UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~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,~~June 30, 2023

[ ] 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 [ ]

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 [ ]

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. [ ]

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 15,~~August 14, 2023, was ~~120,479,780~~122,684,791 shares.

SusGlobal Energy Corp.

INDEX TO FORM 10-Q

For the ~~Three-Month~~Three and Six-Month Periods Ended ~~March 31,~~June 30, 2023 and 2022

SUSGLOBAL ENERGY CORP.

~~SUSG~~~~LOBAL ENERGY CORP.~~

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~March 31,~~June 30, 2023 and 2022

(Expressed in United States Dollars)

(unaudited)

CONTENTS

Interim Condensed Consolidated Balance Sheets	5
Interim Condensed Consolidated Statements of Operations and Comprehensive Loss	6
Interim Condensed Consolidated Statements of Stockholders' Deficiency	7
Interim Condensed Consolidated Statements of Cash Flows	8
Notes to the Interim Condensed Consolidated Financial Statements	~~9-24~~9-25

SusGlobal Energy Corp.

Interim Condensed Consolidated Balance Sheets

As at ~~March 31,~~June 30, 2023 and December 31, 2022

(Expressed in United States Dollars)

(unaudited)

March 31, December 31,
2023 2022
ASSETS
Current Assets
Cash $ 5,920 $ 42,900
Funds held in trust (note 6) 923,625 -
Trade receivables 81,469 69,193
Government remittances receivable 20,503 6,983
Inventory 60,959 58,695
Prepaid expenses and deposits 710,540 580,852
Total Current Assets 1,803,016 758,623

Long-lived Assets, net (note 7) 9,005,949 9,107,152
Long-Term Assets 9,005,949 9,107,152
Total Assets $ 10,808,965 $ 9,865,775
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Accounts payable (note 8) $ 3,685,170 $ 3,475,691
Government remittances payable 394,508 371,587
Accrued liabilities (notes 8, 9, 10 and 13) 1,906,094 1,781,258
Current portion of long-term debt (note 9) 9,907,386 8,816,931
Current portion of obligations under capital lease (note 10) 60,710 57,275
Convertible promissory notes (note 11) 7,563,466 7,796,433
Loans payable to related parties (note 13) 79,945 40,000
Total Current Liabilities 23,597,279 22,339,175
Long-term debt (note 9) 42,948 52,495
Obligations under capital lease (note 10) 47,008 64,483
Total Long-term Liabilities 89,956 116,978
Total Liabilities 23,687,235 22,456,153

Stockholders' Deficiency
Preferred stock, $.0001 par value, 10,000,000 authorized, none issued and outstanding Common stock, $.0001 par value, 150,000,000 authorized, 118,618,245 (2022- 113,438,832) shares issued and outstanding (note 14) 11,866 11,348
Additional paid-in capital 18,058,914 17,152,018
Shares to be issued 60,100 213,600
Accumulated deficit (31,380,369 ) (30,345,197 )
Accumulated other comprehensive loss 371,219 377,853

Stockholders' deficiency (12,878,270 ) (12,590,378 )

Total Liabilities and Stockholders' Deficiency $ 10,808,965 $ 9,865,775

Going concern (note 2)
Commitments (note 15)
Subsequent events (note 19)

		June 30,			December 31,
		2023			2022
ASSETS
Current Assets
Cash	$	20,685		$	42,900
Funds held in trust (note 6)		944,125			-
Trade receivables		71,152			69,193
Government remittances receivable		6,874			6,983
Inventory		64,578			58,695
Prepaid expenses and deposits		697,883			580,852
Total Current Assets		1,805,297			758,623

Long-lived Assets, net (note 7)		9,098,483			9,107,152
Long-Term Assets		9,098,483			9,107,152
Total Assets	$	10,903,780		$	9,865,775
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Accounts payable (note 8)	$	3,855,332		$	3,475,691
Government remittances payable		433,884			371,587
Accrued liabilities (notes 8, 9, 10 and 13)		1,956,555			1,781,258
Current portion of long-term debt (note 9)		10,154,734			8,816,931
Current portion of obligations under capital lease (note 10)		64,528			57,275
Convertible promissory notes (note 11)		9,639,990			7,796,433
Loans payable to related parties (note 13)		80,855			40,000
Total Current Liabilities		26,185,878			22,339,175
Long-term debt (note 9)		33,978			52,495
Obligations under capital lease (note 10)		35,874			64,483
Total Long-term Liabilities		69,852			116,978
Total Liabilities		26,255,730			22,456,153

Stockholders' Deficiency
Preferred stock, $.0001 par value, 10,000,000 authorized, none issued and outstanding Common stock, $.0001 par value, 150,000,000 authorized, 121,327,800 (2022- 113,438,832) shares issued and outstanding (note 14)		12,137			11,348
Additional paid-in capital		18,731,538			17,152,018
Shares to be issued		188,348			213,600
Accumulated deficit		(34,327,147	)		(30,345,197	)
Accumulated other comprehensive income		43,174			377,853

Stockholders' deficiency		(15,351,950	)		(12,590,378	)

Total Liabilities and Stockholders' Deficiency	$	10,903,780		$	9,865,775

Going concern (note 2)
Commitments (note 15)
Subsequent events (note 19)

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

SusGlobal Energy Corp.

Interim Condensed Consolidated Statements of Operations and Comprehensive Loss

For the ~~three-month~~three and six-month periods ended ~~March 31,~~June 30, 2023 and 2022

(Expressed in United States Dollars)

(unaudited)

For the three-month periods
ended
March 31,
2023 March 31,
2022
Revenue $ 164,687 $ 144,470

Cost of Sales
Opening inventory 58,695 20,582
Depreciation 108,372 116,203
Direct wages and benefits 40,852 52,088
Equipment rental, delivery, fuel and repairs and maintenance 21,424 170,188
Utilities 12,937 38,812
Outside contractors - 24,568
242,280 422,441
Less: closing inventory (60,959 ) (16,806 )
Total cost of sales 181,321 405,635

Gross (loss) (16,634 ) (261,165 )

Operating expenses
Management compensation-stock- based
compensation (notes 8 and 14) 57,600 60,113
Management compensation-fees (note 8) 116,456 118,469
Marketing 10,951 376,488
Professional fees 116,688 261,652
Interest expense (notes 8, 9, 10 and 13) 219,675 191,243
Office and administration (note 8) 52,890 60,577
Rent and occupancy (note 8) 50,193 50,925
Insurance 13,543 28,838
Filing fees 12,457 54,175
Amortization of financing costs 18,824 33,532
Directors' compensation (note 8) 15,969 14,809
Stock-based compensation (note 14) 334,291 130,512
Repairs and maintenance 19,687 2,329
Foreign exchange (income) (7,873 ) (77,749 )
Total operating expenses 1,031,351 1,305,913

Net loss from operating activities (1,047,985 ) (1,567,078 )
Other income (expense) (note 16) 12,813 (1,296,148 )
Net loss (1,035,172 ) (2,863,226 )
Other comprehensive (loss)
Foreign exchange (loss) (6,634 ) (142,524 )

Comprehensive loss $ (1,041,806 ) $ (3,005,750 )

Net loss per share-basic and diluted $ (0.01 ) $ (0.03 )

Weighted average number of common shares outstanding- basic and diluted 117,722,279 95,990,936

~~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~~

~~For the three-month periods ended March 31, 2023 and 2022~~

~~(Expressed in United States Dollars)~~

~~(unaudited)~~

Number of
Shares Common
Shares Additional
Paid- in
Capital Shares
to be
Issued Accumulated
Deficit Accumulated
Other
Comprehensive
Income (Loss) Stockholders'
Deficiency

Balance-December 31, 2022 113,438,832 $ 11,348 $ 17,152,018 $ 213,600 $ (30,345,197 ) $ 377,853 $ (12,590,378 )
Shares issued for proceeds previously received 500,000 50 153,450 (153,500 ) - - -
Shares issued to officers 3,100,000 310 446,090 - - - 446,400
Shares issued to employee 20,000 2 2,878 2,880
Shares issued to director 100,000 10 20,990 21,000
Shares issued on conversion of debt to equity 1,049,413 105 220,049 - - - 220,154
Shares issued for professional services 410,000 41 63,439 - - - 63,480
Other comprehensive loss - - - - - (6,634 ) (6,634 )
Net loss - - - - (1,035,172 ) - (1,035,172 )
Balance-March 31, 2023 118,618,245 $ 11,866 $ 18,058,914 $ 60,100 $ (31,380,369 ) $ 371,219 $ (12,878,270 )

Balance-December 31, 2021 92,983,547 9,302 11,272,599 59,640 (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 )

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

~~SusGlobal Energy Corp.~~

~~Interim Condensed Consolidated Statements of Cash Flows~~

~~For the three-month periods ended March 31, 2023 and 2022~~

~~(Expressed in United States Dollars)~~

~~(unaudited)~~

For the three-month period
ended
March 31, 2023 For the three-month period
ended
March 31, 2022
Cash flows from operating activities
Net loss $ (1,035,172 ) $ (2,863,226 )
Adjustments for:
Depreciation 108,678 116,529
Amortization of financing fees 18,824 33,532
Stock-based compensation 391,891 190,625
Loss on conversion of convertible promissory notes 20,513 -
(Gain) loss on revaluation of convertible promissory notes (33,326 ) 1,296,148
Changes in non-cash working capital:
Trade receivables (12,227 ) 12,983
Government remittances receivable (13,524 ) (67,671 )
Inventory (2,218 ) 4,022
Prepaid expenses and deposits (186 ) (295,664 )
Accounts payable 206,655 800,629
Government remittances payable 22,634 19,447
Accrued liabilities 123,472 169,619
Net cash used in operating activities (203,986 ) (583,027 )
Cash flows from investing activities
Adjustments of long-lived assets - (736,421 )
Net cash (used in) investing activities - (736,421 )
Cash flows from financing activities
Advances of long-term debt 1,109,100 -
Repayment of long-term debt (9,134 ) (45,647 )
Financing fee on long-term debt (44,364 ) -
Repayments of obligations under capital lease (14,148 ) (17,502 )
Advances on convertible promissory notes - 1,425,000
Repayment of convertible promissory notes. - (42,660 )
Advances of loans payable to related parties 39,939 28,828
Repayment of loans payable to related parties - (28,828 )
Proceeds on private placement - 16,560
Net cash provided by financing activities 1,081,393 1,335,751
Effect of exchange rate on cash 9,238 (16,278 )
Increase in cash 886,645 25
Cash and cash equivalents-beginning of period 42,900 36,033

Cash and cash equivalents and restricted cash-end of period $ 929,545 $ 36,058
Supplemental Cash Flow Disclosure:
Interest paid $ 105,351 $ 207,548
Supplemental Non-Cash Disclosure:
Common stock issued at fair value for conversion of debt $ 220,154 $ -
Shares issued for prepaid services $ 141,869 $ -

		For the three-month periods ended						For the Six-month periods ended
		June 30, 2023			June 30,2022			June 30, 2023			June 30, 2022

Revenue	$	153,487		$	110,143		$	318,174		$	254,613

Cost of Sales
Opening inventory		60,959			16,806			58,695			20,582
Depreciation (note 7)		105,567			115,262			213,939			231,465
Direct wages and benefits		34,673			53,408			75,525			105,496
Equipment rental, delivery, fuel and repairs and maintenance		19,422			(59,035	)		40,846			111,153
Utilities		43,920			4,358			56,857			43,170
Outside contractors		-			915			-			25,483
		264,541			131,714			445,862			537,349
Less: closing inventory		(64,578	)		(19,555	)		(64,578	)		(19,555	)
Total cost of sales		199,963			112,159			381,284			517,794

Gross loss		(46,476	)		(2,016	)		(63,110	)		(263,181	)
Operating expenses
Management compensation-stock-based
compensation (notes 8 and 14)		57,600			60,113			115,200			120,226
Management compensation-fees (note 8)		117,305			117,266			233,761			235,735
Marketing		110,224			627,721			121,175			1,004,209
Professional fees		66,105			360,433			182,793			622,085
Interest expense (notes 8, 9, 10 and 13)		139,386			189,708			359,061			380,951
Office and administration (note 7)		66,663			131,239			119,553			191,816
Rent and occupancy (note 8)		52,549			65,666			102,742			116,591
Insurance		8,650			34,599			22,193			63,437
Filing fees		10,833			7,368			23,290			61,543
Amortization of financing costs		26,571			33,632			45,395			67,164
Directors' compensation (note 8)		18,611			14,689			34,580			29,498
Stock-based compensation (note 14)		196,134			166,275			530,425			296,787
Repairs and maintenance		1,934			(13,488	)		21,621			(11,159	)
Foreign exchange (income) loss		(239,570	)		217,929			(247,443	)		140,180
Total operating expenses		632,995			2,013,150			1,664,346			3,319,063
Net loss from operating activities		(679,471	)		(2,015,166	)		(1,727,456	)		(3,582,244	)
Other expense (note 16)		(2,267,307	)		(213,503	)		(2,254,494	)		(1,509,651	)
Net loss		(2,946,778	)		(2,228,669	)		(3,981,950	)		(5,091,895	)
Other comprehensive loss
Foreign exchange (loss) income		(328,045	)		309,853			(334,679	)		167,329

Comprehensive loss	$	(3,274,823	)	$	(1,918,816	)	$	(4,316,629	)	$	(4,924,566	)
Net loss per share-basic and diluted	$	(0.02	)	$	(0.03	)	$	(0.03	)	$	(0.06	)
Weighted average number of common shares outstanding- basic and diluted		120,395,741			99,775,157			119,177,114			97,868,636

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

For the three and six-month periods ended June 30, 2023 and 2022

(Expressed in United States Dollars)

(unaudited)

	Number of Shares		Common Shares		Additional Paid- in Capital		Shares to be Issued			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Stockholders' Deficiency

Balance-December 31, 2022	113,438,832	$	11,348	$	17,152,018	$	213,600		$	(30,345,197	)	$	377,853		$	(12,590,378	)
Shares issued for proceeds previously received	500,000		50		153,450		(153,500	)		-			-			-
Shares issued to officers	3,100,000		310		446,090		-			-			-			446,400
Shares issued to employee	20,000		2		2,878											2,880
Shares issued to director	100,000		10		20,990											21,000
Shares issued on conversion of debt to equity	1,049,413		105		220,049		-			-			-			220,154
Shares issued for professional services	410,000		41		63,439		-			-			-			63,480
Other comprehensive loss	-		-		-		-			-			(6,634	)		(6,634	)
Net loss	-		-		-		-			(1,035,172	)		-			(1,035,172	)
Balance-March 31, 2023	118,618,245	$	11,866	$	18,058,914	$	60,100		$	(31,380,369	)	$	371,219		$	(12,878,270	)
Shares issued on conversion of debt	601,296		60		153,786		-			-			-			153,846
Shares issued on conversion of related party debt	1,167,371		117		278,728		-			-			-			278,845
Shares issued on private placement	310,888		31		101,008		-			-			-			101,039
Shares issued for professional services	630,000		63		139,102		-			-			-			139,165
Shares yet to be issued on private placement received	-		-		-		128,248			-						128,248
Other comprehensive loss	-		-		-		-			-			(328,045	)		(328,045	)
Net Loss	-		-		-		-			(2,946,778	)		-			(2,946,778	)
Balance-June 30, 2023	121,327,800		12,137		18,731,538		188,348			(34,327,147	)		43,174			(15,351,950	)

Balance-December 31, 2021	92,983,547		9,302		11,272,599		59,640			(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	)
Shares issued on private placement	1,404,041		140		427,860		-			-			-			428,000
Shares issued on issuance of debt on extinguishment of existing debt	3,975,211		398		1,590,847		-			-			-			1,591,245
Shares yet to be issued	-		-		-		20,000			-			-			20,000
Shares yet to be issued on extinguishment of existing debt	-		-		-		61,470			-			-			61,470
Other comprehensive loss	-		-		-		-			-			309,853			309,853
Net Loss	-		-		-		-			(2,228,669	)		-			(2,228,669	)
Balance-June 30, 2022	102,587,799		10,263		14,286,645		121,570			(23,426,544	)		(168,631	)		(9,176,697	)

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

SusGlobal Energy Corp.

