As filed with the Securities and Exchange Commission on April 5, 2017

Registration No. 333- 209143

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 3
To
FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

SUSGLOBAL ENERGY CORP.
(Exact Name of Registrant as Specified in Its Charter)

Ontario* 4953 Not Applicable
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

Gerald Hamaliuk
Chief Executive Officer
200 Davenport Road
Toronto, ON M5R 1J2

Telephone: (416) 223-8500
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Gerald Hamaliuk
Chief Executive Officer
200 Davenport Road
Toronto, ON M5R 1J2
Telephone: (416) 223-8500
Fax: (416) 223-8507
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copy to:
Thomas A. Rose, Esq.
David B. Manno, Esq.
Sichenzia Ross Ross Ference Kesner LLP
61 Broadway New York,
New York 10006
(212) 930-9700
(212) 930-9725 (Fax)


Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box [   ]

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   [   ]

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [   ]

Large accelerated filer [   ] Accelerated filer                    [   ]
Non-accelerated filer   [   ] (Do not check if a smaller Smaller reporting company [X]
reporting company)  

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) [   ]
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) [   ]

Calculation of Registration Fee
    Proposed Proposed  
  Amount maximum maximum  
Title of each class of to be offering price aggregate Amount of
securities to be registered registered (1) per unit (2) offering price registration fee
Common Stock, par value $0.0001 per share 35,849,086 NA 1,792,454.30 (2) 208*
         

This registration statement is being filed in connection with domestication under Section 388 of the General Corporation Law of the State of Delaware and a continuance under the Business Corporations Act (Ontario), pursuant to which the Registrant’s jurisdiction of incorporation will be changed from Ontario to the State of Delaware.

.  
(1)

The shares to be registered consist of 35,849,086 shares of common stock issuable upon the domestication in exchange of the Registrant’s common shares.

   
(2)

The proposed maximum aggregate offering price of the registrant’s common stock was calculated based upon the book value of $.05 per share of the registrant’s common stock pursuant to Rule 457(f)(2) of the Securities Act of 1933, as amended.

   
 

* previously paid.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.



 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 
SUBJECT TO COMPLETION, DATED APRIL 5, 2017
 

PROSPECTUS

SUSGLOBAL ENERGY CORP.

 
Shares of Common Stock
 
DOMESTICATION IN DELAWARE
 

            We were formed by articles of amalgamation on December 3, 2014 (originally incorporated on October 7, 2014), in the province of Ontario, Canada and our executive office is in Toronto, Ontario, Canada. SusGlobal Energy Corp. (“Old SusGlobal”), a company in the start-up stages, and Commandcredit Corp. (“Commandcredit”), an inactive Canadian public shell company that was formed in Ontario, Canada on June 19, 2000, amalgamated to continue business under the name of SusGlobal Energy Corp. (sometimes referred to in this prospectus as “SusGlobal Energy Canada”) The amalgamation has been accounted for as a capital transaction. On December 2, 2014, at annual and special meetings of the shareholders of each of Commandcredit and Old SusGlobal, the amalgamation of Old SusGlobal and Commandcredit was approved. The amalgamation involved issuances of shares of the amalgamated company on a one for one basis to the shareholders of the existing companies resulting in the shareholders of Commandcredit owning 96.40% of the amalgamated company and the shareholders of Old SusGlobal owing the remaining 3.60% of the amalgamated company.

            This prospectus relates to our intent to change of our jurisdiction of incorporation by discontinuing from Ontario, Canada and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”). On September 17, 2015, the shareholders of SusGlobal Energy Canada by special resolution approved SusGlobal Energy Canada’s application to continue from Ontario to Delaware. We will effect the Domestication under Section 388 of the Delaware General Corporation Law (the “DGCL”) and by filing 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 we will be domesticated and continue as a Delaware corporation (we sometimes refer to the domesticated Delaware entity as “SusGlobal Energy Delaware”). We anticipate that the Domestication will become effective shortly after the effectiveness of the registration statement of which this prospectus forms a part (we refer to this as the “Effective Time”). After SusGlobal Energy Delaware has been formed in Delaware and after the Registration Statement that this prospectus forms a part of is declared effective by the Securities and Exchange Commission, we will file with the Securities and Exchange Commission a post-effective amendment to the Registration Statement that this prospectus forms a part of to adopt the Registration Statement and to update the disclosure contained herein as appropriate.



            Upon the filing of the Certificate of Domestication, each of our currently issued and outstanding common shares will automatically be converted on a one-for-one basis into shares of SusGlobal Energy Delaware’s common stock. SusGlobal Energy Corp. a Delaware corporation is sometimes referred to herein as “SusGlobal Energy Delaware”

            We intend to seek to have our shares of common stock quoted on a market; however, there cannot be any assurance that our shares will be eligible for quotation.

 

We are an “emerging growth company” as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for future filings. Investing in our common stock involves risks. See “ Risk Factors ” beginning on page 14 of this prospectus.

 
 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

This prospectus will not be filed with the Ontario Ministry of Government Services or any other Canadian or Ontario governmental agency. No Canadian governmental agency accepts any responsibility for SusGlobal Energy Canada’s financial soundness or the correctness of any of the statements made or opinions expressed in this prospectus.

 
Prospectus dated April                    ,  2017
 
 


TABLE OF CONTENTS

SUMMARY 2
   
RISK FACTORS 14
   
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS 19
   
CAPITALIZATION 20
   
MARKET PRICES AND DIVIDEND INFORMATION 20
   
THE DOMESTICATION 21
   
SUSGLOBAL ENERGY SELECTED FINANCIAL INFORMATION 33
   
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 34
   
BUSINESS 46
   
MANAGEMENT AND CORPORATE GOVERNANCE 48
   
EXECUTIVE COMPENSATION 51
   
RELATED PARTY TRANSACTIONS 53
   
BENEFICIAL OWNERSHIP 54
   
DESCRIPTION OF CAPITAL STOCK; COMPARISON OF RIGHTS 54
   
SECURITIES ACT RESTRICTIONS ON RESALE OF SUSGLOBAL ENERGY DELAWARE COMMON STOCK 58
   
ACCOUNTING TREATMENT OF THE DOMESTICATION 58
   
VALIDITY OF THE CAPITAL STOCK 58
   
EXPERTS 58
   
WHERE YOU CAN FIND MORE INFORMATION 58
   
INDEX TO FINANCIAL STATEMENTS 60

            No person has been authorized to give any information or make any representation concerning us or the Domestication (other than as contained in this prospectus) and, if any such other information or representation is given or made, you should not rely on it as having been authorized by us. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus or the date of the incorporated document, as applicable.


Terms Used in This Prospectus

            Unless the context otherwise requires, in this prospectus, the terms “the Company,” “SusGlobal Energy” “we,” “us” and “our” refer to SusGlobal Energy Corp. as it currently exists under Ontario law and will continue under Delaware law after the Domestication and the terms “SusGlobal Energy Canada” and SusGlobal Energy Delaware” refer to the Company prior to and after the Domestication, respectively.

Industry and Market Data

            We obtained the industry, market and competitive position data described or referred to throughout this prospectus from our own internal estimates and research as well as from industry and general publications and research, surveys and studies conducted by third parties. While we believe our internal company estimates and research are reliable and the market definitions are appropriate, neither such research nor these definitions have been verified by any independent source.

Summary

            This summary provides an overview of selected information regarding our operations. This is only a summary, it may not contain all of the information that may be important to you in understanding the Domestication. You should carefully read this entire prospectus, including the section entitled “Risk Factors.” See the section of this prospectus entitled “Where You Can Find More Information.”

Our Business

            SusGlobal Energy Corp. (“SusGlobal Energy Canada”) was formed by articles of amalgamation on December 3, 2014 (originally incorporated on October 7, 2014), in the province of Ontario, Canada and our executive office is in Toronto, Ontario, Canada. SusGlobal Energy Corp., a company in the startup stages and Commandcredit Corp. (“Commandcredit”), an inactive Canadian public shell company, amalgamated to form and continue business under the name of SusGlobal Energy Corp. We are a renewable energy company focused on acquiring, developing and monetizing a global portfolio of proprietary technologies in the waste to energy application.

            With the growing amount of organic wastes being produced by society as a whole, a solution for sustainable global management of these wastes must be achieved. We believe 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 Energy Canada can therefore help turn what many consider waste into precious energy. We expect that our 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) Increasing the capacity of existing infrastructure (anaerobic digesters) to allow processing of SSO to increase biogas yield and (c) Utilize recycled plastics to produce liquid fuels.

            The convertibility of organic material into valuable end products such as biogas, liquid biofuels and compost shows the utility of renewable energy. These products can be converted into electricity and fuels and marketed to agricultural operations that are looking for an increase in crop yields, soil amendment and environmentally-sound practices. This practice also diverts these materials from landfills and reduces greenhouse gas emissions that result from landfilling organic wastes.

            We 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.

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            We 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 in the handling of organic waste.

Corporate Information

            Our principal executive offices are located at 200 Davenport Road, Toronto, Ontario M5R 1J2 Canada and our telephone number is (416) 223-8500.

Our Status as an Emerging Growth Company

            We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Certain specified reduced reporting and other regulatory requirements are available to public companies that are emerging growth companies. These provisions include:

  • an exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002;

  • an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;

  • an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements; and

  • reduced disclosure about our executive compensation arrangements.

            We have elected to opt out of the extended transition period for complying with new or revised accounting standards. This election is irrevocable.

            We will continue to be an emerging growth company until the earliest of:

  • the last day of our fiscal year in which we have total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every five years by the SEC to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest $1,000,000) or more;

  • the last day of our fiscal year following the fifth anniversary of the date of our first sale of common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended;

  • the date on which we have, during the prior three-year period, issued more than $1,000,000,000 in non- convertible debt; or

  • the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or SEC, which means the market value of our common stock that is held by non- affiliates (or public float) exceeds $700 million as of the last day of our second fiscal quarter in our prior fiscal year.

            We are also 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 our public float exceeds $75 million on the last day of our second fiscal quarter in our prior fiscal year.

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The Domestication

            We intend to change our jurisdiction from Ontario to the State of Delaware. This prospectus relates to the change of our jurisdiction of incorporation from Ontario, Canada to and continuing as a corporation incorporated under the laws of the State of Delaware (the “Domestication”).

            On September 17, 2015, the Board of Directors of SusGlobal Energy Canada approved SusGlobal Energy Canada’s changing its domicile from Ontario to Delaware by means of domestication under Section 388 of the Delaware General Corporation Law (the “DGCL”) and we refer to this change as the “Domestication”. On September 17, 2015, the shareholders of SusGlobal Energy Canada by special resolution approved the application for a continuance and authorized the Domestication. We will effect the Domestication by filing with the Secretary of State of the State of Delaware a certificate of corporate domestication and a certificate of incorporation of SusGlobal Energy Delaware and by filing an Application for Authorization to continue in another Jurisdiction with the Ministry of Government Services in Ontario. We anticipate that the Domestication will become effective shortly after the effectiveness of the registration statement of which this prospectus forms a part (we refer to this as the “Effective Time”). See “Description of Capital Stock; Comparison of Rights”. We have not received approval of a plan of arrangement in Ontario and no plan of arrangement is contemplated.

Comparison of Rights

            The rights of SusGlobal Ontario’s shareholders are currently governed by the laws of Ontario, SusGlobal’s Articles of Incorporation and bylaws. As a result of the Effective Time, the shareholders of SusGlobal Ontario holding common shares will automatically receive shares of common stock of SusGlobal Delaware. Accordingly, after the Domestication, the rights of holders of common stock will be governed by Delaware law and SusGlobal Delaware’s certificate of incorporation and bylaws.

Provision   SusGlobal Energy Canada   SusGlobal Energy Delaware
         
Authorized Capital   An unlimited number of common shares without par value.   150,000,000 shares of common stock, $0.0001 par value per share, and 10,000,000 shares of preferred stock, $.0001 par value per share, of which shares of none have been designated.
         
Preferred (Preference) Shares     As permitted (but not required) by Delaware law, the SusGlobal Energy Delaware certificate of incorporation empowers the Board of Directors to, by resolution, create and issue one or more series of preferred stock and, with respect to such series, determine the number of shares constituting the series and the designations and the powers, preferences and rights, and the qualifications and limitations thereof. No series of preferred stock has been designated.

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Amendments to Organizational Documents (i.e., Articles of Incorporation, bylaws, Memorandum and Articles of Association)   Under the OBCA, substantive changes to the constating documents of a corporation require a resolution passed by not less than two-thirds of the votes cast by the shareholders voting on the resolution authorizing the alteration and, where certain specified rights of the holders of a class of shares are affected differently by the alteration than the rights of the holders of other classes of shares, a resolution passed by not less than two-thirds of the votes cast by the holders of all of the shares of a corporation, whether or not they carry the right to vote, and a special resolution of each such class, or series, as the case may be, even if such class or series is not otherwise entitled to vote. unanimous shareholder   Pursuant to Delaware law, amendments to the certificate of incorporation must be approved by the Board of Directors and by the holders of at least a majority of the outstanding stock entitled to vote on the amendment, and if applicable, by the holders of at least a majority of the outstanding stock of each class or series entitled to vote on the amendment as a class or series.
  Unless the articles, bylaws or a unanimous shareholder agreement provides otherwise, the directors may, by resolution, make, amend or repeal a bylaw. Such bylaw, amendment or repeal must be submitted to shareholders at the next meeting of shareholders and the shareholders may confirm, reject or amend the bylaw, amendment or repeal.  
         
Provision   SusGlobal Energy Canada   SusGlobal Energy Delaware
         
         
Voting Rights   Common shares: one share, one vote on each matter that comes before holders of common shares   Common stock: one share, one vote on all matters before the holders of the common stock.
         
    As permitted by the Company’s Certificate of Incorporation, the Company’s board may designate one or more series of preferred stock which may have voting rights as assigned to them by the Board of Directors.
         
Provision   SusGlobal Energy Canada   SusGlobal Energy Delaware
         
    SusGlobal Energy Delaware bylaws provide that directors elected by a plurality of the votes cast and except as otherwise required by law, all other matters shall be determined by a majority of the votes cast.

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Redemption of Equity; Treasury Shares   Under the OBCA, subject to a corporation’s articles, a corporation may purchase any of its issued shares provided that, subject to certain exceptions, there are no reasonable grounds for believing that (i) the corporation is or, after the payment, would be unable to pay its liabilities as they become due or (ii) after the payment, the realizable value of the corporation’s assets would be less than the aggregate of (a) its liabilities and (b) its stated capital of all classes.   Pursuant to Delaware law, shares may be repurchased or otherwise acquired, provided the capital of the company will not be impaired by the acquisition. Pursuant to Delaware law, the company may hold or sell treasury shares.
         
  Under the OBCA, a corporation may, subject to the corporation’s articles, purchase or redeem any of its issued redeemable shares if there are no reasonable grounds for believing that (i) the corporation is or, after the payment, would be unable to pay its liabilities as they become due or (ii) after the payment, the realizable value of the corporation’s assets would be less than the aggregate of its liabilities and the amount that would be required to pay the holders of shares that have a right to be paid, on a redemption or liquidation, ratably with or before the holders of the shares to be purchased or redeemed, to the extent such amount is not included in the corporation’s liabilities.  
         
Stockholder/Shareholder Written Consent   The OBCA provides that, subject to certain limited exceptions, a resolution in writing signed by all shareholders (or their attorney authorized in writing) entitled to vote on that resolution is as valid as if it had been passed at a meeting of shareholders.   SusGlobal Energy Delaware’s bylaws permit any action required or permitted to be taken at any annual or special meeting of stockholders to be taken without a meeting, without prior notice and without a vote if a consent in writing, setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Company by delivery to its registered office in the State of Delaware., its principal place of business, or an officer or agent of the Company having custody of the book in which proceedings of meetings of stockholders are recoded.

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Provision   SusGlobal Energy Canada   SusGlobal Energy Delaware
   
Meeting of Stockholder/Shareholder—Notice   Under the OBCA, notice of the time and place of a meeting of shareholders of an offering corporation must be sent to each shareholder entitled to vote at the meeting not less than 21 days and not more than 50 days before the meeting.   As required by Delaware law, the SusGlobal Energy Delaware bylaws require not less than 10 days’ or more than 60 days’ notice, unless the DGCL provides for a different period.
         
Meeting of Stockholder/Shareholders—Call of Meeting   Under the OBCA, the directors of a corporation are required to call an annual meeting of shareholders within 15 months of the previous annual meeting of shareholders and may at any time call a special meeting of shareholders.   The SusGlobal Energy Delaware bylaws provide that (i) annual meetings shall be called by the Board of Directors and (ii) special meetings may be called only by the Board of Directors or the chief executive officer.
         
  The OBCA also permits the holders of not less than 5% of the issued shares that carry the right to vote at a meeting sought to be held to require the directors to call and hold a meeting of the shareholders of the corporation for the purposes stated in the requisition. If the directors do not call a meeting within 21 days of receiving the requisition, any shareholder who signed the requisition may call the meeting.  
         
Meeting of Stockholders/Shareholders— Quorum   Under the OBCA, and subject to a corporation’s bylaws, the holders of a majority of shares entitled to vote at a meeting of shareholders, whether present in person or by proxy, constitute a quorum for the meeting.   Pursuant to Delaware law, the certificate of incorporation or bylaws may specify the number to constitute a quorum but in no event shall a quorum consist of less than one-third of shares entitled to vote at a meeting.
         
    Under the SusGlobal Energy Delaware bylaws, quorum is a majority of t all shares of the Company’s stock entitled to vote at the meeting, unless or except to the extent that the presence of a larger number may be required by law.

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Provision   SusGlobal Energy Canada   SusGlobal Energy Delaware
         
Meeting of Stockholders/Shareholders— Record Date Under the OBCA, the record date for meetings of shareholders is set by the board of directors and may not be more than 60 day or less than 30 days prior to the date on which the meeting is to be held. Pursuant to Delaware law, the record date for meetings of stockholders is (i) as fixed by the Board of Directors, but may not be more than 60 days nor less than 10 days before the date of such meeting of stockholders and (ii) if not fixed by the Board of Directors, the day before notice of meeting is given.
         
Directors—Election/Appointment Under the OBCA, the directors of a corporation are to be elected at each annual meeting of shareholders at which an election of directors is required. Pursuant to Delaware law, directors are elected annually by the stockholders entitled to vote, including the holders of common stock.
         
Where the articles of a corporation provide for cumulative voting, each shareholder entitled to vote at an election of directors has the right to cast a number of votes equal to the number of votes attached to the shares held by the shareholder multiplied by the number of directors to be elected, and the shareholder may cast all such votes in favor of one candidate or distribute them among the candidates in any manner.
         
Directors—Term Under the OBCA, unless expressly elected for a stated term, each director ceases to hold office at the close of the first annual meeting of shareholders following his or her election; a director must cease to hold office not later than the close of the third annual meeting of shareholders following his or her election. Pursuant to Delaware law, directors serve for annual terms.
         
If a director is appointed or elected to fill a vacancy, that director holds office for the unexpired term  of the director’s predecessor.   

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Directors—Removal Under the OBCA, subject to certain conditions, the shareholders may, by ordinary resolution at an annual or special meeting of shareholders, remove any director or directors from office. Pursuant to Delaware law, directors may be removed by the stockholders with or without cause.
         
Directors—Vacancy Subject to certain exceptions and the articles of the corporation, a quorum of directors may fill a vacancy among the directors. Under SusGlobal Energy Delaware’s certificate of incorporation and bylaws, vacancies and newly created directorships may be filled by majority of remaining directors although less than a quorum.
         
Subject to certain exceptions and the articles of the corporation, where shareholders of a class or series of shares have an exclusive right to elect one or more directors and there is a vacancy among those directors, the remaining directors elected by that class or series may fill the vacancy, and where there are no such remaining directors, and holder of that series or class of shares may call a meeting for the purposes of filling the vacancy.
         
Directors—Number Under the OBCA, an offering corporation must have at least three directors, at least one-third of whom must not be officers or employees of the corporation or its affiliates. As determined by Board of Directors, but not less than one, as provided in the SusGlobal Energy Delaware bylaws. Under Delaware law, the number of directors may be fixed by the amendment to the bylaws or certificate of incorporation and if fixed by the certificate of incorporation, the number may be changed only by amendment to the certificate of incorporation.
         
Directors—Residency Under the OBCA, at least 25% of the directors of a corporation that is not a “non-resident corporation” must be resident Canadians, and where such a corporation has fewer than four directors, at least one must be a resident Canadian
         

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Provision   SusGlobal Energy Canada   SusGlobal Energy Delaware
Directors—Quorum and Vote Requirements Under the OBCA, subject to the articles and bylaws of a corporation, a majority of the number of directors or minimum number of directors required by the articles constitutes quorum for a meeting of directors. In no case may quorum be less than two- fifths of the number of directors or minimum number of directors, and if a corporation has fewer than three directors, then all directors must be present to constitute a quorum As permitted by Delaware law, the SusGlobal Energy Delaware bylaws provide that, a majority of the entire Board of Directors shall constitute a quorum (rather than the one-third of the directors permitted by Delaware law). Pursuant to Delaware law, the affirmative vote of a majority of directors present at a meeting at which there is a quorum constitutes action by the Board of Directors.
         
Directors—Managing Director Under the OBCA, subject to the articles or bylaws of a corporation, the directors may appoint from among the directors a managing director or a committee of directors and delegate to such managing director or committee, subject to certain exceptions, the powers of the board of directors Not applicable.
         
Director—Alternates Under the OBCA, directors may not act by proxy. Under Delaware law, directors may not act by proxy.
         
Directors and Officers— Fiduciary Under the OBCA: Under Delaware law:
         
Duties •      directors and officers are required to act honestly and in good faith with a view to the best interests of the corporation and must exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. •      Directors and officers must act in good faith, with due care, and in the best interest of the corporation and all of its stockholders. Directors and officers must refrain from self- dealing, usurping corporate opportunities and receiving improper personal benefits.
         
•      a director or officer is required to disclose any conflict of interest in writing to the corporation or request to have entered in the minutes of meetings of directors the nature and extent of his or her interest •      Decisions made by directors and officers on an informed basis, in good faith and in the honest belief that the action was taken in the best interest of the corporation and its stockholders will be protected by the “business judgment rule.”
         
•      Subject to certain exceptions, a director who has a conflict of interest shall not attend any part of a meeting of directors during which the relevant contract or transaction giving rise to the conflict of interest is discussed and shall not vote on any resolution to approve the contract or transaction.

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Provision   SusGlobal Energy Canada   SusGlobal Energy Delaware
         
Director—Indemnification; Indemnification Insurance The OBCA permits a corporation to indemnify a director or officer of the corporation, a former director or officer of the corporation or another individual who acts or acted at the corporation’s request as a director or officer, or in a similar capacity, provided that (i) the individual acted honestly and in good faith with a view to the best interests of the corporation, and (ii) in the context of criminal or administrative action involving a monetary penalty, the individual had reasonable grounds for believing that the individual’s conduct was lawful. A summary of indemnification of officers and directors under the DGCL and the SusGlobal Energy Delaware Documents is discussed below following this table of comparison. Pursuant to Delaware law, a company may purchase insurance in relation to any person who is or was a director or officer of the corporation.
         
Provision   SusGlobal Energy Canada   SusGlobal Energy Delaware
         
Sale of Assets Under the OBCA, the sale of all or substantially all of the property of the corporation requires the approval of two-thirds of the votes cast at a meeting of shareholders and of two- thirds of the votes cast by holders of shares of each class or series entitled to vote separately thereon. Pursuant to Delaware law, the sale of all or substantially all the assets of the company requires approval by the Board of Directors and stockholders holding at least a majority of the outstanding shares entitled to vote thereon.
         
Compulsory Acquisition Under the OBCA, subject to satisfying certain requirements, an offering corporation may, within 120 days of a take-over bid or issuer bid that was accepted by not less than 90% of the securities of any class of securities to which the bid related (other than securities held at the date of the bid by the offeror or an affiliate or associate of the offeror), acquire the securities held by those security holders who did not accept the take-over bid or issuer bid. Under DGCL Section 253, in a process known as a “short form” merger, a corporation that owns at least 90% of the outstanding shares of each class of stock of another corporation may either merge the other corporation into itself and assume all of its obligations or merge itself into the other corporation by executing, acknowledging and filing with the Secretary of State of the State of Delaware a certificate of such ownership and merger setting forth a copy of the resolution of its Board of Directors authorizing such merger. If the parent corporation is a Delaware corporation that is not the surviving corporation, the merger also must be approved by a majority of the outstanding stock of the parent corporation entitled to vote thereon. If the parent corporation does not own all of the stock of the subsidiary corporation immediately prior to the merger, the minority stockholders of the subsidiary corporation party to the merger may have appraisal rights as set forth in Section 262 of the DGCL.

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Dissolution/Winding Up Under the OBCA, the liquidation or dissolution of the corporation requires the approval of, subject to any applicable court order, two- thirds of the votes cast at a meeting of shareholders and of two-thirds of the votes cast by holders of shares of each class or series entitled to vote separately thereon. Under the DGCL, the dissolution of a corporation requires either (1) the approval of the Board of Directors and at least a majority of the outstanding stock entitled to vote thereon or (2) the approval of all of the stockholders entitled to vote thereon.
         
Provision   SusGlobal Energy Canada     SusGlobal Energy Delaware
         
Dissenters’/Appraisal Rights The OBCA provides that shareholders who dissent from certain actions being taken by a corporation may exercise a right of dissent and require the corporation to purchase the shares held by such shareholder at the fair value of such shares. The dissent right is applicable where a corporation proposes to: Under the DGCL, a stockholder may dissent and obtain fair value of shares in connection with certain corporate actions. A summary of the material portions of those provisions is reproduced below following this table of comparison.
           
alter its articles to alter restrictions on the powers of the corporation or on the business it is permitted to carry on;
approve an amalgamation with another corporation;
approve an arrangement, the terms of which arrangement permit dissent;
sell, lease or otherwise dispose of all or substantially all of the corporation’s property;
authorize the continuation of the company into a jurisdiction other than Ontario.
           
Stockholders’/Shareholders’   Under the OBCA, shareholders,    Pursuant to Delaware law, in any

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Derivative Actions former shareholders, directors, former directors, officers or former officers or a corporation or any of its affiliates, or any other person who, in the court’s discretion, is an appropriate person to make an application to court to bring a derivative action may bring a derivative action. In addition, the OBCA permits derivative actions to be commenced in the name and on behalf of a company or any of derivatives instituted by a stockholder of a corporation, it shall be averred in the complaint that the plaintiff was a stockholder of the corporation at the time of the transaction of which he complains or that such stockholder’s stock thereafter devolved upon such stockholder by operation of law.
         
Pursuant to Delaware law, the complaint shall set forth with particularity the efforts of the plaintiff to obtain action by the Board of Directors (“demand refusal”) or the reasons for not making such effort (“demand excusal”).
         
Such action shall not be dismissed or compromised without the approval of the court.
         
In general, the stockholders maintain stock ownership through the pendency of the derivative suit.
         
Oppression Remedy Under the OBCA, a shareholder, former shareholder, director, former director, officer or former officer of a corporation or any of its affiliates, or any other person who, in the discretion of a court, is a proper person to seek an oppression remedy, and in the case of an offering corporation, the Ontario Securities Commission, may apply to a court for an order to rectify the matters complained of where in respect of a corporation or any of its affiliates, any act or omission of a corporation or its affiliates effects a result, the business or affairs of a corporation or its affiliates are or have been exercised in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards the interest of, any security holder, creditor, director or officer.

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Provision   SusGlobal Energy Canada   SusGlobal Energy Delaware
Anti-Takeover Provisions The OBCA does not contain specific provisions. Section 203 of the DGCL generally prohibits “business combinations,” including mergers, sales and leases of assets, issuances of securities and similar transactions by a corporation with an “interested stockholder” who beneficially owns 15% or more of a corporation’s voting stock, within three years after the person or entity becomes an interested stockholder, unless:
           
the business combination or the transaction which caused the person or entity to become an interested stockholder is approved by the Board of Directors prior to the business combination or the transaction;
           
upon the completion of the transaction in which the person or entity becomes an interested stockholder, the interested stockholder holds at least 85% of the voting stock of the corporation not including (a) shares held by officers and directors and (b) shares held by employee benefit plans under certain circumstances; or
           
Provision   SusGlobal Energy Canada     SusGlobal Energy Delaware
           
at or after the person or entity becomes an interested stockholder, the business combination is approved by the Board of Directors and holders of at least 66 2/3% of the outstanding voting stock, excluding shares held by the interested stockholder.
           
A Delaware corporation may elect not to be governed by Section 203. SusGlobal Energy Delaware has not made such an election.

Risk Factors

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            An investment in our common stock will involve risks. Please review the section entitled “Risk Factors”, on page 14.

Risk Factors

            Any investment in our securities involves a high degree of risk, including the risks described below. Our business, financial condition and results of operations could suffer as a result of these risks, and the trading price of our shares could decline, perhaps significantly, and you could lose all or part of your investment. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. See the section entitled “Information Regarding Forward-Looking Statements.”

Risks Related to Our Business and Industry

             We may experience claims that our products infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products.

            We seek to improve our business processes and develop new products and applications. Many of our competitors have a substantial amount of intellectual property that we must continually monitor to avoid infringement. We cannot guarantee that we will not experience claims that our processes and products infringe issued patents (whether present or future) or other intellectual property rights belonging to others. If we are sued for infringement and lose, we could be required to pay substantial damages or be enjoined from using or selling the infringing products or technology. Further, intellectual property litigation is expensive and time-consuming, regardless of the merits of any claim, and could divert our management’s attention from operating our business.

             Our relationship with our employees could deteriorate, and certain key employees could leave the Company, which could adversely affect our business and our results of operations.

            Our business involves complex operations and therefore demands a management team and employee workforce that is knowledgeable and expert in many areas necessary for our operations. We rely on our ability to attract and retain skilled employees, including our specialized research and development and sales and service personnel, to maintain our efficient production. The departure of a significant number of our highly skilled employees or of one or more employees who hold key regional management positions could have an adverse impact on our operations, including as a result of customers choosing to follow a regional manager to one of our competitors.

