) | Refer to note 11, obligations under capital lease, for details on the non-cash purchase of certain long-lived assets. | ||
(ii) | Refer to note 12, convertible promissory notes, for the issuance of capital stock on the conversion of debt. |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
SusGlobal Energy Corp. |
Notes to the Interim Condensed Consolidated Financial Statements |
|
(Expressed in United States Dollars) |
(unaudited) |
1. Nature of Business and Basis of Presentation
SusGlobal Energy Corp. ("SusGlobal") was formed by articles of amalgamation on December 3, 2014, in the Province of Ontario, Canada and its executive office is in Toronto, Ontario, Canada. SusGlobal, a company in the start-up stages and Commandcredit Corp. ("Commandcredit"), an inactive Canadian public company, amalgamated to continue business under the name of SusGlobal Energy Corp.
On May 23, 2017, SusGlobal filed an Application for Authorization to continue in another Jurisdiction with the Ministry of Government Services in Ontario and a certificate of corporate domestication and certificate of incorporation with the Secretary of State of the State of Delaware under which it changed its jurisdiction of incorporation from Ontario to the State of Delaware (the "Domestication"). In connection with the Domestication each of the currently issued and outstanding common shares were automatically converted on a one-for-one basis into common shares compliant with the laws of the state of Delaware (the "Shares"). As a result of the Domestication, pursuant to Section 388 of the General Corporation Law of the State of Delaware (the "DGCL"), SusGlobal continued its existence under the DGCL as a corporation incorporated in the State of Delaware. The business, assets and liabilities of SusGlobal and its subsidiaries on a consolidated basis, as well as its principal location and fiscal year, were the same immediately after the Domestication as they were immediately prior to the Domestication. SusGlobal filed a Registration Statement on Form S-4 to register the Shares and this registration statement was declared effective by the Securities and Exchange Commission on May, 23, 2017.
On December 11, 2018, the Company began trading on the OTCQB venture market exchange, under the ticker symbol SNRG.
SusGlobal is a renewable energy 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., SusGlobal Energy Canada I Ltd. ("SGECI"), SusGlobal Energy Belleville Ltd. ("SGEBL") 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 ("CAD"). In the opinion of management, all adjustments necessary for a fair presentation have been included.
2. Going Concern
The interim condensed consolidated financial statements have been prepared in accordance with US GAAP, which assumes that the Company will be able to meet its obligations and continue its operations for the next twelve months.
As at June 30, 2019,March 31, 2020, the Company had a working capital deficit of $7,616,175$8,367,335 (December 31, 2018-2019-$4,830,948)8,203,742), incurred a net loss of $1,783,495 (2018-$755,290 (2019-$2,310,552)1,080,544) for the sixthree months ended June 30, 2019March 31, 2020 and had an accumulated deficit of $10,337,807$12,204,787 (December 31, 2018-2019-$8,554,312)11,449,497) and expects to incur further losses in the development of its business.
On March 31, 2020, Pace Savings & Credit Union Limited ("PACE") and the Company reached an agreement for the repayment of the outstanding amounts owing to PACE. One of the credit facilities, in the amount of $34,391 ($48,788 CAD), was repaid in full on April 3, 2020 and the remaining credit facilities and the corporate term loan are to be repaid on or before September 30, 2020. Management continues discussions with a Canadian chartered bank to re-finance its remaining obligations to PACE.
The Company has defaulted on the convertible promissory notes (see note 12). As a result, the amounts owing to PACE (see note 10) and the obligations under capital lease (see note 11), are also in default.
SusGlobal Energy Corp. |
Notes to the Interim Condensed Consolidated Financial Statements |
March 31, 2020 and 2019 |
(Expressed in United States Dollars) |
(unaudited) |
2. Going Concern, (continued)
These factors cast substantial doubt as to the Company's ability to continue as a going concern, which is dependent upon its ability to obtain the necessary financing to further the development of its business, satisfy its obligations to PACE Savings & Credit Union Limited ("PACE") and its other creditors, whose debts are also in default 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 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, 20182019 and 20172018 and their accompanying notes.
Recently Adopted Accounting Pronouncements:
On January 1, 2019, the Company adopted Accounting Standards Update ("ASU") No. 2016-02, Leases which is also known as Accounting Standard Codification ("ASC") Topic 842, that requires lessees to recognize for all operating leases a right-of-use asset and a lease obligation in the interim condensed consolidated balance sheets. Expenses are recognized in the interim condensed consolidated statements of operations and comprehensive loss in a manner similar to previous accounting guidance. Lessor accounting under the new standard is substantially unchanged and is not relevant to the Company. The Company adopted the accounting standard using a prospective transition approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented, with certain practical expedients available to ease the burden of adoption.