Interim Condensed Consolidated Statements of Cash Flows

For the six-month periods ended June 30, 2023 and 2022

(Expressed in United States Dollars)

(unaudited)

For the six-month
period ended
June 30, 2023 For the six-month
period ended
June 30, 2022
Cash flows from operating activities
Net loss $ (3,981,950 ) $ (5,091,895 )
Adjustments for:
Depreciation 214,553 231,789
Amortization of financing fees 45,395 67,164
Stock-based compensation 645,625 417,013
Loss on conversion of convertible promissory notes 74,359 -
Loss on revaluation of convertible promissory notes 2,180,135 5,784,471
Gain on extinguishment of convertible promissory notes - (4,274,820 )
Changes in non-cash working capital:
Trade receivables (360 ) 11,059
Government remittances receivable 265 (172,597 )
Inventory (4,453 ) 702
Prepaid expenses and deposits (107,408 ) (174,067 )
Accounts payable 294,353 2,528,529
Government remittances payable 52,802 40,070
Accrued liabilities 131,935 16,266
Net cash used in operating activities (454,749 ) (616,316 )
Cash flows from investing activities
Purchase of long-lived assets - (1,892,767 )
Net cash (used in) investing activities - (1,892,767 )
Cash flows from financing activities
Advances of long-term debt 1,113,150 -
Repayment of long-term debt (18.447 ) (52,842 )
Financing fee on long-term debt (44,526 ) -
Repayments of obligations under capital lease (23,738 ) (61,093 )
Advances on convertible promissory notes - 2,080,000
Repayment of convertible promissory notes. - (85,880 )
Advances of loans payable to related parties 388,787 69,257
Repayment of loans payable to related parties (70,775 ) (28,711 )
Proceeds on private placement 101,039 444,560
Subscription payable proceeds 128,248 -
Net cash provided by financing activities 1,573,738 2,365,291
Effect of exchange rate on cash (197,079 ) 108,037
Increase (decrease) in cash 921,910 (35,755 )
Cash and cash equivalents-beginning of period 42,900 36,033
Cash and cash equivalents and restricted cash-end of period $ 964,810 $ 278
Supplemental Cash Flow Disclosure:
Interest paid $ 244,917 $ 319,316
Supplemental Non-Cash Disclosure:
Common stock issued at fair value for conversion of debt $ 374,000 $ -
Common stock issued at fair value for conversion of related party debt 278,845 -
Shares issued for prepaid services $ 27,300 $
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
8
SusGlobal Energy Corp.

Notes to the Interim Condensed Consolidated Financial Statements

~~March 31,~~June 30, 2023 and 2022

(Expressed in United States Dollars)

(unaudited)

1. Nature of Business and Basis of Presentation

SusGlobal Energy Corp. ("SusGlobal") was formed by articles of amalgamation on December 3, 2014, in the Province of Ontario, Canada and its executive office is in Toronto, Ontario, Canada. SusGlobal, a company in the start-up stages and Commandcredit Corp. ("Commandcredit"), an inactive Canadian public company, amalgamated to continue business under the name of SusGlobal Energy Corp.

On May 23, 2017, SusGlobal filed an Application for Authorization to continue in another Jurisdiction with the Ministry of Government Services in Ontario and a certificate of corporate domestication and certificate of incorporation with the Secretary of State of the State of Delaware under which it changed its jurisdiction of incorporation from Ontario to the State of Delaware (the "Domestication"). In connection with the Domestication each of the currently issued and outstanding common shares were automatically converted on a one-for-one basis into common shares compliant with the laws of the state of Delaware (the "Shares"). As a result of the Domestication, pursuant to Section 388 of the General Corporation Law of the State of Delaware (the "DGCL"), SusGlobal continued its existence under the DGCL as a corporation incorporated in the State of Delaware. The business, assets and liabilities of SusGlobal and its subsidiaries on a consolidated basis, as well as its principal location and fiscal year, were the same immediately after the Domestication as they were immediately prior to the Domestication. SusGlobal filed a Registration Statement on Form S-4 to register the Shares and this registration statement was declared effective by the Securities and Exchange Commission on May 12, 2017.

On December 11, 2018, the Company began trading on the OTCQB venture market 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"), 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 ~~$1,035,172~~$3,981,950 (2022-$~~2,863,226)~~5,091,895) for the ~~three~~six months ended ~~March 31,~~June 30, 2023, and as at that date had a working capital deficit of ~~$21,794,263~~$24,380,581 (December 31, 2022-$21,580,552) and an accumulated deficit of ~~$31,380,369~~$34,327,147 (December 31, 2022-$30,345,197) and expects to incur further losses in the development of its business.

On February 18, 2021, PACE Savings and Credit Union Limited ("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. Similarly, the Company paid all arrears to PACE on March 15, 2022, and PACE allowed the Company to continue payments to the end of the terms of each obligation, September 2022. On March 28, 2023, the Company and PACE negotiated a full and final mutual release of all obligations owing to PACE. Management continues discussions with equity investors to raise the necessary funds to repay other creditors. The Company was successful in extending the repayment date on a 1st mortgage which had a maturity date of September 1, 2022, to December 1, 2023. One of the Company's significant customer contracts expired at the end of December 31, 2020, and one customer contract was terminated by the Company in September of 2021. 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 prior to the December 1, 2023 maturity date of the 1st mortgage or prior to the maturity dates of debt held by other creditors.

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
~~March 31,~~June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

2. Going Concern, (continued)

These factors cast substantial doubt as to the Company's ability to continue as a going concern, which is dependent upon its ability to obtain the necessary financing to further the development of its business, satisfy its obligations to its creditors, and upon achieving profitable operations through revenue growth. There is no assurance of funding being available or available on acceptable terms. Realization values may be substantially different from carrying values as shown.

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, 2022, and 2021 and their accompanying notes.

4. Recently Issued Accounting Pronouncements

Accounting Pronouncements Recently Adopted

The following section provides a description of new accounting pronouncements ("Accounting Standard Update" or "ASU") issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"), which requires enhanced disclosure of certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty while eliminating certain current recognition and measurement accounting guidance. This ASU also requires the disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases. ASU No. 2022-02 became effective for the Company's annual and interim periods beginning on January 1, 2023. The Company adopted this ASU on January 1, 2023. As a result, the adoption of ASU 2022-02 did not have any impact on the opening balances in the interim condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU-2016-13"). ASU 2016-13 affects loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. ASU 2016-13 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company adopted this ASU on January 1, 2023. As a result, the adoption of ASU 2016-13 did not have any impact on the opening balances in the interim condensed consolidated financial statements.

There were no new accounting pronouncements issued and not yet adopted that were expected to have a material impact on the Company's interim condensed consolidated financial position or results of operations in the current or future periods.

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
~~March 31,~~June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

5. Financial Instruments

The carrying value of the Company's financial instruments, such as cash, funds held in trust, 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 also approximates fair value due to their market interest rate.

Interest, Credit and Concentration Risk

Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk.

The Company is exposed to significant interest rate risk on the current portion of its long-term debt of ~~$3,874,883~~$3,946,267 (C$~~5,244,124)~~5,224,768) (December 31,2022-$~~7,837,423;~~7,285,747; C$~~9,793,106)~~9,868,274).

Credit risk is the risk of loss associated with a counterparty's inability to perform its payment obligations. As at ~~March 31,~~June 30, 2023, the Company's credit risk is primarily attributable to cash and trade receivables. As at ~~March 31,~~June 30, 2023, 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~~is inherent in accounts receivable. As at ~~March 31,~~June 30, 2023, the allowance for doubtful accounts was $nil (C$nil) (December 31, 2022-$nil; C$nil).

As at ~~March 31,~~June 30, 2023, the Company is exposed to concentration risk as it had ~~five~~four customers (December 31, 2022-four customers) representing greater than 5% of total trade receivables and ~~five~~four customers (December 31, 2022-three customers) represented ~~94%~~91% (December 31, 2022-90%) 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 ~~88% (14%~~90% (16%, 35% and 39%) ~~(March 31, 2022-67%~~(June 30, 2022-71%; ~~22%~~21% and ~~45%~~50%) 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 considering all its options to repay its creditors. Refer also to going concern, note 2.

The Company actively monitors its liquidity to ensure that its cash flows and working capital are adequate to support its financial obligations and the Company's capital programs. In order to continue operations, the Company will need to raise capital, and complete the refinancing of its real property and organic waste processing and composting facility. 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,~~June 30, 2023, ~~$181,345~~$258,825 (December 31, 2022-$~~88,843)~~80,843) of the Company's net monetary liabilities were denominated in $. The Company has not entered into any hedging transactions to reduce the exposure to currency risk.

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
~~March 31,~~June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

6. Funds Held in Trust

The Funds held in trust at ~~March 31,~~June 30, 2023, in the amount of ~~$923,625~~$944,125 (C$1,250,000), relate to a full and final mutual release of all obligations owing to PACE, including accrued interest, in exchange for an amount of ~~$923,625~~$944,125 (C$1,250,000). The funds are held in escrow by the Company's Canadian legal counsel. The funds will be released to PACE once the letter of credit, in the amount of ~~$204,550~~$209,090 (C$276,831) is released by the Ministry of the Environment, Conservation and Parks (the "MECP") to ~~PACE.~~PACE and the Company replaces with the new letter of credit in the amount of $481,607 (C$637,637). Immediately prior to this full and final mutual release, the amounts owing to PACE, included in the interim condensed consolidated balance sheets, include ~~$3,449,388~~$3,525,947 (C$4,668,274) disclosed under long-term debt and accrued interest of ~~$391,414~~$400,010 (C$529,725) disclosed under accrued liabilities. The Company raised the funds by securing a 2nd. mortgage on March 1, 2023, in the amount of ~~$1,108,350~~$1,132,950 (C$1,500,000) prior to disbursements of ~~$184,725~~$188,825 (C$250,000), on its Belleville, Ontario Canada property.

7. Long-lived Assets, net

March 31,

December 31,

June 30,

December 31,

2023

2022

2023

2022

Cost

Accumulated
depreciation

Net book value

Net book value

Cost

Accumulated
depreciation

Net book value

Net book value

Land

3,166,512

3,163,941

3,236,794

3,163,941

Property under construction

3,551,532

3,548,648

3,630,358

3,548,648

Composting buildings

2,240,433

737,135

1,503,298

1,535,656

2,290,159

787,849

1,502,310

1,535,656

Gore cover system

1,040,388

551,674

488,714

514,306

1,063,479

590,506

472,973

514,306

Driveway and paving

342,480

151,833

190,647

197,336

350,082

162,204

187,878

197,336

Machinery and equipment

107,187

87,167

20,020

28,036

109,566

97,319

12,247

28,036

Equipment under capital lease

287,912

269,900

18,012

39,574

294,303

39,574

Signage

6,107

3,963

2,144

2,447

6,243

4,363

1,880

2,447

Automotive equipment

162,675

97,605

65,070

77,208

166,286

112,243

54,043

77,208

10,905,226

1,899,277

9,005,949

9,107,152

11,147,270

2,048,787

9,098,483

9,107,152

Depreciation for the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, is disclosed in cost of sales in the amount of ~~$108,372~~$105,567 (C$~~146,568)~~141,721) and $213,939 (C$288,289) (2022-$~~116,203;~~115,262; C$~~147,130)~~147,130 and $231,465; C$294,260) respectively and in office and administration in the amount of ~~$306~~$308 (C$414) and $614 (C$827) (2022-$nil; C$nil and $326; C$413) ~~(2022-$326; C$413),~~respectively, in the interim condensed consolidated statements of operations and comprehensive loss.

8. Related Party Transactions

For ~~three-month period~~three and six-month periods ended ~~March 31, 2022,~~June 30, 2023, the Company incurred ~~$88,728~~$89,376 (C$120,000) and $178,104 (C$240,000) (2022-$~~94,776;~~94,008; C$~~120,000),~~120,000 and $188,784; C$240,000) respectively, 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 ~~$27,728~~$27,930 (C$37,500) and $55,658 (C$75,000) (2022-$~~23,693;~~23,503; C$~~30,000)~~30,000 and $47,196; C$60,000) respectively, in management fees expense with the Company's chief financial officer (the "CFO"). As at ~~March 31,~~June 30, 2023, unpaid remuneration and unpaid expenses in the amount of ~~$252,983~~$350,358 (C$~~342,377)~~463,865) (December 31, 2022-$161,790; C$219,138) is included in accounts payable and ~~$50,933~~$81,022 (C$~~69,012)~~107,271) (December 31, 2022-$22,705; C$30,753) is included in accrued liabilities in the interim condensed consolidated balance sheets.

~~SusGlobal Energy Corp.~~
~~Notes~~During the three and six-month periods ended June 30, 2023, the CEO converted outstanding loans of $278,845 (C$372,483) and $278,845 (C$372,483) (2022-$nil; C$nil and $nil; C$nil) respectively, for 1,167,371 (2022-nil) common shares of the Company, at prices ranging from $0.2076 to $0.3250 based on the ~~Interim Condensed Consolidated Financial Statements~~
~~March 31, 2023 and 2022~~
~~(Expressed in United States Dollars)~~
~~(unaudited)~~closing trading price on the day prior to each conversion.

~~8. Related Party Transactions~~~~, (continued)~~

For the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, the Company incurred ~~$24,334~~$26,504 (C$~~32,911)~~35,594) and $50,838 (C$68,505) (2022-$~~23,506;~~38,296; C$~~29,762)~~48,806 and $61,802; C$78,568) respectively, in rent expense paid under a lease ~~agreement~~arrangement with Haute Inc. ("Haute"), an Ontario company controlled by the CEO.

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

8. Related Party Transactions, (continued)

In addition, during the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, the Company paid the CFO interest of $~~nil~~$nil (C$~~nil~~)nil) and $nil (C$nil) (2022-$~~504;~~nil; C$nil and $502; C$638) respectively, on loans totaling $nil (C$nil) (2022-$29,211 (C$36,000) respectively, provided to the Company and repaid during the ~~prior period.~~three month period ended March 31, 2022.

For the independent directors, the Company recorded directors' compensation during the three ~~months~~and six-month periods ended ~~March 31,~~June 30, 2023 of ~~$15,969~~$18,611 (C$~~21,597)~~25,000) and $34,580 (C$46,597) (2022-$~~14,809;~~14,689; C$~~18,750).~~18,750 and $29,498; C$37,500) respectively. In addition, on February 18, 2023 a new independent director was appointed and he was awarded 100,000 common shares of the Company on March 1, 2023 valued at $21,000 based on the closing trading price on the appointed date and included under stock-based compensation in the interim condensed consolidated statements of operations and comprehensive loss. Further, the new independent director provided the Company funds of $101,039 (C$134,483) for a private placement in exchange for 310,888 common shares of the Company priced at $0.3250 per share.

As at ~~March 31,~~June 30, 2023, outstanding directors' compensation of ~~$137,282~~$159,212 (C$~~185,793)~~210,793) (December 31, 2022-$121,226; C$164,196) 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 ~~$29,576~~$29,684 (C$40,000) per month for twelve (12) months, beginning on the Effective Date, January 1, 2023, and at a rate of ~~$36,970~~$37,105 (C$50,000) per month for twelve (12) months, beginning January 1, 2024. In addition, the Company agreed to grant the CEO 3,000,000 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 CEO for certain out-of-pocket expenses incurred by the CEO.

Pursuant to the terms of the CFO's Consulting Agreement for his services as the CFO, the compensation is at a rate of ~~$9,243~~$9,276 (C$12,500) per month for twelve (12) months, beginning on the Effective Date, January 1, 2023. In addition, the Company agreed to grant the CFO 100,000 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~~three and six-month periods ended ~~March 31,~~June 30, 2023, the Company recognized management stock-based compensation expense of $57,600 and $115,200 (2022-$~~60,113),~~60,113 and $120,226) respectively, on the common stock issued to the CEO and the CFO, 3,000,000 and 100,000 common stock, respectively, as stipulated in their executive consulting agreements, effective January 1, 2023 valued at the trading price on the Effective Date. The total stock-based compensation on the issuance of the common stock totaled $446,400 (2022-$240,450). The portion to be expensed for the balance of the consulting agreements, ~~$388,800~~$331,200 (2022-$~~180,337)~~120,224) is included in prepaid expenses and deposits in the interim condensed consolidated balance sheets.