             We face intense competition, and our failure to compete successfully may have an adverse effect on our net sales, gross profit and financial condition.

            Our industry is highly competitive. Many of our competitors may have greater financial, technical and marketing resources than we do and may be able to devote greater resources to promoting and selling certain products, and our competitors may therefore have greater financial, technical and marketing resources available to them than we do.

            If we do not compete successfully by developing and deploying new cost effective products, processes and technologies on a timely basis and by adapting to changes in our industry and the global economy, our net sales, gross profit and financial condition could be adversely affected.

             Failure to comply with the Foreign Corrupt Practices Act, or FCPA, and other similar anti-corruption laws, could subject us to penalties and damage our reputation.

            We are subject to the FCPA, which generally prohibits U.S. companies and their intermediaries from making corrupt payments to foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment, and requires companies to maintain certain policies and procedures. Certain of the jurisdictions in which we conduct business are at a heightened risk for corruption, extortion, bribery, pay-offs, theft and other fraudulent practices. Under the FCPA, U.S. companies may be held liable for actions taken by their strategic or local partners or representatives. If we, or our intermediaries, fail to comply with the requirements of the FCPA, or similar laws of other countries, governmental authorities in the United States or elsewhere, as applicable, could seek to impose civil and/or criminal penalties, which could damage our reputation and have a material adverse effect on our business, financial condition and results of operations.

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We are not insured against all potential risks.

            To the extent available, we maintain insurance coverage that we believe is customary in our industry. Such insurance does not, however, provide coverage for all liabilities, including certain hazards incidental to our business, and we cannot assure you that our insurance coverage will be adequate to cover claims that may arise or that we will be able to maintain adequate insurance at rates we consider reasonable.

             We may not be able to consummate future acquisitions or successfully integrate acquisitions into our business, which could result in unanticipated expenses and losses.

            Part of our strategy is to grow through acquisitions. Consummating acquisitions of related businesses, or our failure to integrate such businesses successfully into our existing businesses, could result in unanticipated expenses and losses. Furthermore, we may not be able to realize any of the anticipated benefits from the acquisitions.

            In connection with potential future acquisitions, the process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations. Some of the risks associated with acquisitions include:

  • unexpected losses of key employees or customers of the acquired company;

  • conforming the acquired company’s standards, processes, procedures and controls with our operations;

  • coordinating new product and process development;

  • hiring additional management and other critical personnel;

  • negotiating with labor unions; and

  • increasing the scope, geographic diversity and complexity of our operations.

            In addition, we may encounter unforeseen obstacles or costs in the integration of businesses we may acquire. Also, the presence of one or more material liabilities of an acquired company that are unknown to us at the time of acquisition may have a material adverse effect on our financial condition or results of operations.

             Business disruptions could seriously harm our net sales and increase our costs and expenses.

            Our worldwide operations could be subject to extraordinary events, including natural disasters, political disruptions, terrorist attacks, acts of war and other business disruptions, which could seriously harm our net sales and increase our costs and expenses. These blackouts, floods and storms could cause disruptions to our operations or the operations of our suppliers, distributors, resellers or customers. Similar losses and interruptions could also be caused by earthquakes, telecommunications failures, water shortages, tsunamis, typhoons, fires, extreme weather conditions, medical epidemics and other natural or manmade disasters for which we are predominantly self-insured.

Risks Relating to Our Common Stock

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There is currently no public trading market for our common stock and an active trading market for our common stock may not develop.

            There is currently no public or other market for shares of our common stock. Although we intend to seek listing on a market, we may never become listed on a market or exchange and a liquid trading market for our common stock may not develop.

            Even if following the Domestication our common stock becomes listed on a market, we cannot predict the extent to which investor interest in us will lead to the development of an active trading market on the market or how liquid that market might become. An active public market for our common stock may not develop or be sustained. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you, or at all.

             We have a history of net losses and we expect to incur additional losses.

            In each year since our inception we have incurred losses and have generated only $15,721 in revenue. For the -year ended December 31, 2016, net losses attributable to common stockholders aggregated $551,529 and, at December 31, 2016, the Company’s accumulated deficit was $2,447,815. We expect to incur further losses in the development of our business. We cannot assure you that we can achieve profitable operations in any future period.

             Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses doubt as to our ability to continue as a going concern.

            Although our consolidated financial statements have been prepared assuming we will continue as a going concern, our independent registered public accounting firm, in its report accompanying our consolidated financial statements as of and for the years ended December 31, 2016 and 2015, expressed substantial doubt as to our ability to continue as a going concern as of December 31, 2016, as a result of our operating losses since inception and because the Company expects to incur further losses in the development our business. The inclusion of a going concern explanatory paragraph may make it more difficult for us to secure additional financing or enter into strategic relationships on terms acceptable to us, if at all, and may materially and adversely affect the terms of any financing that we may obtain.

             We have no intention of declaring dividends in the foreseeable future.

            The decision to pay cash dividends on our common stock rests with our board of directors and will depend on our earnings, unencumbered cash, capital requirements and financial condition. We do not anticipate declaring any dividends in the foreseeable future, as we intend to use any excess cash to fund our operations. Investors in our common stock should not expect to receive dividend income on their investment.

             We may issue preferred stock in the future, and the terms of the preferred stock may reduce the value of our common stock.

            After the Domestication under the certificate of incorporation of SusGlobal Energy Delaware, our Board of Directors will be authorized to create and issue one or more additional series of preferred stock, and, with respect to each series, to determine number of shares constituting the series and the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions thereof, which may include dividend rights, conversion or exchange rights, voting rights, redemption rights and terms and liquidation preferences, without stockholder approval. If we create and issue one or more additional series of preferred stock, it could affect your rights or reduce the value of our outstanding common stock. Our Board of Directors could, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power of the holders of our common stock and which could have certain anti-takeover effects.

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             Special Meetings of our Stockholders may only be called by our Board of Directors or our chief executive officer and as such our stockholders do not have the ability to call a meeting.

            Under our bylaws only our board of directors or chief executive officer may call a special meeting of shareholders and as such your ability to participate take certain corporate actions like amending the Company’s certificate of incorporation or electing directors is limited.

             We may be exposed to risks relating to evaluations of controls required by Sarbanes-Oxley Act of 2002.

            Pursuant to Sarbanes-Oxley Act of 2002, our management will be required to report on, and our independent registered public accounting firm may in the future be required to attest to, the effectiveness of our internal control over financial reporting. Although we prepare our financial statements in accordance with accounting principles generally accepted in the United States of America, our internal accounting controls may not meet all standards applicable to companies with publicly traded securities. If we fail to implement any required improvements to our disclosure controls and procedures, we may be obligated to report control deficiencies and our independent registered public accounting firm may not be able to certify the effectiveness of our internal controls over financial reporting. In either case, we could become subject to regulatory sanction or investigation. Further, these outcomes could damage investor confidence in the accuracy and reliability of our financial statements.

             If our internal controls and accounting processes are insufficient, we may not detect in a timely manner misstatements that could occur in our financial statements in amounts that could be material.

            As a public company, we will have to devote substantial efforts to the reporting obligations and internal controls required of a public company, which will result in substantial costs. A failure to properly meet these obligations could cause investors to lose confidence in us and have a negative impact on the market price of our shares. We expect to devote significant resources to the documentation, testing and continued improvement of our operational and financial systems for the foreseeable future. These improvements and efforts with respect to our accounting processes that we will need to continue to make may not be sufficient to ensure that we maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required, new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations in the United States or result in misstatements in our financial statements in amounts that could be material. Insufficient internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our shares and may expose us to litigation risk.

            As a public company, we will be required to document and test our internal control procedures to satisfy the requirements of Section 404 of Sarbanes-Oxley, which requires annual management assessments of the effectiveness of our internal control over financial reporting. During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet our deadline for compliance with Section 404. We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we are unable to conclude that we have effective internal control over financial reporting, then investors could lose confidence in our reported financial information, which could have a negative effect on the trading price of our shares.

             For as long as we are an “emerging growth company,” we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to some other public companies.

            As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. We are an emerging growth company until the earliest of:

  • the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;

  • the last day of the fiscal year following the fifth anniversary of this offering;

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  • the date on which we have, during the previous 3-year period, issued more than $1 billion in non- convertible debt; or

  • the date on which we are deemed a “large accelerated filer” as defined under the federal securities laws.

            For so long as we remain an “emerging growth company”, we will not be required to:

  • have an auditor report on our internal control over financial reporting pursuant to the Sarbanes- Oxley Act of 2002;

  • comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis);

  • submit certain executive compensation matters to shareholders advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; and

  • include detailed compensation discussion and analysis in our filings under the Exchange Act and instead may provide a reduced level of disclosure concerning executive compensation.

            In addition, the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period for complying with new or revised accounting standards. The Company has elected to opt out of this extended transition period for complying with new or revised accounting standards. This election is irrevocable.

             Information Regarding Forward-Looking Statements

            Statements in this prospectus may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this prospectus, including the risks described under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus and in other documents which we file with the Securities and Exchange Commission.

            In addition, such statements could be affected by risks and uncertainties related to

  • our ability to raise funds for general corporate purposes and operations, including our clinical trials;

  • our ability to recruit qualified management and technical personnel;

  • our ability to complete successfully within our industry;

  • fluctuations in foreign currency exchange rates;

  • our ability to maintain and enhance our technological capabilities and to respond effectively to technological changes in our industry; and

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  • our ability to protect our intellectual property, on which our business avoiding infringing the intellectual property rights of others;

            Any forward-looking statements speak only as of the date on which they are made, and except as may be required under applicable securities laws, we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this prospectus.

Capitalization

            The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2016.

       
Cash and cash equivalents $  1,774  
Term deposit   148,960  
Total cash, cash equivalents and term deposit $ 150,734  
Debt:      
Loans payable to related party $  217,482  
             Total Debt $  217,482  
       
Stockholders' Deficiency:      
     Common stock $  2,004,407  
     Accumulated deficit   (2,447,815 )
     Comprehensive loss   (41,745 )
             Total Stockholders' Deficiency $  (485,153 )
Total      
Capitalization $  (267,671 )

            You should read this table in conjunction with the “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and the audited and unaudited financial statements and related notes included elsewhere in this prospectus.

Market Prices and Dividend Information

            Our common stock is not listed or quoted on any exchange.

The Domestication

General

            We will effect the Domestication by filing with the Secretary of State of the State of Delaware a certificate of corporate domestication and a certificate of incorporation of SusGlobal Energy Delaware and by an Application for Authorization to Continue in another Jurisdiction with the Ministry of Government Services in Ontario. On September 17, 2015 the directors of SusGlobal Energy Canada approved subject to the required approval of the shareholders of SusGlobal Energy Canada and on September 17, 2015, the shareholders of SusGlobal Energy Canada by special resolution approved the application for a continuance and authorized the Domestication. We anticipate that the Domestication will become effective shortly after the effectiveness of the registration statement of which this prospectus forms a part (we refer to this as the “Effective Time”). In connection with the Domestication, SusGlobal Energy Delaware’s Board of Directors will adopt new bylaws, which together with the new certificate of incorporation filed with the Secretary of State of the State of Delaware, will be the organizational documents of SusGlobal Energy Delaware from and after the Domestication.

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Background and Reasons for the Domestication

            Our Board of Directors believes that the Domestication will, among other things:

  • provide legal, administrative and other similar efficiencies;

  • relocate our jurisdiction of organization to one that is the choice of domicile for many publicly traded corporations, as there is an abundance of case law to assist in interpreting the DGCL, and the Delaware legislature frequently updates the DGCL to reflect current technology and legal trends; and

  • provide a more favorable corporate environment which will help us compete more effectively with other publicly traded companies in raising capital and in attracting and retaining skilled, experienced personnel.

            For many years, Delaware has been a leader in adopting, implementing and interpreting comprehensive and flexible corporate laws that are responsive to the legal and business needs of corporations.

Effects of the Domestication

            Ontario law permits an Ontario company to discontinue from Ontario and continue in an appointed jurisdiction (which includes Delaware) as if it had been incorporated under the laws of that other jurisdiction. On September 17, 2015, our shareholders by special resolution approved the Domestication and as a result we are not asking for your vote or soliciting proxies with respect to the Domestication. Shareholders of SusGlobal Energy Canada were entitled to dissent in respect of the resolution authorizing the continuance from Ontario to Delaware and to be paid the fair value of their shares in connection therewith. In order to properly dissent and be entitled to the fair value of their shares (unless the corporation did not give notice to the shareholder of the purpose of the meeting or of the shareholder’s right to dissent), a shareholder is required by the OBCA to send to corporation, a written objection to the resolution at or before the meeting at which the resolution is to be voted on. SusGlobal Energy Canada did not receive any such written objection to the resolution authorizing the continuance at or prior to the meeting of shareholders held September 17, 2015 at which shareholders voted on the resolution authorizing th e continuance. SusGlobal Energy Canada has received the consent of the Ontario Ministry of Finance for the continuance and intends to apply to the Director under the OBCA for the Director’s authorization of the continuance.

            Section 388 of the DGCL provides that an entity organized in a country outside the United States may become domesticated as a corporation in Delaware by filing in Delaware a certificate of incorporation and a certificate of corporate domestication stating, among other things, that the domestication has been approved as provided in the organizational documents of the non-U.S. entity or applicable non-Delaware law, as appropriate. Section 388 of the DGCL provides that prior to the filing of a certificate of corporate domestication with the Secretary of State of the State of Delaware, the domestication and the certificate of incorporation to be filed with the Secretary of State of the State of Delaware must be approved in the manner provided for by the document, instrument, agreement or other writing, as the case may be, governing the internal affairs of the non-U.S. entity and the conduct of its business or by applicable non-Delaware law, as appropriate. Section 388 of the DGCL does not provide any other approval requirements for a domestication. The DGCL does not provide stockholders with statutory rights of appraisal in connection with a domestication under Section 388.

            Under Section 181 of the OBCA, the OBCA will cease to apply to SusGlobal Energy Canada on the date that the corporation is continued under the DGCL. Similarly, Section 388 of the DGCL provides that, upon domesticating in Delaware:

  • SusGlobal Energy Delaware is deemed to be the same entity as SusGlobal Energy Canada and the domestication shall constitute a continuation of the existence of SusGlobal Energy Canada in the form of SusGlobal Energy Delaware;

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  • all rights, privileges and powers, as well as all property, of SusGlobal Energy Canada shall remain vested in SusGlobal Energy Delaware;

  • all debts, liabilities and duties of SusGlobal Energy Canada shall remain attached to SusGlobal Energy Delaware and may be enforced against SusGlobal Energy Delaware to the same extent as if originally incurred by it; and

  • unless otherwise agreed to or otherwise required under applicable Ontario law, the domestication shall not be deemed a dissolution of SusGlobal Energy Canada.

No Change in Business, Locations, Fiscal Year or Employee Plans

            The Domestication will effect a change in our jurisdiction of incorporation, and other changes of a legal nature, including changes in our organizational documents, which are described in this prospectus. The business, assets and liabilities of SusGlobal Energy Delaware, as well as our principal locations and fiscal year, will be the same upon the effectiveness of the Domestication as they are prior to the Domestication. Upon effectiveness of the Domestication, all of our obligations will continue as outstanding and enforceable obligations of SusGlobal Energy Delaware.

            Any SusGlobal Energy Canada employee benefit plans and agreements will be continued by SusGlobal Energy Delaware. We expect to amend any and all of our share-based benefit plans in accordance with their terms as may be necessary to provide that SusGlobal Energy Delaware common stock will be issued upon the exercise of any options or the payment of any other share-based awards granted under the plans, and otherwise to reflect appropriately the substitution of SusGlobal Energy Delaware common stock for SusGlobal Energy common shares in connection with the plans, from and after the effectiveness of the Domestication.

Our Management and Our Board of Directors

            The executive officers of SusGlobal Energy Delaware will be the same as the executive officers of SusGlobal Energy Canada immediately prior to the Domestication. Our current executive officers are Gerald Hamaliuk (Chief Executive Officer) Marc Hazout (President) and Ike Makrimichalos (Chief Financial Officer and Secretary).

            Our directors after the Domestication will be the same as the directors of SusGlobal Energy Canada prior to the Domestication. Our current directors are Gerald Hamaliuk, Marc Hazout, and Vincent Ramoutar.

            See “Management and Corporate Governance.”

Domestication Share Conversion

            In connection with the Domestication, the issued and outstanding common shares of SusGlobal Energy Canada will automatically convert on a one-for-one basis, into shares of SusGlobal Energy Delaware. Consequently, upon the Effective Time, each holder of SusGlobal Energy Canada’s common shares will instead hold a share of SusGlobal Energy Delaware common stock representing the same proportional equity interest in SusGlobal Energy Delaware as that shareholder held in SusGlobal Energy Canada prior to the Effective Time. The number of shares of SusGlobal Energy Delaware common stock outstanding immediately after the Effective Time will be 33,868,607.

            SusGlobal Energy Delaware does not intend to issue new stock certificates to SusGlobal Energy Delaware stockholders who currently hold any of our share certificates in connection with the Domestication. A shareholder who currently holds any of our share certificates will receive a new stock certificate upon request pursuant to Section 158 of the DGCL or upon any future transaction in SusGlobal Energy Delaware common stock that requires the transfer agent to issue stock certificates in exchange for existing share certificates. It is not necessary for shareholders of SusGlobal Energy Canada to exchange their existing share certificates for share certificates of SusGlobal Energy Delaware in connection with the Domestication. Until surrendered and exchanged, each certificate evidencing SusGlobal Energy Canada common shares will be deemed for all purposes of the Company to evidence the identical number of shares of SusGlobal Energy Delaware common stock.

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Comparison of Shareholder Rights

            Upon the consummation of the Domestication our jurisdiction of incorporation will change from Ontario to the State of Delaware and, as a result, our organizational documents will change and will be governed by Delaware law rather than Ontario law. Although the rights and privileges of stockholders of a Delaware corporation and the rights and privileges of stockholders of an Ontario corporation are, in many instances, comparable, there are significant differences. The following is a summary of the material differences between the rights of holders of SusGlobal Energy common shares and the holders of SusGlobal Energy Delaware’s common stock. These differences arise principally from differences between the DGCL and the OBCA and between SusGlobal Energy Canada’s articles of incorporation and bylaws and SusGlobal Energy Delaware’s certificate of incorporation and bylaws. Our business, assets and liabilities, as well as our executive officers, principal business locations and fiscal year, did not change as a result of the Domestication. While we believe that this summary describes the material differences among the rights of holders of SusGlobal Energy Delaware common stock following the continuance, it does not contain all information, some of which may be important to you. We urge you to read the instruments governing the provisions of the DGCL and the OBCA, which are relevant to a full understanding of the governing instruments, fully and in their entirety.

Votes Required for Certain Transactions

            Under the OBCA, certain corporate actions, such as certain amalgamations (other than with a direct or indirect wholly-owned subsidiary), continuances, and sales, leases or exchanges of all or substantially all the property of a corporation other than in the ordinary course of business, and other corporate actions such as liquidations, dissolutions and (if ordered by a court) arrangements, are required to be approved by special resolution. A special resolution is a resolution passed at a special meeting by not less than two-thirds of the votes cast in respect of the resolution; in certain cases, a special resolution to approve certain corporate actions is also required to be approved separately by the holders of a class or series of shares, including in certain cases a class or series of shares not otherwise carrying voting rights.

            The DGCL requires the affirmative vote of a majority of the outstanding stock entitled to vote thereon to authorize any merger, consolidation, dissolution or sale of substantially all of the assets of a corporation, except that no authorizing stockholder vote is required of a corporation surviving a merger if (a) such corporation's certificate of incorporation is not amended in any respect by the merger, (b) each share of stock of such corporation outstanding immediately prior to the effective date of the merger will be an identical outstanding or treasury share of the surviving corporation after the effective date of the merger and (c) the number of shares to be issued in the merger, together with the number of shares initially issuable upon conversion of any other shares, securities or obligations issued or delivered in the merger, does not exceed 20 percent of such corporation's outstanding common stock immediately prior to the effective date of the merger. The DGCL does not generally require class voting, except in connection with certain amendments to the Certificate of Incorporation that, among other things, adversely affects a class of stock. Stockholder approval is also not required under the DGCL for mergers or consolidations in which a parent corporation merges or consolidates with a subsidiary of which it owns at least 90 percent of the outstanding shares of each class of stock. Finally, unless required by its certificate of incorporation, stockholder approval is not required under the DGCL for a corporation to merge with or into a direct or indirect wholly owned subsidiary of a holding company (as defined in the DGCL) in certain circumstances.

            Under Section 203 of the DGCL ("Section 203"), certain "business combinations" with "interested shareholders" of Delaware corporations are subject to a three year moratorium unless specified conditions are met. Under Section 203, a Delaware corporation is prohibited from engaging in a "business combination" with an "interested stockholder" for three years following the date that such person or entity becomes an interested stockholder. With certain exceptions, an interested stockholder is a person or entity who or which owns, individually or with or through certain other persons or entities, 15% or more of the corporation's outstanding voting shares (including any rights to acquire shares pursuant to an option, warrant, agreement, arrangement, or understanding, or upon the exercise of conversion or exchange rights, and shares with respect to which the person or entity has voting rights only).

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            The three year moratorium imposed by Section 203 on business combinations does not apply if (a) prior to the date on which such stockholder becomes an interested stockholder the board of directors of the subject corporation approves either the business combination or the transaction that resulted in the person or entity becoming an interested stockholder; (b) upon consummation of the transaction that made him or her an interested stockholder, the interested stockholder owned at least 85% of the corporation's voting shares outstanding at the time the transaction commenced (excluding from the 85% calculation shares owned by directors who are also officers of the subject corporation and shares held by employee stock plans that do not give employee participants the right to decide confidentially whether to accept a tender or exchange offer); or (c) on or after the date such person or entity becomes an interested stockholder, the board approves the business combination and it is also approved at a stockholders' meeting by 66 2/3% of the outstanding voting shares not owned by the interested stockholder. Section 203 also might have the effect of limiting the ability of a potential acquirer to make a two tiered bid for the Company in which all stockholders would not be treated equally. Stockholders should note, however, that the application of Section 203 will confer upon the Company's board of directors the power to reject a proposed business combination in certain circumstances, even though a potential acquirer may be offering a substantial premium for the Corporation's shares over the then current market price. Section 203 would also discourage certain potential acquirers unwilling to comply with its provisions. Section 203 is not applicable to companies that are not listed on a (US) national stock exchange or that do not have a class of voting securities held of record by more than 2,000 stockholders. Accordingly, Section 203 does not presently apply to the Corporation. A Delaware corporation to which Section 203 applies may elect not to be governed by Section 203, and the Corporation reserves the right to opt out of Section 203 at any time in the future.

Cumulative Voting

            Under the OBCA, unless a corporation's articles provide otherwise, there is no cumulative voting for the election of directors.

            Under Delaware law, cumulative voting in the election of directors is not mandatory, and for cumulative voting to be effective it must be expressly provided for in the certificate of incorporation. In an election of directors under cumulative voting, each share of stock nominally having one vote is entitled to a number of votes equal to the number of directors to be elected. A stockholder may then cast all such votes for a single candidate or may allocate them among as many candidates as the stockholder may choose. Without cumulative voting, the holders of a majority of the shares of stock present at an annual meeting would have the power to elect all the directors to be elected at that meeting, and no person could be elected without the support of holders of a majority of the shares of stock. The charter documents for SusGlobal Energy Delaware will not provide for cumulative voting.

Classified Board of Directors

            Under the OBCA, it is not necessary that all directors elected at the same meeting hold office for the same term. The OBCA also provides that, unless expressly elected for a stated term, each director ceases to hold office at the close of the first annual meeting of shareholders following his or her election, and the OBCA requires that a director cease to hold office not later than the close of the third annual meeting of shareholders following his or her election.

            A classified board of directors is one on which a certain number, but not all, of the directors are elected on a rotating basis each year. The DGCL permits a corporation to establish a classified board of directors, pursuant to which the directors can be divided into as many as three classes with staggered three year terms of office, with only one class of directors standing for election each year. Members of a classified board may be removed from office only for cause. A classified board of directors could therefore discourage acquisitions of the Company not approved by management, since the acquirer could be unable to install its own designees on the board for more than two years after acquiring control. SusGlobal Energy Delaware’s certificate of incorporation and bylaws will not provide for a classified board.

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Calling a Shareholders Meeting

            Under the OBCA, the holders of not less than 5% of the issued shares of a corporation that carry the right to vote at the meeting sought to be held may requisition the directors to call a meeting of shareholders. Upon the satisfaction of the technical requirements set out in the OBCA for making such a requisition, the directors of the corporation must call a meeting of shareholders. If the directors do not call a meeting within 21 days of receiving the requisition, any shareholder who signed the requisition may call the meeting.

            Under the DGCL, special meetings of the shareholders may be called by the board of directors or by any other person as may be authorized to do so by the certificate of incorporation or the bylaws of the corporation. SusGlobal Energy Delaware’s certificate of incorporation will not limit the ability of stockholders to take action by written consent, and its bylaws permit action by written consent. Under the bylaws of SusGlobal Energy Delaware a special meeting of stockholders may be called by the Board of Directors or the Company’s chief executive officer.

Shareholder Quorum

            Under the OBCA, a corporation's bylaws may specify the number of shares with voting rights attached thereto which shall be present, or represented by proxy, in order to constitute a quorum for the transaction of any business at any meeting of the shareholders.

            Under the DGCL, a corporation's certificate of incorporation or bylaws may specify the number of shares of stock or the voting power that shall be present, or represented by proxy, in order to constitute a quorum for the transaction of any business at any meeting of the stockholders, in no event, however, shall a quorum consist of less than one third of the shares entitled to vote at the meeting except that, where a separate vote by a class or series of classes or series is required, a quorum shall consist of no less than one third of the shares of such class or series or classes or series. Under the bylaws of SusGlobal Energy Delaware, at any meeting of stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of the stock entitled to vote who are present, in person or by proxy may adjourn the meeting to another place, date or time.

Advance Notice Provisions for Shareholder Nominations and Proposals

            Under the OBCA, proposals with respect to the nomination of candidates for election to the board of directors may be made at or before any annual meetings of the corporation. Any shareholder may submit a proposal, and a shareholder or persons who have the support of persons who represent, in the aggregate, not less than 5% of the shares or 5% of the shares o f a class or series of shares of the corporation entitled to vote at the meeting to which the proposal is to be presented may submit a proposal nominating a director for election. If a shareholder or shareholders submitting a proposal submit notice to a corporation of the matter that such shareholder or shareholders propose to raise at a meeting of shareholders not later than 60 days prior to the anniversary of the last previous annual meeting of shareholders, then the corporation is required (subject to certain exceptions) to set out the proposal and any statement of support submitted by the shareholder or shareholders in the management information circular in respect of such meeting. If a corporation refuses to accept a notice that otherwise complies with the related provisions of the OBCA, the shareholder or shareholders who provided such notice and proposal may apply to a court to make any order that it seems fit, including restraining the holding of a meeting at which it was sought to bring forth such a proposal.

            The DGCL does not require advance notice for stockholder nominations and proposals, but a Delaware corporation may require such advance notice pursuant to its bylaws.

Amendment to Governing Documents

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            Under the OBCA, any amendment to a corporation's articles generally requires approval by special resolution which is a resolution passed by not less than two-thirds of the votes cast by shareholders entitled to vote on the resolution. The OBCA provides that unless the articles or bylaws otherwise provide, the directors may, by resolution, make, amend or repeal any bylaws that regulate the business or affairs of a corporation. Where the directors make, amend or repeal a bylaw, they are required under the OBCA to submit the bylaw, amendment or repeal to the shareholders at the next meeting of shareholders, and the shareholders may confirm, reject or amend the bylaw, amendment or repeal. If the directors of a corporation do not submit a bylaw an amendment or a repeal to the shareholders at the next meeting of shareholders, the bylaw, amendment or repeal will cease to be effective, and no subsequent resolution of the directors to adopt, amend or repeal a bylaw having substantially the same purpose and effect is effective until it is confirmed or confirmed as amended by the shareholders.

            The DGCL requires a vote of the corporation's board of directors followed by the affirmative vote of a majority of the outstanding stock of each class entitled to vote for any amendment to the certificate of incorporation. If an amendment alters the powers, preferences or special rights of a particular class or series of stock so as to affect them adversely, that class or series shall be given the power to vote as a class notwithstanding the absence of any specifically enumerated power in the certificate of incorporation. If an amendment adversely affects the rights or preferences of a particular class or series of stock, that class or series must approve the amendment as a class even if the certificate of incorporation does not provide that right. The DGCL also states that the power to adopt, amend or repeal the bylaws of a corporation shall be in the stockholders entitlement to vote, provided that the corporation in its certificate of incorporation may confer such power on the board of directors in addition to the stockholders. The Certificate of Incorporation of SusGlobal Energy Delaware confers such power on the Company's board of directors.

Dissenters’ or Appraisal Rights

            The OBCA provides that shareholders of a corporation governed thereunder who are entitled to vote on certain matters are entitled to exercise dissent rights and to be paid the fair value of their shares in connection therewith. The OBCA does not distinguish for this purpose between listed and unlisted shares. Such matters include: (i) any amalgamation with another corporation (other than with certain affiliated corporations); (ii) an amendment to the corporation's articles to add, change or remove any provisions restricting the issue, transfer or ownership of shares; (iii) an amendment to the corporation's articles to add, change or remove any restriction upon the business or businesses that the corporation may carry on; (iv) a continuance under the laws of another jurisdiction; (v) a sale, lease or exchange of all or substantially all the property of the corporation other than in the ordinary course of business; (vi) matters in respect of which a court has granted dissent rights to shareholders; or (vii) certain amendments to the articles of a corporation which require a separate class or series vote.