The Company elected the following practical expedients upon adoption: not to reassess whether any expired or existing contracts are or contain leases, not to reassess the lease classification for any expired or existing leases, not to reassess initial direct costs for any existing leases, not to separately identify lease and non-lease components (i.e. maintenance costs) except for fleet vehicles and real estate, and not to evaluate historical land easements under the new guidance. Additionally, the Company elected the short-term lease exemption policy, applying the requirements of ASC 842 to long-term leases (leases greater than 1 year) for which it only has one.
Adoption of the new standard resulted in $217,755 ($297,074 CAD) of additional right-of-use lease asset and lease liability as of January 1, 2019. The new standard did not have a significant impact on the interim condensed consolidated statements of operations and comprehensive loss. See note 9, operating lease right-of-use asset and operating lease liability, for additional information.
4. Recent 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.
InOn January 2017,1, 2020, the FASB issuedCompany adopted ASU No. 2018-13, "Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurements to ASC Topic 820, Fair Value Movement. ASU No. 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, and/or adding certain disclosures. The adoption of ASU No. 2018-13, did not have a significant impact on the Company's consolidated financial statements.
On January 1, 2020, the Company adopted ASU No. 2017-04, "Intangibles-Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment". The new standard simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill quantitative impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is to be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The standard is to be effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU No. 2017-04.
In June 2016,2017-04, did not have a significant impact on the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for mostCompany's consolidated financial assets, including trade receivables. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. ASU 2016-13 is effective for the Company beginning January 1, 2020 and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows.statements.
SusGlobal Energy Corp. |
Notes to the Interim Condensed Consolidated Financial Statements |
|
(Expressed in United States Dollars) |
(unaudited) |
5. Financial Instruments
The carrying value of cash and cash equivalents, funds held in trust, trade and other receivables, accounts payable and accrued liabilities approximated their fair values as of June 30,March 31, 2020 and December 31, 2019, due to their short-term nature. The carrying value of the advance, long-term debt, obligations under capital lease, convertible promissory notes, mortgage payable and loans payable to related partiesparty approximated their fair values due to their market interest rates.
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.
In the opinion of management, the Company is exposed to significant interest rate risk on its long-term debt, convertible promissory notes and mortgage payable of $3,844,309$6,830,907 ($5,031,1609,690,604 CAD) (2019-$7,199,706; $9,351,482 CAD).
Credit risk is the risk of loss associated with a counterparty's inability to perform its payment obligations. As at March 31, 2020, the Company's credit risk is primarily attributable to cash and cash equivalents and trade receivables. As at March 31, 2020, the Company's cash and cash equivalents were held with reputable Canadian chartered banks and a credit union.
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, 2020, the allowance for doubtful accounts was $668 ($948 CAD) (December 31, 2018-2019-$3,727,778; $5,085,645730; $948 CAD).
As at June 30, 2019,March 31, 2020, the Company is exposed to concentration risk as it had foursix customers (December 31, 2018-five2019-six customers) representing greater than 5% of total trade receivables and these foursix customers (December 31, 2018-five2019-six customers) represented 72% (2018-90%85% (December 31, 2019-90%) of trade receivables. The Company had certain customers whose revenue individually represented 10% or more of the Company's total revenue. These customers accounted for 74% (37%86% (27%,14%, 23%12%, 12%, 11% and 14%10%) (June 30, 2018-63%(March 31, 2019-90%; 38%42%, 26%, 11% and 25%11%) 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 bank to refinance its obligations to PACE and to another creditor. Refer also to going concern, note 2.
The Company actively monitors its liquidity to ensure that its cash flows and working capital are adequate to support its financial obligations and the Company's capital programs. In order to continue operations, the Company will need to raise capital.capital, repay PACE for all of its outstanding obligations and complete the refinancing of its real property and organic 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 CAD, the Company realizes a portion of its expenses in USD. Consequently, certain assets and liabilities are exposed to foreign currency fluctuations. As at June 30, 2019, $110,307March 31, 2020, $379,228 (December 31, 2018-2019-$68,393)258,403) of the Company's net monetary liabilities were denominated in USD. The Company has not entered into any hedging transactions to reduce the exposure to currency risk.