9. Long-Term Debt

			June 30, 2023			December 31, 2022
(a)	PACE Credit Facility-see below	$	711,999		$	695,974
(b)	PACE Credit Facility-see below		398,150			389,188
(c)	PACE Corporate Term Loan-see below		2,415,798			2,361,424
(d)i.)	Mortgage Payable-due December 1, 2023		3,901,032			3,782,751
(d)ii.)	Mortgage Payable-due August 17, 2023		1,510,600			1,476,600
(d)iii.)	Mortgage Payable-due March 1, 2024		1,102,655			-
(e)	Canada Emergency Business Account-Due December 31, 2023		75,530			73,830
(f)	Corporate Term Loan-Due April 7, 2025		72,948			89,659
			10,188,712			8,869,426
Current portion			(10,154,734	)		(8,816,931	)
Long-Term portion		$	33,978		$	52,495

March 31,
2023
December 31,
2022
(a) PACE Credit Facility-see below $ 696,540 $ 695,974
(b) PACE Credit Facility-see below 389,505 389,188
(c) PACE Corporate Term Loan-see below 2,363,343 2,361,424
(d)i.) Mortgage Payable-due December 1, 2023 3,800,992 3,782,751
(d)ii.) Mortgage Payable-due August 17, 2023 1,477,800 1,476,600
(d)iii.) Mortgage Payable-due March 1, 2024 1,067,660 -
(e) Canada Emergency Business Account-Due December 31, 2023 73,890 73,830
(f) Corporate Term Loan-Due April 7, 2025 80,604 89,659
9,950,334 8,869,426
Current portion (9,907,386 ) (8,816,931 )
Long-Term portion $ 42,948 $ 52,495

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

9. Long-Term Debt, (continued)

As disclosed under funds held in trust, note 6, the Company and PACE finalized a full and final mutual release of all obligations owing to PACE, including accrued interest, in exchange for an amount of ~~$923,625~~$944,125 (C$1,250,000). The funds are being held in escrow by the Company's Canadian legal counsel. The funds will be released to PACE once the letter of credit, in the amount of ~~$204,550~~$209,090 (C$276,831) is released by the MECP to ~~PACE.~~PACE and the Company replaces with the new letter of credit in the amount of $481,607 (C$637,637). Immediately prior to this full and final release, the amounts owing to PACE, included above under a), b) and c) totaled ~~$3,449,388~~$3,525,947 (C$4,668,274).

Refer also to going concern, note 2.

~~SusGlobal Energy Corp.~~
~~Notes to the Interim Condensed Consolidated Financial Statements~~
~~March 31, 2023 and 2022~~
~~(Expressed in United States Dollars)~~
~~(unaudited)~~

~~9. Long-Term Debt~~~~, (continued)~~

The remaining PACE long-term debt was initially payable as noted below:

(a) The credit facility ~~bears~~bore interest at the PACE base rate of 7.00% plus 1.25% per annum ~~currently~~or 12.50%~~, is~~ prior to the full and final mutual release, was payable in monthly blended installments of principal and interest of ~~$6,476~~$6,619 (C$8,764) and ~~matures~~matured on September 2, 2022. The first and only advance on the credit facility on February 2, 2017, in the amount of ~~$1,182,240~~$1,208,480 (C$1,600,000), is secured by a business loan general security agreement, a ~~$1,182,240~~$1,208,480 (C$1,600,000) personal guarantee from the CEO and a charge against the Haute leased premises. Also pledged as security are the shares of the wholly-owned subsidiaries, and a limited recourse guarantee against each of these parties. On April 3, 2020, the pledged shares were delivered by PACE and are currently held as security for the personal guarantee from the CEO and charge against the Haute leased premises. The credit facility iswas fully open for prepayment at any time without notice or bonus.

(b) The credit facility advanced on June 15, 2017, in the amount of ~~$443,340~~$453,180 (C$600,000), ~~bears~~bore interest at the PACE base of 7.00% plus 1.25% per annum ~~currently~~or 12.50%~~, is~~ prior to the full and final mutual release, was payable in monthly blended installments of principal and interest of ~~$3,621~~$3,702 (C$4,901), and ~~matures~~matured on September 2, 2022. The credit facility is secured by a variable rate business loan agreement on the same terms, conditions and security as noted above.

(c) The corporate term loan advanced on September 13, 2017, in the amount of ~~$2,751,772~~$2,812,848 (C$3,724,147), ~~bears~~bore interest at PACE base rate of 7.00% plus 1.25% per annum ~~currently~~or 12.50%~~, is~~ prior to the full and final mutual release, was payable in monthly blended installments of principal and interest of ~~$21,953~~$22,441 (C$29,711), and matures September 13, 2022. The corporate term loan is secured by a business loan general security agreement representing a floating charge over the assets and undertakings of the Company, a first priority charge under a registered debenture and a lien registered under the Personal Property Security Act in the amount of ~~$2,956,323~~$3,028,587 (C$4,000,978) against the assets including inventory, accounts receivable and equipment. The corporate term loan also included an assignment of existing contracts included in the asset purchase agreement.

For the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, ~~$102,842~~$nil (C$nil) and $103,218 (C$139,089) (2022-$~~75,525;~~78,904; C$~~95,625)~~100,699 and $154,429; C$196,324) respectively, in interest was incurred on the PACE long-term debt. As at ~~March 31,~~June 30, 2023, ~~$391,413~~$393,109 (C$529,725) (December 31, 2022-$288,407; C$390,636) in accrued interest is included in accrued liabilities in the interim condensed consolidated balance sheets.

(d) i) 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 ~~$3,842,280~~$3,927,560 (C$5,200,000) (December 31, 2022-$3,839,160; C$5,200,000). The fourth tranche was received on August 13, 2021 in the amount of ~~$1,402,770~~$1,435,070 (C$1,900,000) and a portion of this fourth tranche, ~~$1,369,871~~$1,400,276 (C$1,853,933), was used to fund a portion of the purchase of the Hamilton Property, described under long-lived assets, net ~~note 7.~~(note 7). 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 ~~12.75%~~13%) and 10% per annum with a maturity date of December 1, 2023. The Company continues to be charged at the rate of 10% per annum. 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.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

9. Long-Term Debt, (continued)

Financing fees on the 1st mortgage totaled ~~$298,086~~$304,702 (C$403,419). ~~As at March 31, 2023 $31,581 (C$42,740) (December 31, 2022-$31,555; C$42,740) of accrued interest is included in accrued liabilities in the consolidated balance sheets.~~ In addition, as at ~~March 31,~~June 30, 2023 there is ~~$41,288~~$26,528 (C$~~55,877)~~35,123) (December 31, 2022-$56,409; C$76,404) of unamortized financing fees included in long-term debt in the interim condensed consolidated balance sheets.

ii) On August 17, 2021, the Company obtained a vendor take-back 1st mortgage in the amount of ~~$1,477,800~~$1,510,600 (C$2,000,000), on the purchase of the Hamilton Property, described under long-lived assets, net (note 7). 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.

iii) On March 1, 2023, the Company obtained a 2nd mortgage in the amount of ~~$1,108,350~~$1,132,950 (C$1,500,000) bearing interest at the annual rate of 12%, repayable monthly, interest only with a maturity date of March 1, 2024, secured as noted under (d) i) above. The Company incurred financing fees of ~~$44,334~~$45,318 (C$60,000). As at June 30, 2023 $10,802 (C$14,301) (December 31, 2022-$31,555; C$42,740) of accrued interest is included in accrued liabilities in the consolidated balance sheets. In addition, as at ~~March 31,~~June 30, 2023 there is ~~$40,657~~$30,295 (C$~~55,069)~~40,110) of unamortized financing fees included in long-term debt in the consolidated balance sheets.

~~9. Long-Term Debt~~~~, (continued)~~

For the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, ~~$114,457~~$136,286 (C$~~154,797)~~183,086) and $250,743 (C$337,883) (2022-$111,853; C$~~141,622)~~141,622 and $220,256; C$280,010) respectively, in interest was incurred on the mortgages payable. As at ~~March 31,~~June 30, 2023 ~~$42,512~~$42,007 (C$~~57,534)~~55,616) (December 31, 2022- $31,555; C$42,740) in accrued interest is included in accrued liabilities in the interim condensed consolidated balance sheets.

(e) As a result of the COVID-19 virus, the Government of Canada launched the Canada Emergency Business Account (the "CEBA"), a program to ensure that small businesses have access to the capital they need to see them through the current challenges and better position them to quickly return to providing services to their communities and creating employment. The program is administered by Canadian chartered banks and credit unions.

The Company has received a total of ~~$73,890~~$75,530 (C$100,000) under this program, from its Canadian chartered bank.

Under the initial term date of the loans, which is detailed in the CEBA term loan agreements, the amount is due on December 31, 2022 and is interest-free. If the loans are not repaid by December 31, 2022, the Company can make payments, interest only, on a monthly basis at an annual rate of 5%, under the extended term date, beginning January 1, 2023, maturing December 31, 2025.

The CEBA term loan agreements were amended by extending the interest free repayment date by one year to December 31, 2023. If paid by December 31, 2023, 33.33% ($~~24,630;~~25,176; C$33,333), previously 25%, of the loans would be forgiven. Repayment terms on the extended period are unchanged.

The CEBA term loan agreements contain a number of positive and negative covenants, for which the Company is not in full compliance.

(f) On April 8, 2021, the Company took delivery of a truck and hauling trailer for a total purchase price of ~~$161,330~~$164,911 (C$218,338) plus applicable harmonized sales taxes. The purchase was financed by a bank term loan of ~~$147,780~~$151,060 (C$200,000), over a forty-eight-month term, bearing interest at 4.95% per annum with monthly blended instalments of principal and interest payments of ~~$3,621~~$3,702 (C$4,901) due April 7, 2025.

For the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, ~~$781~~$1,190 (C$~~1,057)~~1,600) and $1,971 (C$2,657) (2022- ~~$1,576;~~$1,454; C$~~1,996)~~1,856 and $3,030; C$3,852) in interest was incurred.

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

10. Obligations under Capital Lease

							March 31, 2023			December 31, 2022								June 30, 2023			December 31, 2022
		(a)		(b)			Total			Total			(a)		(b)			Total			Total
Obligations under Capital Lease	$	-	$	107,718		$	107,718		$	121,758		$	-	$	100,402		$	100,402		$	121,758
Less: current portion				(60,710	)		(60,710	)		(57,275	)				(64,528	)		(64,528	)		(57,275	)
Long-term portion	$	-	$	47,008		$	47,008		$	64,483		$	-	$	35,874		$	35,874		$	64,483

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 ~~$182,841~~$186,899 (C$247,450), is payable in monthly blended installments of principal and interest of ~~$3,782~~$3,866 (C$5,118), plus applicable harmonized sales taxes for a period of forty-six months plus the first two monthly blended installments of ~~$7,389~~$7,553 (C$10,000) plus applicable harmonized sales taxes and an option to purchase the equipment for a final payment of ~~$18,236~~$18,641 (C$24,680) plus applicable harmonized sales taxes on February 27, 2022. The leasing agreement bears interest at the rate of 6.15% annually, compounded monthly, due January 27, 2022. The final payment was made on June 7, 2022.

(b) The lease agreement for certain equipment for the Company's organic waste processing and composting facility at a cost of ~~$287,912~~$294,303 (C$389,650), is payable in monthly blended installments of principal and interest of ~~$5,063~~$5,175 (C$6,852), plus applicable harmonized sales taxes for a period of fifty-nine months plus an initial deposit of ~~$13,372~~$14,691 (C$19,450) plus applicable harmonized sales taxes and an option to purchase the equipment for a final payment of a nominal amount of ~~$74~~$76 (C$100) plus applicable harmonized sales taxes on February 27, ~~2025~~.2025. The leasing agreement bears interest at the rate of 3.59% annually, compounded monthly, due February 27, 2025.

~~10. Obligations under Capital Lease~~~~, (continued)~~

The lease liabilities are secured by the equipment under capital lease as described under long-lived assets, net (note 7).

Minimum lease payments as per the original terms of the obligations under capital lease are as follows:

In the nine-month period ending December 31, 2023	$	45,566
In the six-month period ending December 31, 2023				$	36,229
In the year ending December 31, 2024		60,755			62,108
In the year ending December 31, 2025		5,137			5,251
		111,458			103,588
Less: imputed interest		(3,740	)		(3,186	)
Total	$	107,718		$	100,402

For the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, ~~$1,052~~$931 (C$~~1,423)~~1,249) and $1,983 (C$2,672) (2022-$~~1,760;~~478; C$~~2,229)~~617 and $2,238; C$2,846) in interest was incurred.

11. Convertible Promissory Notes

			March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022

(a)	Convertible promissory note-October 28 and 29, 2021	$	2,398,276	$	2,599,925	Convertible promissory note-October 28 and 29, 2021	$	2,246,802	$	2,599,925
(b)	Convertible promissory note-March 3 and 7, 2022		3,680,576		3,696,044	Convertible promissory note-March 3 and 7, 2022		5,830,388		3,696,044
(c)	Convertible promissory note- June 23, 2022		1,484,614		1,500,464	Convertible promissory note- June 23, 2022		1,562,800		1,500,464
		$	7,563,466	$	7,796,433		$	9,639,990	$	7,796,433

The convertible promissory notes are accounted for under the fair value option in the consolidated balance sheets. The actual principal outstanding on the balance of the convertible promissory notes as at ~~March 31,~~June 30, 2023 is ~~$5,682,160~~$6,680,933 (December 31, 2022-$5,825,260), including accrued interest of $470,773 (2022-$~~5,825,260)~~nil).

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

11. Convertible Promissory Notes, (continued)

(a) On October 28 and 29, 2021, the Company entered into two securities purchase agreement (the "October 2021 SPAs) with two 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.

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.

On May 11, 2022, the holder of the October 29, 2021 investor note, provided an amendment for an optional conversion of his investor notes. The conversion price was amended to be (i) 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 $1.70 multiplied by the discount (35%), provided that in the event of a conversion, of ~~his~~ 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 the amendment.

~~11. Convertible Promissory Notes,~~ ~~(continued)~~

On August 16, 2022, the Company was sent a notice of default from one of the October 2021 Investors, whose investor note was issued on October 29, 2021. On September 15, 2022, the Company and the investor of the October 2021 investor note entered into an amendment to the October 2021 investor note which served as a cure to the previously issued default notice.

Pursuant to the September 15, 2022 amendment, the Company and the October 29, 2021 investor, agreed that the outstanding principal amount of ~~his~~the October 29, 2021 investor note would increase by 10% to $1,618,100 from the previously issued principal amount of $1,471,000. The new agreed upon maturity date was changed to November 15, 2022, subject to certain conditions and the maturity date would automatically be extended to January 15, 2023 provided that the October 29, 2021 investor does not notify the Company in writing prior to the maturity date that the automatic extension of the maturity date has been cancelled. In connection with this amendment, the Company agreed to use its best efforts to promptly facilitate the conversion of the October 29, 2021 investor note into shares of the Company's common stock.

Further, the October 29, 2021 investor agreed not to convert more than $100,000 in any one conversion notice and the October 29, 2021 investor agreed not to issue an additional conversion notice unless and until any previously issued conversion shares have been sold by the October 29, 2021 investor or exceed 10% of the daily trading volume in selling the shares of the Company's common stock

On September 21, 2022 and November 10, 2022, the October 29, 2021 investor issued conversion notices to the Company and the Company issued 372,090 common shares at conversion prices ranging from $0.1885 to $0.2339 per share respectively, on the conversion of $25,000 and $50,000 respectively, of the October 29, 2021 investor note, ~~have~~having a fair market value of $97,129 on conversion. The October 29, 2021 investor has not informed the Company of an extension to the current maturity date but ~~continues~~continued to issue conversion notices to the ~~Company.~~Company prior to the default notice of June 8, 2023, noted below.

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

11. Convertible Promissory Notes, (continued)

On December 22, 2022, the October 28, 2021 investor, whose October 28, 2021 investor note had a previous Principal Amount of $294,118 and a maturity date of July 28, 2022, provided the Company with an amendment whereby the maturity date of ~~his~~the October 28, 2021 investor note was extended to the earlier of July 28, 2023 or the occurrence of a Liquidity Event. In addition, the Company agreed that the investor could convert his October 28, 2021, investor note into shares of the Company's common stock at any time at the investor's option. Previously, the October 28, 2021 Note was only convertible upon the occurrence of the Liquidity Event. The Company also agreed to change the conversion price to be the lowest trading bid price of the Company's common stock on the trading day immediately prior to the conversion date multiplied with a 35% discount to that lowest price. Previously, the conversion price was a 30% discount to the price at which the securities were sold in connection with the Liquidity Event. In consideration for the extension of the maturity date, the Company agreed to issue the investor 500,000 shares of the Company's common stock. 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.

On June 8, 2023, the October 29, 2021 investor's counsel sent the Company a notice of default on the October 29, 2021 investor note and the March 2022 Investor Notes, described below. The default was caused by the holders of these promissory notes not being able to receive shares of the Company's common stock, par value $0.0001 (the "Common Stock") pursuant to the conversion terms of these promissory notes. All cure periods available pursuant to the promissory notes had expired prior to June 8, 2023. The October 29, 2021 investor note had a principal balance of $1,300,000 before and after the default and the March 2022 Investor Notes, whose principal balance totaled $2,640,000 prior to the notice of default, increased by 20% or $528,000 in total as a result of the notice of default. In addition, default interest at the rate of 24% per annum accrued on the March 2022 Investor Notes and totaled $424,946 the June 8, 2023.