            Under the DGCL, registered holders of shares of any class or series have the right, in certain circumstances, to dissent from a merger or consolidation of the corporation by demanding payment in cash for the shares equal to the fair value (excluding any appreciation or depreciation as a consequence, or in expectation, of the transaction) of such shares, as determined by agreement with the corporation or by an independent appraiser appointed by a court in an action timely brought by the corporation or the dissenters. The DGCL grants dissenters appraisal rights only in the case of mergers or consolidations and not in the case of a sale or transfer of assets or a purchase of assets for stock regardless of the number of shares being issued, and does not grant dissenters' rights in connection with amendments to the certificate of incorporation. Further, no appraisal rights are available for shares of any class or series listed on a national securities exchange or held of record by more than 2,000 stockholders, unless the agreement of merger or consolidation converts such shares into anything other than (a) stock of the surviving corporation (or depositary receipts in respect thereof), (b) stock of another corporation which is either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by NASDAQ or held of record by more than 2,000 stockholders, (c) cash in lieu of fractional shares, or (d) some combination of the above. In addition, dissenter's rights are not available for any shares of the surviving corporation if the merger did not require the vote of the stockholders of the surviving corporation. The DGCL does not provide stockholders of a corporation with appraisal rights when the corporation acquires another business through the issuance of its stock (i) in exchange for the assets of the business to be acquired, (ii) in exchange for the outstanding stock of the corporation to be acquired, or (iii) in a merger of the corporation to be acquired with a subsidiary of the acquiring corporation.

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Oppression Remedy

            The OBCA provides an oppression remedy that enables a court to make any order, both interim and final, to rectify the matters complained of if the court is satisfied upon application by a complainant (as defined below) that: (i) any act or omission of the corporation or an affiliate effects or threatens to effect a result; (ii) the business or affairs of the corporation or an affiliate are or have been carried on or conducted in a manner; or (iii) the powers of the directors of the corporation or an affiliate are or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interest of any security holder, creditor, director or officer.

            A complainant may include: (a) a present or former registered holder or beneficial owner of securities of a corporation or any of its affiliates; (b) a present or former officer or director of the corporation or any of its affiliates; and/or (c) any other person who in the discretion of the court is a proper person to make such application.

            The oppression remedy provides the court with an extremely broad and flexible jurisdiction to intervene in corporate affairs to protect shareholders and other complainants. While conduct which is in breach of fiduciary duties of directors or that is contrary to the legal right of a complainant will normally trigger the court's jurisdiction under the oppression remedy, the exercise of that jurisdiction does not depend on a finding of a breach of such legal and equitable rights.

            The DGCL does not provide for an oppression remedy. However, the DGCL provides a variety of legal and equitable remedies to a corporation's stockholders for improper acts or omissions of a corporation, its officers and directors. Under the DGCL, only stockholders can bring an action alleging a breach of fiduciary duty by the directors of a corporation.

Derivative Action

            Under the OBCA, a complainant may apply to the court for leave to bring an action in the name of and on behalf of a corporation or any subsidiary, or to intervene in an existing action to which any such corporation or subsidiary is a party, for the purpose of prosecuting, defending or discontinuing the action on behalf of the corporation or subsidiary. Under the OBCA, no action may be brought and no intervention in an action may be made unless the court is satisfied that the complainant has given notice to the directors of the corporation or its subsidiary of the complainant's intention to apply to the court not less than fourteen (14) days before bringing the application, or otherwise as ordered by the court and (i) the directors of the corporation or its subsidiary do not bring, diligently prosecute or defend or discontinue the action; (ii) the complainant is acting in good faith; and (iii) it appears to be in the interests of the corporation or its subsidiary that the action be brought, prosecuted, defended or discontinued. Under the OBCA, the court in a derivative action may make any order it thinks fit including, without limitation, (i) an order authorizing the complainant or any other person to control the conduct of the action,(ii) an order giving directions for the conduct of the action, (iii) an order directing that any amount adjudged payable by a defendant in the action shall be paid, in whole or in part, directly to former and present security holders of the corporation or its subsidiary instead of to the corporation or its subsidiary, and (iv) an order requiring the corporation or its subsidiary to pay reasonable legal fees and any other costs reasonably incurred by the complainant in connection with the action.

            Under the DGCL, derivative actions may be brought in Delaware by a stockholder on behalf of, and for the benefit of, the corporation. The DGCL provides that a stockholder must aver in the complaint that he or she was a stockholder of the corporation at the time of the transaction of which he or she complains or that such stockholder's stock thereafter devolved upon such stockholders by operation of law. A stockholder may not sue derivatively unless he or she first makes demand on the corporation that it bring suit and such demand has been refused, unless it is shown that such demand would have been futile. The DGCL does not require a bond or security by a plaintiff in a derivative action.

Director Qualifications

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            At least 25% of the directors of a corporation governed by the OBCA must be resident Canadians, unless the corporation has fewer than four directors (in which case at least one director must be a resident Canadian).

            The OBCA also requires that an offering corporation, not have fewer than three directors, at least one-third of whom are not officers or employees of the corporation or its affiliates.

            Delaware law does not have comparable requirements, but a corporation can prescribe qualifications for directors under its certificate of incorporation or bylaws.

Fiduciary Duties of Directors

            Directors of corporations governed by the OBCA have fiduciary obligations to the corporation. Under the OBCA, directors of an OBCA corporation must act honestly and in good faith with a view to the best interests of the corporation, and must exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

            Under the DGCL, the duty of care requires that the directors act in an informed and deliberative manner and to inform themselves, prior to making a business decision, of all material information reasonably available to them. The duty of loyalty may be summarized as the duty to act in good faith, not out of self-interest, and in a manner that the directors reasonably believe to be in the best interests of the stockholders.

            The DGCL also provides that the charter of the corporation may include a provision which limits or eliminates the liability of directors to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided such liability does not arise from certain proscribed conduct, including acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, breach of the duty of loyalty, the payment of unlawful dividends or expenditure of funds for unlawful stock purchases or redemptions or transactions from which such director derived an improper personal benefit. SusGlobal Energy Delaware’s certificate of incorporation eliminates the liability of the directors to the Company or its stockholders for monetary damages for breach of fiduciary duty as directors to the fullest extent permitted by Delaware laws, as that law exists currently and as it may be amended in the future.

            The OBCA does not permit any such limitation of a director's liability.

Interested Director Transactions

            Under the OBCA, a director who has a conflict of interest is required to disclose the conflict of interest in writing to the corporation or request to have entered in the minutes of meetings of directors the nature and extent of his or her interest. Subject to certain exceptions, a director who has a conflict of interest shall not attend any part of a meeting of directors during which the relevant contract or transaction giving rise to the conflict of interest is discussed and shall not vote on any resolution to approve the contract or transaction. Provided that an interested director has complied with the OBCA’s disclosure requirements with respect to a conflict of interest and that the contract or transaction was reasonable and fair to the corporation at the time of its approval, the contract or transaction is not void or voidable.

            Under the DGCL, certain contracts or transactions in which one or more of a corporation's directors has an interest are not void or voidable simply because of such interest, provided that certain conditions are met, such as obtaining required disinterested board approval, fulfilling the requirements of good faith and full disclosure, or proving the fairness of the transaction.

Loans to Officers and Employees

            Under the DGCL, a Delaware corporation may make loans to, guarantee the obligations of, or otherwise assist its officers or other employees and those of its subsidiaries (including directors who are also officers or employees) when such action, in the judgment of the directors, may reasonably be expected to benefit the corporation.

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Removal of Directors

            Under the OBCA, provided that articles of the corporation do not provide for cumulative voting, shareholders of a corporation may by ordinary resolution passed at an annual or special meeting remove any director or directors from office. If holders of a class or series of shares have the exclusive right to elect one or more directors, a director elected by them may only be removed by an ordinary resolution at a meeting of the shareholders of that class or series.

            If all of the directors have resigned or have been removed without replacement, a person who manages or supervises the management of the business and affairs of the corporation is deemed to be a director, unless the person who manages the business or affairs of the corporation is (a) an officer under the direction or control of a shareholder or other person, (b) a lawyer, notary accountant or other professional who participates in the management of the corporation solely for providing professional services or (c) a trustee in bankruptcy, receiver, receiver manager or secured creditor who participates in the management of the corporation or exercises control over its property solely for the purpose of the realization of security or the administration of the bankrupt's estate, in the case of a trustee in bankruptcy.

            Under Delaware law, any director or the entire board of directors of a corporation that does not have a classified board of directors or cumulative voting may be removed with or without cause with the approval of at least a majority of the outstanding shares entitled to vote at an election of directors. The certificate of incorporation and bylaws of SusGlobal Energy Delaware do not provide for cumulative voting or a classified board.

Filling Vacancies on the Board of Directors

            Under the OBCA, subject to the articles of the corporation, a vacancy among the directors may be filled at a meeting of shareholders or by a quorum of directors except when the vacancy results from an increase in the number or maximum number of directors or from a failure to elect the appropriate number of directors required by the articles. Each director so appointed holds office for the unexpired term of his or her predecessor unless his or her office is vacated earlier. The directors are not entitled to appoint directors between meetings of shareholders if, after such an appointment, the total number of directors would be more than one and one-third the number of directors required to have been elected at the last annual meeting of the corporation’s shareholders.

            Under the DGCL, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum.

Indemnification of Officers and Directors

            Under the OBCA, a corporation may indemnify a director or officer, a former director or officer or a person who acts or acted at the corporation's request as a director or officer, or another person acting in similar capacity, of another entity (each an "Indemnifiable Person"), against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him or her in respect of any civil, criminal or administrative action or proceeding to which he or she is made a party by reason of being or having been a director or officer of the corporation, if: (a) he or she acted honestly and in good faith with a view to the best interests of the corporation; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he or she had reasonable grounds for believing that his or her conduct was lawful. A corporation may indemnify an Indemnifiable Person or advance monies in respect of a proceeding in which the Indemnifiable Person is involved because of the Indemnifiable Person’s association with the corporation or other entity if the individual fulfils the requirements under (a) and (b), above. An Indemnifiable Person is entitled to indemnity from the corporation if he or she was not judged by the court or other competent authority to have committed any fault or omitted to do anything that the individual ought to have done and fulfilled the conditions set out in (a) and (b), above.

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            The DGCL generally permits the indemnification of expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred in the defense or settlement of a direct, derivative, or third party action, provided there is a determination by a majority vote of a disinterested quorum of the directors or a committee of the board, by independent legal counsel, or by the stockholders, that the person seeking indemnification acted in good faith and in a manner he or she reasonably believed to be in (or not opposed to) the best interests of the corporation and, with respect to any criminal action, had no reasonable cause to believe the conduct was unlawful. Without court approval, however, no indemnification may be made in respect of any action by the corporation, including any derivative action, in which the person was adjudged liable. The Certificate of Incorporation of SusGlobal Energy Delaware requires it to indemnify its officers and directors and former officers and directors to the fullest extent permitted by Delaware law and as the same may be amended from time to time. Irrespective of the contents of the Company’s charter documents, Delaware law requires indemnification of reasonable defense expenses incurred by a director or officer, in any such proceeding, to the extent the director or officer was successful in the defense of the proceeding.

            In a derivative action under the DGCL, or an action by or in the right of the corporation, the corporation is permitted to indemnify directors and officers against expenses actually and reasonably incurred by them in connection with the defense or settlement of an action or suit if they acted in good faith and in a manner that they reasonably believed to be in or not opposed to the best interests of the corporation. However, in such a case, no indemnification shall be made if the person is adjudged liable to the corporation, unless and only to the extent that the court in which the action or suit was brought shall determine upon application that the defendant directors or officers are fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability.

            The DGCL allows the corporation to advance expenses before the resolution of an action, if the person agrees to repay any such amount advanced if they are later determined not to be entitled to indemnification. In addition, Delaware law authorizes a corporation to purchase insurance for the benefit of its officers and directors whether or not the corporation would have the power to indemnify against the liability covered by the policy but subject to limits imposed by insurance law.

Access to Corporate Records

            The OBCA provides that shareholders and creditors of a corporation, their agents and legal representatives and the Director under the OBCA may examine certain of the corporation's records during usual business hours and take extracts therefrom free of charge, and, if the corporation is an offering corporation, any other person may do so for a reasonable fee. In addition, any person is entitled to obtain the list of registered shareholders of a "offering corporation" upon compliance with certain requirements.

            Under the DGCL, any stockholder of a corporation, their agents or legal representatives may make a written demand to examine the records of that corporation. Such a demand to examine the corporation's records must have a proper purpose, be sworn under oath, and directed to that corporation at its principal place of business or its registered office in Delaware. A proper purpose is one that is reasonably related to that stockholder's interest in the corporation as a stockholder.

Dividends and Repurchases of Shares

            Under the OBCA, and subject to a corporation’s articles, the board of directors may declare dividends, and a corporation may pay a dividend by issuing fully paid shares of the corporation or options or rights to acquire fully paid shares of the corporation and a corporation may pay a dividend in money or property. The board of directors, however, shall not declare and the corporation shall not pay a dividend if there are reasonable grounds for believing that: (a) the corporation is or, after the payment, would be unable to pay its liabilities as they become due; or (b) the realizable value of the corporation's assets would thereby be less than the aggregate of (i) its liabilities, and (ii) its stated capital of all classes. In the case of payment by a corporation to purchase or redeem shares, under the OBCA, and subject to a corporation’s articles , a corporation may not redeem redeemable shares at a price above the redemption price specified in the articles, and the corporation may not make any payment is respect of the purchase or redemption of shares if there are reasonable grounds for believing that (a) the corporation is or, after the payment, would be unable to pay its liabilities as they become due; or (b) after the payment, the realizable value of the corporation's assets would be less than the aggregate of (i) its liabilities and (ii) the amount that would be required to pay the holders of shares that have a right to be paid, on a redemption or in a liquidation, ratably with or before the holders of the shares to be purchased or redeemed, to the extent that the amount has not been included in its liabilities.

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            The DGCL permits a corporation to declare and pay dividends out of surplus or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year as long as the amount of capital of the corporation following the declaration and payment of the dividend is not less than the aggregate amount of the capital represented by the issued and outstanding shares of all classes having a preference upon the distribution of assets. In addition, the DGCL generally provides that a corporation may redeem or repurchase its shares only if the capital of the corporation is not impaired and such redemption or repurchase would not impair the capital of the corporation.

Dissolution

            Under the OBCA, the liquidation or dissolution of a corporation requires the approval of, subject to any applicable court order, two-thirds of the votes cast at a meeting of shareholders and of two-thirds of the votes cast by holders of shares of each class or series entitled to vote separately thereon.

            Under the DGCL, dissolution may be authorized by unanimous approval of all the stockholders entitled to vote thereon, without action of the directors, or by the board of directors followed by approval by a simple majority of the outstanding shares of the corporation's stock entitled to vote.

No Vote or Dissenters’ Rights of Appraisal in the Domestication

            Under the OBCA, a continuance becomes authorized once (a) shareholders voting on the application for continuance have approved it by special resolution and (b) the Director under the OBCA has endorsed an authorization on the application for continuance. On September 17, 2015 the board of directors of SusGlobal Energy Canada approved the Domestication and on September 17, 2015 the shareholders of SusGlobal Energy Canada by special resolution approved the Domestication and authorized SusGlobal Energy Canada to submit an application for continuance. We are not asking you for a proxy and you are requested not to send us a proxy. No shareholder vote or action is required to effect the Domestication.

Material U.S. Federal Income Tax Consequences of the Merger and the Domestication

            The following discussion sets forth the material United States federal income tax consequences of the Domestication to SusGlobal Energy Canada, and the U.S. Holders and Non-U.S. Holders (each as defined below) of its common shares, as well as the expected material United States federal income consequences of the ownership and disposition of the shares of common stock of SusGlobal Energy Delaware by Non-U.S. Holders. This discussion does not address U.S. federal tax laws other than those pertaining to U.S. federal income taxation (such as estate or gift tax laws), nor does it address any aspects of U.S. state or local or non-U.S. taxation. This discussion is general in nature and does not discuss all aspects of U.S. federal income taxation that might be relevant to particular holder in light of their personal investment circumstances or status, nor does it address tax considerations applicable to special classes of holders, such as:

  • dealers in securities;

  • traders in securities that elect to use a mark-to-market method of accounting for securities holdings;

  • tax-exempt organizations;

  • life insurance companies, real estate investment trusts or regulated investment companies;

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  • persons liable for alternative minimum tax;

  • U.S. expatriates;

  • persons that actually or constructively own 10% or more of SusGlobal Energy Canada voting shares (except as specifically provided below);

  • partnerships or other pass-through entities for U.S. federal income tax purposes, or beneficial owners of a partnership or other pass-through entity;

  • persons that hold SusGlobal Energy Canada common shares or SusGlobal Energy Delaware common stock as part of a straddle or a hedging or conversion transaction;

  • U.S. holders whose functional currency is not the U.S. dollar;

  • persons that received SusGlobal Energy Canada common shares or SusGlobal Energy Delaware common stock as compensation for services;

  • controlled foreign corporations; or

  • passive foreign investment companies.

             This summary is based on the assumption that SusGlobal Energy Canada common shares or SusGlobal Energy Delaware common stock, as applicable, are held as capital assets for U.S. federal income tax purposes (generally, property held for investment). If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) holds SusGlobal Energy Canada common shares or SusGlobal Energy Delaware common stock, as applicable, the tax treatment of such partnership and a person treated as a partner of such partnership generally will depend on the status of the partner and the activities of the partnership.

            This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing and proposed Treasury regulations promulgated under the Code, published rulings by the U.S. Internal Revenue Service (“IRS”) and court decisions, all as of the date hereof. These laws are subject to change, possibly on a retroactive basis. We have not and do not intend to seek any rulings from the IRS regarding the Domestication. The Domestication will be effected in part under the applicable provisions of Canadian law which are not identical to analogous provisions of U.S. corporate law. There is no assurance that the IRS will not take positions concerning the tax consequences of the Domestication that are different from those discussed below, or that any such different positions would not be sustained by a court. Subject to the qualifications, assumptions and limitations in the opinion attached as Exhibit 8.1, the statements of law and legal conclusions set forth below represent the opinion of Blais, Halpert, Lieberman & Greene LLC.

            As used in this summary, the term “U.S. Holder” means a beneficial owner of SusGlobal Energy Canada common shares or SusGlobal Energy Delaware common stock, as applicable, that is for U.S. federal income tax purposes a citizen or resident of the United States; a corporation (including any entity that is treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia; an estate the income of which is taxable in the United States regardless of its source; or a trust, the administration of which is subject to the primary supervision of a United States court and one or more United States persons have the authority to control all substantial decisions of the trust, or that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person. The term “Non-U.S. Holder” means a beneficial owner of SusGlobal Energy Canada common shares or SusGlobal Energy Delaware common stock, as applicable, who is not a U.S. Holder.

            THE FOLLOWING SUMMARY IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE. SHAREHOLDERS SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE DOMESTICATION AND CONSIDERATIONS RELATING TO THE OWNERSHIP AND POSSIBLE DISPOSITION OF SUSGLOBAL ENERGY DELAWARE COMMON STOCK, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE, AND LOCAL AND NON-U.S. TAX LAWS.

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U.S. Federal Income Tax Characterization of the Domestication

            Under Section 368(a)(1)(F) of the Code, a reorganization (an “F reorganization”) is a “mere change in identity, form, or place of organization of one corporation, however effected.” To qualify as an F reorganization, a transaction must satisfy three requirements: (i) it must involve only one operating corporation; (ii) there must be no change in the shareholders of the corporation; and (iii) there must be no change in the assets of the corporation. Based on the Treasury regulations under Section 368 of the Code, the proper time for testing these requirements is immediately before and immediately after the purported F reorganization, without regard to other aspects of a larger transaction that may follow that step. Based upon the foregoing, the requirements for an F reorganization will be satisfied, and the Domestication should constitute an F reorganization. Therefore, U.S. Holders will not recognize taxable gain or loss as a result of the Domestication for U.S. federal income tax purposes, except as explained below under the caption headings “—Effect of Section 367” and “—PFIC Considerations.”

            If the Domestication qualifies as an F reorganization, then the tax basis of SusGlobal Energy Delaware common stock received by a U.S. Holder in the Domestication will equal the U.S. Holder’s tax basis in the SusGlobal Energy Canada common shares surrendered in exchange therefore, increased by any amount included in the income of such U.S. Holder as a result of Section 367 or Section 1291(f) of the Code. See the discussion under “—Effect of Section 367” and “—PFIC Considerations” below. The holding period for the SusGlobal Energy Delaware common stock received by a U.S. Holder in the Domestication will include such holder’s holding period for the SusGlobal Energy Canada common shares surrendered in exchange therefore.

Effect of Section 367

            Code Section 367 applies to certain non-recognition transactions involving foreign corporations. When it applies, Code Section 367 has the effect of imposing income tax on U.S. persons in connection with transactions that would otherwise be tax free. Code Section 367 would apply to the Domestication under the circumstances discussed below.

U.S. Holders That Own 10% or More of SusGlobal Energy Canada Common Shares

            A U.S. Holder who, on the day of the Domestication, beneficially owns (directly, indirectly or constructively) 10% or more of the total combined voting power of all classes of SusGlobal Energy Canada stock entitled to vote (a “10% Shareholder”) must include in income as a dividend the “all earnings and profits amount” (within the meaning of Treasury Regulations Section 1.367(b) -2(d)) attributable to the SusGlobal Energy Canada stock owned directly by such U.S. Holder. A U.S. Holder’s ownership of stock options will be taken into account in determining whether such holder owns 10% or more of the total combined voting power of all classes of stock. Complex attribution rules apply in determining whether a U.S. Holder owns 10% or more of the total combined voting power of all classes of SusGlobal Energy Canada stock entitled to vote for U.S. federal income tax purposes.

            A U.S. Shareholder’s all earnings and profits amount with respect to its SusGlobal Energy Canada common shares is the net positive earnings and profits of the corporation (as determined under Treasury Regulations Section 1.367(b) -2(d)(2)) attributable to the shares (as determined under Treasury Regulations Section 1.367(b) -2(d)(3)) but without regard to any gain that would be realized on a sale or exchange of such shares. Treasury Regulations Section 1.367(b) -2(d)(3) provides that the all earnings and profits amount attributable to a shareholder’s stock is determined according to the principles of Section 1248 of the Code. In general, Section 1248 of the Code and the Treasury regulations thereunder provide that the amount of earnings and profits attributable to a block of stock in a foreign corporation is the ratably allocated portion of the foreign corporation’s earnings and profits generated during the period the shareholder held the block of stock.

            Accordingly, under Treasury Regulations Section 1.367(b) -3(b)(3), a U.S. Shareholder should be required to include in income as a deemed dividend the all earnings and profits amount (as defined in Treasury Regulations Section 1.367(b) -2(d)) with respect to its SusGlobal Energy Canada common shares. Based on its own expectation of its projected earnings and profits through the Domestication, SusGlobal Energy Canada does not expect that its cumulative earnings and profits will be greater than zero through the date of the Domestication. If SusGlobal Energy Canada’s cumulative earnings and profits through the date of the Domestication are not greater than zero, then a U.S. Shareholder should not be required to include in gross income the all earnings and profits amount with respect to its SusGlobal Energy Canada common shares.

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            However, it is possible that the amount of SusGlobal Energy Canada’s earnings and profits could be greater than expected through the date of the Domestication or could be adjusted as a result of an IRS examination. The determination of SusGlobal Energy Canada’s earnings and profits is a complex determination and may be impacted by numerous factors. Therefore, it is possible that one or more of these factors may cause SusGlobal Energy Canada to have positive earnings and profits through the date of the Domestication. As a result, depending upon the period in which such a U.S. Shareholder held its SusGlobal Energy Canada common shares, the U.S. Shareholder could be required to include all its earnings and profits amount in income as a deemed dividend under Treasury Regulations Section 1.367(b) -3(b)(3) as a result of the Domestication.

U.S. Holders That Own Less Than 10% of SusGlobal Energy Canada Common Shares

            A U.S. Holder who, on the date of the Domestication, beneficially owns (directly, indirectly or constructively) SusGlobal Energy Canada common shares with a fair market value of $50,000 or more but less than 10% of the total combined voting power of all classes of SusGlobal Energy Canada stock entitled to vote may elect to recognize gain with respect to the receipt of SusGlobal Energy Delaware common stock in the Domestication or, in the alternative, recognize the all earnings and profits amount as described below.

            Unless a U.S. Holder makes the all earnings and profits election as described below, such holder generally must recognize gain (but not loss) with respect to the receipt of SusGlobal Energy Delaware common stock in the Domestication. Any such gain should be equal to the excess of the fair market value of the SusGlobal Energy Delaware common stock received over the U.S. Holder’s adjusted basis in the SusGlobal Energy Canada common shares surrendered in exchange therefor. Such gain should be capital gain, and should be long-term capital gain if the holder held the SusGlobal Energy Canada common shares for longer than one year. Long-term capital gains of non-corporate taxpayers are subject to a maximum U.S. federal income tax rate of 20% (excluding any additional tax that may apply under Section 1411 of the Code on a taxpayer’s “net investment income”).

            In lieu of recognizing any gain as described in the preceding paragraph, a U.S. Holder may elect to include in income the all earnings and profits amount attributable to its SusGlobal Energy Canada common shares under Section 367(b). There are, however, strict conditions for making this election. This election must comply with applicable Treasury regulations and generally must include, among other things: (i) a statement that the transaction is a Section 367(b) exchange; (ii) a complete description of the transaction, (iii) a description of any stock, securities or other consideration transferred or received in the transaction, (iv) a statement describing the amounts required to be taken into account for U.S. federal income tax purposes, (v) a statement that the U.S. Holder is making the election that includes (A) a copy of the information that the U.S. Holder received from SusGlobal Energy establishing and substantiating the U.S. Holder’s all earnings and profits amount with respect to the U.S. Holder’s SusGlobal Energy Canada common shares, and (B) a representation that the U.S. Holder has notified SusGlobal Energy that the U.S. Holder is making the election, and (vi) certain other information required to be furnished with the U.S. Holder’s tax return or otherwise furnished pursuant to the Code or the Treasury regulations thereunder. In addition, the election must be attached by the U.S. Holder to its timely filed U.S. federal income tax return for the year of the Domestication and the U.S. Holder must send notice to SusGlobal Energy of the election no later than the date such tax return is filed. In connection with this election, SusGlobal Energy intends to provide each U.S. Holder eligible to make such an election with information regarding SusGlobal Energy Canada’s earnings and profits upon request.

            SusGlobal Energy Canada does not expect that its cumulative earnings and profits will be greater than zero through the date of the Domestication and, if that proves to be the case, U.S. Holders who make this election should generally not have an income inclusion under Section 367(b), provided the U.S. Holder properly executes the election and complies with the applicable notice requirements. Thus, it is expected that the making of any election to include the all earnings and profits amount in income as a dividend would generally be advantageous to a U.S. Holder who would otherwise recognize gain with respect to its SusGlobal Energy Canada common shares in the Domestication. However, as noted above, if it were determined that SusGlobal Energy Canada had positive earnings and profits through the date of the Domestication, a U.S. Holder that makes the election described herein could have an all earnings and profits amount with respect to its SusGlobal Energy Canada common shares, and thus could be required to include that amount in income as a deemed dividend as a result of the Domestication.

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            U.S. HOLDERS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING WHEN AND WHETHER TO MAKE THIS ELECTION AND, IF THE ELECTION IS DETERMINED TO BE ADVISABLE, THE APPROPRIATE FILING REQUIREMENTS WITH RESPECT TO THIS ELECTION.

             U.S. Holders That Own SusGlobal Energy Canada Common Shares with a Fair Market Value of Less Than $50,000

            A U.S. Holder who, on the date of the Domestication, owns (or is considered to own) stock of SusGlobal Energy Canada with a fair market value less than $50,000 should not be required to recognize any gain or loss under Section 367 of the Code in connection with the Domestication, and generally should not be required to include any part of the all earnings and profits amount in income.

PFIC Considerations

            In addition to the discussion under the heading “—Effects of Section 367” above, the Domestication might be a taxable event to U.S. Holders under the passive foreign investment company (“PFIC”) provisions under Section 1297 of the Code, to the extent that Section 1291(f) of the Code applies.

            SusGlobal Energy Canada may be deemed to be a PFIC. Generally, a foreign corporation is a PFIC if 75% or more of its gross income for a taxable year is passive income or if, on average for such taxable year, 50% or more of the value of the assets held by the corporation during a taxable year produce or are held to produce passive income. Passive income includes dividends, interest, rents and royalties, but excludes rents and royalties that are derived in the active conduct of a trade or business and that are received from an unrelated person, as well as interest, dividends, rents and royalties received from a related person that are allocable to income of such related person other than passive income. For purposes of these rules, SusGlobal Energy Canada would be considered to own the assets of and recognize the income of any subsidiary corporations as to which it owns 25% or more of the value of their outstanding stock, in proportion to such ownership. If a foreign corporation is classified as a PFIC for any taxable year during which a U.S. person owns stock in the foreign corporation, the foreign corporation generally remains thereafter classified as a PFIC with respect to that person. Based on the composition of its assets (which has largely consisted of cash and cash equivalents), SusGlobal Energy Canada may have qualified as a PFIC for its taxable years ended December 31, 2013 through 2015, and it may qualify as a PFIC for its current taxable year. However, the determination of whether a foreign corporation is a PFIC is primarily factual and there is little administrative or judicial authority on which to rely to make a determination. Further, Blais, Halpert, Lieberman & Greene LLC expresses no opinion as to whether SusGlobal Energy Canada is or is not a PFIC.

            Section 1291(f) of the Code generally requires that, to the extent provided in Treasury regulations, a United States person who disposes of stock of a PFIC must recognize gain notwithstanding any other provision of the Code. No final Treasury regulations have been promulgated under this statute. Proposed Treasury regulations were promulgated in 1992 with a retroactive effective date. If finalized in their current form, these regulations generally would require gain recognition by U.S. Holders exchanging common shares of SusGlobal Energy Canada for common stock of SusGlobal Energy Delaware if SusGlobal Energy Canada were classified as a PFIC at any time during such U.S. Holder’s holding period in such common shares and such person had not made either (i) a “mark-to-market” election under Section 1296 of the Code, or (ii) a “qualified electing fund” election under Section 1295 of the Code for the first taxable year in which such U.S. Holder owned common shares of SusGlobal Energy Canada or in which SusGlobal Energy Canada was a PFIC, whichever is later. Any such gain would be allocated ratably over the U.S. Holder’s holding period for the SusGlobal Energy Canada common shares surrendered in the Domestication—the amount of gain allocated to the current taxable year would be treated as ordinary income, and the amount of gain allocated to each other year would be subject to the highest tax rate in effect for that year, and an interest charge would be imposed to recover the deemed benefit of the deferred payment of tax. However, it is not possible to predict at this time whether, in what form, and with what effective date, final Treasury regulations under Section 1291(f) of the Code will be adopted.