6. Business Acquisition
Effective May 24, 2019, the Company purchased all the issued and outstanding shares of 1684567. The acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price paid in the acquisition has been preliminarily allocated to record the assets acquired and liabilities assumed based on their estimated fair value. When determining the fair values of assets acquired and liabilities assumed, management made significant estimates. The transaction closed on May 28, 2019. The purchase consideration consisted of cash from working capital of $200,402 ($269,466 CAD) and cash from a third-party mortgage obtained in the amount of $1,258,273 ($1,691,910 CAD, net of financing fees of $80,387 ($108,090 CAD)). The total purchase price includes the original offer of $1,314,304 ($1,767,250 CAD) and acquisition costs of $144,371 ($194,126 CAD).
|
|
|
|
6. Business Acquisition, (continued)
The allocation of the purchase price is as follows:
|
|
| May 24, 2019 |
Purchase consideration |
|
| |
Cash | ($1,961,376 CAD) | $ | 1,498,687 |
Assets acquired |
|
| |
| Accounts receivable ($ 7,573 CAD) |
| 5,787 |
| Land ($1,838,050 CAD) |
| 1,404,454 |
| Automotive equipment and machinery ($16,525 CAD) |
| 12,627 |
| Customer list ($10,205 CAD) |
| 7,798 |
| Environmental compliance approval ($100,000 CAD) |
| 76,410 |
Liabilities assumed |
|
| |
| Accounts payable ($10,977 CAD) |
| 8,389 |
|
|
|
|
Net assets acquired ($1,961,376 CAD) | $ | 1,498,687 |
7. Intangible Assets
| June 30, 2019 |
|
| December 31, 2018 |
| |
Technology license (net of accumulated amortization of $831 (2018- $731)) | $ | 1,170 |
| $ | 1,270 |
|
Customer list-limited life-$10,205 CAD (net of accumulated amortization of $nil) |
| 7,798 |
|
| - |
|
Trademarks-indefinite life-$14,327 CAD |
| 10,948 |
|
| - |
|
Environmental compliance approvals-indefinite life- $282,700 CAD |
| 216,010 |
|
| 133,919 |
|
$ | 235,926 |
| $ | 135,189 |
|
On May 6, 2015, the Company acquired an exclusive license from Syngas SDN BHD ("Syngas"), a Malaysian company to use Syngas intellectual property within North America for a period of five years for $1 consideration, renewable every five years upon written request. Syngas manufactures equipment that produces liquid transportation fuel from plastic waste material. The Company issued 20,000 common shares of the Company to an introducing party, determined to be valued at $2,000.
On September 15, 2017, the Company acquired the environmental compliance approvals on the purchase of certain assets of Astoria from BDO Canada Limited ('BDO") under an asset purchase agreement (the "APA").
On March 14, 2019, the Company incurred fees to register various trademarks in the United States and Canada.
Effective May 24, 2019, the Company acquired an additional environmental compliance approval ($76,410) and a customer list ($7,798) relating to certain municipal contracts (forty-five-month life) on the purchase of the shares of 1684567.
SusGlobal Energy Corp. |
Notes to the Interim Condensed Consolidated Financial Statements |
|
(Expressed in United States Dollars) |
(unaudited) |
6. Restricted Cash-Funds Held in Trust
The funds held in trust are required to satisfy certain outstanding payments to PACE, including the repayment in full of one of the credit facilities in the amount of $34,391 ($48,788 CAD) and to bring the remaining outstanding PACE amounts current. The funds held in trust were provided to PACE on April 3, 2020. Refer also to going concern, note 2 and long-term debt, note 10.
7. Intangible Assets
March 31, 2020 | December 31, 2019 | |||||
Technology license (net of accumulated amortization of $981 (2019- $931)) | $ | 1,020 | $ | 1,070 | ||
Customer list-limited life-$7,937 CAD (net of accumulated amortization of $1,598) ($2,268 CAD) (2019-$8,617 CAD (net of accumulated amortization of $1,222 ($1,588 CAD)) | 5,595 | 6,634 | ||||
Trademarks-indefinite life-$18,935 CAD | 13,347 | 11,916 | ||||
Environmental compliance approvals-indefinite life- $282,700 CAD | 199,275 | 217,651 | ||||
$ | 219,237 | $ | 237,271 |
In 2019 and for the three-month period ended March 31, 2020, the Company incurred fees to register various trademarks in the United States and Canada, in the amount $13,347 ($18,935 CAD).