During the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, the October 29, 2021 investor provided the Company with notices of conversion to convert in total ~~$143,100~~$100,000 and $243,100 respectively, of his investor note having a fair value on conversion of ~~$199,641.~~$153,846 and $374,000 respectively, for 601,296 and 1,650,709 respectively, of common shares of the Company. The conversion prices per share for the three and six-month periods ended June 30, 2023 ranged from $0.1333 to $0.3400 and $0.1294 to $0.1364 respectively.

The Company initially reserved 1,905,000 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.

(b) 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 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 Maturity Date. On an event of default, the principal amount of the March 2020 Investor Notes will increase to 120% of their original principal amounts. The Investors are entitled to, following an event of default, (as defined in the March 2022 Investor Notes) to convert all or any amount of the Principal Amount and any interest accruing at the default interest rate of 24% per annum into Common Stock, 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 any national security exchange or over-the-counter marketplace for the five (5) trading days immediately prior to the March 2022 Investors' notice of conversion.

1718

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
~~March 31,~~June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

11. Convertible Promissory Notes, (continued)

On May 11, 2022, the holder of the March 3, 2022 Investor Note and on May 13, 2022, the holder of the March 7, 2022 Investor Note, each provided an amendment for an optional conversion of their investor notes. The conversion price was amended to be (i) 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 $1.70 multiplied by the discount (35%), provided that in the event of a conversion, of his 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 amendment for each.

Further, on June 29, 2022, the March 2022 Investors revised their March 2022 Investor Notes, to extend the maturity date to August 15, 2022 and increase the principal amount of each of the March 2022 Investor Notes by twenty percent (20%), from a Principal Amount of $2,000,000 to $2,400,000. In addition, the Company agreed to issue 100,000 common shares to the March 2022 Investor. These restricted shares of the Company's common stock will survive a reverse stock split prior to listing. The common shares were issued on July 11, 2022. The restructurings were accounted for as extinguishments as they were renegotiated after maturity.

On August 16, 2022, the Company was sent notices of default from the March 2022 Investors. And, on September 15, 2022, the Company and the March 2022 Investors entered into an amendment to the March 2022 Investor Notes which served as a cure to the previously issued default notices.

Pursuant to the September 15, 2022 amendment, the Company and the March 2022 Investors agreed that the outstanding Principal Amount totaling $2,400,000 would increase by 10% to $2,640,000. The new agreed upon maturity date was now November 15, 2022, subject to certain conditions and the maturity date was extended to January 15, 2023. In connection with this amendment, the Company agreed to use its best efforts to promptly facilitate the conversion of the March 2022 Investor Notes into shares of the Company's common stock only after the October 29, 2021 investor note, as described under paragraph ~~(e)~~(a) above, has been fully converted.

Further, in the event that the October 29, 2021 investor note has been fully converted and the conversion shares sold, thereafter, the March 2022 Investor Notes may both be converted at the March 2022 Investors' discretion on a pari-passu basis, provided, however, that no conversion shall exceed $50,000 for each of the March 2022 Investor Notes and each of the March 2022 Investors shall not sell more than 5% of the daily trading volume in selling the Company's shares of common stock.

As noted above, on June 8, 2023 the counsel for the March 2022 Investors provided the Company with a notice of default. This resulted in the principal balance of the March 2022 Investor Notes increasing in principal from $2,640,000 in total to $3,168,000, in total. In addition, interest in accruing at the rate of 24% per annum. As at June 30, 2023, accrued interest of $470,773 (2022-$nil) is included in the convertible promissory notes balance.

~~(h)~~(c) On June 23, 2022, the Company executed one convertible promissory note (the "June 2022 Investor Note") with an investor (the "June 2022 Investor") in the amount of $1,200,000 bearing interest at 10% per annum and having an OID of 10%. The maturity date of the June 2022 Investor Note is the earlier of December 23, 2022 and the date of the Company's uplist to a national securities exchange. The proceeds from the June 2022 Investor Note were used to repay this investor's June 2021 Investor Note and their December 2021 Investor Note which matured June 16, 2022 and June 2, 2022 respectively, plus accrued interest. The net proceeds, after repaying the December 2021 Investor Note and the June 2021 Investor Note with accrued interest and related disbursements totaled approximately $204,000. The net proceeds were received on June 28, 2022. In addition, the Company issued 1,333,333 common shares to the June 2022 Investor on June 29, 2022 which have been included in the determination of the extinguishment gain and recognized at fair value. The restructuring was accounted for as extinguishments as it was renegotiated after maturity.

The June 2022 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 ('Event of Default"), as defined in the June 2022 Investor Note, with interest accruing at the default interest rate of 15% per annum from the Event of Default, at a conversion price (the "Conversion Price") equal to the lesser of 90% (representing a 10% discount) multiplied by the price per share of the Common Stock at the public offering associated with the Event of Default.

1819

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
~~March 31,~~June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

11. Convertible Promissory Notes, (continued)

On December 29, 2022, the Company and the investor agreed to extend the maturity date to the earlier of June 23, 2023 or the occurrence of a Liquidity Event. In consideration for the extension of the maturity date, the Company agreed to: (i) increase the principal amount to $1,320,000.00 (the "Increased Principal Amount"); (ii) that interest is payable on the Increased Principal Amount and that such interest (but not any default interest that becomes due) is paid in full and in advance by the Company issuing to the June 2022 Investor 450,000 shares of the Company's common stock and (iii) issue to the June 2022 Investor 666,667 shares of the Company's common stock (the "Modification Fee Shares"). The parties agreed that the Modification Fee Shares served as an increase in the amount of commitment fee shares issued to the investor pursuant to the securities purchase agreement signed by the Company and the June 2022 Investor on June 23, 2022, in connection with the issuance of the June 2022 Investor Note. 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.

On June 29, 2023, the June 2022 Investor provided a 45-day extension of the June 2022 Investor Note in exchange for an increase in the principal balance of the June 2022 Investor Note of $100,000, from $1,320,000 to $1,420,000.

The Company initially reserved 8,000,000 of its authorized and unissued Common Stock (the "June 2022 Reserved Amount"), free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of the June 2022 Investor Note.

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.

During the three-month period ended March 31, 2023, the Company issued 1,049,413 (2022-2,000,000) common shares on the conversion of convertible promissory notes, having fair values on conversion in the amount of $199,641 (2022-$463,862), at conversion prices ranging from $0.1294 to $0.1442 (2022-$0.20) per share.

Refer also to going concern, note 2.

Fair value option for the convertible promissory notes

The Company is eligible to elect the fair value option under ASC 825, Financial Instruments and bypass analysis of the potential embedded derivative features described above. The Company believes that the fair value option better reflects the underlying economics of the convertible promissory notes issued after December 31, 2020. As a result, the 2021 and 2022 promissory notes were recorded at fair value upon issuance and subsequently remeasured at each reporting date until settled or converted. The Company recognized the notes initially at fair value, which exceeded the proceeds received resulting in a day one loss that has been recognized in net loss. Transaction and other issuance costs have been expensed as incurred. Subsequently, the Company recognizes the notes at fair value with changes in net loss.

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

11. Convertible Promissory Notes, (continued)

Gains and losses attributable to changes in credit risk were insignificant during the ~~three-month~~three and six-month periods ended ~~March 31,~~June 30, 2023 and 2022. ~~For the three-month period ended March 31, 2023, the~~The Company recognized a loss of $nil (2022-$~~659,535)~~659,526) at the time of issuance of the convertible promissory notes and ~~a gain~~an additional loss of ~~$33,326 (2022-loss of $636,623)~~$2,213,461 and $2,180,135 (2022-$4,512,540 and $5,124,945) attributed to the change in fair value of the convertible promissory ~~notes. The~~notes for the three and six-month periods ended June 30, 2023. In addition, for the three and six-month periods ended June 30, 2023, the Company recognized a gain on extinguishment of convertible promissory notes of $nil and $nil (2022-$4,274,820 and $4,274,820). Further, for the three and six-month periods ended June 30, 2023, the Company incurred debt issuance costs of $nil and $nil (2022-$~~75,000)~~26,000 and $101,000) respectively, which were expensed as incurred.

12. 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:

		Fair value as at March 31, 2023 and December 31, 2022 Using:						Fair value as at June 30, 2023 and December 31, 2022 Using:
		Level 3		March 31, 2023		December 31, 2022		Level 3		June 30, 2023		December 31, 2022
Assets:	$		$	-	$	-	$	-	$	-	$	-
Liabilities:
Convertible promissory notes				7,563,466		7,796,433		9,639,990		9,639,990		7,796,433
	$		$	7,563,466	$	7,796,433	$	9,639,990	$	9,639,990	$	7,796,433

During each of the ~~three-month~~three and six-month periods ended ~~March 31,~~June 30, 2023 and 2022, there were no transfers between Level 1, Level 2, or Level 3. There were no financial assets or other liabilities measured at fair value on a recurring basis as of ~~March 31,~~June 30, 2023 and December 31, 2022.

The following table summarizes the change in Level 3 financial instruments during the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 and December 31, 2022.

		March 31, 2023			December 31, 2022			June 30, 2023			December 31, 2022
Fair value at December 31, 2022	$	7,796,433		$	3,798,516		$	7,796,433		$	3,798,516
Fair value at issuance					2,159,525			-			2,159,526
Amendments								2,180,923			-
Conversions/repayments		(199,641	)		(136,880	)		(336,578	)		(136,880	)
Mark to market		(33,326	)		7,633,844			(788	)		7,663,844
Settlement		-			(5,688,573	)		-			(5,688,573	)
Fair value at March 31, 2023 and December 31, 2022	$	7,563,466		$	7,796,433
Fair value at June 30, 2023 and December 31, 2022							$	9,639,990		$	7,796,433

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 11 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 75% (2022-75%), except for those that were amended post maturity which were assumed to be 100%. The probability of default was determined in reference to a 1-year PD rate for a 'CCC+' rating at issuance, and a combination of 'CC' and 'CCC-' credit ratings at ~~March 31,~~June 30, 2023 and December 31, 2022. Increasing (decreasing) the probability of default would result in a significantly higher (lower) fair value measurement.

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

12. Fair Value Measurement, (continued)

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 ~~106.2%~~104.1% to ~~123.4%~~141.2% was used for the expected volatility (2022-92% to 159%). 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 24.39% to 25.18% (2022-24.4% to 25.6%) was used for the credit spread.

Refer also to going concern, note 2.

13. Loans Payable to Related Parties

		March 31, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Directors	$	47,500	$	40,000	$	47,500	$	40,000
Officers		32,445		-		33,355		-
Total	$	79,945	$	40,000	$	80,855	$	40,000

The loans owing to directors were received by the Company on June 6, 2022 and March 16, 2023, are unsecured, bearing interest at 5% per annum and due on demand.

During the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, ~~$543~~$603 and $1,146 (2022-$~~nil)~~131 and $131) respectively, in interest was incurred on the directors' loans. As at ~~March 31,~~June 30, 2023, ~~$1,631~~$2,240 (December 31, 2022-$1,088) of accrued interest is included in accrued liabilities in the interim condensed consolidated balance sheets. ~~And, during~~During the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, $nil (C$nil) and $nil (C$nil) (2022-$~~504;~~nil; C$~~638)~~638 and $530; C$674) in interest was paid on loans from the CFO.

During the three and six-month periods ended June 30, 2023, Travellers converted outstanding loans of $278,845 and $278,845 (December 31, 2022-$33,371 of outstanding accounts payable) respectively, for 1,167,371 and 1,167,371 (December 31, 2022-193,778) respectively, common shares of the Company, based on closing trading prices on the day prior to each conversion.

The loans from the officers are non-interest bearing and due on demand.

14. Capital Stock

As at ~~March 31,~~June 30, 2023, the Company had 150,000,000 common shares authorized with a par value of $.0001 per share and ~~118,618,245~~121,327,800 (December 31, 2022-113,438,832) common shares issued and outstanding.

For the ~~three-month~~six -month period ended ~~March 31,~~June 30, 2023, the Company issued ~~1,049,413~~1,650,709 (December 31, 2022-2,372,090) common shares on the conversion of a convertible promissory note having a fair value on conversion in the amount of ~~$199,641~~$374,000 (December 31, 2022-$579,247) at conversion prices ranging from $0.1294 to ~~$0.1442~~$0.3400 (December 31, 2022- $0.1885 to $0.2339) per share. This resulted in a loss on conversion of ~~$20,513~~$74,359 disclosed under other income (expense), note 16.

In addition, the Company raised ~~$nil~~$101,039 (December 31, 2022-$907,760, net of share issue costs of $1,440), on a private placement for ~~nil~~310,888 (December 31, 2022-4,444,041) common shares at an issue price of ~~$nil~~$0.3250 (December 31, 2022-$0.154 to $0.45) per share. The private placement was with a director of the Company. Further, ~~410,000~~1,040,000 (December 31, 2022-6,655,000) common shares of the Company were issued for professional services valued at ~~$63,480~~$202,645 (December 31, 2022-$2,186,110), based on the closing trading prices on the effective dates of the consulting agreements. The portion relating to the ~~three-month~~six-month period ended ~~March~~June 30, 2023, $202,645 (December 31, ~~2023, $63,480 (2022-~~2022-$2,092,230) is included in the amount disclosed as stock-based compensation in the interim condensed consolidated statements of operations and comprehensive loss and the balance, $nil (December 31, 2022-$374,531) is included in prepaid expenses and deposits in the interim condensed consolidated balance sheets. In addition, during the year ended December 31, 2022, 4,125,211 ~~share~~shares were issued on the issuance of debt on extinguishment of existing debt having a fair value on issuance of $1,652,715 and 1,616,667 common shares were issued on the extension of the maturity dates on convertible promissory notes having a fair value on issuance of $231,067. Further, on September 8, 2022, 241,502 common shares were returned to treasury.

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

14. Capital Stock, (continued)

And, during the ~~year~~six-month period ended ~~December 31, 2022,~~June 30, 2023, Travellers converted ~~$33,371 (C$45,200) of~~$278,845 (December 31, 2022-$33,371 in outstanding accounts payable) in loans and outstanding accounts payable for ~~193,778~~1,167,371 (December 31, 2022-193,778) common shares of the ~~Company.~~Company, based on closing trading prices on the day prior to each conversion.

On January 3, 2023, the Company issued 3,000,000 (January 2, 2022-1,000,000) common shares to the CEO and 100,000 (January 2, 2022-50,000) common shares to the CFO in connection with their executive consulting agreements, valued at $446,400 (December 31, 2022-$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 for the three and six-month periods ended June 30, 2023 is an amount of $57,600 ~~(2022-60,113), representing that portion of the stock-based compensation for the period.~~and $115,200 (2022-$60,113 and $120,226) respectively. Also, on January 17, 2022 and March 22, 2022, the Company issued 230,000 common shares on proceeds previously received.

Further, on January 3, 2023, the Company issued 20,000 (February 7, 2022-10,000) common shares to an employee valued at $2,880 (December 31, 2022-$1,990) based on the closing trading price on the date of issuance. ~~And,~~Also 100,000 common shares were issued on March 1, 2023 to a new director appointed on February 18, 2023, valued at $21,000, based on the closing trading price on the date appointed. Both amounts are disclosed as stock-based compensation in the interim condensed statements of operations and comprehensive loss.

~~At March 31,~~As at June 30, 2023, the Company recorded ~~$60,100~~a balance of $188,348 (December 31, 2022-$~~213,600)~~213,600 for 750,000 shares to be issued relating to consulting agreements, of which 500,000 were issued on January 27, 2023, valued on the effective dates stipulated in the consulting agreements) for 250,000 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.~~agreement and $128,248 for shares to be issued on a private placement priced at $0.2414 per share. These professional services are included under stock-based compensation in the interim condensed consolidated statements of operations and comprehensive loss. ~~And, during~~During the three-month period ended March 31, 2023, the Company issued 500,000 (2022-230,000) common shares for proceeds previously received.

15. Commitments

a) Effective January 1, 2023, as stipulated in each of their respective executive consulting agreements, the CEO's monthly fee is ~~$29,556~~$30,212 (C$40,000) for 2023 and ~~$36,945~~$37,765 (C$50,000) for 2024 and for the CFO ~~$9,236~~$9,441 (C$12,500). The future minimum commitment under these consulting agreements, is as follows:

For the nine-month period ending December 31, 2023 $ 349,128
For the year ending December 31, 2024 443,340
$ 792,468

For the six-month period ending December 31, 2023	$	237,918
For the year ending December 31, 2024		453,180
	$	691,098

b) The Company has agreed to lease its office premises from Haute on a month-to-month basis, at the monthly rate of ~~$6,650~~$6,798 (C$9,000). The Company is responsible for all expenses and outlays in connection with its occupancy of the leased premises, including, but not limited to utilities, realty taxes and maintenance.

c) Effective February 3, 2021, upon the successful completion of a Nasdaq listing, the Company has committed a payment of $300,000 to a consulting firm providing advisory and consulting services.

d) 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 ~~$6,743,060~~$6,892,724 ($9,125,809).