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Consequences to Non-U.S. Holders

            The exchange of common shares of SusGlobal Energy Canada for common stock of SusGlobal Energy Delaware by a Non-U.S. Holder will not be a taxable transaction for such holder for United States federal income tax purposes.

Dividends

            A distribution of cash or other property (other than certain distributions of SusGlobal Energy stock) in respect of SusGlobal Energy Delaware common stock generally will be treated as a dividend to the extent that the amount of such distribution does not exceed SusGlobal Energy’s current and accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent that the amount of such distribution exceeds SusGlobal Energy’s current and accumulated earnings and profits, such distribution generally will be treated first as a return of capital, reducing a Non-U.S. Holder’s adjusted tax basis in such holder’s SusGlobal Energy Delaware common stock, with any excess treated as capital gain.

            Dividends paid by SusGlobal Energy Delaware to Non-U.S. Holders generally would be subject to withholding of United States federal income tax at the rate of 30%, or such lower rate as may be specified by an applicable income tax treaty, provided that SusGlobal Energy has received proper certification of the application of such income tax treaty (on an applicable IRS Form W-8). A Non-U.S. Holder that is eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the IRS. Pursuant to the income tax treaty between the United States and Canada (the “Treaty”), dividends paid by a U.S. corporation to a Canadian resident where each qualifies for benefits under the Treaty are subject to U.S. federal withholding tax at a maximum rate of 15%. Non-U.S. Holders should consult their own tax advisors regarding their eligibility for claiming benefits under the Treaty and regarding their particular circumstances to claim a tax credit or tax deduction against their Canadian (or other) tax liability for any U.S. federal withholding tax.

            Dividends that are effectively connected with a Non-U.S. Holder’s conduct of a trade or business in the United States or, if provided in an applicable income tax treaty, dividends that are attributable to a Non-U.S. Holder’s permanent establishment in the United States, are not subject to the U.S. withholding tax, but are instead taxed in the manner applicable to U.S. Holders. In that case, SusGlobal Energy will not have to withhold United States federal withholding tax if the Non-U.S. Holder complies with applicable certification and disclosure requirements (generally on IRS Form W-8ECI). In addition, dividends received by a foreign corporation that are effectively connected with the conduct of a trade or business in the United States may be subject to a branch profits tax at a 30% rate, or a lower rate specified in an applicable income tax treaty.

Gain on Disposition

            A Non-U.S. Holder generally will not be subject to U.S. federal income tax, including by way of withholding, on gain recognized on a sale or other disposition of stock of SusGlobal Energy Delaware unless any one of the following is true:

(i)        the Non-U.S. Holder is an individual who is present in the United States for 183 or more days in the taxable year of the sale, exchange or other disposition and certain other requirements are met;

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(ii)        the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States and, if an applicable income tax treaty requires, attributable to a U.S. permanent establishment maintained by such Non- U.S. Holder; or

(iii)        SusGlobal Energy Canada or SusGlobal Energy Delaware is or has been a U.S. real property holding corporation at any time within the five-year period preceding the disposition or the non-U.S. Holder’s holding period, whichever period is shorter, and, in the event of common stock that is regularly traded on an established securities market for tax purposes, the Non-U.S. Holder held, directly or indirectly, at any time within the five-year period preceding such disposition, more than 5% of such regularly traded common stock.

            SusGlobal Energy Canada has not been and is not, and SusGlobal Energy Delaware does not anticipate becoming, a U.S. real property holding corporation for U.S. federal income tax purposes. However, the determination of whether a corporation is a U.S. real property holding corporation is primarily factual and there can be no assurance whether such facts will not change or whether the IRS or a court will agree with our determination.

Information Reporting and Backup Withholding

            A Non-U.S. Holder may have to comply with specific certification procedures to establish that the holder is not a U.S. person as described above (generally on an applicable IRS Form W-8) or otherwise establish an exemption in order to avoid backup withholding and information reporting tax requirements with respect to payments of dividends on the stock of SusGlobal Energy Delaware.

            The payment of the proceeds of the disposition of stock by a Non-U.S. Holder to or through the U.S. office of a broker generally will be reported to the IRS and reduced by backup withholding unless the Non-U.S. Holder either certifies its status as a Non-U.S. Holder under penalties of perjury or otherwise establishes an exemption and the broker has no actual knowledge to the contrary. Information reporting requirements, but not backup withholding, will also apply to payments of the proceeds from sales of SusGlobal Energy Delaware stock by foreign offices of U.S. brokers or foreign brokers with certain types of relationships to the United States, unless the broker has documentary evidence in its records that the holder is a Non-U.S. Holder and certain other conditions are met, or the holder otherwise establishes an exemption.

            Backup withholding is not an additional tax. Any amounts that are withheld under the backup withholding rules will be refunded or credited against the Non-U.S. Holder’s U.S. federal income tax liability if certain required information is furnished to the IRS. Non-U.S. Holders should consult their own tax advisors regarding application of backup withholding in their particular circumstance and the availability of and procedure for obtaining an exemption from backup withholding under current U.S. Treasury regulations.

SusGlobal Energy Selected Financial Information

            The selected historical data for the years ended December 31, 2016 and 2015 have been derived from the audited consolidated financial statements of SusGlobal Energy which are included elsewhere in this prospectus. The selected financial information should be read in conjunction with the financial statements and supplementary data and “SusGlobal Energy’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this prospectus.

Statement of Operations Data:

    Year ended  
    December 31,  
    2016     2015  
             
Revenue $  15,721   $  -  
Operating expenses $  567,250   $  1,279,054  
Net loss $  551,529   $  1,279,054  
Other comprehensive loss $  33,207   $  1,169  
Comprehensive Loss $  584,736   $  1,280,223  
Basic and diluted loss per share $  0.02   $  0.04  
Weighted average number of common shares   32,849,183     29,303,083  

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Balance Sheet Data:

    As at  
    December 31,  
    2016     2015  
             
Cash and cash equivalents $  1,774   $  39,213  
Term deposit $  148,960     -  
Total assets $  198,081   $ 26,758  
Total liabilities $  683,234   $  285,491  
Shareholders' deficiency $  485,153   $  258,733  

SusGlobal Energy Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

            This Management’s Discussion and Analysis (“MD&A”) provides a discussion and analysis of the financial condition and results of operations to enable a reader to assess material changes in the financial condition and results of operations as at and for the years ended December 31, 2016 and 2015. The MD&A should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto of SusGlobal Energy Corp. (the “Company” or “SusGlobal”) as at and for the years ended December 31, 2016 and 2015. The Audited Consolidated Financial Statements for the years ended December 31, 2016 and 2015 have been prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”). The Company does not file current or periodic reports with the Securities and Exchange Commission.

            Unless otherwise noted, all amounts are in United States dollars. In the opinion of management, all adjustments (which consist only of normal recurring adjustments) considered necessary for a fair presentation have been included.

Nature of Business

            The Company is a renewable energy company focused on acquiring, developing and monetizing a portfolio of proprietary technologies in the waste to energy application globally. It is management's objective to grow SusGlobal Energy into a significant sustainable waste to energy provider.

Highlights

The Biodigester and Electricity Generating Facility (the “BioGrid”)

            On March 21, 2017, the Company and the Municipalities have agreed to schedule a meeting to discuss a settlement agreement.

            On March 1, 2017, the Company delivered to the Township of Georgian Bluffs and the Township of Chatsworth (the “Municipalities”) a Notice of Dispute under Section 19(1) of the Agreement. This section of the Agreement provides for the situation in which a party to the Agreement considers that a dispute has arisen under or in connection with the Agreement that the parties cannot resolve. The nature and particulars of such dispute is as follows:

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  • The Municipalities were not entitled to draw down the amount drawn as set forth in correspondence from the Company’s counsel to the Municipalities counsel;

  • The amount drawn and allegedly owing by the Company to the Operator totaling $36,702 ($49,278 CAD), which has been included in the accounts payable of the Company, is an amount in dispute between the Company and the Operator;

  • The amount drawn for payment to the Municipalities counsel in the amount of $11,744 ($15,767 CAD), which has been included in the accrued liabilities of the Company, was not permitted under the Agreement;

  • An outstanding invoice relating to a service provided by a haulage company related to residue in the amount of $23,793 ($31,946 CAD), which has been included in the accounts payable of the Company, that was substantially from the operation of the BioGrid prior to August 13, 2016, the date the Company assumed the operations, is entirely and completely for the account of and the responsibility of the Municipalities, pursuant to section 9(6) of the Agreement, and,

  • The Company also disputes that the Municipalities were entitled to draw down the entire amount of the letter of credit on the basis that the Agreement had been legally terminated by the Municipalities.

            Section 19(1) of the Agreement requires that all parties participate in the dispute resolution process, the first step of which is a requirement for senior representatives of the parties to the Agreement to meet within twenty business days in an attempt to resolve the disputes with each senior representative prepared to propose a solution to the dispute. The Company has offered such a meeting with a reasonable notice period of three to four business days.

            On February 6, 2017, the Municipalities were made aware of the Company’s new Corporate Line of Credit (“Line of Credit”) with PACE Savings & Credit Union Limited (“PACE”), noted below. Negotiations are continuing to restore the agreement. As noted below, the Company was informed that the Agreement was terminated effective November 4, 2016 and since, the Company has made every effort to resolve the differences. In addition, the funds advanced on the Line of Credit from PACE are currently unavailable to use until the matter with the Municipalities related to BioGrid Project is resolved.

            On December 15, 2016, the Company was informed by the legal representative of the Municipalities, that the Municipalities have no interest to continue to discuss a solution with the Company.

            On November 4, 2016, the Company was informed by the Municipalities, that they have rejected the Company’s claim for Force Majeure and have served the Company with Notice of Immediate Termination. The Company continued to use commercially reasonable efforts to rectify the cause of the Force Majeure Event while the claim for Force Majeure was in effect and to attempt to resolve this issue with the Municipalities under the Disputes and Resolutions provision in section 19 of the biodigester operation and expansion agreement.

            On November 2, 2016, the Company was informed by the legal representative of the Municipalities, that the Company had breached the biodigester expansion and operation agreement. The Municipalities indicated that they were willing to continue with the agreement and would waive their right of termination subject to the Company agreeing and fulfilling certain conditions between the dates of November 2, 2016 and December 15, 2016.

            On October 28, 2016 at a scheduled meeting with the Municipalities, the Company advised the Municipalities as to the concerns the Company had with protecting the assets at the BioGrid and the potential damage which may be caused should the equipment failure not be rectified prior to temperatures reaching low levels and as a result impact the biodigester operation negatively exposing the biodigester to irreparable further damage.

            On October 26, 2016, the Company was informed by the legal representative of the Townships of Georgian Bluffs and Chatsworth (the “Municipalities”), that the Municipalities recognized the Force Majeure Event for the equipment failure of the BioGrid’s gas engine. The Municipalities informed the Company that they expected the Company to take all commercially reasonable steps to obtain the necessary parts and have them installed as quickly as possible.

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            On October 16, 2016, the Company informed the Director of Operations at the Township of Georgian Bluffs, that it was invoking the Force Majeure provision under section 17 of the expansion and operation agreement with the BioGrid, as a result of a catastrophic failure of the BioGrid’s gas engine. The parties began the process of resolving this issue under the Disputes and Resolutions provision under section 19 of the expansion and operation agreement.

            On June 2, 2016, the Company announced that its wholly-owned subsidiary, SusGlobal Energy Canada I Ltd., signed an expansion and operation agreement (the “Agreement”) for the BioGrid, with the Municipalities Joint BioGrid Project, located near Owen Sound, Ontario, Canada. Effective June 1, 2016, SusGlobal Energy Canada I Ltd., entered into a twenty-five year Agreement to construct, maintain and operate the BioGrid which is automatically renewable for two additional five year periods, unless either party provides written notice of termination. SusGlobal Energy Canada I Ltd. had until August 12, 2016 to finalize the necessary financing commitment of $5,586,000 ($7,500,000 CAD). On August 13, 2016, the Company’s wholly-owned subsidiary, SusGlobal Energy Canada I Ltd., took over operation of the BioGrid.

            Approximately three weeks after assuming the operations of the BioGrid, the facility encountered a catastrophic gas engine failure. The repair of the engine took approximately two months. During this period, the Company invoked the Force Majeure provision under section 17 of the Agreement. On November 4, 2016, the Company was informed by the Municipalities, that they rejected the Force Majeure and served the Company with Notice of Immediate Termination.

            The project will also reduce greenhouse gas emissions from the production of renewable electricity and heat as well as reducing methane emissions by diverting organics from landfills, allowing SusGlobal Energy Canada I Ltd. to monetize the emission reductions under Ontario’s Cap and Trade program. Landfills in the area do not collect the methane-containing gas produced by the landfilling operations; only vent it to prevent fires and explosions at the landfills. SusGlobal Energy Canada I Ltd. also expects to produce a Class AA Organic Fertilizer that can be added to composting facilities or incorporated directly into fertilizer compounds from the digestate.

Financing Agreement with PACE

            On February 6, 2017, the Company announced that it has entered into an agreement for a Line of Credit of $4,096,400 ($5,500,000 CAD) with PACE. The Line of Credit facility will be advanced in tranches to allow for the funding of engineering, permitting, construction costs and equipment purchases for the BioGrid Project located near Owen Sound, Ontario, Canada. This will be the first wastewater treating plant in Ontario to achieve a “net zero” status for sustainable waste treating. The site will produce all the electricity needed for its operations, export 100 kW power under a Feed-In Tariff Contract (“FIT Contract”) and will supply biogas or power to nearby industrial and commercial sites. The project will also reduce greenhouse gas emissions from the production of renewable electricity and heat as well as reducing methane emissions by diverting organics from landfilling, allowing the Company to monetize the emission reductions under Ontario’s Cap and Trade Program. The Company also expects to produce a Class AA Organic Fertilizer that can be added to composting facilities or incorporated directly into fertilizer compounds from the digestate. The line of credit was obtained to fund the BioGrid Project, that effective, November 4, 2016 was terminated by the Municipalities. The Company and the Municipalities have agreed to schedule a meeting to discuss a settlement agreement. The funds advanced on the line of credit from PACE are currently unavailable to use until the matter with the Municipalities related to the BioGrid Project is resolved.

            The initial advance of $1,229,280 CAD$1,600,000 was received by the Company on February 2, 2017. The Line of Credit bears interest at the PACE base rate +1.25%, currently 8% and is secured by a business loan general security agreement, guaranteed by the Company’s wholly-owned subsidiaries and a $1,229,280 ($1,600,000 CAD) personal guarantee from the Company’s Executive Chairman and President and a collateral mortgage on real property comprising of office building leased by the Company. In addition, also pledged as security were the shares of the wholly-owned subsidiaries and a pledge of shares of the Company held by the Chief Executive Officer’s company, the chief financial officer and held by a director’s company, including a limited recourse guarantee by each. The pledge of shares and the collateral mortgage will remain in place so long as the credit facility is not in default or demanded and shall be released on the date on which the credit facility is paid in full.

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            During the construction period, the credit facility will be subject to monthly interest payments only. Once the expanded facility is fully operational, the line will be converted to a term facility and subject to blended monthly payments of principal and interest sufficient to repay the term loan within the specified amortization. The loan is fully open for prepayment at any time without notice or bonus.

            A commitment fee of $83,900 ($110,000CAD) was paid to PACE on closing. In addition and as continuing security for the financing, the Company provided PACE with a pledge of shares, to remain, so long as the credit facility is not in default or demanded and shall be released on the date on which the credit facility is paid in full.

            In addition, the agents who assisted in establishing the Line of Credit with PACE, received common shares of the Company, totaling 1,620,000 determined to be valued at $469,800 and cash of $300,000 for their services, on closing.

Other

            On December 7, 2016, the Company was awarded funding for the Advanced Water Technologies Program (“AWT”), a program for business led collaborations in the water sector. AWT is administered by the Southern Ontario Water Consortium to assist small and medium sized businesses in the Province of Ontario, Canada, leverage world-class research facilities and academic expertise to develop and demonstrate water technologies for successful introduction to the market. And, is designed to enhance the Ontario water cluster and continue to build Ontario’s reputation for water excellence around the world. The Company’s academic partner is the Centre for Alternative Wastewater Treatment at Fleming College in Lindsay, Ontario Canada. The program budget is for $595,840 ($800,000 CAD), of which the Company contributes 50% in cash and in-kind contributions and CAWT contributes 50%.

            On February 13, 2017, the Company filed a Second Amendment Form S-4 with the United States Securities and Exchange Commission. This registration statement was filed in connection with domestication under Section 388 of the General Corporations Law of the State of Delaware and a continuance under the Business Corporations Act (Ontario), pursuant to which the Company’s jurisdiction on incorporation will be changed from Ontario to the State of Delaware.

            Effective January 1, 2017, new consulting agreements were finalized for the services of the Executive Chairman and President and for the Chief Executive Officer. The consulting agreements are for a period of three years, commencing January 1, 2017. For each of these two executive officers, the monthly fees will be as follows: $3,724 ($5,000 CAD) for 2017 and $11,172 ($15,000 CAD) for 2018 and 2019. In addition, the Chief Executive Officer will be granted 3,000,000 Restricted Stock Units (“RSU”). The RSU’s will vest in three equal installments annually on January 1, 2018, 2019 and 2020. The Company has also agreed to reimburse each for certain out-of-pocket expenses incurred by each executive officer.

            On October 21, 2016, the Company hired the services of a contractor to assume the role of Vice President of Corporate Development, effective November 1, 2016, for a period of fourteen months, at the rate of $3,050 ($4,000 CAD) per month, plus applicable taxes. In addition, the contractor was offered up to 115,000 common shares of the Company, at a price of $0.10 per common share, exercisable within 180 days of the effective date of the contract.

            On August 19, 2016, Travellers International Inc. (“Travellers”), an Ontario company controlled by the president and director of the Company, provided a further loan in the amount of $156,408 ($210,000 CAD) which was required to initiate a letter of credit in the amount of $148,960 ($200,000 CAD), in favour of the Municipalities.

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The letter of credit was a requirement of the BioGrid agreement noted above. Fees for the letter of credit included $7,624 ($10,000 CAD) incurred and charged by Travellers and $2,287 ($3,000 CAD) charged by the Company’s chartered bank. There is no written agreement evidencing this loan or the previous loan with Travellers.

            On August 3, 2016, the Company signed an agreement with Grimsby Energy Inc. from Grimsby, Ontario, Canada, to allow hydrolyzed and pasteurized organic wastes to be processed at their Anaerobic Biodigester. The agreement commences November 1, 2016 and can be terminated by either party within three hundred and sixty-five days minimum written notice. Up to the date of this filing, there has been no activity under this agreement.

            On May 14, 2015, the Ontario Ministry of Environment and Climate Change announced formal targets to be met to satisfy a commitment necessary to join the Western Climate Initiative (WCI) along with Quebec and California, who are in the WCI with Cap and Trade commitments since 2014. The Ontario targets are very ambitious, with Greenhouse Gas (GHG) emission reductions of 15% by 2020, 37% by 2030 and 80% by 2050, all from a 1990 baseline. Ontario achieved a 6% reduction in GHG emissions from 1990 levels in 2014, mainly by closing all coal-fired power plants. The targets announced will require a focused program to reduce GHG emissions. The Company’s activities all contribute to GHG reductions, so will be a key part of Ontario’s initiative. The Company has also contacted counterparties in Quebec and California to explore opportunities for relevant projects. SusGlobal is committed to making all its commercial activities carbon neutral. The new Cap and Trade regulations will be effective January 2017.

            On May 6, 2015, the Company finalized an agreement with Syngas SDN BHD (“Syngas”), a company incorporated under the laws of Malaysia, providing an exclusive license for the Company to use Syngas Intellectual Property within North America for a period of five years from the date of this agreement, for $1 consideration, renewable every five years upon written request. Syngas produces equipment that uses an innovative process to produce liquid transportation fuel from plastic waste material. The Company issued 20,000 common shares of the Company to an introducing party, determined to be valued at $2,000. The technology license is being amortized on a straight-line basis, over a period of 10 years. There are no other obligations under this agreement.

            The Company and Syngas intend to collaborate and cooperate with a view to achieving economic and financial success for their respective businesses. The Company will continue to pursue other similar intellectual property around the world as we combine this and other technologies in innovative configurations to monetize the portfolio of proprietary technologies and processes to deliver value to our customers and shareholders.

Management Responsibility for Financial Statements

            The information provided in this prospectus, including the financial statements, is the responsibility of management. In the preparation of these statements, estimates are sometimes necessary to make a determination of future values for certain assets or liabilities. Management believes such estimates have been based on careful judgments and have been properly reflected in the accompanying financial statements.

Overview

            The Company was formed by articles of amalgamation on December 3, 2014 (originally incorporated on October 7, 2014), in the Province of Ontario, Canada and its executive office is in Toronto, Ontario, Canada. SusGlobal Energy Corp. (“Old SusGlobal”), a company in the start-up stages, and Commandcredit Corp. (“Commandcredit”), an inactive Canadian public shell company, amalgamated to form SusGlobal Energy Corp. The amalgamation has been accounted for as a capital transaction.

            On December 2, 2014, at annual and special meetings of the shareholders of each of Commandcredit and Old SusGlobal, the amalgamation of Old SusGlobal and Commandcredit was approved. The amalgamation involved issuances of shares of the amalgamated company on a one for one basis to the shareholders of the existing companies resulting in the shareholders of Commandcredit owning 96.40% of the amalgamated company and shareholders of Old SusGlobal owing the remaining 3.60% of the amalgamated company.

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            For accounting purposes, this acquisition resulted in the acquisition of control by Commandcredit of the net assets of SusGlobal, consisting primarily of net financial assets. Since the net assets of SusGlobal did not constitute a business, the transaction represents an asset purchase at fair value in consideration of the issuance of shares by the amalgamated company. The transaction was measured based on the fair value of the net assets acquired, which was considered more clearly evident and, thus, more reliably measured. The carrying value of each of these assets and liabilities comprising the net assets of SusGlobal was deemed to approximate fair value due to their short term nature. All intercompany balances were eliminated on amalgamation.

            The balance sheets of the two companies immediately before the amalgamation were as follows:

    Command credit     Old SusGlobal  
             
Assets            
Cash $  -   $ 76,481  
Harmonized sales taxes receivable   -     4,571  
Due from related party   -     129,519  
Prepaid expenses and deposit   -     19,576  
             
Total Assets $  -   $ 230,147  
             
             
Liabilities and            
Stockholders’            
(Deficiency) Equity            
Accounts payable $  59,231   $ 8,661  
Accrued liabilities   2,695     1,088  
Due to related parties   159,395     -  
             
Total Liabilities $  221,321   $ 9,749  
             
Capital stock-net of share issue costs $  356,676   $ 60,450  
Subscriptions payable   -     199,944  
Deficit   (570,530 )   (38,464 )
Comprehensive loss   (7,467 )   (1,532 )
Stockholders’ (deficiency) equity $  (221,321 ) $ 220,398  
             
Total Liabilities and Stockholders’ (Deficiency) Equity $   -   $ 230,147  

            The net assets of SusGlobal acquired by Commandcredit in the amount of $220,398, was completed through the issuance of 650,000 common shares of the amalgamated company.

             The following is a discussion of SusGlobal Energy’s financial condition and results of operations for the years ended December 31, 2016 and 2015. This discussion should be read in conjunction with the information contained in our audited and unaudited consolidated financial statements and the notes thereto included in this prospectus.

            The Company recorded a net loss from operations of $551,529 for the year ended December 31, 2016 compared to a net loss from operations of $1,279,054 for the year ended December 31, 2015.

Selected Annual Financial Information

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    Dec 31 2016     Dec 31 2015  
Revenue $  15,721   $  -  
Net Loss   551,529     1,279,054  
Weighted average number of common shares   32,849,183     29,303,083  
Basic and diluted loss per share   0.02     0.04  
             
Cash (bank indebtedness)   1,774     (5,740 )
Total assets   198,081     26,758  
Total liabilities   683,234     285,491  
Working capital deficiency   487,703     262,070  

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

            Revenue was $15,721 for the year ended December 31, 2016 compared to $nil for the year ended December 31, 2015. The revenue was generated from the operation of the BioGrid facility.

            The net loss for the year ended December 31, 2016 was $551,529, significantly lower than the net loss of $1,279,054 in the prior year, primarily due to the absence of any stock-based compensation in the current year, offset by increased activity, including the operation of the BioGrid facility.

            Our operating expenses decreased by $711,804 from $1,279,054 for the year ended December 31, 2015 to $567,250 for the year ended December 31, 2016. This was primarily due to the absence of stock-based compensation of $810,000 which occurred in the prior year, offset by the operation of the BioGrid. The Company incurred professional fees of $203,507 for the year ended December 31, 2016, a reduction of $64,367 from the total of $267,874 in the prior year. The higher professional fees incurred in the prior year were primarily due to the legal expenses in connection with the preparation of the Company’s Form S-4 with the SEC, which was filed on January 27, 2016. Office and administration expenses increased by $42,987 from $61,087 for the year ended December 31, 2015 to $104,074 for the year ended December 31, 2016, primarily due to increased activity during the year, including the operations at the BioGrid. With assuming operations of the BioGrid effective August 13, 2016, the Company incurred various expenses in the operation of the BioGrid, including major engine repairs of $50,847 and expenses in connection with the operations and maintenance of the facility. The engine at the BioGrid failed approximately three weeks after assuming operation of the BioGrid and was out of service for approximately two months. Along with invoking the Force Majeure provision of its Agreement, the Company began submitting details of expenses incurred as a result of the catastrophic gas engine failure and the resulting loss of business, to its insurer. The Company also incurred expenses relating to the operations and maintenance of the BioGrid, totaling $69,525, including the fees for the onsite operator.

Related Party Transactions

            During the year, the Company incurred $45,289 ($60,000 CAD) (2015-$46,998; $60,000 CAD) in management fees charged by Travellers and $45,289 ($60,000 CAD) (2015-$46,998; $60,000 CAD) in management fees charged by Landfill Gas Canada Limited (“LFGC”), an Ontario company controlled by a director and Chief Executive Officer of the Company. The balance of the management fees, in the amount of $36,230 ($48,000 CAD) (2015-$37,598; $48,000 CAD) was charged by the Company’s Chief Financial Officer and $6,037 ($8,000 CAD) (2015-$nil) was charged by the Company’s Vice-President of Corporate Development. As at December 31, 2016, unpaid remuneration and unpaid expenses in the amount of $95,396 ($128,083 CAD) (2015-$38,150; $52,802 CAD) is included in accounts payable and $61,982 ($83,220 CAD) (2015-$18,261; $25,275 CAD) is included in accrued liabilities.

            In addition, the Company incurred a fee of $7,624 ($10,000 CAD) from Travellers, who provided the funds to establish the letter of credit for the BioGrid.

            During the year, the Company incurred $31,702 ($42,000 CAD) (2015-$28,199; $36,000 CAD) in rent paid under a rental agreement to Haute Inc., an Ontario company controlled by a director and president.

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            Loans payable in the amount of $217,482 ($292,000 CAD) (December 31, 2015-$59,245; $82,000 CAD), owing to Travellers and bearing interest at the rate of 12% per annum are due on demand and unsecured. As at December 31, 2016, $15,043 ($20,197 CAD) (December 31, 2015-$682; $944 CAD), in interest is included in accrued liabilities. One of the loans owing to Travellers, in the amount of $61,074 ($82,000 CAD) was repaid subsequent to the year-end, including accrued interest. There were no written agreements evidencing these loans.

            During the year, Silver Dragon Resources Ltd., an Ontario company in which a director and president of the Company is also a director and Chief Executive Officer, provided funds to the Company totaling $53,968 ($71,500 CAD). The loans were non-interest bearing, due on demand and unsecured. The loans were repaid in full on December 5, 2016. There were no written agreements evidencing these loans.

            The Company had one year consulting contracts with each of its three officers, which expired on October 31, 2015. The monthly payments for the three officers totaled $10,427 ($14,000 CAD). The Company extended the consulting contracts, at the same monthly amounts, on a month to month basis until new consulting contracts are completed. As noted above, effective January 1, 2017, new consulting agreements were signed for the Executive Chairman and President and the Chief Executive Officer, expiring December 31, 2019. For each of these two executive officers, the monthly fees will be as follows: $3,724 ($5,000 CAD) for 2017 and $11,172 ($15,000 CAD) for 2018 and 2019. In addition, the Chief Executive Officer will be granted 3,000,000 Restricted Stock Units (“RSU”). The RSU’s will vest in three equal installments annually on January 1, 2018, 2019 and 2020. The Company has also agreed to reimburse each for certain out-of-pocket expenses incurred by each executive officer.

            On November 1, 2014, the Company entered into a one year premises lease agreement with Haute Inc., an Ontario company controlled by a director and president of the Company, expiring October 31, 2015. The monthly minimum payment was $2,234 ($3,000 CAD). The Company’s monthly rent continued at the same amount through December 2015. Subsequent to the year-end and effective January 1, 2016, the Company signed a new premises lease agreement with Haute Inc., for a period of one year at a minimum monthly amount of $2,607 ($3,500 CAD). Effective January 1, 2017, the Company entered into a new three year premises lease agreement with Haute Inc., at a monthly amount of $2,979 ($4,000 CAD) for 2017, $ 3,724 ($5,000 CAD) for 2018 and $4,469 ($6,000 CAD) for 2019. The Company is also 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.

EXECUTIVE COMPENSATION

            The summary of executive compensation is as follows:

    Year Ended  
    Dec 31 2016     Dec 31 2015  
Management fees $  132,845   $  131,594  

Liquidity and Capital Resources

            As of December 31, 2016, the Company had a cash balance of $1,774 and current debt obligations in the amount of $683,234 (December 31, 2015-$285,491). The Company does not currently have sufficient funds to satisfy the current debt obligations. Should the Company‘s creditors seek or demand payment, the Company does not have the resources to pay or satisfy any such claims currently.

