SusGlobal Energy Corp. Reports Third Quarter 2023 Financial Results

Newsfile Corp.

Wed, Nov 15, 2023, 6:00 AM 13 min read

Toronto, Ontario--(Newsfile Corp. - November 15, 2023) - SusGlobal Energy Corp. (OTCQB: SNRG) ("SusGlobal") or (the "Company"), an environmental, agricultural, industrial biotechnology and renewables company, today announced financial results for the third quarter ended September 30, 2023, and provided an update on its operational progress.

Recent Highlights

On April 3, 2023, as disclosed, Pace Savings & Credit Union Limited had lent money to the Company and its subsidiaries (collectively, with the Company, referred to as the "Borrowers"). As of March 28, 2023, the Borrowers owed Alterna Savings and Credit Union Limited ("Alterna"), as assignee of that debt, $3,812,765 (CAD$5,195,274), including accrued interest of approximately $387,000 (CAD$527,000). On March 28, 2023, the Company entered into an escrow agreement, dated March 28, 2023, (the "Escrow Agreement") with a third-party escrow agent (the "Escrow Agent") to facilitate the discharge in full of its indebtedness to Alterna. Pursuant to the Escrow Agreement, the Company deposited into escrow $917,364 (CAD$1,250,000) and signed counterparts of a mutual release agreement and indemnity agreement. On October 23, 2023, the letter of credit No. 78 dated May 20, 2020, in the sum of $203,163.53 (CAD$276,830.63) in favor of the Ontario Ministry of the Environment, Conservation and Parks was released to Alterna. Alterna had deposited into escrow an authorization empowering the Company to discharge all security and registrations relating to the debt on its behalf, such that Alterna will no longer have any registered security interests in relation to the Company. On November 3, 2023, the escrowed property was released and the Company no longer has any indebtedness to Alterna (or Pace).
On August 1, 2023, the Company announced it had received a Renewable Natural Gas (RNG) Carbon Intensity (CI) Report using the GHGenius model to calculate the CI of 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 renewable fuel regulations in the province of Ontario, Alberta and British Columbia. The GHGenius 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 to 2050 using historical data or correlations for changes in energy and process parameters with time that are stored in the model. Facilities will produce a total of approximately 675,000 Gigajoules (GJ) of RNG per year, approximately 36,000 dry tonnes per year (dry tpy) of Digestate produced will be processed and sold as SUSGRO™ Organic Liquid Fertilizer. The Company has received a -24.7 on the Report's CI 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.
On October 3, 2023, the Company announced it had signed Commercial Terms for a Ten (10) year Renewable Natural Gas ("RNG") Purchase and Sale Agreement. The Buyer will pay a purchase price of US$20.50 (CA$28.00) per Metric Million British Thermal Unit ("MMbtu") for the RNG at the delivery point, equivalent to approximately one Gigajoule ("GJ") of RNG, valuing the final Ten (10) year offtake agreement at approximately US$138,000,000 (CA$188,771,520). The Agreement is an industry standard summary of the commercial terms for the Renewable Natural Gas purchase and sale which allows the parties to maintain confidentiality while finalizing the definitive Renewable Natural Gas Purchase and Sale Agreement ("RNGPA") in the form of a GasEDI Base Contract with special provisions which was signed on September 22, 2023. The RNGPA incorporates mutually agreeable and additional, more comprehensive terms, representations, warranties, and covenants customary to meet the local natural gas operating system standards, purchase offtake arrangements and required reporting. Under the terms of the agreement, subject to the finalization of transaction confirmations in the coming weeks, SusGlobal has committed to produce, starting in 2026 up to 674,184 GJs annually of RNG to be generated through the anaerobic digestion of organic matter at the Company's licensed facilities in Belleville and Hamilton, Ontario.
On October 12, 2023, the Company announced that its wholly owned subsidiary, SusGlobal Energy Belleville Ltd. ("SusGlobal Belleville") generated approximately 12,500 additional Verified Emission Reductions and Removals ("VERRs") and sold a further 9,000 carbon credits as part of the Anew™ SusGlobal Belleville Composting Offset Project in Ontario (the "Project"). The Project has generated approximately 117,000 VERRS (generated from 2017 through 2022). The Project and report are listed on the GHG CleanProjects® Registry, https://www.csaregistries.ca/GHG_VR_Listing/CleanProjectDetail?ProjectId=909 a business unit of the Standards Division of the Canadian Standards Association ("CSA") 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 was developed by Anew Climate, LLC formerly known as Blue Source Canada ULC ("Anew").
On November 7, 2023, the Company announced that its wholly owned subsidiary, SusGlobal Energy Canada Corp. ("SusGlobal Canada"), completed the Purchase of 2.03 acres of prime M5 Industrial Lands, located at 490 Nash Road North, in Hamilton, Ontario, adjacent to the Company's existing 3.26-acre site and facility at 520 Nash Road North. The Company believes the purchase marks a monumental step forward for SusGlobal as it merges the lands for a total 5.29-acre licensed site and solidifies its position as a leader in the organic waste processing and fertilizer production industry. Colliers International Realty Advisors Inc. ("Colliers") at the Company's request, carried out an analysis of the property to estimate its prospective market value. Based on their opinion the market value "As Complete" of the fee simple interest is estimated at US$14,222,000 (CA$18,750,000). The report describes the methods and approaches to value in support of the above conclusion, and contains the pertinent data gathered in their investigation of the market.