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

15. Commitments, (continued)

e) Effective November 1, 2022, the Company acquired the exclusive rights to the use of a well-known athlete's name, endorsement and the like, for the purposes of advertisement, promotion and sale of the Company's products. In return, the Company issued 500,000 common shares of the Company and the individual's company is entitled to the following fees:

•~~$125,000~~ $125,000 sixty days subsequent to the Company's shares listed on the Nasdaq or another senior exchange.

•~~$125,000~~ $125,000 on the one-year anniversary of the first payment above and,

•~~$125,000~~ $125,000 on the one-year anniversary of the second payment above.

There is also an arrangement to issue 250,000 warrants to the individual's company once the Company's shares are listed on the Nasdaq or another major exchange.

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 ~~$2,217~~$2,266 (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 ~~$7,389~~$7,553 (C$10,000). The future minimum commitment is as follows:

For the nine-month period ending December 31, 2023	$	7,389
For the six-month period ending December 31, 2023			$	7,553
For the year ending December 31, 2024		7,389		7,553
For the year ending December 31, 2025		7,389		7,553
	$	22,167	$	22,659

g) PACE had provided the Company a letter of credit in favor of the MECP in the amount of ~~$204,550~~$209,090 (C$276,831) and, as security, has registered a charge of lease over the organic waste processing and composting facility, located at 704 Phillipston Road, Roslin, Ontario, Canada. As noted under funds held in trust, note 6, the Company and PACE finalized a full and final release of all obligations owed to PACE The funds held in trust are being held in escrow with the Company's Canadian legal counsel and will be released to PACE once this current letter of credit is returned to PACE by the MECP. This will occur once the Company replaces this letter of credit with a new letter of credit in the amount of ~~$471,150~~$481,607 ($C637,637). As security, PACE had registered a charge of lease over the premises, located at 704 Phillipston Road, Roslin, Ontario, Canada. The Company is required to provide for environmental remediation and clean-up costs for its organic waste processing and composting facility.

~~15. Commitments~~~~, (continued)~~

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. 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 ~~$674,717~~$689,692 (C$913,137) (December 31, 2022-$676,635; C$904,287).

As at ~~March 31,~~June 30, 2023, the MECP has not drawn on the letter of credit. The Company is in the process of obtaining a letter of credit for the new financial assurance with the MECP in the amount of ~~$471,150~~$481,607 (C$637,637).

SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

16. Other ~~Income (Expense)~~Expense

		March 31, 2023			March 31, 2022			June 30, 2023			June 30, 2022
(a) Loss on conversion of convertible promissory note	$	(20,513	)	$	-		$	(74,359	)	$	-
(b) Gain (loss) on revaluation of convertible promissory notes		33,326			(1,296,148	)
(b) Loss on revaluation of convertible promissory notes								(2,180,135	)		(5,784,471	)
(c) Gain on extinguishment of convertible promissory notes								-			4,274,820
							$	(2,254,494	)	$	(1,509,651	)
	$	12,813		$	(1,296,148	)

(a) As described under convertible promissory notes, note ~~12(a)~~11(a), the loss is on ~~three~~five conversions of the October 29, 2021 investor note.

(b) ~~Gain (loss)~~Loss on revaluation of convertible promissory notes. Refer to note 11, convertible promissory notes.

17. Economic Dependence

The Company generated ~~88%~~91% and 90% of its revenue from three customers, during the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023 ~~(March 31, 2022-67%~~(2022-78% and 71% from two customers). respectively.

18. 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 ~~$48,207~~of $49,277 (C$65,241). The amount is included in accounts payable on the Company's interim condensed consolidated balance sheets.

19. Subsequent Events

The Company's management has evaluated subsequent events up to the date the interim condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following to be material subsequent events:

(a)On ~~April 4,~~July 14, 2023, ~~one of the October 2021 Investors provided~~ the Company ~~with a notice~~paid the final deposit of ~~conversions~~$159,306 (C$210,000) for ~~his October 29, 2021 investor note~~an agreement of purchase and sale for 2.03 acres of land in Hamilton, Ontario, Canada, adjacent to the Company's current property. This deposit is in addition to the first deposit of $75,530 (C$100,000) paid prior to the end of June 30, 2023 and included under prepaid expenses and deposits in the ~~amount~~interim condensed consolidated balance sheets.

(b) On July 17, 2023, the Company received notice from The Scotts Miracle-Gro Company that it was withdrawing its opposition to the Company's trademark SUSGRO (the "Mark") application in the U.S. and Canada. On July 27, 2023, the Mark was registered under Registration Number TMA1,192,300 with Innovation, Science and Economic Development Canada, Canadian Intellectual Property Office. This registration will be in effect for a period of ~~$50,000 in exchange~~ten years, expiring on July 27, 2033.

(c) On July 17, 2023 the Company issued a total of 1,225,694 common shares for ~~375,052~~a private placement. Of this total, 531,250 common shares were issued for proceeds of $128,248 (C$170,000) received prior to June 30, 2023 and 694,444 for proceeds of $151,720 (C$200,000) for proceeds received on July 13 and 14 of 2023. The prices on the private placement ranged from $0.2414 to $0.32 per share.

(d) On July 19, 2023, $34,269 (C$45,200) of accounts payable owing to Travellers was converted for 131,297 common shares of the Company at a conversion price of ~~$0.1333~~$0.261 per ~~share.~~

~~(b)On April 12, 2023, the Company received funds of $148,740 (C$200,000) in exchange for 450,000 common shares of the Company.~~

~~19. Subsequent Events~~~~, (continued)~~

~~(c)~~Effective April 17, 2023, the Company engaged the services of a consultant for a three-month period for professional services and subsequently issued 180,000 common shares of the Company to the consultant pricedshare, based on the closing trading price on the ~~effective date, valued at $41,040.~~previous day.

~~(d)~~On April 18, 2023, the CEO converted $177,784 (C$238,000) of outstanding loans to the Company in return for 856,483 common shares of the Company, priced at the closing trading price of $0.2076 per share

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this Management's Discussion and Analysis ("MD&A"), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "would," "expect," "intend," "could," "estimate," "should," "anticipate," or "believe," and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers should carefully review the risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission on April 17, 2023.

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~~three and six-month periods ended ~~March 31,~~June 30, 2023 compared with the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2022 unless otherwise noted. Unless otherwise indicated or unless the context otherwise requires, all references in this document to "we, "us, "our," the "Company," and similar expressions refer to SusGlobal Energy Corp., and depending on the context, its subsidiaries.

SPECIAL NOTICE ABOUT GOING CONCERN AUDIT OPINION

OUR AUDITORS ISSUED OPINIONS 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, 2022 AND 2021. 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:

On February 4, 2019, the Company registered its common stock, having a par value of $.0001 per share, pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and is effective pursuant to General Instruction A.(d).

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, at 200 Davenport Road. Our telephone number is 416-223-8500. Our website address is www.susglobalenergy.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K are all available, free of charge, on our website as soon as practicable after we file the reports with the Securities and Exchange Commission (the "SEC"). SusGlobal Energy Corp., 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.

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.

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., SusGlobal Energy Belleville Ltd., SusGlobal Energy Hamilton Ltd., and 1684567 Ontario Inc.

On December 11, 2018, the Company began trading on the OTCQB venture market exchange, under the ticker symbol SNRG.

As the global amount of organic waste continues to grow, a solution for sustainable global management of these wastes is paramount. SusGlobal through its proprietary technology and processes, is equipped and confident to deliver this objective. Management believes renewable energy is the energy of the future. Sources of this type of energy are more evenly distributed over the earth's surface than finite energy sources, making it an attractive alternative to petroleum-based energy. Biomass, one of the renewable resources, is derived from organic material such as forestry, food, plant and animal residuals. SusGlobal can therefore help ~~you~~ turn what many consider waste into precious energy and regenerative products. The portfolio will be comprised of three distinct types of technologies: (a) Process Source Separated Organics ("SSO") in anaerobic digesters to divert from landfills and recover biogas. This biogas can be converted to gaseous fuel for industrial processes, electricity to the grid or cleaned for compressed renewable gas. (b) Maximizing the capacity of existing infrastructure (anaerobic digesters) to allow processing of SSO to increase biogas ~~yield. (c)~~yield and (c) process SSO and digestate to produce an organic compost or a pathogen free organic liquid fertilizer. The convertibility of organic material into valuable end products such as biogas, liquid biofuels, organic fertilizers and compost shows the utility of renewables. These products can be converted into electricity, fuels and marketed to agricultural operations that are looking for an increase in crop yields, soil amendment and environmentally-sound practices. This practice also diverts these materials from landfills and reduces Greenhouse Gas Emissions ("GHG") that result from landfilling organic wastes. The Company can provide peace of mind that the full lifecycle of organic material is achieved, global benefits are realized and stewardship for total sustainability is upheld. It is management's objective to grow SusGlobal into a significant sustainable waste to energy and regenerative products provider, as Leaders in The Circular Economy®.

We believe the products and services offered can benefit both the public and private markets. The following includes some of our work managing organic waste streams: Anaerobic Digestion, Dry Digestion, Wastewater Treatment, In-Vessel Composting, SSO Treatment, Biosolids Heat Treatment, Leachate Management, Composting and Liquid Fertilizers.

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 integrating our technologies with capital investment to optimizing the processing of SSO. Our processes not only divert significant organic waste from landfills, but also result in methane avoidance, with significant GHG reductions from waste disposal. The processes produce regenerative products through the conversion of organic wastes into biogas, organic fertilizer, both dry compost and liquid.

Currently, the primary customers are municipalities in both rural and urban centers in Ontario, Canada. Where necessary, to be in compliance with provincial and local environmental laws and regulations, SusGlobal submits applications to the respective authorities for approval prior to any necessary engineering being carried ~~out.~~out and has existing Environmental Compliance Approvals (ECAs) at its facilities.

We are a "smaller reporting company," as defined under SEC Regulation S-K. As such, we also are exempt from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and also are subject to less extensive disclosure requirements regarding executive compensation in our periodic reports and proxy statements. We will continue to be deemed a smaller reporting company until (i) our public float exceeds $250 million on the last day of our second fiscal quarter in our prior fiscal year (if our annual revenues exceeded $100 million in such prior fiscal year); or (ii) our public float exceeds $700 million on the last day of our second fiscal quarter in our prior fiscal year (if our annual revenues were less than $100 million in such prior fiscal year).

~~The Coronavirus Outbreak ("COVID-19") May Adversely Affect Our Business Operations and Financial Condition~~RECENT BUSINESS DEVELOPMENTS

~~In March 2020,~~On August 1, 2023, the ~~World Health Organization declared~~Company announced it has received a RNG Carbon Intensity ("CI") Report. This report uses the ~~outbreak~~GHGenius model to calculate the CI of ~~COVID-19 a pandemic which has resulted~~the produced RNG from Source Separated Organic ("SSO") Feedstock, analyzing the energy balance and emissions of contaminants associated with the production and use of traditional and alternative transportation fuels. Versions of the model are specified in substantial global economic disruption and uncertainty. In response to the COVID-19 pandemic, the measures implemented by various authorities have caused us to change the Company's business practices, including those related to where employees work, the distance between employeesrenewable fuel regulations in the ~~Company's facilities, limitations on in-person meetings between employees~~provinces of Ontario, Alberta and British Columbia. The GHGenius model is capable of estimating life cycle emissions of the primary greenhouse gases ("GHG") and the criteria pollutants from combustion and process sources. GHGenius can predict emissions for past, present and future years through 2050, using historical data or correlations for changes in energy and process parameters with ~~customers, suppliers, service providers and stakeholders, as well as restrictions on business travel to domestic and international locations.~~time that are stored in the model.

The Report and Carbon Intensity Score allows the Company to proceed and enter into a long term and lucrative offtake agreement, leading to project and equity financing. The Company ~~is fortunate that~~has the infrastructure, assets, licenses and capabilities to produce and distribute RNG which offers lower carbon options adjacent to our existing fertilizer production facilities, building a revolutionary circular economy model for sustainable change, utilizing transformative technology solutions to regenerate organic waste to energy and fertilizers at its ~~operations have not been forced to close as we're considered an essential service. To date, there has been no material impact on~~strategically located facilities in western and eastern Ontario near the ~~Company's workforce, operations, financial performance, liquidity, or supply chain as a result of COVID-19. However, the extent and continued impact~~hub of the ~~COVID-19 pandemic on our business will depend on certain developments including~~largest integrated gas storage facility in North America. A long-term offtake agreement can ensure that the duration and spread of the outbreak and new variant strains of the virus; the availability and distribution of effective vaccines; the severity of the economic decline attributable to the pandemic and timing, nature and sustainability of economic recovery; and government responses, including vaccination or testing mandates, all of which are highly uncertain and unpredictable.

~~The~~ Company will continue to ~~monitor health orders issued by applicable governments~~lead the organic waste diversion and regenerative products program, helping to ~~ensure compliance~~reduce the world's GHG emissions creating strong alignment with ~~evolving domestic~~our ESG and ~~global COVID-19 guidelines.~~uplisting goals, maximizing shareholder value.

The Company has received a 24.7 on the Report's Carbon Intensity Score. As this system uses a reversed scaled approach, in which lower a number denotes a better value in the RNG and sustainability, the Company is expected to continue to receive these opportunities in the future attracting seasoned offtake partners.

~~RECENT BUSINESS DEVELOPMENTS~~When organic waste decomposes, it naturally releases biogas, a GHG containing carbon dioxide and methane, into the atmosphere. Before this biogas can escape as GHGs it is captured and purified to create RNG. RNG is low carbon, meaning, that using RNG can reduce the amount of GHG emissions released into the atmosphere compared to conventional fossil fuels or natural gas. When added to the North American gas system, it can help reduce greenhouse gas emissions.

The RNG produced is then injected into the natural gas transmission and distribution system, providing for building space heat/hot water, industrial process heat, electricity generation and transportation, thereby reducing GHG emissions and generating additional carbon credits for the Company.

On July 17, 2023, the Company received notice from The Scotts Miracle-Gro Company that it was withdrawing its opposition to the Company's trademark SUSGRO (the "Mark") application in the U.S. and Canada. On July 27, 2023, the Mark was registered under Registration Number TMA1,192,300 with Innovation, Science and Economic Development Canada, Canadian Intellectual Property Office. This registration will be in effect for a period of ten years, expiring on July 27, 2033.

On July 14, 2023, the Company paid the final deposit of $159,306 (C$210,000) for an agreement of purchase and sale for 2.03 acres of land in Hamilton, Ontario, Canada, adjacent to the Company's current property. This deposit is in addition to the first deposit of $75,530 (C$100,000) paid on June 15, 2023.

On April 25, 2023, the Company announced that its wholly owned subsidiary SusGlobal Energy Belleville Ltd., generated approximately 9,500 additional Verified Emission Reduction and Removals ("VERRs") and recently sold a further 3,000 carbon credits as part of the Anew™ SusGlobal Belleville Composting Offset Project in Ontario (the "Project"). The project has to date generated approximately 114,500 VERRs (generated from 2017-2022) with an approximate market value of $3.70 (C$5) and $7.40 (C$10) per VERR. The Project report was submitted to the GHG CleanProjects® Registry, a business unit of the Standards Division of the Canadian Standards Association ("CSA"). The Project is part of the Offset Development and Marketing Agreement with Anew Canada ULC (formerly known as Blue Source Canada ULC) ("Anew Canada") for developed and marketed greenhouse gas ("GHG") offset credits from the Company's 49-acre Organic & Non-Hazardous Waste Processing & Composting Facility in Belleville, Ontario.

The Project has enabled an increase in the diversion of organic waste from landfills, thereby avoiding methane generation. Methane is a highly potent greenhouse gas which is 28 times more effective at trapping heat energy in our atmosphere than carbon dioxide. As organic wastes decompose in landfills, the methane builds up and must be released to prevent dangerous working conditions. By diverting waste that contributes to this problem, the Project benefits the community as well as the climate.

This initial sale of carbon credits expands the Company's ability to deliver on its mission to reduce organic wastes from wood, leaf and yard material, treated municipal sewage waste (biosolids), residential curbside green bin material or SSO and paper sludge otherwise destined for landfills.