            To pay current debt obligations and to fund any future operations, The Company requires significant new funds, which the Company may not be able to obtain. In addition to the funds required to liquidate the $683,234 in current debt obligations, the Company estimates that approximately $900,000 must be raised to fund capital requirements and general corporate expenses for the next 12 months and $5,586,000 ($7,500,000 CAD) in capital costs for the Agreement with the BioGrid Project. On February 6, 2017, the Company announced that it has entered into an agreement with PACE, for a Line of Credit of $4,096,400 ($5,500,000 CAD). The first tranche was received on February 2, 2017, in the amount of $1,229,280 ($1,600,000 CAD). The funds advanced on the Line of Credit from PACE are currently unavailable to use until the matter with the Municipalities related to the BioGrid Project is resolved

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            On February 6, 2017, the Company announced that it has entered into an agreement with PACE, for a Line of Credit of $4,096,400 ($5,500,000 CAD). The first tranche was received on February 2, 2017, in the amount of $1,229,280 ($1,600,000 CAD). The Line of Credit facility will be advanced in tranches to allow for the funding of engineering, permitting, construction costs and equipment purchases for the BioGrid Project. The funds advanced on the line of credit from PACE are currently unavailable to use until the matter with the Municipalities related to the BioGrid Project is resolved.

Going Concern

            The consolidated financial statements have been prepared in accordance with US GAAP, which assumes that the Company will be able to meet its obligations and continue its operations for the next twelve months.

            As at December 31, 2016, the Company had a working capital deficit of $487,703 (December 31, 2015-$262,070), incurred a net loss of $551,529 (2015-$1,279,054) for the year and had an accumulated deficit of $2,447,815 (December 31, 2015-$1,896,286) and expects to incur further losses in the development of its business. These factors and those noted below, 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 and upon achieving profitable operations. Management believes that the Company will be able to obtain the necessary funding by equity or debt; however, there is no assurance of funding being available or available on acceptable terms. Realization values may be substantially different from carrying values as shown.

            Subsequent to the year-end, the Company finalized a corporate Line of Credit of $4,096,400 ($5,500,000 CAD) with PACE. The Line of Credit was obtained to fund the BioGrid Project, which is a project described in the Agreement between the Company and the Municipalities. The Municipalities terminated the Agreement on November 4, 2016 and the Company filed a Notice of Dispute with the Municipalities on March 1, 2017.

            The Company and the Municipalities have agreed to schedule a meeting to discuss a settlement agreement. The funds advanced on the Line of Credit from PACE are currently unavailable to use until the matter with the Municipalities related to the BioGrid Project is resolved.

            The 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.

2016 Share Issuances

            At December 31, 2016, the Company had an unlimited number of common shares authorized, without par value, and 34,128,910 (2015-31,547,346) common shares issued and outstanding. On the date of this filing, the Company had 35,849,086 common shares issued and outstanding.

Stock Options and Warrants

            During the year, the Company’s Vice-President of Corporate Development was offered 115,000 common shares of the Company at a price of $0.10 per common share, exercisable within 180 days of the effective date of the contract, which began effective November 1, 2016. In addition, effective January 1, 2017, the Company’s Chief Executive Officer was granted 3,000,000 RSU’s. The RSU’s will vest in three equal installments annually on January 1, 2018, 2019 and 2020. The Company has no other stock options or warrants outstanding as at the date of this filing and as at December 31, 2016 and 2015.

Off-Balance Sheet Arrangements

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            During the years ended December 31, 2016 and 2015 and as of the date of this filing, the Company had no off balance sheet arrangements or contractual obligations that have had or are reasonably likely to have a material 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 have not been disclosed in our financial statements.

NEW ACCOUNTING POLICIES

            During 2016, the Company adopted the following new accounting policies:

Trade Receivables

            Trade receivables are recorded when billed and when services are performed. The carrying value of trade receivables, net of allowance for doubtful accounts, represents the estimated realizable value. The Company estimates the allowance for doubtful accounts based on historical trends; type of customer, such as commercial or municipal; the age of outstanding receivables; and existing economic conditions. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. Past-due receivable balances are written off when our internal collection efforts have been unsuccessful.

Revenue Recognition

            Revenues are generated from the fees charged for waste collection and from the sale of electricity. The fees charged for services are generally defined in our service agreements and vary based on contract-specific terms such as frequency of service, weight, volume and the general market factors influencing a region’s rates. The Company recognizes revenue as services are performed and collection is reasonably assured.

CRITICAL ACCOUNTING POLICIES

Use of estimates

            The preparation of the Company’s 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 related to accruals and to the deferred income tax asset valuation allowances. 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 judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that is not readily apparent from other sources. Areas involving significant estimates and assumptions include: going concern assumptions, deferred income tax assets and related valuation allowance, accruals and fair valuation of shares. Actual results could differ materially and adversely 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

            From time to time the Company may grant options and/or warrants to management, directors, employees and consultants. The Company recognizes compensation expense at fair value. Under this method, the fair value of each warrant is estimated on the date of the grant and amortized over the vesting period, with the resulting amortization credited to paid in capital. The fair value of each grant is determined using the Black-Scholes option-pricing model. Consideration paid upon exercise of stock options and/or warrants is recorded in equity as share capital.

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Recent Accounting Pronouncements

            From time to time, new accounting pronouncements are issued by FASB or other standard setting bodies and adopted by the Company as of the specified effective date or possibly early adopted, where permitted. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position, results of operations or cash flows.

            In April 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-03, “Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Cost”. The guidance requires an entity to present debt issuance costs in the balance sheet as a direct reduction from the carrying amount of the debt liability, consistent with debt discounts, rather than as an asset. Amortization of debt issuance costs will continue to be reported as interest expense. Debt issuance costs related to revolving credit arrangements, however, will continue to be presented as an asset and amortized ratably over the term of the arrangement. ASU No. 2015-03 is effective for reporting periods beginning after December 15, 2015 including interim periods within those annual periods. The Company is currently evaluating the impact of adopting ASU No. 2015-03.

            In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The adoption of this ASU is expected to result in all operating leases being capitalized in the Company’s financial statements. The Company is currently evaluating the impact of adopting ASU No. 2016-02.

            In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other ( Topic 350) - Simplifying the Test for Goodwill Impairment”. The new standard simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill quantitative impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The standard is effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted. The Company early adopted ASU No. 2017-04 on January 1, 2017. The Company is currently evaluating the impact of adopting ASU No. 2017-04.

            Management is responsible for establishing and maintaining disclosure controls and procedures for the Company. Based on an evaluation of the Company's disclosure controls and procedures as of the end of the period covered by this MD&A, management believes that such controls and procedures are effective in providing reasonable assurance that material items requiring disclosure are identified and reported in a timely manner.

FINANCIAL RISKS

Financial risk

            The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk, market risk, interest rate risk and foreign currency risk.

            Risk management is carried out by the Company’s management team with guidance from the Audit Committee under policies approved by the Board of Directors (the “Board”). The Board also provides regular guidance for overall risk management.

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Credit risk

            Credit risk is the risk of loss associated with counterparty’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to cash and trade receivables. Cash is held with a Canadian chartered bank, from which management believes the risk of loss to be minimal. In the opinion of management, the Company is not exposed to significant credit risks arising from its financial instruments. The Company also controls its exposure related to trade receivables by discontinuing service, to the extent allowable, to non-paying customers. As at December 31, 2016, the Company had two customers representing greater than 5% of total trade receivable and these two customers represented 99% 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 95% of revenue.

Liquidity risk

            Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they become due. The Company’s liquidity and operating results may be adversely affected if its access to the capital markets is hindered, whether as a result of a downturn in stock market conditions generally or matters specific to the Company. The Company generates cash flow from its financing activities. As at December 31, 2016, the Company had cash of $1,774 (December 31, 2015-bank indebtedness of $5,740), and did not have the ability to settle liabilities of $683,234 (December 31, 2015-$285,491). All of the Company’s financial liabilities have contractual maturities of less than thirty days and are subject to normal trade terms. The Company regularly evaluates its cash position in an effort to preserve and secure its capital as well as liquidity.

Market risk

            Market risk is the risk of loss that may arise from changes in market factors such as interest rates and foreign exchange rates.

Interest rate risk

            The Company has a term deposit and interest-bearing debt. The Company’s current policy is to invest excess cash in interest bearing accounts at major Canadian chartered banks. The Company periodically monitors the investments it makes and is satisfied with the creditworthiness of its Canadian chartered bank.

Foreign currency risk

            The Company’s functional currency is Canadian dollars (“CDN”). The Company raises funds for its operations in both United States dollars (“USD”) and CAD and currently realizes a portion of its expenses in USD. Consequently, certain assets and liabilities are exposed to foreign currency fluctuations. The Company maintains a USD and a CAD bank account along with a CAD term deposit in a Canadian chartered bank. The Company does not hedge its foreign currency risk, as management does not believe the foreign currency risk derived from currency conversions to be material. As at December 31, 2016, $5,108 (December 31, 2015-$52,251), of the Company’s net monetary liabilities were denominated in USD.

CAPITAL RISK MANAGEMENT

            The Company manages its capital with the following objectives:

(i)

to ensure sufficient financial flexibility to achieve the ongoing business objectives including funding of future growth opportunities, and pursuit of accretive acquisitions; and

   
(ii)

to maximize shareholder return through enhancing the share value.

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            The Company monitors its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Company may manage its capital structures by issuing new shares, repurchasing outstanding shares, adjusting capital spending, or disposal of assets. The capital structure is reviewed by management and the Board on an ongoing basis.

            The Company considers its capital to be stockholders’ deficiency, which comprises common stock, accumulated deficit and comprehensive loss.

            The Company manages capital through its financial and operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based on operating expenditures, and other investing and financing activities. The forecast is updated based on its activities. Selected information is provided to the Board. The Company’s capital management objectives, policies and processes have remained unchanged during the year ended December 31, 2016.

            The Company is not subject to any capital requirements imposed by a lending institution or regulatory body.

Trend

            There are significant uncertainties regarding the world financial markets and the availability of equity financing for the purpose of funding potential ongoing projects. The future performance of the Company is tied to the overall financial markets as well as identifying new projects. Apart from the risk noted hereunder, management is not aware of any other trends, commitments, events or uncertainties that would have a material adverse effect on the Company’s business, financial condition or results of operations.

No active business operations

            The Company is focused on identifying new projects, immediately, in municipalities of Ontario and subsequently, across the Country. The Company cannot offer any assurances that it will ever find another business opportunity that management determines to be worth pursuing. The Company can also offer no assurance that if it identifies a new project and/or completes the acquisition of another business, it will be able to do so on commercially reasonable terms in a manner that is advantageous to its shareholders.

            The Company has never engaged in the profitable operation of a business, and there can be no assurance that it will ever be able to do so. There is no guarantee that the Company will develop and sustain a suitable business operation.

Failure to obtain additional financing and going concern uncertainty

            To date, the Company has not had positive cash flow from operations. The Company’s available cash has been used and will continue to be used to fund negative cash flow. No assurance can be given that the Company will ever generate a positive cash flow from operations.

            Currently, the Company has an agreement with PACE for a $4,096,400 ($5,500,000 CAD) Line of Credit and has received its first tranche of $1,229,280 ($1,600,000 CAD) on February 2, 2017. The funds advanced on the line of credit from PACE are currently unavailable to use until the matter with the Municipalities related to the BioGrid Project is resolved. Further financing will be required to fund its ongoing operations and working capital deficiency. While there is no assurance that these funds can be raised, the Company believes such financing will be available as required. The Company’s ability to continue operations is dependent on the Company’s ability to secure additional financing, Additional financing may not be available when needed or, even, if available, the terms of such financing might not be favorable to the Company and might involve substantial dilution to existing shareholders. The Company has submitted and is in the process of submitting applications to both Provincial and Federal programs offering funds in the form of grants and/or low interest loans, which support the Company’s initiatives.

49


The Company was not successful with its recent application for a grant to a Provincial program providing funding for companies demonstrating projects achieving greenhouse gas reductions. The company will continue to monitor the availability of future programs, both Provincially and Federally. Failure to obtain additional financing on a timely basis could have a material adverse effect on the Company’s business and financial condition and affect its ability to continue as a going concern.

Management

            The success of the Company is largely dependent on the performance of its directors and officers. There is no assurance that the Company can maintain the services of its directors and officers or other qualified personnel required to operate the business. The loss of the services of these persons could have a material adverse effect on the Company and its prospects.

Dividends

            The Company has not paid any dividends on its common shares since incorporation and does not anticipate paying any dividends on its common shares in the foreseeable future. The Company has a limited operating history and there can be no assurance of its ability to operate its projects profitably.

Business

Overview

            SusGlobal Energy Corp. (“SusGlobal Energy Canada”) 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 Energy Corp. (“Old SusGlobal”, a company in the start-up stages and Commandcredit Corp. (“Commandcredit”), an inactive Canadian public shell company that was formed in Ontario, Canada on June 19, 2000 amalgamated to continue business under the name of SusGlobal Energy Corp. We are a renewable energy company focused on acquiring, developing and monetizing a global portfolio of proprietary technologies in the waste to energy application.

            With the growing amount of organic wastes being produced by society as a whole, a solution for sustainable global management of these wastes must be achieved. SusGlobal Energy Canada through its proprietary technology and processes is equipped and confident to deliver this objective.

            We believe 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 Energy Canada can therefore help you turn what many consider waste into precious energy. 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) Increasing the capacity of existing infrastructure (anaerobic digesters) to allow processing of SSO to increase biogas yield. (c) Utilize recycled plastics to produce liquid fuels.

            The convertibility of organic material into valuable end products such as biogas, liquid biofuels and compost shows the utility of renewable energy. These products can be converted into electricity, fuels and marketed to agricultural operations that are looking for an increase in crop yields, soil amendment and environmentally-sound practices. This practice also diverts these materials from landfills and reduces greenhouse gas emissions that result from landfilling organic wastes.

            We 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.

50


            Our project and services offered can benefit the public and private markets. The following includes some of our work managing organic waste streams: Anaerobic Digestion, Dry Digestion, Biogas production, Wastewater Treatment, In- Vessel Composting, SSO Treatment, Biosolids Heat Treatment and Composting.

            We 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 we provide includes identifying idle or underutilized anaerobic digesters and integrating our technologies with capital investment to optimizing the operation of the existing digesters to reach their full capacity for processing SSO. Our processes not only divert significant organic waste from landfills, but also result in methane avoidance, with significant Greenhouse Gas (“GHG”) reductions from waste disposal. The processes also produce renewable energy through the conversion of wastewater biosolids and organic wastes in the same equipment (co-digestion) and valuable end products such as biogas, electricity and organic fertilizer, considered Class AA organic fertilizer.

            Currently, our primary customers are municipalities in both rural and urban centers throughout southern and central Ontario, Canada. Much of the research and development that has been carried out has been completed by our Chief Executive Officer through multiple projects carried out on projects prior to the formation of SusGlobal. Where necessary, to be in compliance with Provincial and local environmental laws and regulations, we submit applications to the respective authorities for approval prior to any necessary engineering is carried out. The application for environmental approval, for our current project, the BioGrid, which is an amendment to an already existing environmental permit, has been submitted and we are awaiting final approval.

            We currently have a total of five (5) employees, all performing services under consulting or employment contracts, of which three (3) are executive officers.

            There are no legal proceedings to which the Company or any of its property is the subject.

Products and Services

            On August 3, 2016, the Company signed an agreement with Grimsby Energy Inc. from Grimsby, Ontario, Canada, to allow hydrolyzed and pasteurized organic wastes to be processed at their Anaerobic Biodigester. The agreement commenced November 1, 2016 and can be terminated by either party within three hundred and sixty-five days minimum written notice. Up to the date of this filing, there has been no activity under this agreement.

            On August 13, 2016, the Company’s wholly-owned subsidiary, SusGlobal Energy Canada I Ltd., took over operation of the biodigester and electricity generating facility (the “BioGrid”) located in Owen Sound, Ontario, Canada. The expansion and operation agreement for the BioGrid, a facility owned by the Township of Georgian Bluffs and the Township of Chatsworth, was signed by the company on June 7, 2016. Approximately three weeks after assuming the operations of the BioGrid, the facility encountered a catastrophic gas engine failure. The repair of the engine took approximately two months. During this period, the Company invoked the Force Majeure provision under section 17 of the Agreement. On November 4, 2016, the Company was informed by the Municipalities, that they rejected the Force Majeure and served the Company with Notice of Immediate Termination. The Company and the Municipalities have agreed to schedule a meeting to discuss a settlement agreement.

            On February 6, 2017, the Company announced that it has entered into an agreement for a Line of Credit of $4,096,400 ($5,500,000 CAD) with PACE. The Line of Credit facility will be advanced in tranches to allow for the funding of engineering, permitting, construction costs and equipment purchases for the BioGrid Project. As noted above , the Company was informed that the Agreement was terminated effective November 4, 2016 and since, the Company has made every effort to resolve the differences. The Company and the Municipalities have agreed to schedule a meeting to discuss a settlement agreement. The funds advanced on the line of credit from PACE are currently unavailable to use until the matter with the Municipalities related to the BioGrid Project is resolved.

51


            There are no legal proceedings to which the Company or any of its property is subject.

Corporate Information

            Our principal executive offices are located at 200 Davenport Road, Toronto Ontario M5R 1J2 Canada and our telephone number is (416) 223-8500.

Management and Corporate Governance

Board of Directors

            Upon consummation of the Domestication, our board approved Delaware bylaws which permit our Board of Directors to set the size of the Board at not less than 1 director. Our Board of Directors currently consists of three directors. For the size and scope of our business and operations, we believe a board of approximately this size is appropriate as it is small enough to allow for effective communication among the members but large enough so that we get a diverse set of perspectives and experiences around our board room. Our bylaws provide that, in uncontested elections, directors will be elected by a majority of the votes cast, and in contested elections, directors will be elected by a plurality of the votes cast.

            Each director on our Board of Directors will serve a one-year term or until their successor has been duly elected and qualified, subject to their earlier death, resignation, disqualification or removal. Pursuant to the DGCL and our bylaws, in general, any vacancies on our Board of Directors resulting from death, retirement, resignation, disqualification, removal or other cause may be filled only by an affirmative vote of a majority of the remaining directors then in office, although less than a quorum, or by a sole remaining director. Our current directors are as follows:

Name Age Position
Marc M. Hazout 52 Chairman of the Board, President and Director
Gerald P. Hamaliuk 70 Chief Executive Officer and Director
Vincent R. Ramoutar 54 Director
Gordon E. Miller 64 Director
Marsha E. Guy 62 Director

            We believe that each of our directors possesses the experience, skills and qualities to fully perform his duties as a director and contribute to our success. Our directors were nominated because each is of high ethical character, highly accomplished in his field with superior credentials and recognition, has a reputation, both personal and professional, that is consistent with our image and reputation, has the ability to exercise sound business judgment, and is able to dedicate sufficient time to fulfilling his obligations as a director. Our directors as a group complement each other and each of their respective experiences, skills and qualities so that collectively the Board operates in an effective, collegial and responsive manner. Each director’s principal occupation and other pertinent information about particular experience, qualifications, attributes and skills that led the Board to conclude that such person should serve as a director, appears on the following pages.

             Gerald P. Hamaliuk , age 70 has served as Chief Executive Officer and as a member of the board of directors of the Company since December 2014. Since 2001, Mr. Hamaliuk has served as the president of Landfill Gas Canada Oakville (Canada), Shenzhen (China), Kuala Lumpur (Malaysia), a company that utilizes Canadian biogas technology to develop renewable energy projects that reduce greenhouse gas emissions in developing countries in Asia. From 1997 to 2001, Mr. Hamaliuk was a vice-president industrial division/business development Engineer at Kilborn Engineering Inc. and SNCLavalin after SNC acquired Kilborn in 1997.

            The determination was made that Mr. Hamaliuk should serve our Board of Directors because of his extensive experience in the services the Company intends to offer.

52


             Marc M. Hazout, age 52, has served as Chairman and President of SusGlobal Energy since it was founded in 2014. Since 2005, Mr. Hazout has also served as the Chief Executive Officer, President, principal financial and accounting officer and a director of Silver Dragon Resources Inc., a company whose common stock is quoted on the OTC marketplace and is engaged in the acquisition and exploration of silver and other mineral properties. Mr. Hazout has over 15 years of experience in public markets, finance and business operations. Over the past several years, Mr. Hazout has been involved in acquiring, restructuring and providing management services as both a director and an officer to several publicly traded companies. In 1998, Mr. Hazout founded and has been President and CEO of Travellers International Inc. (“Travellers”), a private investment banking firm headquartered in Toronto. Over the past several years, Travellers has focused on building relationships in China with the objective of participating in that country’s growth opportunities. Mr. Hazout attended York University in Toronto studying International Relations and Economics. Mr. Hazout speaks English, French and Hebrew, as well as some Spanish and Italian.

            The determination was made that Mr. Hazout should serve on our Board of Directors because he possesses significant experience in securities and capital markets and brings an extensive network of relationships in China.

            Vincent R. Ramoutar , age 54, is a seasoned executive and an inventor who has gained exposure in several high-tech businesses in an entrepreneurial startup environment. Having co-founded or worked in six startup companies. Vincent’s specialties include raising capital for startups, corporate strategy, marketing, and business development. Mr. Ramoutar has been involved in several energy and resources companies as an adviser since 2007 and has provided management services and partnerships in the European public markets with focus on raising capital and growth opportunities. Mr. Ramoutar obtained a Bachelor of Science degree in computer science from New York Institute of Technology (magna cum laude), New York.

            The determination was made that Mr. Ramoutar should serve on our Board of Directors because he possesses significant experience in securities and capital markets and brings an extensive network of relationships in several technology markets.

             Gordon E. Miller, 64, has held several senior management positions with the Ontario Ministry of the Environment and was the Environmental Commissioner of Ontario from 2000 to 2015. Mr. Miller was also a Professor at Sir Sandford Fleming College, Frost Campus, Lindsay, Ontario from 1986-1989 where SusGlobal Energy in partnership with the College recently was awarded an application under the AWT Program for academic research. Mr. Miller graduated with honors from the University of Guelph in Guelph, Ontario, with a Hon. B.Sc. in Biology and a M.Sc. in Plant Ecology. Mr. Miller has been recognized for his many publications as well as his many scientific and technical presentations.

            The determination was made that Mr. Miller should serve on our Board of Directors because of his strong scientific and technical experience which will be extremely valuable as the Company continues to grow.

             Marsha E. Guy , age 62, has been the National Director Sales & Marketing of GFL Environmental Inc. (“GFL”) for six years and brings over 25 years of experience in the waste and recycling management industry. Ms. Guy has contributed to the growth and success of a number of companies in the waste management industry, expanding the company portfolio through organic sales and acquisition growth. Ms. Guy has been involved in the restructuring and alignment of company activities both as National Manager and Director to several publicly traded companies. During Marsha’s career she has had the great privilege of relationship building, information processing and opportunity identification. Marsha’s determination and strength of will have been paramount in the forward movement of integration of waste management activities across Canada. Ms. Guy attended the Harvard School of Business studying Economics.

            The determination was made that Ms. Guy should serve on our Board of Directors because she possesses strength and determination in moving the integration of waste management activities across Canada making her experience extremely valuable to the Company’s technology integrations for waste management.

53


Corporate Governance

Corporate Governance Guidelines

            Our Board of Directors is responsible for overseeing the management of our company.

            The Board’s principal responsibilities are to supervise and evaluate management, to oversee the conduct of SusGlobal’s business, to set policies appropriate for the business and to approve corporate strategies and goals. The Board is to carry out its mandate in a manner consistent with the fundamental objective of enhancing shareholder value.

Director Independence

            Based on information provided by each director concerning his background, employment, and affiliations, we believe that Vincent Ramoutar, Gordon Miller and Marsha Guy are “independent” as that term is defined under the Nasdaq Marketplace Rules.

Board Committees

            Our Board has established three standing committees: the Audit Committee, the Compensation Committee and the Corporate Governance and Nominating Committee. Copies of the committee charters of each of the Audit Committee, the Compensation Committee and the Corporate Governance and Nominating Committee setting forth the responsibilities of the committees can be found under the Corporate Governance section of our website at www.susglobalenergy.com and such information is also available in print to any stockholder who requests it from us. Our website is not incorporated into this prospectus.

Audit Committee

            The Audit Committee was established to assist the Board in fulfilling its oversight responsibilities in the following principal areas: (1) accounting policies and practices, (2) the financial reporting process, (3)financial statements provided by SusGlobal to the public, (4) risk management including systems of accounting and financial controls, (5) appointing, overseeing and evaluating the work and independence of the external auditors, and (6) compliance with applicable legal and regulatory requirements. The Audit Committee currently consists of Mr. Ramoutar.

Compensation Committee

            The Compensation Committee is responsible for setting and administering the policies and programs that govern both annual compensation and stock option programs for the executive officers and directors of SusGlobal. The Compensation Committee is also responsible for providing oversight with regard to the corporation’s various programs of compensation, including all incentive plans, stock option plans and stock purchase plans. The Compensation Committee currently consists of Mr. Ramoutar.

Corporate Governance and Nominating Committee

            The Corporate Governance and Nominating Committee was established to assist the Board in its responsibilities relating to reviewing SusGlobal’s operational compliance with applicable legal requirements and sound ethical standards. The Corporate Governance and Nominating Committee currently consists of Mr. Ramoutar.

Code of Ethics

            We have adopted a Code of Conduct and Ethics that applies to our officers, employees and consultants and a Financial Management Code of Conduct for our Chief Executive Officer, Chief Financial Officer and senior financial officers. Our Code of Conduct and Ethics and our Financial Management Code of Conduct are available on our website at www.susglobalenergy.com or upon request to the Company’s corporate secretary.

54


Executive Officers

            Set forth below is certain information relating to our current executive officers and key employees. Biographical information for Messrs. Hamaliuk and Hazout is set forth above under Board of Directors.

Name Age Title
Gerald Hamaliuk 70 Chief Executive Officer and Director
Marc Hazout 52 Chairman and President
Ike Makrimichalos 61 Chief Financial Officer

            Ike Makrimichalos, age 61 has been the Chief Financial Officer at the Company since 2014. Since July 2013, Mr. Makrimichalos has been the controller at Silver Dragon Resources Inc., a company whose common stock is quoted on the OTC marketplace and is engaged in the acquisition and exploration of silver and other mineral properties. Since July 2011, Mr. Makrimichalos has been the Chief Financial Officer at Auto Sector Retiree Health Care Trust. From September 2011 to November 2013, Mr. Makrimichalos was the Chief Financial Officer of Royal Standard Minerals Inc., a mining exploration company whose common stock is quoted on the OTCPink marketplace. From November 2009 to September 2011, Mr. Makrimichalos was the controller at Mukuba Resources Limited, a mining company whose common stock is quoted on the NEX. Mr. Makrimichalos left public practice in 2008, after serving over twenty seven years with Deloitte & Touche LLP. Mr. Makrimichalos received a Bachelor of Arts from the University of Toronto and became a Chartered Accountant in December 1986.

Involvement in Certain Legal Proceedings

            To our knowledge, our directors and executive officers have not been involved in any of the following events during the past ten years:

  1.

any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

     
  2.

any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

     
  3.

being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;

     
  4.

being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

Executive Compensation

Summary Compensation Table

            The following table sets forth certain summary information with respect to the compensation paid to the Company’s Chief Executive Officer, President and Chief Financial Officer for services rendered in all capacities to the Company for the fiscal year ended December 31, 2016 and 2015. Other than as listed below, the Company had no executive officers whose total annual salary and bonus exceeded $100,000 for that fiscal year:

55



     Summary Compensation Table    
                   
Name and
principal
position

Year



Salary
($)


Bonus
($)


Stock
awards
($)

Option
awards
($)

Non-equity
incentive plan
compensation ($)

Nonqualified
deferred
compensation
earnings
($)
All other
compensation
($)

Total
($)


                   
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
                   
Gerald
Hamaliuk
2016
2015
45,290
46,998


100,000*




45,290
146,998
                   
Chief
Executive
Officer


















                   
Marc Hazout
2016
2015
45,290
46,998


50,000*




45,290
96,998
                   
Ike
Makrimichalos

2016

36,232













36,232
                   
Chief
Financial
Officer


2015


37,598




50,000*










87,598

*

The aggregate grant date fair values were computed in accordance with FASB Topic 718 and consisted of 2,000,000 shares issued to the executive officers on January 29, 2015 and March 27, 2015 and were priced at the private placement offering of $0.10 per share, totaling $200,000.

Employment, Consulting and Management Agreements

            Pursuant to consulting agreements (the “ Consulting Agreements ”) dated November 1, 2014, the Company engaged (i) Travellers International Inc. and Marc Hazout to provide the services of executive chairman and president of the Company, (ii) Ike Makrimichalos to provide the services of Chief Financial Officer of the Company, and (iii) Landfill Gas Canada Ltd. and Gerald Hamaliuk to provide the services of Chief Executive Officer of the Company (the counterparties to each Consulting Agreement are referred to as “ Consultants ”).

            Under the Consulting Agreements, each of (i) Travellers International Inc. together with Marc Hazout and (ii) Landfill Gas Canada Inc. together with Gerald Hamaliuk is entitled to fees of $5,000 (CAD) per month and Ike Makrimichalos is entitled to fees of $4,000 (CAD) per month. In addition, the Company agreed, subject to approval of the Company’s Chief Executive Officer and the Board, to grant the Consultants under each Consulting Agreement 500,000 common shares of the Company. The Company has also agreed to reimburse each consultant for certain out-of-pocket expenses incurred by the Consultant.

            Each Consulting Agreement has a term of one year and provides that, if the Company terminates the Consulting Agreement the Consultant is entitled to be paid six months’ compensation as well as any bonus compensation owing. Upon Constructive Discharge (as defined in the Consulting Agreements) and subject to certain notification requirements and the Company’s opportunity to cure the Constructive Discharge, the Consultant is entitled to six months’ compensation as well as any bonus compensation owing. The three consulting agreements have been extended at the same monthly amounts, on a month to month basis until new consulting agreements are completed.