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 an additional environmental compliance approval, having an indefinite life, of $74,370 ($100,000 CAD). The Company also acquired a customer list of $6,645 ($8,617 CAD), net of accumulated amortization of $1,222 ($1,588 CAD), relating to certain municipal contracts (forty-five-month life) on the purchase of the shares of 1684567.8. Long-lived Assets, net
|
|
|
|
|
| March 31, | December 31, | |||||||||||||||||
June 30, 2019 | December 31, 2018 | 2020 | 2019 | |||||||||||||||||||||
| Cost |
|
| Accumulated |
|
| Net book value |
|
| Net book value |
| Cost | Accumulated | Net book value | Net book value | |||||||||
|
|
| depreciation |
|
|
|
|
| depreciation | |||||||||||||||
Land | $ | 1,404,454 |
| $ | - |
| $ | 1,404,454 |
| $ | - |
| $ | 1,304,694 | $ | - | $ | 1,304,694 | $ | 1,425,002 | ||||
Composting buildings |
| 2,247,029 |
|
| 240,946 |
|
| 2,006,083 |
|
| 1,988,144 |
| 2,130,519 | 316,725 | 1,813,794 | 1,965,690 | ||||||||
Gore cover system |
| 1,071,763 |
|
| 163,138 |
|
| 908,625 |
|
| 748,112 |
| 1,000,122 | 228,701 | 771,421 | 869,864 | ||||||||
Driveway and paving |
| 354,160 |
|
| 50,763 |
|
| 303,397 |
|
| 304,639 |
| 326,721 | 66,433 | 260,288 | 291,427 | ||||||||
Machinery and equipment |
| 50,427 |
|
| 24,862 |
|
| 25,565 |
|
| 27,661 |
| 60,979 | 42,637 | 18,342 | 22,270 | ||||||||
Equipment under capital lease |
| 426,773 |
|
| 194,214 |
|
| 232,559 |
|
| 280,323 |
| 656,262 | 267,070 | 389,192 | 167,578 | ||||||||
Office trailer |
| 9,169 |
|
| 3,557 |
|
| 5,612 |
|
| 3,817 |
| 8,459 | 5,185 | 3,274 | 4,268 | ||||||||
Vacuum trailer |
| 5,731 |
|
| - |
|
| 5,731 |
|
| - |
| 5,287 | 1,190 | 4,097 | 4,908 | ||||||||
Computer equipment |
| 6,753 |
|
| 4,169 |
|
| 2,584 |
|
| 3,186 |
| 6,230 | 4,865 | 1,365 | 1,862 | ||||||||
Computer software |
| 7,030 |
|
| 6,297 |
|
| 733 |
|
| 2,389 |
| 6,485 | 6,485 | - | - | ||||||||
Automotive equipment |
| 10,338 |
|
| 984 |
|
| 9,354 |
|
| 953 |
| 9,537 | 3,054 | 6,483 | 7,863 | ||||||||
Signage |
| 2,594 |
|
| 886 |
|
| 1,708 |
|
| 1,886 |
| 2,393 | 937 | 1,456 | 1,721 | ||||||||
$ | 5,596,221 |
| $ | 689,816 |
| $ | 4,906,405 |
| $ | 3,361,110 |
| $ | 5,517,688 | $ | 943,282 | $ | 4,574,406 | $ | 4,762,453 |
Included above are the long-lived assets acquired on the business acquisition described under note 6.
12 |
9. Operating Lease Right-of-Use Asset and Operating Lease Liability
The Company had one operating lease right-of-use asset and related operating lease liability and had recognized as such, effective January 1, 2019, based on the present value of lease payments over the lease term that expires on March 31, 2034, calculated to be $217,755 ($297,074 CAD). The Company used its estimated secured incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The operating lease right-of-use asset was being amortized on a straight-line basis over the lease term which expires March 31, 2034 and amortization expense is included under office and administration expense in the interim condensed consolidated statements of operations and comprehensive loss. The Company does not act as a lessor nor does it have any leases classified as financing leases.
The operating lease right-of-use asset was periodically reviewed for impairment losses. The Company used the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant and Equipment-Overall, to determine whether the operating lease right-of-use asset was impaired, and if so, the amount of the impairment loss to recognize.
The Company monitored for events or changes in circumstances that required a reassessment of its operating lease right-of-use asset. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding operating lease right-of-use asset.