On March 28, 2023, the Company and PACE Savings and Credit Union Limited ("PACE") finalized a full and final mutual release of all obligations owing to PACE, including accrued interest, in exchange for an amount of ~~$923,625~~$944,125 (C$1,250,000). The funds are held in escrow by the Company's Canadian legal counsel. The funds will be released to PACE once the letter of credit, in the amount of ~~$204,550~~$209,090 (C$276,831) is released by the Ministry of the Environment, Conservation and Parks (the "MECP") to PACE. Immediately prior to this full and final mutual release, the amounts owing to PACE, included in the interim condensed consolidated balance sheets, include ~~$3,449,388~~$3,525,947 (C$4,668,274) disclosed under long-term debt and accrued interest of ~~$391,414~~$400,101 (C$529,725) disclosed under accrued liabilities. The Company raised the funds by securing a 2^nd. mortgage on March 1, 2023 in the amount of ~~$1,108,350~~$1,132,950 (C$1,500,000) prior to disbursements of ~~$184,725~~$188,825 (C$250,000), on its Belleville, Ontario Canada property.

New and Renewed Consulting Contracts

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, 2023 (the "Effective Date"). The CEO's Consulting Agreement replaced the consulting agreement which expired on December 31, 2022.

Pursuant to the terms of the CEO's Consulting Agreement, for his services as the CEO, the compensation is at a rate of $29,556 (C$40,000) per month for twelve (12) months, beginning on the Effective Date, and at a rate of $36,945 (C$50,000) per month for twelve (12) months, beginning January 1, 2024. In addition, the Company agreed to grant the CEO 3,000,000 restricted shares of the Company's common stock, par value of $0.0001 per share (the "Common Stock") on the Effective Date. This common stock was issued on January 3, 2023. The Company has also agreed to reimburse the CEO for certain out-of-pocket expenses incurred by the CEO.

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.

The Company also entered into an Executive Consulting Agreement (the "CFO Consulting Agreement"), by and between the Company and the CFO of the Company, effective January 1, 2023. Pursuant to the terms of the CFO Consulting Agreement, the CFO is entitled to fees of $9,236 (C$12,500) per month for twelve (12). In addition, the Company has also agreed to grant the CFO 100,000 restricted shares of the Company's common stock, par value of $0.0001 per share on the Effective Date. The Company has also agreed to reimburse the CFO for certain out-of-pocket expenses incurred by the CFO. This common stock was issued on January 3, 2023. The CFO's Consulting Agreement replaced the consulting agreement which expired on December 31, 2022.

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.

Financings

~~Financings~~

(a) Securities Purchase Agreements

~~At March 31,~~As at June 30, 2023, the Company had and currently has 5 security purchase agreements outstanding with 4 investors. The outstanding principal balance, ~~at March 31, 2023~~including adjustments for a recent amendment and defaults, including accrued interest of ~~the convertible promissory notes was $5,682,160~~$470,773, totaled $6,680,933 with a fair value of $7,563,466. At the time of this filing, the outstanding principal balance was $5,632,160 after 1 additional conversion of $50,000 on the October 29, 2021 investor note, for 375,052 common shares of the Company.$9,639,990.

Please refer to the interim condensed consolidated financial statements, convertible promissory notes, note 11 and fair value measurement, note 12 for details on the convertible promissory notes.

(b)Pace Savings & Credit Union Limited ("PACE")

As noted above, on March 28, 2023, the Company and PACE Savings and Credit Union Limited ("PACE") finalized a full and final mutual release of all obligations owing to PACE, including accrued interest, in exchange for an amount of ~~$923,625~~$944,125 (C$1,250,000). The funds are held in escrow by the Company's Canadian legal counsel. The funds will be released to PACE once the letter of credit, in the amount of ~~$204,550~~$209,090 (C$276,831) is released by the Ministry of the Environment, Conservation and Parks (the "MECP") to PACE. Immediately prior to this full and final mutual release, the amounts owing to PACE, included in the interim condensed consolidated balance sheets, include ~~$3,449,388~~$3,525,947 (C$4,668,274) disclosed under long-term debt and accrued interest of ~~$391,414~~$400,101 (C$529,725) disclosed under accrued ~~liabilities.~~liabilities in the interim condensed consolidated balance sheets. The Company raised the funds by securing a 2^nd. mortgage on March 1, 2023 in the amount of ~~$1,108,350~~$1,132,950 (C$1,500,000) prior to disbursements of ~~$184,725~~$188,825 (C$250,000), on its Belleville, Ontario Canada property.

The remaining PACE long-term debt was initially payable as noted below:

(i)��The credit facility bears interest at the PACE base rate of 7.00% plus 1.25% per annum, currently 12.50%, is payable in monthly blended installments of principal and interest of $6,476 (C$8,764) and matures on September 2, 2022. The first and only advance on the credit facility on February 2, 2017, in the amount of $1,182,240 (C$1,600,000), is secured by a business loan general security agreement, a $1,182,240 (C$1,600,000) personal guarantee from the CEO and a charge against the Haute leased premises. Also pledged as security are the shares of the wholly-owned subsidiaries, and a limited recourse guarantee against each of these parties. On April 3, 2020, the pledged shares were delivered by PACE and are currently held as security for the personal guarantee from the CEO and charge against the Haute leased premises. The credit facility is fully open for prepayment at any time without notice or bonus.

(ii) The credit facility advanced on June 15, 2017, in the amount of $480,180 (C$600,000), bears interest at the PACE base of 7.00% plus 1.25% per annum, currently 12.50%, is payable in monthly blended installments of principal and interest of $3,621 (C$4,901), and matures on September 2, 2022. The credit facility is secured by a variable rate business loan agreement on the same terms, conditions and security as noted above.

(iii) The corporate term loan advanced on September 13, 2017, in the amount of $2,751,772 (C$3,724,147), bears interest at PACE base rate of 7.00% plus 1.25% per annum, currently 12.50%, is payable in monthly blended installments of principal and interest of $21,953 (C$29,711), and matures September 13, 2022. The corporate term loan is secured by a business loan general security agreement representing a floating charge over the assets and undertakings of the Company, a first priority charge under a registered debenture and a lien registered under the Personal Property Security Act in the amount of $2,956,323 (C$4,000,978) against the assets including inventory, accounts receivable and equipment. The corporate term loan also included an assignment of existing contracts included in the asset purchase agreement.

For the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, ~~$102,842~~$nil (C$nil) and $103,218 (C$139,089) (2022-$~~75,525;~~78,904; C$~~95,625)~~100,699 and $154,429; C$196,324) respectively, in interest was incurred on the PACE long-term debt. As at ~~March 31,~~June 30, 2023 ~~$391,413~~$400,101 (C$529,725) (December 31, 2022-$288,407; C$390,636) in accrued interest is included in accrued liabilities in the interim condensed consolidated balance sheets

(c)Other Financings

(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 ~~$3,842,280~~$3,927,560 (C$5,200,000) (December 31, 2022-$3,839,160; C$5,200,000). The fourth tranche was received on August 13, 2021 in the amount of ~~$1,402,770~~$1,435,070 (C$1,900,000) and a portion of this fourth tranche, ~~$1,369,871~~$1,400,276 (C$1,853,933), was used to fund a portion of the purchase of the Hamilton Property, described under long-lived assets, net ~~note 7.~~(note 7), to the interim condensed consolidated financial statements. 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 12.50%) and 10% per annum with a maturity date of December 1, 2023. The Company continues to be charged at the rate of 10% per annum. 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.

Financing fees on the 1st mortgage totaled ~~$298,086~~$304,702 (C$403,419). ~~As at March 31, 2023 $31,581 (C$42,740) (December 31, 2022-$31,555; C$42,740) of accrued interest is included in accrued liabilities in the consolidated balance sheets.~~ In addition, as at ~~March 31,~~June 30, 2023 there is ~~$41,288~~$56,823 (C$~~55,877)~~75,232) (December 31, 2022-$56,409; C$76,404) of unamortized financing fees included in long-term debt in the interim condensed consolidated balance sheets.

(ii) On August 17, 2021, the Company obtained a vendor take-back 1st mortgage in the amount of ~~$1,477,800~~$1,510,600 (C$2,000,000), on the purchase of the Hamilton Property, described under long-lived assets, net (note 7). to the interim condensed consolidated financial statements. 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.

(iii) On March 1, 2023, the Company obtained a 2nd mortgage in the amount of ~~$1,108,350~~$1,132,950 (C$1,500,000) bearing interest at the annual rate of 12%, repayable monthly, interest only with a maturity date of March 1, 2024, secured as noted under (d) i) above. The Company incurred financing fees of ~~$44,334~~$45,318 (C$60,0000). In addition, as at ~~March 31,~~June 30, 2023 there is $40,657 (C$55,069) of unamortized financing fees included in long-term debt in the consolidated balance sheets

~~(iii)~~(iv) As a result of the COVID-19 virus, the Government of Canada launched the Canada Emergency Business Account (the "CEBA"), a program to ensure that small businesses have access to the capital they need to see them through the current challenges and better position them to quickly return to providing services to their communities and creating employment. The program is administered by Canadian chartered banks and credit unions.

The Company has received a total of ~~$73,890~~$75,530 (C$100,000) under this program, from its Canadian chartered bank.

The CEBA term loan agreements contain a number of positive and negative covenants, for which the Company is not in full compliance.

~~(iv)~~(v) On April 8, 2021, the Company took delivery of a truck and hauling trailer for a total purchase price of ~~$161,330~~$164,911 (C$218,338) plus applicable harmonized sales taxes. The purchase was financed by a bank term loan of ~~$147,780~~$151,060 (C$200,000), over a forty-eight-month term, bearing interest at 4.95% per annum with monthly blended instalments of principal and interest payments of ~~$3,621~~$3,702 (C$4,901) due April 7, 2025.

For the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, ~~$781~~$1,190 (C$~~1,057)~~1,600) and $1,971(C$2,657) (2022- ~~$1,576;~~$1,454; C$~~1,996)~~1,856 and $3,030; C$3,852) respectively, in interest was incurred.

~~(v)~~(vi) On April 18, 2023 and June 14, 2023, the CEO converted ~~$177,784~~$177,806 (C$238,000) and $101,039 (C$134,483) respectively, of outstanding loans to the Company in return for 856,483 and 310,888 respectively, common shares of the Company, priced at the closing trading price of $0.2076 and $0.325 respectively, per share.

(d)Financings Related to Obligations Under Capital Lease

There were no new capital leases entered into by the Company during the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023.The original terms of the ~~obligations~~remaining obligation under capital lease outstanding at ~~March 31,~~June 30, 2023 isare noted below.

(i) The lease agreement for certain equipment for the Company's organic waste processing and composting facility at a cost of ~~$287,912~~$294,303 (C$389,650), is payable in monthly blended installments of principal and interest of ~~$5,063~~$5,175 (C$6,852), plus applicable harmonized sales taxes for a period of fifty-nine months plus an initial deposit of ~~$14,372~~$14,691 (C$19,450) plus applicable harmonized sales taxes and an option to purchase the equipment for a final payment of a nominal amount of ~~$74~~$76 (C$100) 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.

Operations

The Company owns 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 and Non-Hazardous 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, SSO, leaf and yard, food, liquid, paper sludge and biosolids. During the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, tipping fees ranged from $51 (C$69) to $118 (C$159) per MT.

The Company owns a 40,535 square foot facility on 3.26 acres in Hamilton, Ontario (the "Hamilton Facility"), which includes an Environmental Compliance Approval to process 65,884 MT per annum of organic waste, 24 hours per day 7 days a week. The facility will be designed to produce, distribute and warehouse the Company's SusGro™ organic liquid fertilizer and other products that are to be provided under private label and to be sold through big box retailers, consumer lawn and garden suppliers, and for end use to the wine, cannabis and agriculture industries. With the addition of a further 11,000 square feet of office space and R&D labs, the Hamilton facility will also house the continued development of SusGlobal's proprietary formulations and branded liquid and dry organic fertilizers.

LIQUIDITY AND CAPITAL RESOURCES

As of ~~March 31,~~June 30, 2023, the Company had a bank balance of ~~$5,920~~$20,685 (December 31, 2022-$42,900) and current debt obligations and other current liabilities in the amount of ~~$23,597,279~~$26,185,878 (December 31, 2022-$22,339,175). As at ~~March 31,~~June 30, 2023, the Company had a working capital deficit of ~~$21,794,263~~$24,380,581 (December 31, 2022-$21,580,552). The Company does not currently have sufficient funds to satisfy the current debt obligations.

The Company's total assets as at ~~March 31,~~June 30, 2023 were ~~$10,808,965~~$10,903,780 (December 31, 2022-$9,865,775) and total current liabilities were ~~$23,597,279~~$26,185,878 (December 31, 2022-$22,339,175). Significant losses from operations have been incurred since inception and there is an accumulated deficit of ~~$31,380,369~~$34,327,147 as at ~~March 31,~~June 30, 2023 (December 31, 2022 -$30,345,197). Continuation as a going concern is dependent upon generating significant new revenue and generating external capital and securing debt to satisfy its creditors' demands and to achieve profitable operations while maintaining current fixed expense levels. 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.

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 ~~$23,597,279~~$26,185,878 in current debt obligations and other current liabilities, the Company estimates that approximately ~~$27,500,000~~an additional $5,000,000 must be raised to fund capital requirements and general corporate expenses for the next 12 months.

In the normal course of business, we are exposed to market risks, including changes in interest rates, certain commodity prices and Canadian currency rates. The Company does not use derivatives to manage these risks.

During the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, the ~~April~~October 29, 2021 ~~Investor~~investor converted $100,000 and $243,100 respectively, of his unsecured convertible promissory ~~notes having a stated amount of $400,000~~note for 601,296 and ~~a fair value on conversion of $463,862~~1,650,709 respectively, common shares of the Company.

As at ~~March 31,~~June 30, 2023, the current and long-term portions of our debt obligations totaled ~~$17,701,463~~$20,009,959 (December 31, 2022-$16,827,617).

In addition, as at ~~March 31, 2022,~~June 30, 2023, the Company had an outstanding letter of credit provided by PACE, in the amount of ~~$221,548~~$209,090 (C$276,831), in favor of the MECP. 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 in the process of obtaining a letter of credit for the new financial assurance with the MECP in the amount of ~~$510,301~~$481,607 (C$637,637).

CONSOLIDATED RESULTS OF OPERATIONS - FOR THE THREE-MONTH PERIOD ENDED ~~MARCH 31,~~JUNE 30, 2023COMPARED TO THE THREE-MONTH PERIOD ENDED ~~MARCH 31,~~JUNE 30, 2022

		For the three-month periods ended
		June 30, 2023			June 30, 2022

Revenue	$	153,487		$	110,143

Cost of Sales
Opening inventory		60,959			16,806
Depreciation		105,567			115,262
Direct wages and benefits		34,673			53,408
Equipment rental, delivery, fuel and repairs and maintenance		19,422			(59,035	)
Utilities		43,920			4,358
Outside contractors		—			915
		264,541			131,714
Less: closing inventory		(64,578	)		(19,555	)
Total cost of sales		199,963			112,159

Gross loss		(46,476	)		(2,016	)

Operating expenses
Management compensation-stock-based compensation		57,600			60,113
Management compensation-fees		117,305			117,266
Marketing		110,224			627,721
Professional fees		66,105			360,433
Interest expense		139,386			189,708
Office and administration		66,663			131,239
Rent and occupancy		52,549			65,666
Insurance		8,650			34,599
Filing fees		10,833			7,368
Amortization of financing costs		26,571			33,632
Directors' compensation		18,611			14,689
Stock-based compensation		196,134			166,275
Repairs and maintenance		1,934			(13,488	)
Foreign exchange (income) loss		(239,570	)		217,929
Total operating expenses		632,995			2,013,150

Net Loss Before Other Expense		(679,471	)		(2,015,166	)
Other Expense		(2,267,307	)		(213,503	)
Net Loss	$	(2,946,778	)	$	(2,228,669	)

For the three-month periods
ended
March 31, 2023 March 31, 2022

Revenue $ 164,687 $ 144,470

Cost of Sales
Opening inventory 58,695 20,582
Depreciation 108,372 116,203
Direct wages and benefits 40,852 52,088
Equipment rental, delivery, fuel and repairs and maintenance 21,424 170,188
Utilities 12,937 38,812
Outside contractors - 24,568
242,280 422,441
Less: closing inventory (60,959 ) (16,806 )
Total cost of sales 181,321 405,635

Gross (loss) (16,634 ) (261,165 )

Operating expenses
Management compensation-stock-based compensation 57,600 60,113
Management compensation-fees 116,456 118,469
Marketing 10,951 376,488
Professional fees 116,688 261,652
Interest expense 219,675 191,243
Office and administration 52,890 60,577
Rent and occupancy 50,193 50,925
Insurance 13,543 28,838
Filing fees 12,457 54,175
Amortization of financing costs 18,824 33,532
Directors' compensation 15,969 14,809
Stock-based compensation 334,291 130,512
Repairs and maintenance 19,687 2,329
Foreign exchange (income) (7,873 ) (77,749 )
Total operating expenses 1,031,351 1,305,913

Net Loss Before Other (Loss) Expense (1,047,985 ) (1,567,078 )
Other Income (Expense) 12,813 (1,296,148 )
Net Loss $ (1,035,172 ) $ (2,863,226 )

During the three-month period ended ~~March 31,~~June 30, 2023, the Company generated ~~$164,687~~$153,487 of revenue from its organic waste processing and composting facility compared to ~~$144,470~~$110,143 in the three-month period ended ~~March 31,~~June 30, 2022. The increase in revenue is primarily due to additional waste revenue from new business ~~in the amount of $35,077, new revenue~~ from ~~the sale of carbon credits in the amount of $10,229 offset by a reduction of garbage collection revenue of $25,089 as the Company began reducing this service in the prior year.~~existing customers, approximately $44,000.