Revenue decreased by 37.1% during the third quarter of 2023 to $186,901 compared to the third quarter of 2022 in the amount of $297,202, The decrease in revenue is primarily due to lower carbon credit revenue of approximately $83,000 and lower waste revenue of approximately $27,000.

"We continue to process municipal organic waste streams, diverting them from landfills, while producing regenerative products and monetizing carbon offset credits as part of our Circular Economy model. We have confidence in a revenue ramp up this year and the signing of an offtake agreement," said Marc Hazout, Executive Chairman, President and CEO of SusGlobal Energy Corp. "Now that we have increased our landholdings at our second facility, our goal is to commence the commercialization of our proprietary organic liquid fertilizer and proceed with an RNG initiative in order to increase revenue and cash flow, maximizing shareholder value with an objective to up-list to a major exchange."

Unaudited 2023 Third Quarter Financial Results

For the third quarter ended September 30, 2023, SusGlobal recorded:

Revenue of $186,901.
Cost of sales of $193,120.
Operating expenses of $1,070,180 comprised primarily of $312,324 of total stock-based compensation, $140,161 of interest expense, $117,401 of management compensation-fees, $103,930 of professional fees and foreign exchange loss of $214,406.
Net loss of $1,193,109, or $0.01 loss per share-basic and diluted.
Included in the other expense for the period was an expense of $116,710 for the loss on the revaluation of the convertible promissory notes.
Adjusted EBITDA (a non-GAAP financial measure) loss of $509,178.
$10,599,934 in total assets and $26,203,416 in total current liabilities at the end of the third quarter.

About SusGlobal Energy Corp.

SusGlobal Energy Corp., the developer of SusGro™, an award winning and revolutionary pathogen free organic liquid fertilizer, is an environmental, agricultural, industrial biotechnology and renewables company focused on acquiring, developing, and monetizing a portfolio of proprietary technologies in the waste to energy and regenerative product applications globally. It is management's objective to grow SusGlobal into a significant sustainable waste to energy and regenerative products provider and a trusted brand for the fertilizer, soil and aquaculture market, as LEADERS IN THE CIRCULAR ECONOMY®. For more information, please visit the Company's website at: www.susglobalenergy.com.

In accordance with SEC Regulation G, the non-GAAP measurements in this press release have been reconciled to the nearest GAAP measurement, which can be viewed under the heading "Interim Condensed Consolidated Reconciliation of Non-GAAP Information" in the financial table included in this press release.

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company's objectives. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects," "plans," "anticipates," "believes," "intends," "estimates," "projects," "aims," "potential," "goal," "objective," "prospective," and similar expressions, or that events or conditions "will," "would," "may," "can," "could" or "should" occur. The Company cautions investors that any forward-looking statements by the Company are not guarantees of future results or performance, and that actual results may differ materially from those in forward looking statements as a result of various factors, including, but not limited to, lack of sufficient financial resources; variations in market conditions, currency and our stock; the Company's ability to obtain any necessary permits, approvals, consents or authorizations required for its activities; the Company's ability to produce energy, biogas, compost or organic fertilizer from its properties successfully or profitably, to continue its projected growth, or to be fully able to implement its business strategies and other risk factors described in the Company's filings with the U.S. Securities and Exchange Commission, which may be viewed at www.sec.gov.

- Financial Tables Follow -

SusGlobal Energy Corp.
Interim Condensed Consolidated Balance Sheets
As at September 30, 2023 and December 31, 2022
(Expressed in United States Dollars)
(unaudited)

		September 30,			December 31,
		2023			2022
ASSETS
Current Assets
Cash	$	6,431		$	42,900
Funds held in trust		924,500			-
Trade receivables		111,582			69,193
Government remittances receivable		5,080			6,983
Inventory		42,889			58,695
Prepaid expenses and deposits		687,187			580,852
Total Current Assets		1,777,669			758,623