SusGlobal Energy Corp. |
Notes to the Interim Condensed Consolidated Financial Statements |
|
(Expressed in United States Dollars) |
(unaudited) |
9. Operating Lease Right-of-Use Asset and Operating Lease Liability, (continued)
Effective May 24, 2019, the Company acquired the shares of 1684567., the company that owned the land upon which the right-of-use asset was situated. As a result, the Company is both the tenant and the landlord and as such, no longer recognizes an operating right-of-use asset and related operating lease liability.Related Party Transactions
For the six-monththree-month period ended June 30, 2019, the Company recorded $6,087 ($8,117 CAD (2018-$nil; $nil CAD) for the amortization of the operating lease right-of-use asset.
For the six-month period ended June 30, 2019,March 31, 2020, the Company incurred interest of $2,429$33,494 ($3,23945,000 CAD) (2018-(2019-$nil; $nil CAD) on the operating lease liability.
10. Related Party Transactions
During the six-month period ended June 30, 2019, the Company incurred $67,491 ($90,000 CAD) (2018-$70,443; $90,00033,849; $45,000 CAD) in management fees expense with Travellers International Inc. ("Travellers"), an Ontario company controlled by a director and the president of the Companyand chief executive officer (the "President""CEO"); $67,491$nil ($90,000nil CAD) (2018-(2019-$70,443; $90,00033,849; $45,000 CAD) in management fees expense with Landfill Gas Canada Ltd. ("LFGC"), an Ontario company controlled by a former director and former chief executive officer of the Company (the "CEO"); $26,996and $17,863 ($36,00024,000 CAD) (2018-(2019-$23,481; $30,00013,540; $18,000 CAD) in management fees expense with the Company's chief financial officer (the "CFO"); and $nil ($nil CAD) (2018-$9,391; $12,000 CAD) in management fees expense with the Company's vice-president of corporate development (the "VPCD"). As at June 30, 2019,March 31, 2020, unpaid remuneration and unpaid expenses in the amount of $94,086$304,324 ($123,133431,727 CAD) (December 31, 2018-2019-$48,691; $66,426324,303; $421,227 CAD) is included in accounts payable and $210,892$11,278 ($276,00016,000 CAD) (December 31, 2018-2019-$184,714; $251,99712,318; $16,000 CAD) is included in accrued liabilities.liabilities in the interim condensed consolidated balance sheets.
In addition, during the six-monththree-month period ended June 30, 2019,March 31, 2020, the Company incurred interest expense of $4,481$441 ($5,975592 CAD) (2018-(2019-$4,818; $6,1563,802; $5,055 CAD) on the outstanding loanloans from Travellers and $3,347$nil ($4,463nil CAD) (2018-(2019-$1,544; $1,9731,669; $2,219 CAD) on the outstanding loans from the directors. As at June 30, 2019,March 31, 2020, interest of $8,384$417 ($10,973592 CAD) (December 31, 2018-2019-$17,882; $24,395nil; $nil CAD) on thesethe loans outstanding to Travellers is included in accrued liabilities.liabilities in the interim condensed consolidated balance sheets.
DuringFor the six-monththree-month period ended June 30, 2019,March 31, 2020, the Company incurred $32,296$17,523 ($43,06723,543 CAD) (2018-(2019-$32,499; $41,52116,998; $22,598 CAD) in rent expense paid under a rental agreement towith Haute Inc. ("Haute"), an Ontario company controlled by the President.CEO.
For those independent directors providing their services throughout 2019, the Company accrued directors' compensation totaling $1,200, based on the subsequent issuance of 20,000 common shares of the Company to each of the five directors that are expected to be issued subsequent to March 31, 2020. And, for services provided in the three-month period ended March 31, 2020, $240 (2019-$2,200). The Companydirectors' compensation was priced based on the trading price of the shares at the close of business on March 31, 2020 and will be recorded based on the trading price of the shares, immediately prior to issuance. Also included in directors' compensation for its five independent directors for services provided for the six-monththree-month period ended June 30, 2019, includingMarch 31, 2020, are the audit committee chairman's fees, in the amount of $12,700 (2018-$1,565)$744 ($1,000 CAD) (2019 $752; $1,000 CAD). As at June 30, 2019, $24,454March 31, 2020, outstanding directors' compensation of $797 ($1,130 CAD) (December 31, 2018-2019-$52,000) of outstanding fees to the directors3,480; $4,520 CAD) is included in accounts payable and $2,145 (December 31, 2019-$3,650) is included in accrued liabilities.liabilities, in the interim condensed consolidated balance sheets.