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 ~~$181,321~~$199,963 for the three-month period ended ~~March 31,~~June 30, 2023 compared to ~~$405,635~~$112,159 for the three-month period ended ~~March 31,~~June 30, 2022. These costs include equipment rental, delivery, fuel, repairs and maintenance, direct wages and benefits, depreciation, utilities and outside contractors. Included are the costs for the estimate of the clean-up of certain waste as ordered by the MECP, which decreased significantly from the prior period. In addition, with ceasing the garbage collection operation, the Company no longer requires the use of outside contractors.

Operating expenses reduced by ~~$274,462~~$1,380,155 from ~~$1,305,913~~$2,013,150 in the three-month period ended ~~March 31,~~June 30, 2022 to ~~$1,031,351~~$632,995 in the three-month period ended ~~March 31,~~June 30, 2023, explained further below.

Management compensation related to stock-based compensation reduced by $2,513, in the three-month period ended ~~March 31,~~June 30, 2023 compared to the three-month period ended ~~March 31,~~June 30, 2022, as a result of the new common stock issued to the officers as stipulated in their executive consulting contracts, effective January 1, 2023. The total stock-based compensation valued at $446,400 (2022-$240,450), based on the trading price of the shares on the effective date will be expensed over the terms of the executive consulting contracts. And the management compensation relating to fees was flat, with little change between the three-months ended June 30, 2023 compared to the three-months ended June 30, 2022.

Marketing expenses reduced by ~~$2,013,~~$517,497, from ~~$118,469~~$627,721 in the three-month period ended ~~March 31,~~June 30, 2022 to ~~$116,456 in the three-month period ended March 31, 2023, the result of increased monthly fees, effective January 1, 2023, offset by the foreign exchange impact of the weakening Canadian dollar.~~

~~Marketing expenses reduced by $365,537, from $376,488 in the three-month period ended March 31, 2022 to $10,951~~$110,224 for the three-month period ended ~~March 31,~~June 30, 2023, primarily the result of a new and scaled back marketing ~~campaign which had not yet commenced during the current period.~~in 2023 compared to that in 2022.

Professional fees reduced by ~~$144,964,~~$294,328, from ~~$261,652~~$360,433 in the three-month period ended ~~March 31,~~June 30, 2022 to ~~$116,688~~$66,105 in the three-month period ended ~~March 31,~~June 30, 2023. The primary reasons for the decrease include the absence of professional fees incurred on the issuance of convertible promissory notes in the current period whereas ~~$75,000~~$25,000 in professional fees was incurred in the prior period. In addition, the Company ~~incurred lower fees from~~did not re-engage certain consultants ~~engaged to assist management in various reporting matters.~~

~~Interest expense increased by $28,432 from $191,243~~who provided services in the three-month period ended ~~March 31,~~June 30, 2022, ~~to $219,675~~a saving of approximately $150,000 and savings for various audit, review, tax and legal services, a savings of approximately $111,000.

Interest expense reduced by $50,322 from $189,708 in the three-month period ended ~~March 31,~~June 30, 2022 to $139,386 in the three-month period ended June 30, 2023. ~~This increase was primarily~~The decrease is partially due to ~~increases in in~~ the ~~prime rate~~absence of interest on the ~~Companies variable~~PACE debt, after the Company obtained a full and final mutual release on March 28, 2023, offset by additional interest ~~from~~on the new mortgage ~~received~~effective March 1, ~~2023.~~2023, which bears interest at the rate of 12% per annum.

Office and administration expenses reduced by ~~$7,687,~~$64,576, from ~~$60,577~~$131,239 in the three-month period ended ~~March 31,~~June 30, 2022 to ~~$52,890~~$66,663 in the three-month period ended ~~March 31,~~June 30, 2023, primarily ~~resulting from~~due to the ~~translation~~absence of ~~expenses originating~~certain expenditures including a claim from a ~~weakening Canadian dollar.~~municipality of approximately $25,500, website costs of approximately $15,500 and a reduction in other expenditures including lab testing and security.

Rent and occupancy decreased ~~nominally~~ by ~~$732,~~$13,117, from ~~$50,925~~$65,666 in the three-month period ended ~~March 31,~~June 30, 2022 to ~~$50,193~~$52,549 in the three-month period ended ~~March 31, 2023.,~~June 30, 2023 as a result of the absence of additional rent for roof repairs in the prior period.

Insurance decreased by ~~$15,295,~~$25,949, from ~~$28,838~~$34,599 in the three-month period ended ~~March 31,~~June 30, 2022 to ~~$13,543~~$8,650 in the three-month period ended ~~March 31,~~June 301, 2023, primarily due to the absence of insurance on the Company's new facility under construction in Hamilton, Ontario, Canada, whose construction ~~has~~had ceased ~~temporarily.~~temporarily and the Company self-insuring on certain other insurance.

Filing fees ~~decreased~~increased by ~~$41,718,~~$3,465, from ~~$54,175~~$7,368 in the three-month period ended ~~March 31,~~June 30, 2022 to ~~$12,457~~$10,833 in the three-month period ended ~~March 31,~~June 30, 2023, primarily due to ~~the absence of costs associated with the special meeting of the shareholders on March 24, 2022, administrative costs incurred in the filing of the S-1 registration statement and~~ an ~~increase in investor relations activities.~~increased cost for filings.

The amortization of financing costs reduced by ~~$14,708,~~$7,061, from ~~$33,532~~$33,632 in the three-month period ended ~~March 31,~~June 30, 2022 to ~~$18,824~~$26,571 in the three-month period ended ~~March 31,~~June 30, 2023, due to certain financing costs in connection with the mortgages payable having been fully amortized by the end of Q3-2022.

~~Directors'~~Directors’ compensation increased nominally by ~~$1,160~~$3,922 from ~~$14,809~~$14,689 in the three-month period ended ~~March 31,~~June 30, 2022 to ~~$15,969~~$18,611 in the three-month period ended ~~March 31, 2023,~~June 30, due to the appointment of a new independent director during the ~~current period.~~

~~Stock-based compensation increased by $203,779, from $130,512 in~~during the three-month period ended March 31, ~~2022 to $334,291~~2023.

Stock-based compensation increased by $29,859, from $166,275 in the three-month period ended ~~March 31,~~June 30, 2022 to $196,134 in the three-month period ended June 30, 2023, as a result of ~~significant~~several new consulting services provided ~~by several new service providers.~~during the current period.

Repairs and maintenance increased by ~~$17,358,~~$15,422, from ~~$2,329~~a credit of $13,488 in the three-month period ended ~~March 31,~~June 30, 2022 to ~~$19,687~~an expense of $1,934 in the three-month period ended ~~March 31,~~June 30, 2023, due to the ~~cost~~absence of ~~repairs to the Company's composting buildings.~~a credit adjustment on a prior expenditure.

The foreign exchange income decreased by ~~$69,876,~~$457,499, from ~~income~~an expense of ~~$77,749~~$217,929 in the three-month period ended ~~March 31,~~June 30, 2022 to income of ~~$7,873~~$239,570 in the three-month period ended ~~March 31,~~June 30, 2023, due primarily to the translation of significant United States dollar denominated transactions and balances during the period including the convertible promissory notes, compared to the prior period, during a period ~~of a strengthening~~in which the Canadian ~~dollar.~~

dollar strengthened.

During the current three-month period ended ~~March 31,~~June 30, 2023, the Company recorded a ~~gain~~loss on the revaluation of the convertible promissory notes in the amount of ~~$33,326~~$2,213,461 compared to loss of ~~$1,296,148~~$213,503 in the prior period ended ~~March 31,~~June 30, 2022 due primarily ~~no new~~to the increase in principal for certain convertible promissory notes ~~issued during~~due to an amendment and defaults along with the ~~current period versus $1,425,000 in~~impact of default interest accruing at 24% per annum. In addition, the ~~prior period and a loss~~losses on the conversion of a convertible promissory note resulted in an increase in other expense of ~~$20,513.~~$53,846. In total, the other expense increased by $2,053,804.

As at March 31, 2023, the Company had a working capital deficit of $21,794,263 (December 31, 2022-$21,580,552), incurred a net loss of $1,035,172 (March 31, 2022-$2,863,226) for the three months ended March 31, 2023 and had an accumulated deficit of $31,380,369 (December 31, 2022-$30,345,197) and expects to incur further losses in the development of its business.

These factors cast substantial doubt as to the Company's ability to continue as a going concern, which is dependent upon its ability to obtain the necessary financing to further the development of its business satisfy its outstanding obligations to its 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.

CONSOLIDATED RESULTS OF OPERATIONS - FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2023COMPARED TO THE SIX-MONTH PERIOD ENDED JUNE 30, 2022

		For the six-month periods ended
		June 30, 2023			June 30, 2022

Revenue	$	318,174		$	254,613

Cost of Sales
Opening inventory		58,695			20,582
Depreciation		213,939			231,465
Direct wages and benefits		75,525			105,496
Equipment rental, delivery, fuel and repairs and maintenance		40,846			111,153
Utilities		56,857			43,170
Outside contractors		—			25,483
		445,862			537,349
Less: closing inventory		(64,578	)		(19,555	)
Total cost of sales		381,284			517,794

Gross loss		(63,110	)		(263,181	)

Operating expenses
Management compensation-stock-based compensation		115,200			120,226
Management compensation-fees		233,761			235,735
Marketing		121,175			1,004,209
Professional fees		182,793			622,085
Interest expense		359,061			380,951
Office and administration		119,553			191,816
Rent and occupancy		102,742			116,591
Insurance		22,193			63,437
Filing fees		23,290			61,543
Amortization of financing costs		45,395			67,164
Directors' compensation		34,580			29,498
Stock-based compensation		530,425			296,787
Repairs and maintenance		21,621			(11,159	)
Foreign exchange (income) loss		(247,443	)		140,180
Total operating expenses		1,664,346			3,319,063

Net Loss Before Other Expense		(1,727,456	)		(3,582,244	)
Other Expense		(2,254,494	)		(1,509,651	)
Net Loss	$	(3,981,950	)	$	(5,091,895	)

During the six-month period ended June 30, 2023, the Company generated $318,174 of revenue from its organic waste processing and composting facility and its garbage collection operations compared to $254,613 in the six-month period ended June 30, 2022, an increase of $63,561. The increase in revenue is primarily due to additional waste revenue in the form of tipping fees from new business from existing customers, approximately $79,300, revenue from the sale of carbon credits of approximately $10,300 offset by the reduction in garbage collection revenue of approximately $26,000.

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 $381,284 for the six-month period ended June 30, 2023 compared to $517,794 for the six-month period ended June 30, 2022. These costs include equipment rental, delivery, fuel, repairs and maintenance, direct wages and benefits, depreciation, utilities and outside contractors. The reduction in costs of $136,510 is attributable to reduced depreciation as several of the Company's mobile equipment were fully depreciated in the current period, a reduction in direct labour and benefits from reduced overtime and one less staff member, offset by increased utilities costs as projected credits offered by the hydro utility expired. In addition, the equipment rental, delivery, fuel, repairs and maintenance include an estimate for the clean-up of certain waste as ordered by the MECP. The estimate has been reduced as the Company was able to use the services of a hauler to dispose of some of the excess waste to a landfill facility at a lower cost than that in the prior period.

Operating expenses reduced by $1,654,717 from $3,319,063 in the six-month period ended June 30, 2022 to $1,664,346 in the six-month period ended June 30, 2023, explained further below.

Management compensation related to stock-based compensation reduced by $5,026, in the six-month period ended June 30, 2023 compared to the six-month period ended June 30, 2022, as a result of the new common stock issued to the officers as stipulated in their executive consulting contracts, effective January 1, 2023. The total stock-based compensation valued at $446,400 (2022-$240,450), based on the trading price of the shares on the effective date is being expensed over the terms of the executive consulting contracts. And the management compensation relating to fees reduced slightly by $1,974, from $235,735 in the six-month period ended June 30, 2022 to $233,761 in the six-month period ended June 30, 2023.

Marketing expenses decreased by $883,034, from $1,004,209 in the six-month period ended June 30, 2022 to $121,175 for the six-month period ended June 30, 2023, primarily the result of a new and scaled back marketing in 2023 compared to that in 2022.

Professional fees reduced by $439,292, from $622,085 in the six-month period ended June 30, 2022 to $182,793 in the six-month period ended June 30, 2023. The primary reasons for the decrease included the absence of professional fees incurred on the issuance of convertible promissory notes in the current period whereas $75,000 in such professional fees was incurred in the prior period. In addition, the Company did not re-engage certain consultants who provided services in the prior period, a saving of approximately $229,000 and savings for various audit, review, tax and legal services, including the absence of fees in connection with its S-1/A registration statement, a total savings of approximately $125,000.

Interest expense remained relatively flat with a decrease of $21,890 from $380,951 in the six-month period ended June 30, 2022 to $359,061 in the six-month period ended June 30, 2023. The decrease is partially due to the absence of interest on the PACE debt, after the Company obtained a full and final mutual release on March 28, 2023, offset by additional interest on the new mortgage effective March 1, 2023, which bears interest at the rate of 12% per annum.

Office and administration expenses reduced by $72,263, from $191,816 in the six-month period ended June 30, 2022 to $119,553 in the six-month period ended June 30, 2023. This is primarily due to the absence of certain expenditures including a claim from a municipality of approximately $25,500, website costs of approximately $15,500, a reduction in other expenditures including lab testing and security and the effect of the translation rate for a weakening Canadian dollar quarter to quarter.

Rent and occupancy reduced by $13,849, from $116,591 in the six-month period ended June 30, 2022 to $102,742 in the six-month period ended June 30, 2023, primarily due to the absence of additional rent expense for roof repairs in the prior period.

Insurance reduced by $41,244, from $63,437 in the six-month period ended June 30, 2022 to $22,193 in the six-month period ended June 30, 2023, primarily due to the absence of insurance on the Company's new facility under construction in Hamilton, Ontario, Canada, whose construction had ceased temporarily and the Company self-insuring on certain other insurance.

Filing fees decreased by $38,253, from $61,543 in the six-month period ended June 30, 2022 to $23,290 in the six-month period ended June 30, 2023, primarily due to the absence of costs associated with the special meeting of the shareholders held last period on March 24, 2022 and the absence of administrative costs incurred in the filing of the S-1 (and S-1/A) registration statement and reduced investor relations activities.

The amortization of financing costs increased by $21,769, from $67,164 in the six-month period ended June 30, 2022 to $45,395 in the six-month period ended June 30, 2023, due to certain financing costs in connection with the mortgages payable having been fully amortized by the end of Q3-2022.

Directors' compensation increased nominally from $29,498 in the six-month period ended June 30, 2022 to $34,580 in the six-month period ended June 30, 2023, due to the appointment of a new independent director during the during the three-month period ended March 31, 2023.

Stock-based compensation increased by $233,638, from $296,787 in the six-month period ended June 30, 2022 to $530,425 in the six-month period ended June 30, 2023, as a result of several new consulting services provided during the current period.

Repairs and maintenance increased by $32,780, from income of $11,159 in the six-month period ended June 30, 2022 to an expense of $21,621 in the six-month period ended June 30, 2023, due to the absence of a credit adjustment on a prior expenditure.

The foreign exchange income increased by $387,623, from a loss of $140,180 in the six-month period ended June 30, 2022 to income of $247,443 in the six-month period ended June 30, 2023, due primarily to the translation of significant United States dollar denominated transactions and balances during the period including the convertible promissory notes, compared to the prior period, during a period in which the Canadian dollar strengthened.