Long-lived Assets, net		8,822,265			9,107,152
Long-Term Assets		8,822,265			9,107,152
Total Assets	$	10,599,934		$	9,865,775
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Accounts payable	$	3,871,418		$	3,475,691
Government remittances payable		453,492			371,587
Accrued liabilities		1,983,650			1,781,258
Current portion of long-term debt		9,994,265			8,816,931
Current portion of obligations under capital lease		83,950			57,275
Convertible promissory notes		9,756,700			7,796,433
Loans payable to related parties		59,941			40,000
Total Current Liabilities		26,203,416			22,339,175
Long-term debt		-			52,495
Obligations under capital lease		-			64,483
Total Long-term Liabilities		-			116,978
Total Liabilities		26,203,416			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, 124,783,286 (2022- 113,438,832) shares issued and outstanding		12,482			11,348
Additional paid-in capital		19,473,057			17,152,018
Shares to be issued		60,100			213,600
Accumulated deficit		(35,520,256	)		(30,345,197	)
Accumulated other comprehensive income		371,135			377,853

Stockholders' deficiency		(15,603,482	)		(12,590,378	)

Total Liabilities and Stockholders' Deficiency	$	10,599,934		$	9,865,775

SusGlobal Energy Corp.
Interim Condensed Consolidated Statements of Operations and Comprehensive Loss
For the three and nine-month periods ended September 30, 2023 and 2022
(Expressed in United States Dollars)
(unaudited)

		For the three-month periods ended						For the Nine-month periods ended
		September 30, 2023			September 30,2022			September 30, 2023			September 30, 2022
Revenue	$	186,901		$	297,202		$	505,075		$	551,815

Cost of Sales
Opening inventory		64,578			19,555			58,695			20,582
Depreciation		87,528			112,731			301,467			344,196
Direct wages and benefits		36,459			52,860			111,984			158,356
Equipment rental, delivery, fuel and repairs and maintenance		14,723			365,975			55,569			477,128
Utilities		32,721			(7,760	)		89,578			35,410
Outside contractors		-			535			-			26,018
		236,009			543,896			617,293			1,061,690
Less: closing inventory		(42,889	)		(48,154	)		(42,889	)		(48,154	)
Total cost of sales		193,120			495,742			574,404			1,013,536

Gross loss		(6,219	)		(198,540	)		(69,329	)		(461,721	)
Operating expenses
Management compensation-stock-based compensation		57,600			60,113			172,800			180,339
Management compensation-fees		117,401			115,175			351,162			350,910
Marketing		923			(250	)		122,098			1,003,959
Professional fees		103,930			190,653			286,723			812,738
Interest expense		140,161			208,537			499,222			589,488
Office and administration		56,567			67,377			176,120			259,193
Rent and occupancy		58,385			54,586			161,127			171,177
Insurance		10,974			12,867			33,167			76,304
Filing fees		8,562			9,699			31,852			71,242
Amortization of financing costs		26,901			27,752			72,296			94,916
Directors' compensation		18,631			14,366			53,211			43,864
Stock-based compensation		254,724			659,050			785,149			955,837
Repairs and maintenance		1,015			2,386			22,636			(8,773	)
Foreign exchange loss (income)		214,406			378,510			(33,037	)		518,690
Total operating expenses		1,070,180			1,800,821			2,734,526			5,119,884
Net loss from operating activities		(1,076,399	)		(1,999,361	)		(2,803,855	)		(5,581,605	)
Other expenses		(116,710	)		(1,697,619	)		(2,371,204	)		(3,207,270	)
Net loss		(1,193,109	)		(3,696,980	)		(5,175,059	)		(8,788,875	)
Other comprehensive loss					-						-
Foreign exchange income (loss)		327,961			652,484			(6,718	)		819,813

Comprehensive loss	$	(865,148	)	$	(3,044,496	)	$	(5,181,777	)	$	(7,969,062	)
Net loss per share-basic and diluted	$	(0.01	)	$	(0.04	)	$	(0.04	)	$	(0.09	)
Weighted average number of common shares outstanding- basic and diluted		122,972,355			105,189,849			120,391,943			100,335,858

SusGlobal Energy Corp.
Interim Condensed Consolidated Reconciliation of Non-GAAP Information
For the three-month periods ended Sept 30, 2023 and 2022
(Expressed in United States Dollars)
(Unaudited)

	For the three-month periods ended
	Sept 30, 2023			Sept 30, 2022
Net loss (GAAP)	$	(1,193,109	)	$	(3,696,980	)
Add the following items:
Interest expense		140,161			208,537
Depreciation and amortization		87,835			113,056
Stock-based compensation		312,324			719,163
Amortization of financing costs		26,901			27,752
Loss on revaluation of convertible promissory notes		116,710			1,447,619
Adjusted EBITDA (non-GAAP)	$	(509,178	)	$	(1,180,853	)