56


            Effective January 1, 2017, new consulting agreements were finalized for the services of the executive chairman and president and for the Chief Executive Officer. The consulting agreements are for a period of three years, commencing January 1, 2017. For each of these two executive officers, the monthly fees will be as follows: $3,724 (5,000 CAD) for 2017 and $11,172 (15,000 CAD) for 2018 and 2019. In addition, the Chief Executive Officer will be granted 3,000,000 Restricted Stock Units (“RSU”). The RSU’s will vest in three equal installments annually on January 1, 2018, 2019 and 2020. The Company has also agreed to reimburse each for certain out-of-pocket expenses incurred by each executive officer.

            The Company has an employment agreement with its accounting and office manager for a period of one year, effective February 1, 2017, at a monthly amount of $4,096 ($5,500 CAD).

Stock Option Plan

            The Board has adopted a stock option plan (the “ Plan ”) to encourage common share ownership in the Company by directors, officers, employees and consultants of the Company. Under the Plan, the total number of common shares that are reserved and set aside for issuance under the Plan and pursuant to any other management options outstanding may not exceed 10% of the number of issued and outstanding common shares at the date of the grant, and the number of shares reserved for issuance to any one person may not exceed 5% of the number of issued and outstanding common shares at the date of the grant.

            Under the Plan, options may be granted only to directors, officers, employees and consultants of the Company or its affiliates or to a personal holding company of such an optionee, and options are non-assignable. At the time that a grant of options is approved, the Board shall fix the exercise price of such options at a price that is not lower than the fair market value of the common shares at the time of the grant. Full payment of the exercise price must be made upon the exercise of the options.

            Options granted under the Plan shall have a term of no longer than five years. No options have been granted under the Plan.

Director Compensation Policy

            The Company does not currently have a director compensation policy. For the year ended December 31, 2016, as noted below no option or stock awards were granted to directors and no cash payments were made to directors during the fiscal year ended December 31, 2016. The director compensation for the year ended December 31, 2016, is noted below:

Director Compensation





Name

Fees
earned or
paid in
cash($)



Stock|
awards($)



Option
awards($)
Non-equity
incentive
plan
compensation
($)

Nonqualified
deferred
compensation
earnings ($)



All other
compensation($)




Total($)
               
(a) (b) (c) (d) (e) (f) (g) (h)
               
Marc Hazout - - - - - - -
               
Gerald Hamaliuk - - - - - - -
               
Vincent Ramoutar - - - - - - -

57


            There are no outstanding equity awards as of December 31, 2016 and as at the date of this filing.

Related Party Transactions

            During the year, the Company incurred $45,289 ($60,000 CAD) (2015-$46,998; $60,000 CAD) in management fees charged by Travellers and $45,289 ($60,000 CAD) (2015-$46,998; $60,000 CAD) in management fees charged by Landfill Gas Canada Limited (“LFGC”), an Ontario company controlled by a director and Chief Executive Officer of the Company. The balance of the management fees, in the amount of $36,230 ($48,000 CAD) (2015-$37,598; $48,000 CAD) was charged by the Company’s Chief Financial Officer and $6,037 ($8,000 CAD) (2015-$nil) was charged by the Company’s vice-president of corporate development. As at December 31, 2016, unpaid remuneration and unpaid expenses in the amount of $95,396 ($128,083 CAD) (2015-$38,150; $52,802 CAD) is included in accounts payable and $61,982 ($83,220 CAD) (2015-$18,261; $25,275 CAD) is included in accrued liabilities.

            In addition, the Company incurred a fee of $7,624 ($10,000 CAD) from Travellers, who provided the funds to establish the letter of credit noted for the BioGrid.

            During the year, the Company incurred $31,702 ($42,000 CAD) (2015-$28,199; $36,000 CAD) in rent paid under a rental agreement to Haute Inc., an Ontario company controlled by a director and president.

            Loans payable in the amount of $217,482 ($292,000 CAD) (December 31, 2015-$59,245; $82,000 CAD), owing to Travellers and bearing interest at the rate of 12% per annum are due on demand and unsecured. As at December 31, 2016, $15,043 ($20,197 CAD) (December 31, 2015-$682; $944 CAD), in interest is included in accrued liabilities. One of the loans owing to Travellers, in the amount of $61,074 ($82,000 CAD) was repaid subsequent to the year-end, including accrued interest. There are no written agreements evidencing these loans.

            During the year, Silver Dragon Resources Ltd., an Ontario company in which a director and president of the Company is also a director and Chief Executive Officer, provided funds to the Company totaling $53,968 ($71,500 CAD). The loans were non-interest bearing, due on demand and unsecured. The loans were repaid in full on December 5, 2016. There are no written agreements evidencing these loans.

            The Company had one year consulting contracts with each of its three officers, which expired on October 31, 2015. The monthly payments for the three officers totaled $10,427 ($14,000 CAD). The Company extended the consulting contracts, at the same monthly amounts, on a month to month basis until new consulting contracts are completed. As noted above, effective January 1, 2017, new consulting agreements were signed for the Executive Chairman and President and the Chief Executive Officer, expiring December 31, 2019. For each of these two executive officers, the monthly fees will be as follows: $3,724 ($5,000 CAD) for 2017 and $11,172 ($15,000 CAD) for 2018 and 2019. In addition, the Chief Executive Officer will be granted 3,000,000 Restricted Stock Units (“RSU”). The RSU’s will vest in three equal installments annually on January 1, 2018, 2019 and 2020. The Company has also agreed to reimburse each for certain out-of-pocket expenses incurred by each executive officer.

            On November 1, 2014, the Company entered into a one year premises lease agreement with Haute Inc., an Ontario company controlled by a director and president of the Company, expiring October 31, 2015. The monthly minimum payment was $2,234 ($3,000 CAD). The Company’s monthly rent continued at the same amount through December 2015. Subsequent to the year-end and effective January 1, 2016, the Company signed a new premises lease agreement with Haute Inc., for a period of one year at a minimum monthly amount of $2,607 ($3,500 CAD). Effective January 1, 2017, the Company entered into a new three year premises lease agreement with Haute Inc., at a monthly amount of $2,979 ($4,000 CAD) for 2017, $ 3,724 ($5,000 CAD) for 2018 and $4,469 ($6,000 CAD) for 2019. The Company is also 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.

Beneficial Ownership

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            The following table sets forth certain information regarding beneficial ownership of SusGlobal Energy Corp’s securities as of March 30 2017:

  • by each person who is known by us to beneficially own more than 5% of our securities;
  • by each of our officers and directors; and
  • by all of our officers and directors as a group.
    Amount And  
    Nature Of Approximate
    Beneficial Percent of
Title Of Class Name And Address Of Beneficial Owner (1)   Ownership (2) Class (%)
Common Marc Hazout

7,920,000

22.09%
Common Ike Makrimichalos

500,000 (3)

1.39%
Common Gerald Hamaliuk

3,300,000 (3)

9.20%
Common Vincent Ramoutar

2,000,000 (3)

5.58%
Common Gordon Miller

20,000

0.06%
Common Marsha Guy

20,000

0.06%
Common All officers and directors as a group (6 Persons)

13,760,000

38.38%

(1)

Except as noted above, the address for the above identified officers and directors of the Company is c/o 200 Davenport Road, Toronto, ON, Canada M5R 1J2.

   
(2)

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to the shares shown. Except where indicated by footnote and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of voting securities shown as beneficially owned by them. Percentages are based upon the assumption that each shareholder has exercised all of the currently exercisable options he or she owns which are currently exercisable or exercisable within 60 days and that no other shareholder has exercised any options he or she owns.

   
(3)

The noted shares have been pledged as security for the Line of Credit with PACE.

            The above-referenced table is based on 35,849,086 issued and outstanding shares of common stock on the date of this filing.

Description of Capital Stock; Comparison of Rights

             The following description of the SusGlobal Energy Delaware capital stock (common and preferred) reflects our capital stock as it will exist from and after the Effective Time, as governed by our new certificate of incorporation and bylaws and by Delaware law. We also identify the material differences between the rights of shareholders of SusGlobal Energy Canada and SusGlobal Energy Delaware. These descriptions are a summary only.

General

            We are currently an Ontario company incorporated under the laws of Ontario. We were incorporated on October 7, 2014.

Authorized Share Capital

59


            Until the Effective Date, we will not have any Delaware Capital Stock and will not exist as a Delaware entity. Upon the effectiveness of the Domestication, SusGlobal Delaware’s authorized capital stock will consist of 150,000,000 shares of common stock par value $0.0001 per share and 10,000,000 shares of preferred stock, par value $.0001 per share.

Common Stock

            Voting. Each holder of SusGlobal Energy Delaware common stock will generally be entitled to one vote for each share of common stock owned of record on all matters submitted to a vote of stockholders of SusGlobal Energy Delaware. Except as otherwise required by law, holders of common stock (as well as holders of any preferred stock entitled to vote with the common stockholders) will generally vote together as a single class on all matters presented to the stockholders for their vote or approval, including the election of directors. There will be no cumulative voting rights with respect to the election of directors or any other matters.

             Dividends and distributions . Subject to applicable law and the rights, if any, of the holders of any series of preferred stock of SusGlobal Energy Delaware then outstanding, the holders of SusGlobal Energy Delaware common stock will have the right to receive dividends and distributions, whether payable in cash or otherwise, as may be declared from time to time by its Board of Directors, from legally available funds.

             Liquidation, dissolution or winding up. Subject to applicable law and the rights, if any, of the holders of any series of preferred stock of SusGlobal Energy Delaware then outstanding, in the event of the liquidation, dissolution or winding-up of SusGlobal Energy Delaware, holders of its common stock will be entitled to share ratably in proportion to the number of shares of common stock held by them in the assets available for distribution after payment or reasonable provision for the payment of all creditors.

             Other provisions . There will be no redemption provisions or sinking fund provisions applicable to the common stock of SusGlobal Energy Delaware.

            The rights, preferences, and privileges of the holders of the SusGlobal Energy Delaware common stock will be subject to, and may be adversely affected by, the rights, preferences and privileges of the holders of any series of preferred stock of SusGlobal Energy Delaware.

Shares Reserved For Future Issuances

            We do not have any outstanding warrants or options.

Preferred Stock

            Under the New SusGlobal Delaware certificate of incorporation, our Board of Directors will be authorized by resolution to create and issue one or more series of preferred stock of SusGlobal Energy Delaware, and, with respect to each series, to determine the number of shares constituting the series and the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions thereof, which may include dividend rights, conversion or exchange rights, voting rights, redemption rights and terms and liquidation preferences, without stockholder approval. Our Board of Directors may therefore create and issue one or more series of preferred stock with voting and other rights that could adversely affect the voting power of the holders of our common stock and which could have certain anti-takeover effects. Before SusGlobal Energy Delaware may issue any series of preferred stock, its Board of Directors will be required to adopt resolutions creating and designating such series of preferred stock.

Delaware Anti-Takeover Laws and the New SusGlobal Energy Delaware Certificate of Incorporation and bylaws

60


            The SusGlobal Energy Delaware certificate of incorporation and bylaws contain provisions that may prevent or discourage a third party from acquiring SusGlobal Energy Delaware, even if the acquisition would be beneficial to its stockholders. The Board of Directors of SusGlobal Energy Delaware have the authority to fix the rights, powers and preferences of shares of one or more series of preferred stock of SusGlobal Energy Delaware and to issue such shares without a stockholder vote.

            SusGlobal Energy Delaware is subject to Section 203 of the DGCL. Section 203 prohibits SusGlobal Energy Delaware from engaging in any business combination (as defined in Section 203) with an “interested stockholder” for a period of three years subsequent to the time that the stockholder became an interested stockholder unless:

  • prior to such time, the corporation’s Board of Directors approve either the business combination or the transaction in which the stockholder became an interested stockholder;

  • upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owns at least 85% of the outstanding voting stock (with certain exclusions);

or

  • at or after the person becomes an interested stockholder, the business combination is approved by the corporation’s Board of Directors and authorized by a vote of at least 66 2/3% of the outstanding voting stock of the corporation not owned by the interested stockholder.

            For purposes of Section 203, an “interested stockholder” is defined as an entity or person (other than the corporation and any direct or indirect majority-owned subsidiary of the corporation) beneficially owning 15% or more of the outstanding voting stock of the corporation, based on voting power, and any entity or person affiliated with or controlling or controlled by such an entity or person.

            A “business combination” includes mergers, asset sales and other transactions resulting in financial benefit to a stockholder. Section 203 could prohibit or delay mergers or other takeover or change of control attempts with respect to us and, accordingly, may discourage attempts that might result in a premium over the market price for the shares held by stockholders.

            Such provisions may have the effect of deterring hostile takeovers or delaying changes in control of management of SusGlobal Energy Delaware.

Indemnification

            Section 145 of the Delaware General Corporation Law, or the Delaware Law, provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation — a “derivative action”), if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys’ fees) incurred in connection with defense or settlement of such action, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. Under Section 145 of the Delaware Law, a corporation shall indemnify an agent of the corporation for expenses actually and reasonably incurred if and to the extent such person was successful on the merits in a proceeding or in defense of any claim, issue or matter therein.

61


            Section 145 of the Delaware Law authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended. Our certificate of incorporation provides for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware Law. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling our company pursuant to such provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Securities Act Restrictions On Resale Of SusGlobal Energy Delaware Common Stock

            As of the effective date of the Registration Statement that this prospectus forms a part of, the outstanding shares of common stock of SusGlobal Energy Delaware will have been registered under the Securities Act, and holders of shares of such stock who are not affiliates of the Company may freely resell their stock under the Securities Act. Holders of such shares of such stock who are affiliates of the Company, however, will not be permitted to resell their shares unless an exemption from registration under the Securities Act, such as Rule 144 thereunder, is available. In general, Rule 144 will permit an affiliate of the Company to resell shares of stock received in connection with the Domestication only if certain requirements are met. Among other things, the affiliate of the Company may not sell shares of any class (including any shares of that class otherwise acquired) in an amount that, during any three-month period, exceeds 1% of the outstanding shares of that class (or, solely in the case of the common stock, the average weekly trading volume of the stock on any exchange or quotations service that the common stock may be listed or quoted on during the four calendar weeks preceding the filing of the notice referenced below, if greater). In addition, all such resales must be made in unsolicited brokers’ transactions, the Company must have filed all periodic reports it was required to file under the Exchange Act within the year preceding the resale and (depending on the amount being resold), the affiliate of the Company must have filed a notice of sale on Form 144 with the SEC. For this purpose, an “affiliate” of the Company is any person who controls, is controlled by or is under common control with the Company.

Accounting Treatment of the Domestication

            There will be no accounting effect or change in the carrying amount of the assets and liabilities of SusGlobal Energy Delaware as a result of Domestication. The business, capitalization, assets, liabilities and financial statements of SusGlobal Global Energy Delaware immediately following the Domestication will be the same as those of SusGlobal Energy Canada immediately prior to thereto. There will also not be any accounting impact regarding the change in par value in the shares of SusGlobal Energy Delaware as a result of the Domestication.

Validity of the Capital Stock

            The validity of the shares common stock of SusGlobal Energy Delaware into which the outstanding common shares of SusGlobal Energy Canada will be converted in connection with the Domestication will be passed upon for SusGlobal Energy Delaware by Sichenzia Ross Ference Kesner LLP.

Experts

            The financial statements of SusGlobal Energy Canada as of December 31, 2016 and 2015 included in this prospectus have been so included in reliance on the report of SF Partnership, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

Where You Can Find More Information

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            We have filed with the SEC the Registration Statement on Form S-4 (the “Registration Statement”) under the Securities Act with respect to the Domestication. This prospectus, which constitutes part of the Registration Statement, does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information about us, and the Domestication, we refer you to the Registration Statement and the exhibits and schedules filed as a part of the Registration Statement. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete. If a contract or document has been filed as an exhibit to the Registration Statement, we refer you to the copy of the contract or document that has been filed as an exhibit to the Registration Statement, each statement about such contract or document being qualified in all respects by such reference.

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SUSGLOBAL ENERGY CORP.
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2016 and 2015

(Expressed in United States Dollars )

 

SusGlobal Energy Corp.
December 31, 2016 and 2015

Table of contents

Report of the Independent Registered Public Accounting Firm 1
Consolidated balance sheets 2
Consolidated statements of operations and comprehensive loss 3
Consolidated statements of changes in stockholders’ deficiency 4
Consolidated statements of cash flows 5
Notes to the consolidated financial statements 6-15



Page | 1


SusGlobal Energy Corp.
Consolidated Balance Sheets
As at December 31, 2016 and 2015

    2016     2015  
             
             

ASSETS

           

Current Assets

           

 Cash

$  1,774   $  -  

 Term deposit (note 6)

  148,960     -  

 Trade receivables, no allowance

  9,127     -  

 Harmonized sales taxes receivable

  1 6,084     8,971  

 Prepaid expenses and deposit

  1 9,586     14,450  

 

           

Total Current Assets

  195,531     23,421  

 

           

Intangible Asset (note 7)

  1,670     1,870  

 

           

Long-lived Assets, net (note 8)

  880     1,467  

Total Assets

$  198,081   $  26,758  

 

           

LIABILITIES AND STOCKHOLDERS’

           

DEFICIENCY

           

Current Liabilities

           

 Bank indebtedness

$  -   $  5,740  

 Accounts payable (note 9)

  292,595     112,030  

 Accrued liabilities (note 9)

  173,157     108,476  

 Loans payable to related party (note 10)

  217,482     59,245  

 

           

Total Liabilities

  683,234     285,491  

 

           

Stockholders’ Deficiency

           

 

           

Common stock, unlimited number of common stock
authorized without par value, 34,128,910 (2015-
31,547,346) shares issued
and outstanding (note 11)

  2,004,407     1,646,091  

Accumulated deficit

  (2,447,815 )   (1,896,286 )

Comprehensive loss

  (41,745 )   (8,538 )

 

           

Stockholders’ deficiency

  (485,153 )   (258,733 )

 

           

Total Liabilities and Stockholders’ Deficiency

$  198,081   $  26,758  

Going concern (note 2)
Commitments (note 13)

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

Page | 2


SusGlobal Energy Corp.
Consolidated Statements of Operations and Comprehensive Loss
For the years ended December 31, 2016 and 2015

    2016     2015  
             
Revenue (note 15) $  15,721   $  -  
             
Operating expenses            
             
Stock-based compensation   -     810,000  
Professional fees   203,507     267,874  
Management fees (note 9)   132,845     131,594  
Office and administration (note 9)   104,074     61,087  
Operations and maintenance   69,525     -  
Engine repairs and other maintenance   50,847     -  
Filing fees   6,452     ,4528,499  
Total operating expenses   567,250     1,279,054  
             
Loss before income taxes   (551,529 )   (1,279,054 )
Provision for income taxes (note 12)   -     -  
Net loss   (551,529 )   (1,279,054 )
Other comprehensive loss            
Foreign exchange loss   (33,207 )   (1,169 )
             
Comprehensive loss $  (584,736 ) $  (1,280,223 )
             
Net loss per share-basic and diluted $  (0.02 ) $  (0.04 )
             
Weighted average number of common shares outstanding- basic and diluted   32,849,183     29,303,083  

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

Page | 3


SusGlobal Energy Corp.
Consolidated Statements of Changes in Stockholders’ Deficiency
For the years ended December 31, 2016 and 2015

    Number of     Common     Share     Accumulated     Comprehensive     Stockholders’  
    Shares     Shares     Subscriptions     Deficit     Income (Loss)     Deficiency  
                Payable                    
Balance – December 31, 2014   18,056,676   $ 377,130   $ 221,334   $   (617,232 ) $   (7,369 ) $  (26,137 )
                                     
Shares issued to directors and officers   8,100,000.     810,000     -     -     -     810,000  
Shares issued on private placement, net of share issue costs   2,220,000.     158,560     -     -     -     158,560  
Shares issued for proceeds previously received   2,380,000.     221,334     (221,334 )   -     -     -  
Shares issued as compensation for private placement   500,000.     50,000     -     -     -     50,000  
Shares issued for consulting services   290,670.     29,067     -     -     -     29,067  
Other comprehensive loss   -     -     -     -     (1,169 )   (1,169 )
Net loss   -     -     -     (1,279,054 )   -     (1,279,054 )
Balance – December 31, 2015   31,547,346   $ 1,646,091    $ -   $   (1,896,286 ) $   (8,538 ) $  (258,733 )
Shares issued on private placement, net of share issue costs   2,581,564.     358,316     -     -     -     358,316  
Other comprehensive loss   -     -     -     -     (33,207 )   (33,207 )
Net loss   -     -     -     (551,529 )   -     (551,529 )
Balance – December 31, 2016   34,128,910    $ 2,004,407   $ -   $   (2,447,815 ) $ (41,745 ) $  (485,153 )

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

Page | 4


SusGlobal Energy Corp.
Consolidated Statements of Cash Flows
For the years ended December 31, 2016 and 2015

    2016     2015  
             
Cash flows from operating activities            
Net loss $  (551,529 ) $  (1,279,054 )
Adjustments for:            
 Depreciation   546     489  
 Amortization of intangible asset   180     131  
 Stock-based compensation   -     810,000  
Changes in non-cash working capital:            
 Trade receivables   (9,249 )   -  
 Harmonized sales taxes receivable   (6,928 )   7,517  
 Prepaid expenses and deposit   (4,753 )   (8,942 )
 Accounts payable   179,487     56,977  
 Accrued liabilities   62,156     76,183  
Net cash used in operating activities   (330,090 )   (336,699 )
             
Cash flows from investing activities            
 Purchase of term deposit   (150,960 )   -  
 Acquisition of long-lived assets   -     (1,956 )
Net cash used in investing activities   (150,960 )   (1,956 )
             
Cash flows from financing activities            
 Bank indebtedness   (5,996 )   5,740  
 Advances from loans payable to related parties   212,476     59,245  
 Repayments of loans payable to related parties   (53,968 )   -  
 Private placement proceeds (net of cash share issue costs)   357,631     235,626  
Net cash provided by financing activities   510,143     300,611  
             
Effect of exchange rate on cash   (27,319 )   (1,170 )
Increase (decrease) in cash   1,774      (39,213 )
Cash-beginning of year   -     39,213  
Cash-end of year $  1,774   $  -  

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

Page | 5


SusGlobal Energy Corp.
Notes to the Consolidated Financial Statements
December 31, 2016 and 2015

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 Energy Corp., a company in the start-up stages and Commandcredit Corp. (“Commandcredit”), an inactive Canadian public shell company, amalgamated to continue business under the name of SusGlobal Energy Corp.

SusGlobal is a renewable energy company focused on acquiring, developing and monetizing a global portfolio of proprietary technologies in the waste to energy application.

The consolidated financial statements of SusGlobal and its wholly-owned subsidiaries, SusGlobal Energy Canada Corp. and SusGlobal Energy Canada I Ltd. (the “Company”), have been prepared following generally accepted accounting principles in the United States (“US GAAP”), and are expressed in United States Dollars. In the opinion of management, all adjustments necessary for a fair presentation have been included.

2. Going Concern

The consolidated financial statements have been prepared in accordance with US GAAP, which assumes that the Company will be able to meet its obligations and continue its operations for the next twelve months.

As at December 31, 2016, the Company had a working capital deficit of $487,703 (December 31, 2015-$262,070), incurred a net loss of $551,529 (2015-$1,279,054) for the year and had an accumulated deficit of $2,447,815 (December 31, 2015-$1,896,286) and expects to incur further losses in the development of its business. These factors and those noted below, 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 and upon achieving profitable operations. Management believes that the Company will be able to obtain the necessary funding by equity or debt however, there is no assurance of funding being available on acceptable terms. Realization values may be substantially different from carrying values as shown.

Subsequent to the year-end, the Company finalized a corporate line of credit (“Line of Credit”) of $4,096,400 ($5,500,000 CAD) with PACE Savings & Credit Union Limited (“PACE”). The Line of Credit was obtained to fund the BioGrid Project, which is a project described in the expansion and operation agreement (the “Agreement”) between the Company and the Township of Georgian Bluffs and the Township of Chatsworth (the “Municipalities”), as described in note 15. The Municipalities terminated the Agreement on November 4, 2016 and the Company filed a Notice of Dispute with the Municipalities on March 1, 2017, as described in note 16 (c).

The Company and the Municipalities have agreed to schedule a meeting to discuss a settlement agreement. The funds advanced on the Line of Credit from PACE are currently unavailable to use until the matter with the Municipalities related to the BioGrid Project is resolved.

These 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

a)

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, SusGlobal Energy Canada Corp., incorporated on December 14, 2015 and SusGlobal Energy Canada I Ltd., incorporated on December 15, 2015. All significant inter-company balances and transactions have been eliminated on consolidation.

b)

Use of estimate s

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 related to accruals and to the deferred income tax asset valuation allowances. 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 judgments 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: going concern assumptions, deferred income tax assets and related valuation allowance, accruals and fair valuation of shares. 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.

Page | 6


SusGlobal Energy Corp.
Notes to the Consolidated Financial Statements
December 31, 2016 and 2015

3. Significant Accounting Policies, (continued)

c)

Cash and cash equivalent s

Cash and cash equivalents consist of deposits held in financial institutions and liquid investments with original maturities of three months or less at the time of purchase.

d)

Trade receivable s

Trade receivables are recorded when billed and when services are performed. The carrying value of the receivables, net of an allowance for doubtful accounts, represents the estimated realizable value. The Company estimates the allowance for doubtful accounts based on historical trends; type of customer, such as commercial or municipal; the age of outstanding receivables; and existing economic conditions. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. Past-due receivable balances are written off when internal collection efforts have been unsuccessful.

e)

Financial instrument s

The Company classifies all financial instruments as held-for-trading, loans and receivables, or other financial liabilities. Loans and receivables and other financial liabilities are measured at amortized cost. Instruments classified as held for trading are measured at fair value with unrealized gains and losses recognized in the statement of operations and comprehensive loss. Debt transaction costs are allocated to the related debt and amortized over the life of the loan using the effective interest method. Equity transaction costs are recorded in equity.

The Company has designated its cash and term deposit as held for trading, which is measured at fair value. Trade receivables are classified as loans and receivables, which is measured at amortized cost, which approximates fair value due to its short-term nature. Accounts payable and accrued liabilities are classified as other liabilities, which are measured at amortized cost, which approximates fair value due to their short-term nature. Loans payable to related party is also classified as other liabilities, which approximates fair value due to its market interest rate.

f)

Fair value of financial instrument s

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

  a.

Level 1 – Quoted prices in active markets for identical assets or liabilities .

  b.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities .

  c.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities .

The Company uses the following methods and significant assumptions to estimate fair values. The fair value of cash and term deposit is measured using Level 1 inputs.

Page | 7


SusGlobal Energy Corp.
Notes to the Consolidated Financial Statements
December 31, 2016 and 2015

3. Significant Accounting Policies, (continued)

g)

Intangible asset

Intangible asset, consisting of a technology license, is stated at cost less accumulated amortization and is amortized on a straight-line basis over the useful life, which is 10 years. The Company evaluates the intangible asset for permanent impairment when triggering events are identified.

h)

Long-lived assets

Long-lived assets are stated at cost. Equipment awaiting installation on site is not depreciated until it is commissioned. Depreciation is based on the estimated useful life of the asset and depreciated annually as follows:

Category Rate Method
Computer hardware 30% Straight line

i)

Impairment of long-lived assets

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.

j)

Income taxes

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recorded for differences between the accounting and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or receivable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.

k)

Revenue recognition

Revenues are from the fees charged for waste collection and from the sale of electricity. The fees charged for services are generally defined in service agreements and vary based on contract-specific terms such as frequency of service, weight, volume and the general market factors influencing a region’s rates. Revenue is recognized as services are performed and collection is reasonably assured.

l)

Loss per share

Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus potentially dilutive securities outstanding for each year. The computation of diluted loss per share has not been presented as its effect would be anti-dilutive.

m)

Stock-based compensation

From time to time the Company may grant options and/or warrants to management, directors, employees and consultants. The Company recognizes compensation expense at fair value. Under this method, the fair value of each warrant is estimated on the date of the grant and amortized over the vesting period, with the resulting amortization credited to accumulated paid in capital. The fair value of each grant is determined using the Black-Scholes option-pricing model. Consideration paid upon the exercise of stock options and/or warrants is recorded in equity as share capital.

Page | 8


SusGlobal Energy Corp.
Notes to the Consolidated Financial Statements
December 31, 2016 and 2015

3. Significant Accounting Policies, (continued)

n)

Comprehensive Loss

The Company accounts for comprehensive loss in accordance with ASC 220, “Comprehensive Income,” which establishes standards for reporting and presentation of comprehensive loss and its components. Comprehensive loss is presented in the consolidated statements of stockholders’ deficit and consists of net loss and foreign currency translation adjustments.

o)

Foreign currency translation

The functional currency of the Company is Canadian dollar. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net income (loss) for the year. In translating the financial statements of the Company’s Canadian subsidiaries from their functional currency into the Company’s reporting currency of United States dollars, balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in cumulative other comprehensive income (loss) in stockholders’ equity. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

4. Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by FASB or other standard setting bodies and adopted by the Company as of the specified effective date or possibly early adopted, where permitted. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position, results of operations or cash flows.

Recently Issued Accounting Standards

In April 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-03,“Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Cost”. The guidance requires an entity to present debt issuance costs in the balance sheet as a direct reduction from the carrying amount of the debt liability, consistent with debt discounts, rather than as an asset. Amortization of debt issuance costs will continue to be reported as interest expense. Debt issuance costs related to revolving credit arrangements, however, will continue to be presented as an asset and amortized ratably over the term of the arrangement. ASU No. 2015-03 is effective for reporting periods beginning after December 15, 2015 including interim periods within those annual periods. The Company is currently evaluating the impact of adopting ASU No. 2015-03.

In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The adoption of this ASU is expected to result in all operating leases being capitalized in the Company’s financial statements. The Company is currently evaluating the impact of adopting ASU No. 2016-02.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other(Topic 350) - Simplifying the Test for Goodwill Impairment”. The new standard simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill quantitative impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The standard is effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted. The Company early adopted ASU No. 2017-04 on January 1, 2017. The Company is currently evaluating the impact of adopting ASU No. 2017-04.