Furthermore, for the three-month period ended March 31, 2020, the Company grantedrecognized management compensation expense of $nil (2019-$332,500), on the CEO 3,000,000vesting of restricted stock units ("RSU"RSUs"), under a consulting agreement effective granted in prior years to the CEO and the former chief executive officer. On January 1, 2017, determined to be valued at $990,000 based on private placement pricing at10, 2020, the time. On each of February 25, 2018 and April 2, 2019, 1,000,000CEO's remaining RSUs were exchanged into 1,000,000 common stock of the Company. The RSUs for the remaining installment are expected to vest on January 1, 2020, subject to meeting certain performance objectives. On May 17, 2018, at a meeting of the board of directors (the "Board"), approved an amendment to the President's consulting agreement, to include the granting of 3,000,000 RSUs to the President, determined to be valued at $3,000,000, based on private placement pricing at the time, on the same terms and conditions as those granted to the CEO. Immediately thereafter, 1,000,000 of the President's RSUs were exchanged into1,000,000 common stock of the Company. On January 8, 2019, 1,000,000 of the President's RSUs were exchanged into 1,000,000 common stockshares of the Company. Based on private placement pricing at the time of the granting of the RSUs, the common stockshares issued to the PresidentCEO on eachthe exchange of the 1,000,000 RSUs, was determined to be valued at $1,000,000. The RSUs for the remaining installment are expected to vest on January 1, 2020, subject to meeting certain performance objectives.
SusGlobal Energy Corp. |
Notes to the Interim Condensed Consolidated Financial Statements |
|
(Expressed in United States Dollars) |
(unaudited) |
10. Related Party TransactionsLong-Term Debt
Credit | Credit | Credit | Corporate | March 31, 2020 | December 31, 2019 | |||||||||||||
Facility | Facility | Facility | Term Loan | Total | Total | |||||||||||||
Long-Term Debt | $ | 707,053 | $ | 395,413 | $ | 34,391 | $ | 2,396,708 | $ | 3,533,565 | $ | 3,859,401 | ||||||
Current portion | (707,053 | ) | (395,413 | ) | (34,391 | ) | (2,396,708 | ) | (3,533,565 | ) | (3,859,401 | ) | ||||||
Long-term portion | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - |
The presentation above is based on the due on demand terms of the long-term debt.
On March 31, 2020, PACE and the Company reached an agreement with respect to the repayment of the outstanding balances owing to PACE. One of the credit facilities, in the amount of $34,391 ($48,788 CAD), (continued)
Forwas repaid in full on April 3, 2020, as noted below and the six-month period endedremaining credit facilities and the corporate term loan are due on or before September 30, 2020. On April 3, 2020, the Company provided PACE with funds, held in trust on March 31, 2020, to bring the remaining credit facilities and the corporate term loan current. The funds remaining, which were held in trust on March 31, 2020 are to be used to satisfy the principal and interest payments on the noted debt through July 2020. In addition, the letter of credit the Company has with PACE in favor of the Ministry of the Environment, Conservation and Parks (the "MECP"), will be renewed from the current expiry date of June 30, 2019,2020 to September 30, 2020, at the Company recognized management compensation expenseappropriate time. On April 3, 2020, the shares previously pledged as security to PACE, were released. However, the personal guarantee from the CEO and charge against the Company's premises lease remain unchanged. This long-term debt is considered to be in default as a result of $665,000 (2018-$665,000)defaults on the awardsconvertible promissory notes (see note 12). As a result, PACE may demand repayment before September 30, 2020.
Refer also to the President and the CEO, representing one-sixth of the total value of the awards of $3,990,000, based on private placement pricing at the time.going concern, note 2.
11. Long-Term DebtThe long-term debt was initially payable as noted below.
| Credit |
|
| Credit |
|
| Credit |
|
| Corporate |
|
| June 30, 2019 |
|
| December 31, 2018 |
| |
| Facility |
|
| Facility |
|
| Facility |
|
| Term |
|
| Total |
|
| Total |
| |
|
|
|
|
|
|
| Loan |
|
|
|
|
| ||||||
| (a) |
|
| (b) |
|
| (c) |
|
| (d) |
|
|
|
|
| |||
Long-Term Debt | $ | 769,210 |
| $ | 430,174 |
| $ | 37,480 |
| $ | 2,607,445 |
| $ | 3,844,309 |
| $ | 3,727,778 |
|
Current portion |
| (769,210 | ) |
| (430,174 | ) |
| (37,480 | ) |
| (2,607,445 | ) |
| (3,844,309 | ) |
| (3,727,778 | ) |
Long-term portion | $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
|
(a) | The credit facility bears interest at the PACE base rate of 7.00% plus 1.25% per annum, currently 8.25% |
|
|
(b) | The credit facility advanced on June 15, 2017, in the amount of |
|
|
(c) | The credit facility advanced on August 4, 2017, in the amount of |
|
|
(d) | The corporate term loan advanced on September 13, 2017, in the amount of |
| |
|
Repayments are as follows:
|
|
|
|
|
|
|
|
|
|
For the six-month period ended June 30, 2019, $155,522 ($207,390 CAD) (2018-$158,433; $202,419 CAD) in interest was incurred.