During the current six-month period ended June 30, 2023, the Company recorded a loss on the revaluation of convertible promissory notes of in the amount of $2,180,135 compared to a loss of 1,509,651 (including net of the gain on extinguishment of convertible promissory notes) in the prior period ended June 30, 2022. The increase is primarily due to an increase in principal for certain convertible promissory notes due to an amendment and defaults along with the impact of default interest accruing at 24% per annum. In addition, during the six-month period ended June 30, 2023, the Company recorded a loss of $74,359 on the conversions of a convertible promissory note. Overall, the other expense increased by $744,843.

As at June 30, 2023, the Company had a working capital deficit of $24,380,581 (December 31, 2022-$21,580,552), incurred a net loss of $3,981,950 (June 30, 2022-$5,091,895) for the six months ended June 30, 2023 and had an accumulated deficit of $34,327,147 (December 31, 2022-$30,345,197) and expects to incur further losses in the development of its business.

These factors cast substantial doubt as to the Company's ability to continue as a going concern, which is dependent upon its ability to obtain the necessary financing to further the development of its business, satisfy its obligations to its 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.

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

The Company records compensation costs related to stock-based awards in accordance with ASC 718, Compensation-Stock Compensation, whereby the Company measures stock-based compensation cost at the grant date based on the estimated fair value of the award. Compensation cost is recognized on a straight-line basis over the requisite service period of the award. Where necessary, the Company utilizes the Black-Scholes option-pricing model to estimate the fair value of stock options granted, which requires the input of highly subjective assumptions including: the expected option life, the risk-free rate, the dividend yield, the volatility of the Company's stock price and an assumption for employee forfeitures. The risk-free rate is based on the U.S. Treasury bill rate at the date of the grant with maturity dates approximately equal to the expected term of the option. The Company has not historically issued any dividends and does not expect to in the near future. Changes in any of these subjective input assumptions can materially affect the fair value estimates and the resulting stock- based compensation recognized. The Company has not issued any stock options and has no stock options outstanding at ~~March 31, 2023.~~June 30, 2023 and as of the date of the filing of this document.

Indefinite Asset Impairments

The Company evaluates the intangible assets for impairment annually in the fourth quarter or when triggering events are identified and whether events and circumstances continue to support the indefinite useful life using Level 3 inputs.

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 after December 31, 2020. 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

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"), which requires enhanced disclosure of certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty while eliminating certain current recognition and measurement accounting guidance. This ASU also requires the disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases. ASU No. 2022-02 became effective for the Company's annual and interim periods beginning on January 1, 2023. As a result, the adoption of ASU 2022-02 did not have any impact on the opening balances in the interim condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU-2016-13"). ASU 2016-13 affects loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. ASU 2016-13 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company adopted this ASU on ~~January1,~~January 1, 2023. As a result, the adoption of ASU 2016-13 did not have any impact on the opening balances in the interim condensed consolidated financial statements.

EQUITY

~~EQUITY~~

As at ~~March 31,~~June 30, 2023, the Company had ~~118,618,245~~121,327,800 common shares issued and outstanding. As at ~~May 15,~~August 14, 2023, the Company had ~~120,479,780~~122,684,791 common shares issued and outstanding.

STOCK OPTIONS, WARRANTS AND RESTRICTED STOCK UNITS

The Company has no stock options, warrants or restricted stock units outstanding as at ~~March 31,~~June 30, 2023 and as of the date of the filing of this ~~filing.~~document.

RELATED PARTY TRANSACTIONS

For ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2022, the Company incurred ~~$88,728~~$89,376 (C$120,000) and $178,104 (C$240,000) (2022-$~~94,776;~~94,008; C$~~120,000),~~120,000 and $188,784; C$240,000) respectively, 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 ~~$27,728~~$27,930 (C$37,500) and $55,658 (C$75,000) (2022-$~~23,693;~~23,503; C$~~30,000)~~30,000 and $47,196; C$60,000) respectively, in management fees expense with the Company's chief financial officer (the "CFO"). As at ~~March 31,~~June 30, 2023, unpaid remuneration and unpaid expenses in the amount of ~~$252,983~~$350,358 (C$~~342,377)~~463,865) (December 31, 2022-$161,790; C$219,138) is included in accounts payable and ~~$50,933~~$81,022 (C$~~69,012)~~107,271) (December 31, 2022-$22,705; C$30,753) is included in accrued liabilities in the interim condensed consolidated balance sheets.

35During the three and six-month periods ended June 30, 2023, the CEO converted outstanding loans of $278,845 (C$372,483) and $278,845 (C$372,483) (2022-$nil; C$nil and $nil; C$nil) respectively, for 1,167,371 (2022-nil) common shares of the Company, at prices ranging from $0.2076 to $0.3250 based on the closing trading price on the day prior to each conversion.

In addition, during the ~~three-month period~~three and six-month periods ended ~~March 31,~~June 30, 2023, the Company paid the CFO interest of $nil (C$nil) and $nil (C$nil) (2022-$~~504;~~nil; C$nil and $502; C$638) respectively, on loans totaling $nil (C$nil) (2022-$29,211 (C$36,000) respectively, provided to the Company and repaid during the ~~prior period.~~three month period ended March 31, 2022.

For the independent directors, the Company recorded directors' compensation during the three ~~months~~and six-month periods ended ~~March 31,~~June 30, 2023 of ~~$15,969~~$18,611 (C$~~21,597)~~25,000) and $34,580 (C$46,597) (2022-$~~14,809;~~14,689; C$~~18,750).~~18,750 and $29,498; C$37,500) respectively. In addition, on February 18, 2023 a new independent director was appointed, and he was awarded 100,000 common shares of the Company on March 1, 2023 valued at $21,000 based on the closing trading price on the appointed date and included under stock-based compensation in the interim condensed consolidated statements of operations and comprehensive loss. Further, the new director provided the Company funds of $101,039 (C$134,483) for a private placement in exchange for 310,888 common shares of the Company priced at $0.3250 per share.

On July 19, 2023, $34,269 (C$45,200) of accounts payable owing to Travellers was converted for 131,297 common shares of the Company at a conversion price of $0.261 per share, based on the closing trading price on the previous day.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

As a smaller reporting company, as that term is defined in Item 10(f)(1) of Regulation S-K, we are not required to provide information required by this Item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period covered by this Quarterly Report on Form 10-Q.

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 effective. The matters involving internal controls over financial reporting that may be considered material weaknesses included the small size of the Company and the resulting lack of a segregation of duties.

Notwithstanding these material weaknesses, management has concluded that the unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q present fairly, in all material respects, the financial position, results of operations and cash flows in conformity with generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

During the ~~three-month~~six-month period ended ~~March 31,~~June30, 2023, there were no changes made by management to its internal controls over financial reporting.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings.

The Company has a claim against it for unpaid legal fees in the amount ~~$48,206~~of $49,277 (C$65,241). The amount is included in accounts payable on the Company's interim condensed consolidated balance sheets.

Item 1A. Risk Factors.

As a smaller reporting company, we are not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, the Company issued:

(i) 500,000 common shares for proceeds previously received.

(ii) 3,000,000 common shares issued to the CEO as stipulated in his 2023 executive consulting agreement and 100,000 common shares issued to the CFO as stipulated in his 2023 executive consulting agreement.

(iii) ~~1,049,413~~1,650,709 common shares issued on the conversion of a convertible promissory ~~notes~~note to equity.

(iv) ~~410,000~~1,040,000 common shares were issued for professional services.

(v) 20,000 common shares issued to an employee.

(vi) 100,000 common shares were issued to a new director.

(vii)310,888 common shares issued on a private placement.

(viii)1,167,371 of common shares issued on the conversion of related party debt.

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.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

Not Applicable.

Item 6. Exhibits.

The following exhibits are filed as part of this quarterly report on Form 10-Q:

Exhibit No.	Description

10.1**	Executive Chairman Consulting Agreement between SusGlobal Energy Canada Corp., Travellers International Inc. and Marc Hazout effective January 3, 2023 (incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K filed on April 17, 2023).
10.2**	Executive Consulting Agreement between SusGlobal Energy Canada Corp., and Ike Makrimichalos effective January 1, 2023 (incorporated by reference to Exhibit 10.8 to the Annual Report on Form 10-K filed on April 17, 2023).
~~10.3~~	Mortgage Commitment between R. Williamson Consultants Ltd., P.I.C.K.S. Inc., and Canadian Western Trust Company (the lenders") and 1684567 Ontario Inc. (the "borrower") and SusGlobal Energy Corp. (the "guarantor"), on March 1, 2023 (incorporated by reference to Exhibit 10.8 to the Annual Report on Form 10-K filed on April 17, 2023).
~~10.4~~	Escrow Agreement, dated March 28, 2023, by and between SusGlobal Energy Canada Corp., Alterna Savings and Credit Union Limited as assignee of Pace Savings & Credit Union Limited and Goodmans LLP (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 3, 2023).
~~10.5~~	Full and Final Mutual Release Agreement, dated as of March 28, 2023, by and between Alterna Savings and Credit Union Limited as assignee of Pace Savings & Credit Union Limited, SusGlobal Energy Corp., SusGlobal Energy Canada Corp., SusGlobal Energy Canada I Ltd., SusGlobal Energy Belleville Ltd., and Haute Inc. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on April 3, 2023).
~~10.6~~	Indemnity Agreement, dated as of March 28, 2023, by and between Alterna Savings and Credit Union Limited as assignee of Pace Savings & Credit Union Limited, SusGlobal Energy Corp., SusGlobal Energy Canada Corp., SusGlobal Energy Canada I Ltd., SusGlobal Energy Belleville Ltd., and Haute Inc. (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on April 3, 2023).
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*32.1+	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of Sarbanes-Oxley Act of 2002).
101.INS*	Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith
**	Management contract or compensatory plan or arrangement
+	In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SUSGLOBAL ENERGY CORP.

~~May 15,~~August 14, 2023	By:	/s/ Marc Hazout
		Marc Hazout
		Executive Chairman, President and Chief Executive Officer


~~May 15,~~August 14, 2023	By:	/s/ Ike Makrimichalos
		Ike Makrimichalos
		Chief Financial Officer (Principal Financial and Accounting Officer)

Part I	FINANCIAL INFORMATION
Item 1	Financial Statements	4
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	2526
Item 3	Quantitative and Qualitative Disclosures About Market Risk	3641
Item 4	Controls and Procedures	3641
Part II	OTHER INFORMATION	3741
Item 1	Legal Proceedings	3741
Item 1A	Risk Factors	3741
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	3742
Item 3	Defaults Upon Senior Securities	3742
Item 4	Mine Safety Disclosures	3742
Item 5	Other Information	3742
Item 6	Exhibits	3843

		For the three-month periods ended
		March 31, 2023			March 31, 2022
Revenue	$	164,687		$	144,470

Cost of Sales
Opening inventory		58,695			20,582
Depreciation		108,372			116,203
Direct wages and benefits		40,852			52,088
Equipment rental, delivery, fuel and repairs and maintenance		21,424			170,188
Utilities		12,937			38,812
Outside contractors		-			24,568
		242,280			422,441
Less: closing inventory		(60,959	)		(16,806	)
Total cost of sales		181,321			405,635

Gross (loss)		(16,634	)		(261,165	)

Operating expenses
Management compensation-stock- based
compensation (notes 8 and 14)		57,600			60,113
Management compensation-fees (note 8)		116,456			118,469
Marketing		10,951			376,488
Professional fees		116,688			261,652
Interest expense (notes 8, 9, 10 and 13)		219,675			191,243
Office and administration (note 8)		52,890			60,577
Rent and occupancy (note 8)		50,193			50,925
Insurance		13,543			28,838
Filing fees		12,457			54,175
Amortization of financing costs		18,824			33,532
Directors' compensation (note 8)		15,969			14,809
Stock-based compensation (note 14)		334,291			130,512
Repairs and maintenance		19,687			2,329
Foreign exchange (income)		(7,873	)		(77,749	)
Total operating expenses		1,031,351			1,305,913

Net loss from operating activities		(1,047,985	)		(1,567,078	)
Other income (expense) (note 16)		12,813			(1,296,148	)
Net loss		(1,035,172	)		(2,863,226	)
Other comprehensive (loss)
Foreign exchange (loss)		(6,634	)		(142,524	)

Comprehensive loss	$	(1,041,806	)	$	(3,005,750	)

Net loss per share-basic and diluted	$	(0.01	)	$	(0.03	)

Weighted average number of common shares outstanding- basic and diluted		117,722,279			95,990,936

		For the three-month period ended March 31, 2023			For the three-month period ended March 31, 2022
Cash flows from operating activities
Net loss	$	(1,035,172	)	$	(2,863,226	)
Adjustments for:
Depreciation		108,678			116,529
Amortization of financing fees		18,824			33,532
Stock-based compensation		391,891			190,625
Loss on conversion of convertible promissory notes		20,513			-
(Gain) loss on revaluation of convertible promissory notes		(33,326	)		1,296,148
Changes in non-cash working capital:
Trade receivables		(12,227	)		12,983
Government remittances receivable		(13,524	)		(67,671	)
Inventory		(2,218	)		4,022
Prepaid expenses and deposits		(186	)		(295,664	)
Accounts payable		206,655			800,629
Government remittances payable		22,634			19,447
Accrued liabilities		123,472			169,619
Net cash used in operating activities		(203,986	)		(583,027	)
Cash flows from investing activities
Adjustments of long-lived assets		-			(736,421	)
Net cash (used in) investing activities		-			(736,421	)
Cash flows from financing activities
Advances of long-term debt		1,109,100			-
Repayment of long-term debt		(9,134	)		(45,647	)
Financing fee on long-term debt		(44,364	)		-
Repayments of obligations under capital lease		(14,148	)		(17,502	)
Advances on convertible promissory notes		-			1,425,000
Repayment of convertible promissory notes.		-			(42,660	)
Advances of loans payable to related parties		39,939			28,828
Repayment of loans payable to related parties		-			(28,828	)
Proceeds on private placement		-			16,560
Net cash provided by financing activities		1,081,393			1,335,751
Effect of exchange rate on cash		9,238			(16,278	)
Increase in cash		886,645			25
Cash and cash equivalents-beginning of period		42,900			36,033

Cash and cash equivalents and restricted cash-end of period	$	929,545		$	36,058
Supplemental Cash Flow Disclosure:
Interest paid	$	105,351		$	207,548
Supplemental Non-Cash Disclosure:
Common stock issued at fair value for conversion of debt	$	220,154		$	-
Shares issued for prepaid services	$	141,869		$	-

		For the six-month period ended June 30, 2023			For the six-month period ended June 30, 2022
Cash flows from operating activities
Net loss	$	(3,981,950	)	$	(5,091,895	)
Adjustments for:
Depreciation		214,553			231,789
Amortization of financing fees		45,395			67,164
Stock-based compensation		645,625			417,013
Loss on conversion of convertible promissory notes		74,359			-
Loss on revaluation of convertible promissory notes		2,180,135			5,784,471
Gain on extinguishment of convertible promissory notes		-			(4,274,820	)
Changes in non-cash working capital:
Trade receivables		(360	)		11,059
Government remittances receivable		265			(172,597	)
Inventory		(4,453	)		702
Prepaid expenses and deposits		(107,408	)		(174,067	)
Accounts payable		294,353			2,528,529
Government remittances payable		52,802			40,070
Accrued liabilities		131,935			16,266
Net cash used in operating activities		(454,749	)		(616,316	)
Cash flows from investing activities
Purchase of long-lived assets		-			(1,892,767	)
Net cash (used in) investing activities		-			(1,892,767	)
Cash flows from financing activities
Advances of long-term debt		1,113,150			-
Repayment of long-term debt		(18.447	)		(52,842	)
Financing fee on long-term debt		(44,526	)		-
Repayments of obligations under capital lease		(23,738	)		(61,093	)
Advances on convertible promissory notes		-			2,080,000
Repayment of convertible promissory notes.		-			(85,880	)
Advances of loans payable to related parties		388,787			69,257
Repayment of loans payable to related parties		(70,775	)		(28,711	)
Proceeds on private placement		101,039			444,560
Subscription payable proceeds		128,248			-
Net cash provided by financing activities		1,573,738			2,365,291
Effect of exchange rate on cash		(197,079	)		108,037
Increase (decrease) in cash		921,910			(35,755	)
Cash and cash equivalents-beginning of period		42,900			36,033
Cash and cash equivalents and restricted cash-end of period	$	964,810		$	278
Supplemental Cash Flow Disclosure:
Interest paid	$	244,917		$	319,316
Supplemental Non-Cash Disclosure:
Common stock issued at fair value for conversion of debt	$	374,000		$	-
Common stock issued at fair value for conversion of related party debt		278,845			-
Shares issued for prepaid services	$	27,300		$

For the nine-month period ending December 31, 2023	$	349,128
For the year ending December 31, 2024		443,340
	$	792,468