Page | 9


SusGlobal Energy Corp.
Notes to the Consolidated Financial Statements
December 31, 2016 and 2015

5. Financial Instruments

The carrying value of cash, term deposit, trade receivables, bank indebtedness, accounts payable and accrued liabilities approximated their fair values as of December 31, 2016 and December 31, 2015 due to their short-term nature. The carrying value of the loans payable related party approximated its fair value due to its market interest rate.

Interest, Credit and Concentration Risk

In the opinion of management, the Company is not exposed to significant interest or credit risks arising from its financial instruments. As at December 31, 2016, the Company had two customers representing greater than 5% of total trade receivables and these two customers represented 99% of trade receivables. The Company had certain customers whose revenue individually represented 10% or more of Company’s total revenue. These customers accounted for 95% 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 sufficient working capital and available sources of financing to meet future cash requirements for capital programs and operations.

The Company intends to continue to raise funds through the issuance of common shares under a private placement or debt, to ensure it has sufficient access to cash to meet current and foreseeable financial requirements. 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.

Currency Risk

Although the Company’s functional currency is Canadian dollars (“CAD”), the Company realizes a portion of its expenses in United States dollars (“USD”). Consequently, certain assets and liabilities are exposed to foreign currency fluctuations. As at December 31, 2016, $5,108 (December 31, 2015-$52,251) of the Company’s net monetary liabilities were denominated in United States dollars. The Company has not entered into any hedging transactions to reduce the exposure to currency risk.

6. Term Deposit

On August 22, 2016, the Company placed funds in a term deposit in the amount of $148,960 ($200,000 CAD), as security for a letter credit in the names of the Municipalities. This was a requirement of having taken over, effective August 13, 2016, the operation of biodigester and electricity generating facility (the “BioGrid”) located in Owen Sound, Ontario, Canada, owned by the Municipalities. The term deposit earns interest at the rate of 1.320% annually and is due on October 21, 2017. The Company incurred a charge of $2,287 ($3,000 CAD) from its Chartered Bank, to establish the letter of credit and a fee of $7,624 ($10,000 CAD) from Travellers International Inc. (“Travellers”), an Ontario company controlled by a director and president of the Company, who provided the funds. On January 10, 2017, the Municipalities withdrew the full amount of the term deposit to satisfy payment of certain expenses of the BioGrid. The Company was in the process of arranging to establish a new letter of credit in the same amount, but on March 1, 2017, the Company delivered to the Municipalities, a Notice of Dispute, as disclosed in note 16 (c).

7. Intangible Asset

    2016     2015  
Technology License (net of accumulated amortization of $331 (2015 - $131) $  1,670   $  1,870  

On May 6, 2015, the Company finalized an agreement with Syngas SDN BHD (“Syngas”), a company incorporated under the laws of Malaysia, providing an exclusive license for the Company to use Syngas Intellectual Property within North America for a period of five years from the date of this agreement, for $1 consideration, renewable every five years upon written request. Syngas produces equipment that uses an innovative process to produce liquid transportation fuel from plastic waste material. The Company issued 20,000 common shares of the Company to an introducing party, determined to be valued at $2,000. The technology license is being amortized on a straight-line basis, over a period of 10 years.

Page | 10


SusGlobal Energy Corp.
Notes to the Consolidated Financial Statements
December 31, 2016 and 2015

8 . Long-lived Assets, net

          Accumulated     December 31,     December 31,  
                2016     2015  
    Cost     depreciation     Net book     Net book value  
                value        
                         
Computer hardware $  1,956   $  1,076   $  880   $  1,467  

9. Related Party Transactions

During the year, the Company incurred $45,289 ($60,000 CAD) (2015-$46,998; $60,000 CAD) in management fees charged by Travellers and $45,289 ($60,000 CAD) (2015-$46,998; $60,000 CAD) in management fees charged by Landfill Gas Canada Limited (“LFGC”), an Ontario company controlled by a director and chief executive officer of the Company. The balance of the management fees, in the amount of $36,230 ($48,000 CAD) (2015-$37,598; $48,000 CAD) was charged by the Company’s chief financial officer and $6,037 ($8,000 CAD) (2015-$nil) was charged by the Company’s vice-president of corporate development. As at December 31, 2016, unpaid remuneration and unpaid expenses in the amount of $95,396 ($128,083 CAD) (2015-$38,150; $52,802 CAD) is included in accounts payable and $61,982 ($83,220 CAD) (2015-$18,261; $25,275 CAD) is included in accrued liabilities.

In addition, the Company incurred a fee of $7,624 ($10,000 CAD) from Travellers, who provided the funds to establish the letter of credit as described in note 6.

During the year, the Company incurred $31,702 ($42,000 CAD) (2015-$28,199; $36,000 CAD) in rent paid under a rental agreement to Haute Inc., an Ontario company controlled by a director and president.

10. Loans Payable to Related Party

    2016     2015  
Travellers International Inc. $  217,482   $  59,245  

Loans payable in the amount of $217,482 ($292,000 CAD) (December 31, 2015-$59,245; $82,000 CAD), owing to Travellers and bearing interest at the rate of 12% per annum are due on demand and unsecured. As at December 31, 2016, $15,043 ($20,197 CAD) (December 31, 2015-$682; $944 CAD), in interest is included in accrued liabilities. One of the loans owing to Travellers, in the amount of $61,074 ($82,000 CAD) was repaid subsequent to the year-end, including accrued interest.

During the year, Silver Dragon Resources Ltd., an Ontario company in which a director and president of the Company is also a director and chief executive officer, provided funds to the Company totaling $53,968 ($71,500 CAD). The loans were non-interest bearing, due on demand and unsecured. The loans were repaid in full on December 5, 2016.

11. Capital Stock

At December 31, 2016, the Company had an unlimited number of common shares authorized without par value and 34,128,910 (2015-31,547,346) common shares issued and outstanding.

During the year, the Company raised $358,316 (2015-$158,560) cash on a private placement, net of cash share issue costs of $28,690 (2015-$13,440), on the issuance of 2,581,564 (2015-2,220,000) common shares of the Company.

Page | 11


SusGlobal Energy Corp.
Notes to the Consolidated Financial Statements
December 31, 2016 and 2015

11. Capital Stock, (continued)

In the prior year, in addition to the cash share issuance cost above for 2015, the Company issued 500,000 common shares to two unrelated individuals (250,000 each), who assisted in raising capital through the private placement, determined to be valued at $50,000. The company also issued 2,380,000 common shares in connection with a private placement that occurred in the year ended December 31, 2014, which raised $221,340 cash, net of cash share issue costs of $16,660. In addition, during 2015, the Company issued 8,100,000 common shares of the Company to certain founding officers and directors and a new director, determined to be valued at $810,000, disclosed as stock-based compensation in the consolidated statements of operations and comprehensive loss. The Company also issued 20,000 common shares determined to be valued at $2,000 to the introducing party for the technology license acquired on May 6, 2015, as disclosed in note 7. Furthermore, 220,670 common shares of the Company issued pursuant to a consulting and business advisory arrangement for $22,067 and 50,000 common shares of the Company for a consulting contract for $5,000.

12. Income Taxes

The Company’s income tax provision has been calculated as follows:

    2016     2015  
             
Loss before income taxes $  (551,529 ) $   (1,279,054 )
Deferred: Expected income tax recovery at the statutory rate of 26.50% (2015 –26.5%)   (146,155 )   (338,949 )
Permanent differences   (2,718 )   215,191  
Change in valuation allowance   148,873     123,758  
Provision for income taxes $ -   $  -  
The following summarizes the principal temporary differences and related future tax:            
Losses carried forward $  3 28,929   $  180,056  
Valuation allowance   (328,929 )   (180,056 )
Deferred income tax asset $   -   $  -  

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company computes tax asset benefits for net operating losses carried forward.

The Company has non-capital losses available for carry forward of $1,263,214 ($1,696,044 CAD) (2015-$658,803; $911,838 CAD) which will start expiring in 2024 and continue expiring till 2036.

In addition, the Company has capital losses carried forward totaling $104,271 ($139,999 CAD). These capital losses can be carried forward indefinitely and can be used only against capital gains.

13 . Commitments

a)

On October 21, 2016, the Company hired the services of a contractor to assume the role of Vice President of Corporate Development, effective November 1, 2016, for a period of fourteen months, at the rate of $2,979 ($4,000 CAD) per month, plus applicable taxes. In addition, the contractor was offered up to 115,000 common shares of the Company, at a price of $0.10 per common share, exercisable within 180 days of the effective date of the contract. The future minimum commitment under this consulting agreement, is as follows:


  2017 $  35,748  

Page | 12


SusGlobal Energy Corp.
Notes to the Consolidated Financial Statements
December 31, 2016 and 2015

13. Commitments, (continued)

b)

Effective January 1, 2017, new consulting agreements were finalized for the services of the Executive Chairman and President and for the Chief Executive Officer. The consulting agreements are for a period of three years, commencing January 1, 2017. For each of these two executive officers, the monthly fees will be as follows: $3,724 ($5,000 CAD) for 2017 and $11,172 ($15,000 CAD) for 2018 and 2019. In addition, the chief executive officer will be granted 3,000,000 Restricted Stock Units (“RSU”). The RSU’s will vest in three equal installments annually on January 1, 2018, 2019 and 2020. The Company has also agreed to reimburse each for certain o u t-of-pocket expenses incurred by each executive officer. The future minimum commitment under these consulting agreements, is as follows:


  2017 $  89,376  
  2018   268,128  
  2019   268,128  
    $ 625,632  

The Company has a one year consulting agreement with its Chief Financial Officer, which originally expired on October 31, 2015. The monthly payment under this contract totals $2,979 ($4,000 CAD). The Company extended the consulting agreement, at the same monthly amount, on a month to month basis until a new consulting agreement is completed. The Company has also agreed to reimburse for certain out-of-pocket expenses incurred.

c)

On November 1, 2014, the Company entered into a one year premises lease agreement with Haute Inc., expiring October 31, 2015. The monthly minimum payment was $2,234 ($3,000 CAD). The Company’s monthly rent continued at the same amount through December 2015. Subsequent to December 31, 2015 and effective January 1, 2016, the Company signed a new premises lease agreement with Haute Inc., for a period of one year at a minimum monthly amount of $2,607 ($3,500 CAD). Effective January 1, 2017, the Company entered into a new three year premises lease agreement with Haute Inc., at a monthly amount of $2,979 ($4,000 CAD) for 2017, $3,724 ($5,000 CAD) for 2018 and $4,469 ($6,000 CAD) for 2019. The Company is also 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. The future minimum commitment under this premises lease is as follows :


  2017 $  35,748  
  2018   44,688  
  2019   53,628  
    $ 134,064  

d)

The Company is a partner in business led collaboration in the water sector, a program known as the Advanced Water Technologies Program. This program is administered by the Southern Ontario Water Consortium to assist small and medium sized business in the Province of Ontario, Canada, leverage world-class research facility and academic expertise to develop and demonstrate water technologies for successful introduction to market. The Company’s commitment under this program is as follows:


  2017 $ 87,469  
  2018   22,463  
    $ 109,932  

Page | 13


SusGlobal Energy Corp.
Notes to the Consolidated Financial Statements
December 31, 2016 and 2015

14. Segmented Information

The Company uses a management approach for determining segments. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company’s reportable segments. The Company’s management reporting structure provides for only one segment: renewable energy and operates in one country, Canada.

15. Revenue

The BioGrid

On June 2, 2016, the Company announced that its wholly-owned subsidiary, SusGlobal Energy Canada I Ltd., signed an Agreement for the BioGrid, with the Municipalities Joint BioGrid Project, located near Owen Sound, Ontario, Canada. Effective June 1, 2016, SusGlobal Energy Canada I Ltd., entered into a twenty-five year Agreement to construct, maintain and operate the BioGrid which is automatically renewable for two additional five year periods, unless either party provides written notice of termination. SusGlobal Energy Canada I Ltd. had until August 12, 2016 to finalize the necessary financing commitment of $5,586,000 ($7,500,000 CAD). On August 13, 2016, the Company’s wholly-owned subsidiary, SusGlobal Energy Canada I Ltd., took over operation of the BioGrid.

Approximately three weeks after assuming the operations of the BioGrid, the facility encountered a catastrophic gas engine failure. The repair of the engine took approximately two months. During this period, the Company invoked the Force Majeure provision under section 17 of the Agreement. On November 4, 2016, the Company was informed by the Municipalities, that they rejected the Force Majeure and served the Company with Notice of Immediate Termination.

On March 1, 2017, the Company delivered to the Municipalities, a Notice of Dispute, as disclosed in note 16 (c).

The Company and the Municipalities have not been able to resolve their items of dispute and have agreed to schedule a meeting to discuss a settlement agreement.

16. Subsequent Events

a)

On February 6, 2017, the Company announced that it has entered into an agreement for a Line of Credit of $4,096,400 ($5,500,000 CAD) with PACE. The Line of Credit facility will be advanced in tranches to allow for the funding of engineering, permitting, construction costs and equipment purchases for the BioGrid Project located near Owen Sound, Ontario, Canada. As noted above under note 15, the Company was informed by the Municipalities that the Agreement was terminated effective November 4, 2016. The funds advanced on the Line of Credit from PACE are currently unavailable to use until the matter with the Municipalities related to the BioGrid Project is resolved.

   

The initial advance of $1,229,280 ($1,600,000 CAD) was received by the Company on February 2, 2017. The Line of Credit bears interest at the PACE base rate +1.25%, currently 8%, payable on a monthly basis, interest only, due February 2, 2018 and is secured by a business loan general security agreement guaranteed by the Company’s wholly-owned subsidiaries and a $1,230,400 ($1,600,000 CAD) personal guarantee from the Company’s executive chairman and president and a collateral mortgage on real property comprising an office building leased by the Company. In addition, also pledged as security were the shares of the wholly-owned subsidiaries and a pledge of shares of the Company held by the chief executive officer’s company, the chief financial officer and held by a director’s company, including a limited recourse guarantee by each. The pledge of shares and the collateral mortgage will remain in place so long as the credit facility is not in default or demanded and shall be released on the date that the credit facility is paid in full.

   

During the construction period, the credit facility would be subject to monthly interest payments only. Once the expanded facility is fully operational, the line will be converted to a term facility and subject to blended monthly payments of principal and interest sufficient to repay the term loan within the specified amortization. The loan is fully open for prepayment at any time without notice or bonus.

   

A total commitment fee of $81,928 ($110,000) was paid to PACE, $18,620 ($25,000 CAD) of which was paid as a deposit and included under prepaid expenses on the consolidated balance sheets at the end of the year and the balance $63,308 ($85,000 CAD), on closing. In addition, the agents who assisted in establishing the Line of Credit with PACE, received common shares of the Company, totaling 1,620,000 and cash of $300,000, on closing, for their services.

Page | 14


SusGlobal Energy Corp.
Notes to the Consolidated Financial Statements
December 31, 2016 and 2015

16. Subsequent Events, (continued)

b)

On February 13, 2017, the Company filed a Second Amendment Form S-4 with the United States Securities and Exchange Commission. This registration statement was filed in connection with domestication under Section 388 of the General Corporations Law of the State of Delaware and a continuance under the Business Corporations Act (Ontario), pursuant to which the Company’s jurisdiction on incorporation will be changed from Ontario to the State of Delaware.

   
c)

On March 1, 2017, the Company delivered to the Municipalities a Notice of Dispute under Section 19(1) of the Agreement. This section of the Agreement provides for the situation in which a party to the Agreement considers that a dispute has arisen under or in connection with the Agreement that the parties cannot resolve. The nature and particulars of such dispute is as follows:


The Municipalities were not entitled to draw down the amount drawn as set forth in correspondence from the Company’s counsel to the Municipalities counsel;

The amount drawn and allegedly owing by the Company to the Operator totaling $36,702 ($49,278 CAD), which has been included in the accounts payable of the Company, is an amount in dispute between the Company and the Operator;

The amount drawn for payment to the legal representative of the Municipalities in the amount of $11,744 ($15,767 CAD), which has been included in the accrued liabilities of the Company, was not permitted under the Agreement;

An outstanding invoice relating to a service provided by a haulage company related to residue in the amount of $23,793 ($31,946 CAD), which has been included in the accounts payable of the Company, that was substantially from the operation of the BioGrid prior to August 13, 2016, the date the Company assumed the operations, is entirely and completely for the account of and the responsibility of the Municipalities, pursuant to section 9(6) of the Agreement, and,

The Company also disputes that the Municipalities were entitled to draw down the entire amount of the letter of credit on the basis that the Agreement had been legally terminated by the Municipalities.


d)

Subsequent to the year-end, the Company raised $15,763 on a private placement, net of share issue costs of $1,245, on the issuance of 55,176 common shares of the Company. In addition, the Company issued 1,620,000 common shares to the agents who assisted in establishing the Line of Credit with PACE determined to be valued at $469,800. The Company also paid $300,000 to these agents for their services. The Company also issued 40,000 common shares to two new directors and 5,000 common shares to an employee, determined to be valued at $11,600 and $1,450 respectively, for their services.

The Company has evaluated subsequent events that occurred after December 31, 2016 through March 27, 2017, which is the date the consolidated financial statements were available to be issued.

Page | 15


Item 21. Exhibits and Financial Statement Schedules

Exhibit    
Number   Description
     
3.1   Form of Certificate of Incorporation of SusGlobal Energy Corp.*
     
3.2   Form of Bylaws of SusGlobal Energy Corp.*
     
4.1   Specimen Common Stock certificate*
     
5.1   Form of Opinion of Sichenzia Ross Ference Kesner LLP
     
8.1   Opinion of Blais, Halpert, Lieberman & Greene LLC*
     
10.1   SusGlobal Stock Option Plan*
     
10.2 Executive Chairman Consulting Agreement between SusGlobal Energy corp., Travellers International Inc. and Marc Hazout*
     
10.3   CEO Consulting Agreement SusGlobal Energy Corp., Landfill Gas Canada Ltd. and Gerald Hamaliuk*
     
10.4   CFO Consulting Agreement between SusGlobal Energy Corp. and Ike Makrimichalos*

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10.5

Financing Agreement with Phoenix Capital Partners Inc. dated December 2, 2015*

   
10.6

Memorandum of Agreement between Syngas SDN BHD and SusGlobal Energy Corp.*

   
10.7

Commercial Lease Agreement between Haute Inc. and SusGlobal Energy Corp.*

   
10.8

Biodigester Expansion and Operation Agreement**

   
10.9

Phoenix Amended Engagement Agreement Dated July 20, 2016*

   
10.10

Executive Chairman Consulting Agreement between SusGlobal Energy Corp., Travellers International Inc. and Marc Hazout*

   
10.11

CEO Consulting Agreement SusGlobal Energy Corp., Landfill Gas Canada Ltd. and Gerald Hamaliuk*

   
10.12

Commercial Lease Agreement between Haute Inc. and SusGlobal Energy Corp.*

   
10.13

PACE Savings and Credit Union Limited Term Sheet dated December 31, 2016*

   
10.14

Susglobal Energy Ron Williamson Quarter Horses Inc. 1428245 Ontario Limited Engagement Letter*

   
10.15

Summary of Oral Agreement with Silver Dragon Resources Ltd*

   
10.16

Summary of Oral Agreement with Travellers International Inc.*

   
10.17

Summary of Oral Agreement with Travellers International Inc. *

   
10.18

Variable Rate Business Loan Agreement from Borrowers and Guarantor-SusGlobal Energy

   
10.19

Business Loan General Security Agreement from SusGlobal Energy Corp.

   
10.20

Business Loan General Security Agreement from SusGlobal Energy Canada Corp.

   
10.21

Business Loan General Security Agreement from SusGlobal Energy Canada I Ltd.

   
10.22

Guarantee and Postponement of Claim by Marc M. Hazout

   
10.23

Hypothecation of 500,000 Common Shares of SusGlobal Energy Corp. dated January 31, 2017 and executed by Ike Makrimichalos

   
10.24

Hypothecation of 2,000,000 Common Shares of SusGlobal Energy Corp. dated January 31, 2017 and executed by Vince Ramoutar

   
10.25

Hypothecation of 3,300,000 Common Shares of SusGlobal Energy Corp. dated January 31, 2017 and executed by Gerald Hamaliuk

   
10.26

Hypothecation of 1 Common Share of SusGlobal Energy Canada Corp., dated January 29, 2017 and executed by Marc Hazout

   
10.27

Hypothecation of 1 Common Share of SusGlobal Energy Canada I Ltd., dated January 29, 2017 and executed by Marc Hazout

   
10.28

Guarantee and Postponement of claim for each of Ike Makrimichalos, Landfill Gas Canada Ltd., and 1370383 Ontario Ltd.

   
21.1

Subsidiaries of the Registrant *

   
23.1

Consent of SF Partnership

   
23.2

Consent of Sichenzia Ross Ference Kesner LLP (form contained in Exhibit 5.1).

   
23.3

Consent of Blais, Halpert, Lieberman & Greene LLC (contained in Exhibit 8.1)

   
24.1

Power of Attorney (included in the signature page to the Registration Statement on Form S-4, filed by SusGlobal Energy Corp. filed on January 1, 2016)

* Previously filed.

**

A redacted version of this Exhibit has been previously filed. An un-redacted version of this Exhibit has been separately filed with the Securities and Exchange Commission pursuant to an application for confidential treatment. The confidential portions of the Exhibit have been omitted and are marked by an asterisk.

65


Item 22. Undertakings

The undersigned registrant hereby undertakes:

(1)        To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

  (a)

To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

     
  (b)

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

     
  (c)

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2)        That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3)        That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of the registration statement shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided , however , that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(4)        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants, the registrants have been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, each registrant will, unless in the opinion of its counsel, the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(5)        The undersigned registrant hereby undertakes to supply, by means of a post-effective amendment, all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

66


(6)        That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, if a primary offering of securities of the undersigned registrant is deemed to occur pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, and if the securities are deemed to be offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

  (i)

Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

     
  (ii)

Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

     
  (iii)

The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

     
  (iv)

Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

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SIGNATURES

            Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Toronto, Ontario on April 5, 2017.

  SUSGLOBAL ENERGY CORP.
   
  By: /s/ Gerald Hamaliuk
  Name: Gerald Hamaliuk
  Title: Chief Executive Officer

            Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature   Title   Date
         
/s/ Gerald Hamaliuk   Chief Executive Officer   April 5, 2017
Gerald Hamaliuk   (principal executive officer) and Director Board       
     
         
/s/ Ike Makrimichalos   Chief Financial Officer and   April 5, 2017
Ike Makrimichalos   (principal financial and accounting officer)    
         
/s/ Marc Hazout   President and Chairman of the Board      April 5, 2017
Marc Hazout        
         
/s/ Vincent Ramoutar   Director   April 5, 2017
Vincent Ramoutar        
         
/s/ Gordon Miller   Director   April 5, 2017
Gordon Miller        
  
    Director   April  , 2017
Marsha Guy        

68




Exhibit 5.1

                                                                                                                                                                                                                                 April 4, 2017
SusGlobal Energy Corp.
200 Davenport Road
Toronto, ON M5R1J2

Re:     SusGlobal Energy Corp. Registration Statement on Form S-4 Gentlemen:

We have acted as legal counsel to SusGlobal Energy Corp.,, a business company presently incorporated under the laws of the province of Ontario ( “ SusGlobal Ontario ”), in connection with the Registration Statement on Form S-4 (the “ Registration Statement ”) filed by SusGlobal Ontario with the Securities and Exchange Commission (the “ Commission ”) under the Securities Act of 1933, as amended, and the domestication of SusGlobal under the laws of the State of Delaware (the “ Domestication ”). Upon consummation of the Domestication, SusGlobal will become a Delaware corporation (as domesticated, the “ Company ”).

The Registration Statement relates to SusGlobal’s intent to change its jurisdiction of incorporation by discontinuing from Ontario, Canada and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”).

The Domestication will be effected under Section 388 of the Delaware General Corporation Law (the “DGCL”) and by filing 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 SusGlobal Ontario will be domesticated and continue as a Delaware corporation (we sometimes refer to the domesticated Delaware entity as “SusGlobal Delaware”).

We anticipate that the Domestication will become effective shortly after the effectiveness of the Registration Statement. After SusGlobal Energy Delaware has been formed in Delaware the Company will file with the Securities and Exchange Commission a post-effective amendment to the Registration Statement to adopt the Registration Statement and to update the disclosure contained therein as appropriate.

We have reviewed the Registration Statement and the Certificate of Incorporation which will be filed with the Delaware Secretary of State. We also have examined the originals, or duplicates or certified or conformed copies, of such records, agreements, documents and other instruments and have made such other investigations as we have deemed relevant and necessary in connection with the opinions hereinafter set forth. As to questions of fact material to this opinion, we have relied upon certificates or comparable documents of public officials and of SusGlobal Ontario’s, officers and representatives.

In rendering the opinion set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies and the authenticity of the originals of such latter documents. We have further assumed that: SusGlobal Ontario has the full power, authority and legal right to domesticate in the State of Delaware pursuant to the Delaware General Corporation Law; the Domestication has been duly authorized by SusGlobal Ontario and the Certificate of Incorporation and a Certificate of Domestication from a Non-Delaware Corporation to a Delaware Corporation Pursuant to Section 388 of the DGCL will be duly authorized, executed and filed with the Delaware Secretary of State and all related fees and charges will be paid in connection therewith.




Based upon the foregoing, and subject to the qualifications, assumptions and limitations stated herein, we are of the opinion that, subsequent to the Domestication:

The securities being registered pursuant to the Registration Statement consisting of 35,823,010 shares of common stock issuable upon the Domestication the will be validly issued, fully paid, and nonassessable;

We do not express any opinion herein concerning any law other than the laws of the State of Delaware and the federal laws of the United States.

We hereby consent to the filing of this opinion as Exhibit 5 to the Registration Statement and to the use of the name of our firm therein. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act.

Very truly yours,

/s/ Sichenzia Ross Ference Kesner LLP
Sichenzia Ross Ference Kesner LLP



BIODIGESTER EXPANSION AND OPERATION AGREEMENT

THIS biodigester expansion and operation agreement made as of the 1st day of June, 2016 (the "Effective Date");

 B E T W E E N:

The Corporation of the Township of Georgian Bluffs
(hereinafter called “Georgian Bluffs”)

and

The Corporation of the Township of Chatsworth
(hereinafter “Chatsworth”)

and

SusGlobal Energy Canada I Ltd

(hereinafter called “the Company”)

WHEREAS Georgian Bluffs and Chatsworth (together the "Municipalities") together own property and operate a biodigester and electricity generating facility located at 062111 Side Road 3, Georgian Bluffs (Lot 4, Concession 6, former Township of Derby, County of Grey) (the “Existing Facility”);

AND WHEREAS the Municipalities have formed a joint board, as a joint municipal standing committee, the Biodigester Joint Board, to report, recommend and oversee the management of the Existing Facility,to make reports and recommendations concerning the Existing Facility to the Councils of each of the Municipalities and to pursue improvements to the Existing Facility (the “Joint Board”);

AND WHEREAS subsection I I (3) of the Municipal Act, 2001 provides that the Municipalities may pass by- laws respecting, inter alia, waste management and public utilities;

AND WHEREAS section 74 of the Municipal Act, 2001 provides that municipalities may for their own purposes pass such by-laws in relation to waste management in the municipality or in another municipality:

AND WHEREAS section 93 of the Municipal Act provides that no person shall construct, maintain or operate a sewage public utility in the municipality if the municipality has jurisdiction to provide the public utility in that area without first obtaining consent of the municipality and further provides that the consent may be subject to such conditions and li mits on the powers to which the consent relates as may be agreed upon;


AND WHEREAS the Municipalities deem it desirable to provide consent to the Company to construct, maintain and operate a sewage public utility and to set out the conditions and limits on such consent as have been agreed upon; AND WHEREAS the Municipal Act, 2001 provides that each of the Municipalities may enter into agreements for the provision of municipal capital facilities including facilities used for wastewater purposes;

AND WHEREAS a municipal capital facilities agreement may provide for the lease, operation and maintenance of the municipal capital facilities and may provide for certain types of assistance to be provided in respect of such facilities;

AND WHEREAS each of the Municipalities may provide financial or other assistance to any person who has entered into a municipal capital facilities agreement in respect of the facilities that are subject of the agreement;

AND WHEREAS by resolution <*>, Council of Georgian Bluffs has declared that the Existing Facility and the Proposed Expansion are municipal capital facilities for the purposes of the Township and are for a wastewater purpose;

AND WHEREAS by resolution <*>, Council of Chatsworth has declared that the Existing Facility and the Proposed Expansion are municipal capital facilities for the purposes of the Township and are for a wastewater purpose;

AND WHEREAS in order to grant the license to the Company for a period of 25 years Chatsworth has enacted By-law <*>and Georgian Bluffs has enacted By-law <>;

AND WHEREAS Georgian Bluffs has amended the current tipping fees pursuant to By-law Number <*> and Chatsworth has amended the current tipping fees pursuant to By-law Number<*>;

AND WHEREAS each of Georgian Bluffs and Chatsworth have provided notice as required by the their respective By-laws prior to authorizing execution of this Agreement; AND WHEREAS the Municipalities wish to improve the economic performance of the Existing Facility;

AND WHEREAS the electricity generated and environmental attributes by the Existing Facility are sold to or the property of the Independent Electricity System Operator pursuant to a Feed-In Tariff Contract -Contract # F-000-981-BIG-l 30-203 ("FIT Contract");

AND WHEREAS the Company desires to invest certain capital to modify the Existing Facility and construct the Plant (as defined below) and the Municipalities are willing to permit such investment to occur subject to the terms and conditions provided herein;

AND WHEREAS the Company has represented it has the technical and financial resources to improve the performance of the Existing Facility and operate the Plant on the terms and conditions provided herein;

2


NOW, THEREFORE, in consideration of the agreements herein expressed and other good and valuable consideration, the receipt and sufficiency of such consideration being acknowledged by each Party to each other Party, the Parties agree as follows:

1.