SusGlobal Energy Corp. |
Notes to the Interim Condensed Consolidated Financial Statements |
|
(Expressed in United States Dollars) |
(unaudited) |
12.10. Long-Term Debt, (continued)
For the three-month period ended March 31, 2020, $76,749 ($103,116 CAD) (2019-$77,619; $103,189 CAD) in interest was incurred. As at March 31, 2020 $187,066 ($265,379 CAD) (December 31, 2019-$124,926; $162,263 CAD) in accrued interest is included in accrued liabilities.
11. Obligations under Capital Lease
March 31, | December 31, | ||||||||||||||||||||||||||
|
|
|
|
| June 30, 2019 |
|
| December 31, 2018 |
| 2020 | 2019 | ||||||||||||||||
| (a) |
|
| (b) |
|
| Total |
|
| Total |
| (a) | (b) | (c) | Total | Total | |||||||||||
Obligations under Capital Lease | $ | 135,271 |
| $ | 127,838 |
| $ | 263,109 |
| $ | 288,708 |
| $ | 89,067 | $ | 90,343 | $ | 260,954 | $ | 440,364 | $ | 218,069 | |||||
Less: current portion |
| (50,747 | ) |
| (40,186 | ) |
| (90,933 | ) |
| (81,109 | ) | (89,067 | ) | (90,343 | ) | (260,954 | ) | (440,364 | ) | (218,069 | ) | |||||
Long-term portion | $ | 84,524 |
| $ | 87,652 |
| $ | 172,176 |
| $ | 207,599 |
| $ | - | $ | - | $ | - | $ | - | $ | - |
As a result of the convertible promissory notes defaults, these leases are also in default (see note 12). The lessor may demand full repayment of these obligations under capital lease. As a result, the obligations under capital lease have been presented as current liabilities. The original terms of the obligations under capital lease are noted below under paragraphs (a), (b) and (c). Refer also to going concern, note 2.
(a) | The lease agreement for certain equipment for the Company's organic composting facility at a cost of |
| |
(b) | The lease agreement for certain equipment for the Company's organic composting facility at a cost of (c) The lease agreement for certain equipment for the Company's organic composting facility at a cost of $274,664 ($389,650 CAD), is payable in monthly blended installments of principal and interest of $4,830 ($6,852 CAD), plus applicable harmonized sales taxes for a period of fifty-nine months plus an initial deposit of $13,710 ($19,450 CAD) plus applicable harmonized sales taxes and an option to purchase the equipment for a final payment of a nominal amount of $70 ($100 CAD) plus applicable harmonized sales taxes on February 27, 2025. The leasing agreement bears interest at the rate of 3.59% annually, compounded monthly, due February 27, 2025. |
The lease liabilities are secured by the equipment under capital lease as described in note 8.
Minimum lease payments as per the original terms of the obligations under capital lease are as follows:
In the six-month period ending December 31, 2019 | $ | 54,702 |
| |||
In the year ending December 31, 2020 |
| 100,478 |
| |||
In the nine-month period ending December 31, 2020 | $ | 117,823 | ||||
In the year ending December 31, 2021 |
| 108,944 |
| 158,466 | ||
In the year ending December 31, 2022 |
| 22,769 |
| 78,968 | ||
In the year ending December 31, 2023 | 57,963 | |||||
In the year ending December 31, 2024 | 57,963 | |||||
In the year ending December 31, 2025 | 4,900 | |||||
| 286,893 |
| 476,083 | |||
Less: imputed interest |
| (23,784 | ) | (35,719 | ) | |
Total | $ | 263,109 |
| $ | 440,364 |
For the six-monththree-month period ended June 30, 2019, $8,555March 31, 2020, $3,089 ($11,4084,150 CAD) (2018-(2019-$9,738; $12,441 CAD)3,670; $4,879 CAD in interest was incurred.
13. Convertible Promissory Notes
|
| June 30, 2019 |
|
| December 31, 2018 |
| |
|
|
|
|
| |||
(a) | Convertible promissory notes-January 28, 2019 (net of unamortized financing costs of $20,329 (2018- $nil)) | $ | 317,171 |
| $ | - |
|
(b) | Convertible promissory notes-March 7 and March 8, 2019 (net of |
| 722,115 |
|
| - |
|
(c) | Convertible promissory note-May 23, 2019 (net of unamortized financing costs of $40,987 (2018-$nil)) |
| 209,013 |
|
| - |
|
| $ | 1,248,299 |
| $ | - |
|
SusGlobal Energy Corp. |
Notes to the Interim Condensed Consolidated Financial Statements |
|
(Expressed in United States Dollars) |
(unaudited) |
13.12. Convertible Promissory Notes, (continued)
March 31, 2020 | December 31, 2019 | ||||||
(a) | Convertible promissory notes-January 28, 2019 (net of unamortized financing costs of $nil (2019- $1,918)) | $ | 258,073 | $ | 176,964 | ||
(b) | Convertible promissory notes-March 7 and March 8, 2019 (net of unamortized financing costs of $nil) (2019- $25,625)) | 712,000 | 724,375 | ||||
(c) | Convertible promissory note-May 23, 2019 (net of unamortized financing costs of $6,643 (2019-$17,924)) | 213,357 | 217,076 | ||||
(d) | Convertible promissory note-July 19, 2019 (net of unamortized financing costs of $9,576 (2019-$17,411)) | 160,424 | 152,589 | ||||
(e) | Convertible promissory note-October 17, 2019 (net of accumulated financing costs of $14,181 (2019-$20,975) | 141,819 | 135,025 | ||||
$ | 1,485,673 | $ | 1,406,029 |
(a)
| On January 28, 2019, the Company entered into securities purchase agreements (the "January 2019 SPAs") with three investors (the "January 2019 Investors") pursuant to which the Company issued to the January 2019 Investors 12% unsecured convertible promissory notes (the "January 2019 Investor Notes") in the aggregate principal amount of $337,500, with such principal and the interest thereon convertible into shares of the Company's common stock (the "Common Stock") at the January 2019 Investors' option. Although the January 2019 SPAs are dated January 28, 2019 (the "January 2019 Effective Date"), they became effective upon the receipt in cash of the issue price by the January 2019 Investors. |
The amounts of $102,500, $100,000, and $100,000, totaling $302,500, represented the proceeds to the Company, net of transaction-related expenses, for the January 2019 Notes from the January 2019 Investors and were received in cash from February 1 through February 4, 2019. | |
The maturity date of each of the January 2019 Investor Notes is January 28, 2020 (the "January 2019 Maturity Dates"). The Notes bear interest at a rate of twelve percent (12%) per annum (the "January 2019 Interest Rate"), which interest shall be paid by the Company to the January 2019 Investors in Common Stock at any time the January 2019 Investors send a notice of conversion to the Company. The January 2019 Investors are entitled to, at their option, convert all or any amount of the principal face amount and any accrued but unpaid interest of the January 2019 Notes into Common Stock, at any time, at a conversion price for each share of Common Stock equal to 65% multiplied by the lowest trading price (as defined in the January 2019 Notes) of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange upon which the Company's shares are traded during the twenty (20) consecutive Trading Day period immediately preceding (i) the January 2019 Effective Date; or (ii) the conversion date. | |
The Company has reserved a minimum of eight (8) times the number of its authorized and unissued Common Stock (the "January 2019 Reserved Amounts"), free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of the January 2019 Notes. Upon full conversion of the January 2019 Investor Notes, any shares remaining in such reserve shall be cancelled. The Company increases the January 2019 Reserved Amount in accordance with the Company's obligations under the January 2019 Investor Notes. Since the January 2019 Investor Notes were not repaid by their January 28, 2020 maturity date, they are in default and the outstanding balance (principal plus accrued interest) of each of the January 2019 Investor Notes was increased by 50% and increased by a further $15,000 (together the "Default Amounts") along with the interest rate increasing from 12% to 24% annually. The January 2019 Investors continue to have the option to require the Company to immediately issue, in lieu of the Default Amount, the number of shares of common stock of the Company equal to the Default Amount divided by the conversion price then in effect. During the three-month period ended March 31, 2020, the January 2019 Investors converted a total of $17,000 of their January 2019 Investor Notes. |
SusGlobal Energy Corp. | ||
| ||
| ||
| ||
|
13.
12. Convertible Promissory Notes, (continued)