DEFINITIONS

   

Whenever used in this Agreement, the following terms shall have, unless otherwise expressly indicated, the meanings defined as follows:


  (l)

"Agreement" shall mean this biodigester expansion and operation agreement including all schedules hereto as such may from time to time be amended;

   

 

  (2)

"Applicable Laws" shall mean any applicable Canadian federal, provincial or municipal laws, orders-in-council, by-laws, codes, rules, policies, regulations and statutes; (b) applicable orders, decisions, codes, judgments, injunctions, decrees, awards and writs of any court, tribunal, arbitrator, Governmental Authority or other person having jurisdiction; (c) applicable rulings and conditions of any licence, permit, certificate, registration, authorization, consent and approval issued by a Governmental Authority; and (d) any requirements under or prescribed by applicable common law;

   

 

  (3)

"Business Day" shall mean any day other than a Saturday, Sunday or statutory holiday in the Province of Ontario;

   

 

  (4)

"Company" or "company" shall mean SusGlobal Energy Canada I Ltd.; Company shall also mean and include any successor of the Company or any permitted assignee of the Company;

   

 

  (5)

"Control'' for the purposes of this Agreement 1s determined based on the following:

   

 

 

(a) in the case of a corporation, a person controls such corporation if securities to which are attached more than fifty percent (50%) of the votes that may be cast to elect directors of such corporation are beneficially owned by the person and the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors of such corporation;

   

 

 

(b) in the case of a limited partnership, the general partner of such limited partnership controls such limited partnership;

   

 

 

(c) in the case of a person other than a corporation or a limited partnership, a person controls such person if the former person possesses, directly or indirectly, at least a majority partnership, co-tenancy or other interest in such person and has the overall power to determine the policies and conduct of the management of such person; and

   

 

 

(d) a person who controls another person is deemed to control any person which is controlled, or deemed to be controlled, by the other person, and the words "Controls" and "Controlled" have corresponding meanings;

3

 



  (6)

"Chatsworth" means The Corporation of the Township of Chatsworth, a municipal corporation;

     
  (7)

"ECA" means an environmental compliance approval, renewable energy approval, certificate of approval or similar approval issued by the MOECC;

     
  (8)

"Effective Date" means the date first written above;

     
  (9)

"Environmental Law" shall mean and include any Applicable Law relating to the release of Hazardous Materials or protection of the environment and human health.


  (I0)

"Georgian Bluffs" means The Corporation of the Township of Georgian Bluffs, a municipal corporation;

     
  (11)

"Good Engineering and Operating Practices" means any of the practices, methods and activities adopted by a significant portion of the North American electric utility and environmental waste management industry as good practices applicable to the design, building, and operation of facilities of similar type, size and capacity or any of the practices, methods or activities which, in the exercise of skill, diligence, prudence, foresight and reasonable judgement by a prudent operator in light of the facts known at the time the decision was made, could reasonably have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety, expedition and Laws and Regulations. Good Engineering and Operating Practices are not intended to be limited to the optimum practices, methods or acts to the exclusion of all others, but rather are intended to delineate acceptable practices, methods, or acts generally accepted in the North American electric utility industry and environmental waste management industry. Without limiting the generality of the foregoing and in respect of the operation of the Facility, Good Engineering and Operating Practices include taking Commercially Reasonable Efforts to ensure that:


  (a)

adequate materials, resources and supplies are available to meet the Facility's needs under reasonable conditions and reasonably anticipated abnormal conditions;

     
  (b)

sufficient operating personnel are available and are adequately qualified, experienced and trained to operate the Facility properly, efficiently and taking into account manufacturers' guidelines and specifications and are capable of responding to abnormal conditions;

     
  (c)

preventative, routine and non-routine maintenance and repairs are performed on a basis that ensures reliable long-term and safe operation and taking into account manufacturers' recommendations and are performed by knowledgeable, trained and experienced personnel utilizing proper equipment, tools and procedures; and

4



  (d)

appropriate monitoring and testing is done to ensure equipment is functioning as designed and to provide assurance that equipment will function properly under both normal and abnormal conditions.


  (12)

"Govern mental Authority" means any federal, provincial, or municipal government, parliament or legislature, or any regulatory authority, agency, tribunal, commission, board or department of any such government, parliament or legislature, or any court or other law, regulation or rule-making entity, having jurisdiction in the relevant circumstances and any person acting under the authority of any Governmental Authority;

     
  (13)

"Hazardous Material" shall mean and include each substance designated as a hazardous waste, hazardous substance, hazardous material, hazardous waste, special waste, radioactive material, pollutant, contaminant, toxic substance or other compound, element or substance in any form as designated with words of similar meaning and regulatory effect under any Environmental Law, petroleum and petroleum products, derivatives, wastes or additives, polychlorinated biphenyls, asbestos, and any other substance for which liability or standards of conduct may be imposed under Environmental Law.

     
  (14)

"IESO" means the Independent Electricity System Operator, or its successor;

     
  (15)

"Insolvency Legislation" means the Bankruptcy and Insolvency Act (Canada), the Winding Up and Restructuring Act (Canada), the Companies' Creditors Arrangement Act (Canada) and analogous legislation in effect in the provinces and territories of Canada and the bankruptcy, insolvency, creditor protection or similar laws of any other jurisdiction (regardless of the jurisdiction of such application or competence of such law);

     
  (16)

"ITA" means the Income Tax Act, R.S.C., 1985, c. I (5th Supp.);

     
  (17)

"Letter of Credit" means one or more irrevocable and unconditional standby letters of credit issued by a financial institution listed in either Schedule I or II of the Bank Act (Canada) or another financial institution having a minimum Credit Rating of (i) A- with S&P, (ii) A3 with Moody's, (iii) A (low) with DBRS, or (iv) A- with Fitch IBCA;

     
  (18)

"Material Adverse Effect" means any change (or changes taken together) in, or effect on, the affected Party that materially and adversely affects the ability of such Party to perform its obligations hereunder;

     
  (19)

"MFIPPA" means the Municipal Freedom of Information and Protection of Privacy Act, R.S.O. 1990, c. M.56;

5



  (20)

"MOECC" means the Ontario Ministry of the Environment and Climate Change and any successor ministry;

     
  (21)

"Municipalities" means Chatsworth and Georgian Bluffs and "Municipality" means either of Chatsworth or Georgian Bluffs, as the context requires;

     
  (22)

"Mu11icipal Act, 2001" means the Municipal Act, 2001, S.O. 2001, c. 25;

     
  (23)

"OHSA" means the Occupational Health and Safety Act, R.S.O . 1990, c. 0.1;

     
  (24)

"Parties" means all of Chatsworth, Georgian Bluffs and the Company and "Party" shall mean any one of them, provided that wherever Party is used, Chatsworth and Georgian Bluffs shall be deemed a single Party unless the contrary is expressly stated;

     
  (25)

"Plant" shall mean any and all equipment required for a facility to process Source Separated Organics ("SSO") including but not limited to the equipment listed in Schedule "A" to this Agreement and any associated structures including material handling, digestion, biogas collection and energy conversion equipment and Utilities Interfaces and other related equipment as deemed appropriate and supplied by the Company. All equipment supplied by the Company will be agreed by both parties after Environmental Permits are issued. The approved equipment listing will be substituted into Schedule "A" to this Agreement, which will be initialed by the Parties to demonstrate such approval, it being agreed that the Schedule "A" currently attached represents the equipment considered by the Parties hereto as representing the equipment required to be supplied. For certainty, it is agreed by the Parties that SSO does not include any commercial, agricultural or manure organic wastes.

     
  (26)

"Property" means the land owned jointly where the biodigester, the Existing Facility, is located, with a legal description as set out in Schedule "D" to this Agreement;

     
  (27)

"Regulation 170/03" means Ontario Regulation 170/03 issued under the

     
 

Environmental Protection Act, R.S.O. 1990, c. E.19;

     
  (28)

"Site" shall mean a location within the Municipalities' Property, having an approximate size of I O hectares. The Site shall be mutually agreed upon by the Parties, taking into account the convenience to supply SSO Feedstock, the convenience and proximity to the Utilities Interfaces, and aesthetic and environmental considerations. The Site shall include any necessary access to provide such vehicle access, water, sanitary and storm sewers, natural gas, biogas and electrical services to and from the Site as many be required. Following selection of the Site and utility locations, they shall be surveyed and a plan thereof be prepared at the expense of the Company, which plan and description shall be initialed by the Parties and attached to this Agreement as Schedule "E";

6



  (29)

"Start Date" means the earlier of the date the Company first receives SSO for the Plant or the date that is 18 months after the Effective Date;

     
  (30)

"STDC" means Sustainable Development Technology Canada or successor organization;

     
  (31)

"Taxes" means all ad va/orem, property, municipal, education, occupation, severance, production, transmission, utility, gross production, gross receipts, sales, use, excise and other taxes, governmental charges, licenses, permits and assessments, other than (i) HST and (ii) taxes based on profits, net income or net worth;

     
  (32)

"Utilities Interfaces" shall mean the equipment supplied by the Company that makes possible the interconnection between the Plant and utility services including but not limited to electricity, gas and water.


2.

TERM & TERMINATION


  (1)

Unless terminated earlier in accordance with the provisions of this Agreement, the term of this Agreement ("Term") shall be for twenty-five (25) years commencing upon the Effective Date and terminating at 5:00 p.m. local time on the twenty- fifth anniversary of the Effective Date. The Term may be renewed and extended for two additional periods for five (5) years each, each a Renewal Term, unless one Party delivers written notice of termination to the other Parties not later than one hundred and eighty days (180) prior to the end of the initial Term or any renewal and extension thereof. Provided, however, that in any renewal term each party shall have the right to terminate the contract upon provision of the 180 days written notice.

     
  (2)

This Agreement shall be immediately terminated upon written notice from the Municipalities to the Company, if one of the following events occurs:


  (a)

One of the events of Default in paragraphs 4(1)(a), 4(1)(b), 4(1)(c), 4( l ){d) or 13 occurs;

     
  (b)

If the Company is unable to secure the commitment of $7.5 million in funding with at least $1,000,000.00 being advanced to the Company within fifty (50) Business Days of the Effective Date (the "first tranche" of funding) or fails to provide any Letter of Credit or other financial assurance as provided for in this Agreement;

     
  (c)

If the Company fails to receive all approvals required for the construction of the Plant prior to the first anniversary of the Effective Date; or

     
  (d)

Fails to secure a supply of SSO of fifteen thousand (15,000) tonnes per annum, in the aggregate, for a minimum period of fifteen (15) years prior to the first anniversary of the Start Date;

7



  (3)

This Agreement may be terminated with twenty (20) Business Days written notice by:


  (a)

Any Party if an event of Force Majeure exceeds 1 year in duration; or

     
  (b)

The Parties mutually agree in writing to terminate this Agreement .


  (4)

If this Agreement is terminated as provided in Sub-section 2(2)(b), 2(2)(c), 2(2)(c) or 2(2)(d) then:


  (a)

Any assigned agreements (Maintenance, utility connection agreements, service agreements) will be immediately transferred to the Municipalities and the Parties shall work cooperatively through the transition; and

     
  (b)

the Company shall have twenty (20) Business Days to remove any of the Company's equipment, materials, vehicles or other items from the Property and shall have no further access to the Property thereafter.


  (5)

If this Agreement is terminated pursuant to Section 2(2) (a) or 3(3), the Municipality shall have the right to purchase the Plant for $1.00.


3.

LICENSE

     
(1)

The Municipalities hereby demise and license the Site to the Company, and the Company hereby licenses and accepts the Site from the Municipalities, to have and to hold during the Term, subject to the terms and conditions of this Agreement. During the Term of this Agreement, the Municipalities shall provide the Company with the quiet enjoyment of the Site for the purpose of the Existing Facility and Plant. Any use the Municipalities may make of the Property shall not interfere with the Company's operation of the Existing Facility and P l a n t .

     
(2)

The Company shall use the Site only for the purposes related to the Existing Facility and Plant as contemplated herein. A security fence consisting of chain link construction or similar but comparable construction may be placed around the perimeter of the Site, provided that the fence is located on the Site at the discretion of the Company, if it is necessary for reasons of security or safety, after consultation with the Municipalities. All improvements shall be at the Company's expense, and the installation of all improvements shall be at the discretion and option of the Company. Any fill brought onto the site by the Company or its contractors will be "clean fill" according to civil works good practice in effect at the time. The Company shall have the right to replace, repair, add or otherwise modify its equipment or any portion thereof, whether the equipment is specified or not on any Schedule attached hereto, during the Term. This Agreement does not confer upon Company any rights to any mineral, water, aggregate, soil, or timber on the Property. The Municipalities may extract these resources provided that, in so doing, there is no interference with the Company’s rights in the Property herein or created by this Agreement. Any topsoil displaced during borehole, foundation excavations or otherwise shall be stockpiled and not removed from the Property, unless so done by the Municipalities or is required by Applicable Law.

8



  (3)

The Company will maintain the Property, the Existing Facility, the Site and the Plant in good condition, reasonable wear and tear excepted. It is understood and agreed that the Company's ability to use the Site is contingent upon it obtaining after the execution of this Agreement all of the certificates, permits and other approvals (collectively, the "Governmental Approvals") that may be required by any federal, provincial or local authorities which will permit the Company's use of the Site as set forth above. The Municipalities shall cooperate with the Company in its effort to obtain such approvals and shall take no action which would adversely affect the status of the Property with respect to the proposed use by the Company. In the event that any of such applications for such Governmental Approvals should be finally rejected or any Governmental Approval issued to the Company is canceled, expires, lapses or is otherwise withdrawn or terminated by Governmental Authority, this Agreement is terminated and the Company shall have twenty (20) Business Days to remove any its equipment, materials, vehicles or other items from the Property and shall have no further access to the Property thereafter.

     
  (4)

During the Term of this Agreement, the Municipalities shall exempt the Company from all of the taxes levied by the Municipalities, including for municipal and school purposes related to the Property.


4.

PRIOR TO CONSTRUCTION OF THE PLANT


  (1)

The Company shall:

         
  (a)

Prior to 5:00 p.m. local time on the fiftieth (50 th ) Business Day following the Effective Date, have:

         
  (1)

received the commitment of the funders to finance the expansion/construction and operation of the Plant and shall have received the first tranche of the funding and provide written confirmation of such to the Municipalities; and

         
  (2)

made suitable arrangements with the Municipalities to take over the operation and maintenance of the Existing Facility, including but not limited having the required insurance in place, transfer of responsibility for the utility services for the Existing Facility, assignment of the manufacturers services agreements and any filings with any Governmental Authority required for the operation of the Existing Facility.


  (b)

After 5:00 p.m. local time on the fiftieth (50 th ) Business Day following the Effective Date, when the Company assumes control and responsibility for the Existing Facility, subject only to any express reservations, have retained Aquatech Canadian Water Services ("Facility Operator") to operate, maintain and repair the Existing Facility in accordance with all Applicable Law and Good Engineering and Operating Practices all at the sole cost of the Company. The Company may, subject to the consent of the Municipalities, which is not to be unreasonably withheld, from time to time, replace the Facility Operator, with a suitably qualified and experienced person to operate, maintain and repair the Existing Facility and shall provide the Municipalities with written proof of such retainer forthwith upon such retainer. Notwithstanding the foregoing, the Company shall remain solely responsible to ensure the Existing Facility is operated, maintained and repaired in compliance with Good Engineering and Operating Practice and all Applicable Laws.

9



  (c)

Prior to 5:00 p.m. local time on the seventieth (70 111 ) Business Day following the Effective Date, have submitted a complete application to the MOECC for an amendment to the existing approval for the Existing Facility and/or for a new approval for the Plant and/or Existing Facility, each or all as may be required by the MOECC to amend or replace the ECA for the Existing Facility.

     
  (d)

At or prior to 5:00 p.m. local time on the fiftieth (50 111 ) Business Day following the Effective Date and continuing during the Term, provide a Letter of Credit to the Municipalities in the amount of two hundred thousand dollars ($200,000.00) to secure the Company's performance of its obligations hereunder, including paying third parties. The Municipalities may draw upon the Letter of Credit where (i) the Company has failed to make a required payment to the Municipalities under this Agreement; or (ii) where the Company has failed to pay a third party and such obligation is required to be paid by the Company under the provisions of this Agreement; or (iii) the Company has failed to pay a third party any amount owed in respect of the Existing Facility or Plant and the Municipalities use the Letter of Credit to pay such. The Letter of Credit shall be in a form acceptable to the Municipalities acting reasonably. Where the Letter of Credit has been drawn upon, the Company shall replenish such Letter of Credit within twenty (20) Business Day of the Letter of Credit being drawn upon.

     
  (e)

Obtain all required permits and approvals or assist the Municipalities where applicable including as may be required zoning changes, official plan amendments, building permits and reimburse the Municipalities for any and all costs reasonably incurred and approved in advance in writing by the Company.

     
  (f)

Make the necessary arrangements for the completion of all Utilities Interfaces necessary for the Plant at the sole cost of the Company.

     
  (g)

Engage only qualified contractors, sub-contractors and other persons for the planning, design, installation and construction of the Plant in accordance with Good Engineering and Operating Practices and all Applicable Laws.

10



  (h)

Engage only qualified equipment suppliers with industry standard warranties.

     
  (i)

Ensure any person used for the planning, design, operation or construction of the Plant or part thereof, is properly qualified and has the appropriate insurance, including having any contractor or sub-contractor provide material and performance bonding in the amount of the contract price for the construction of the Plant.


  (2)

The Company shall provide a copy of its plans to the Municipalities to review prior to submission of any application for permits or approvals. The Municipalities agree to provide their comments on the plans as soon as reasonably practicable.

     
  (3)

The Company shall remit and/or pay all Taxes and other employers' fees, including but not limited to WSIB remittances, insurance premiums, Canada Pension Plan remittances and Employment Insurance remittances, related to any persons it employs to operate the Existing Facility and Plant and the Company acknowledges and agrees that any persons it so employs are its responsibility and are not employees, agents or contractors of the Municipalities.


5.

CONSTRUCTION AND OPERATION


  (1)

The Company, at its sole cost, shall:


  (a)

plan and develop the Plant in accordance with Schedule "B" - Plan and Description, unless otherwise agreed to by the Parties.

     
  (b)

adhere to Good Engineering and Operating Practices and all Applicable Law in carrying out the planning, design, engineering, project management, installation, construction, operation, maintenance and repair of the modifications to the Existing Facility, the Utilities Interfaces and the Plant.

     
  (c)

be identified as the 'constructor' of the Work for purposes of the OHSA and shall perform all obligations in connection therewith. Company shall be responsible for submission of the required 'Notice of Project" and registration form under OHSA. The Company shall deliver a copy of such "Notice of Project" to the Municipalities promptly on such document being available, and in any event prior to the commencement of construction of a Project. The Company shall develop, implement and diligently manage a worker health and safety management system to ensure compliance with all Applicable Laws. Throughout performance of work, the Company shall promptly notify the Municipalities of any critical injury, fatality, or any other significant worker health and safety incident,including any incident reported to a Governmental Authority, occurring at any Site. In the event of such incident, the Company shall take immediate actions in accordance with all Applicable Laws to mitigate the impact to worker health and safety.

11



  (d)

agrees to comply with all provisions of the Construction Lien Act, R.S.O. 1990, c. C.30, and other statutes from time to time applicable in respect of all work done or improvements made to the Site for which the Company is responsible pursuant to this Agreement and the Company shall take all steps necessary to ensure that no lien is enforceable against the Site or Property. If any lien becomes enforceable, then the Company shall use its commercially reasonable efforts to arrange for such lien to be discharged or vacated within sixty (60) Business Days of the date on which the Company becomes aware of such lien. Without limiting any of the foregoing, the Company shall satisfy all judgments and pay all costs resulting from any liens, or other encumbrances arising from the performance of the work or any actions brought in connection with any such liens or other encumbrances, or in connection with any other claim or lawsuit brought against the Municipalities by any person that provided goods or services to the Company.


  (e)

Arrange for the provision and payment of the necessary Utilities Interfaces.

     
  (f)

Charge and collect tipping fees as may be provided in the applicable by- laws of each Municipality and which accord with the provisions of this Agreement, provided that the Company shall not collect tipping fees for the Sunset Strip businesses as listed in Schedule “F”.

     
  (g)

Undertake commissioning in accordance with the commissioning plan provided in Schedule "C".

     
  (h)

Maintain the existing fence and any other fence installed on or within the Property in good condition.

     
  (i)

Collect and remit taxes as required by Applicable Law.

     
  (j)

Plan, design, install, finance, construct and maintain any capital improvements of the Existing Facility as may be required by Applicable Laws or Good Engineering and Operating Practices.

     
  (k)

Prior to the first anniversary of the Start Date, have secured a stable, secure supply of SSO from one or more suppliers for a volume, in aggregate, of fifteen thousand (15,000) tonnes per annum for at least fifteen (15) years and confirmed such with the Municipalities by providing them evidence of such arrangements;.

12



  (2)

The Parties acknowledge that the continuity of the Plant operation will be subject to short term interruptions caused by routine maintenance, equipment breakdowns, testing schedules, forced outages and force majeure. The Company shall use commercially reasonable efforts to minimize the duration of interruptions.

     
  (3)

The Company shall receive, accept and process all septage and sewage from the geographic area of the Municipalities at the Existing Facility and/or the Plant, subject to compliance with Applicable Laws.

     
  (4)

The Company shall at no charge, on an as needed basis, accept and process all septage and sewage from the Sunset Strip businesses as listed in Schedule “F” collected and transported to the Existing Facility by the Municipalities.

     
  (5)

The Company shall be responsible for all sales and marketing of the SSO operation in order to secure the necessary feed stock and input materials and shall be responsible for the management and disposal of all outputs and waste products in accordance with Applicable Laws.

     
  (6)

The Parties shall record and maintain all records required by this Agreement or any other Governmental Authority.


6.

DECOMMISSIONING

     
(1)

 Except where this Agreement is terminated prior to the twenty-fifth anniversary of the Effective Date, at the Municipalities' written request, the Company shall remove the Plant from the Site on the later of the twenty-fifth anniversary of the Effective Date or thirty (30) Business Days after receipt of such request and restore the Site as close as practicable to the current state as at the Effective Date of this Agreement. The Company shall ensure the Existing Plant is left in a tidy, safe and operable state similar to the current state at the time of the Effective Date of this Agreement. All Hazardous Materials shall be removed from the Site and transported and disposed of in accordance with al l Applicable  Laws.

     
(2)

Where this Agreement is terminated prior to the twenty-fifth anniversary of the Effective Date:


  (a)

and it is terminated as a result of a default by the Municipalities or otherwise without default by the Company, the Company may remove the equipment it owns from the Site and the Plant provided no harm is caused to the Existing Facility and the Existing Facility is left in a safe condition and in good working order; and

     
  (b)

and it is terminated as a result of a default by the Company, the Municipalities may purchase the Plant and equipment owned by the Company at the Site for one dollar ($1 .00).


7.

RESPONSIBILITIES OF THE MUNICIPALITIES

13



  (1)

The Municipalities:

       
  (a)

Agree to process any building permit application from the Company for the Plant in accordance with their existing practices;

       
  (b)

Shall cooperate with the Company in the permitting, design, financing, construction, modification and operation of the Existing Facility and the Plant, all at the cost of the Company;

       
  (c)

Shall cooperate with the Company to apply for capital grants to STDC and the Eureka Program and cooperate with the Company in any other applications for grants or financial assistance, all at the cost of the Company;

       
  (d)

Shall ensure that the Company receives the quiet enjoyment of the Site during the Term; and

       
  (e)

Consider requests from the Company to amend the by-laws establishing tipping fees.


8.

FIT CONTRACT

     
(1)

The Company acknowledges the Existing Facility is subject to the FIT Contract. It shall be the responsibility of the Company to secure any amendments, if such are required, to the FIT Contract to permit the Plant to be constructed.

     
(2)

The Company acknowledges that pursuant to the FIT Contract, the Environment Attributes related to the Existing Facility are the property of the IESO and the Company has no right to such Environmental Attributes, as such is defined in the FIT Contract. After 5:00 pm on the fiftieth (50th) Business Day following the Effective Date, the Company shall, at its sole cost except where the FIT Contract provides otherwise, track and provide information required by the FIT Contract for dealing with the Environmental Attributes. All right, title and interest in and to all Environmental Attributes arising in connection with the Plant, the Existing Facility, the Property or any of the activities or facilities or their operation as contemplated herein or as may occur from time to time in the future during the term of this Agreement, other than the Environmental Attributes that are the property of the IESO under the FIT Contract, belong to and are owned by the Company and each of the Municipalities hereby transfers, assigns and forever quit claims those Environmental Attributes to the Company.

     
(3)

The Municipalities shall provide reasonable assistance to the Company to secure any amendments to the FIT Contract necessary for the Plant.

     
(4)

The Company acknowledges that the FIT Contract will remain in the name of the Municipalities. After 5:00 pm on the fiftieth (50 1 h) Business Day following the Effective Date, the Municipalities are entitled to ten percent (10%) of the revenues and any other economic benefit from the FIT Contract and the Company is entitled ninety percent (90%) of the revenues and any other economic benefit from the FIT Contract. The Municipalities shall hold the said ninety percent (90%) of the revenues and any other economic benefit from the FIT Contract in trust for and on behalf of the Company and may offset any portion thereof consisting of money against any monies owed by the Company to the Municipalities if they have provided notice of such to the Company in sufficient time to prevent any reasonable likelihood of payment of the monies so offset by the Company..

14



  (5)

The Company shall operate the Existing Facility in compliance with the FIT Contract and Applicable Laws and shall use commercially reasonable efforts to maximize the energy output and revenue from the generation of electricity from the Existing Facility.


9.

TIPPING FEES & PAYMENTS

     
(1)

Each of the Municipalities retain the sole right and responsibility to establish tipping fees for the Existing Facilities and Plant, for both septage and the processing of SSO where such septage or SSO has its source and is produced in the geographic area of such Municipality ("In-Franchise Materials"). The Company may, no more than once per year, request the Municipalities to amend the by-law in respect of the tipping fees for In-Franchise Materials. The Municipalities will set the tipping fees for In-Franchise Materials in a manner that is consistent with Applicable Laws. For all septage or SSO generated from outside the geographic area of the Municipalities ("Ex-franchise Materials") the Municipalities agree that the Company may set all other tipping fees, and change, amend and otherwise deal with those other tipping fees, entirely as it sees fit so long as the tipping fees for Ex- Franchise Materials is not less than the tipping fees for In-Franchise Materials.

     
(2)

After, 5:00 p.m. on the fiftieth (50 1 h) Business Day following the Effective Date (when the Company shall assume control of the Existing Facility), the Company shall be responsible to bill and collect tipping fees in accordance with the approved by-laws of the relevant Municipality for the Plant for both septage and the processing of SSO which have their source and are produced in the geographic area of such Municipality, other than the sewage and septage of the Sunset Strip businesses as listed on Schedule “F” which is to be dealt with as set out in Section 9(5). Risk of collection of such fees (excluding Sunset Strip businesses fees where the risk resides with the Municipalities) resides with the Company.

     
(3)

Commencing on the Start Date, for each one year period ending on the anniversary of the Start Date, the Company shall ensure that payment is made to the Municipalities in the total amount to the Municipalities, together, of a minim um of [+], excluding any amounts referred to in Section 9(6) and any applicable Taxes, for each such twelve month period commencing on, and not before, the Start Date and ending on the termination of this Agreement (prorating as required at the time of such termination). This amount shall be paid in twelve (12) equal monthly installments of [+], excluding applicable Taxes, on the first (lst) Business Day of each month. The Municipalities may set off the revenue received pursuant to the FIT Contract being held in trust for and on behalf of the Company during a month against the amount to be paid by the Company to the Municipalities on the first (1 5 t) Business Day of the following month if but only if such set off is carried out in accordance with the requirements of Section 8(4). The payment may be made by electronic funds transfer or cheque payable to Georgian Bluffs, in trust for the Municipalities.

[+] Indicates confidential portion has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

15



  (4)

During the Term of this Agreement, within twenty (20) Business Days of each anniversary of the Start Date, the Company shall provide a summary showing the revenue from the Existing Facility from septage and sewage (other than for certainty the revenue from tipping fees from septage and sewage from the Sunset Strip businesses listed on Schedule “F” and the FIT Contract. Often percent of the annual revenue from septage and sewage plus the FIT Contract exceeds [+] then the Company shall immediately pay the amount by which the ten percent of the annual revenue from septage and sewage plus the FIT Contract exceeds [+] to the Municipalities plus any applicable Taxes.

     
  (5)

Subject to Section 9(6) below, the Company shall be entitled to all revenue and benefits accruing or received with respect to the Existing Facility, the Property and the Plant from and after the date which is the fiftieth (50 1 h) Business Day after the Effective Date, provided that the Municipalities shall be entitled to ten percent (10%) of sewage and septage from local haulers and ten percent (10%) of the revenues from the FIT Contract during the period from the fiftieth (50th) Business Day after the Effective Date to (but not including) the Start Date. The Company shall have no right to receive any revenue for accepting and processing sewage and septage from the Sunset Strip businesses which shall remain with and be collected by the Municipalities .

     
  (6)

Any debts owing to the Municipalities with regard to septage and Sunset Strip fees as of the day the Company takes control of the Existing Facility (5:00 p.m. on the fiftieth (50th) Business Day following the Effective Date) are considered bad debts owing to the Municipalities and are their debts to collect and any such revenue collected shall remain revenue of the Municipalities, regardless of when collected. For certainty, it is confirmed by each of the Municipalities that all revenue and liabilities accruing or incurred with respect to the Existing Facility or the property prior to the Company taking control of the Existing Facility on the fiftieth (50 1 ) Business Day after the Effective Date are entirely and completely for the account of and the responsibility of the Municipalities.

     
  (7)

The Municipalities may periodically invoice the Company in respect of time spent by employees of each Municipality dealing with the Company as provided for in this Agreement, provided that no such employee time shall be spent without the prior written consent of the Company which expressly and specifically requests the same.

[+] Indicates confidential portion has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

16



  (8)

All invoices are due and payable when rendered. If invoices are not paid within twenty (20) Business Days, then the Municipality may draw upon the Letter of Credit for the amount owing, it being agreed that any draw on the Letter of Cred it shall be treated as a payment by the Company under this Agreement.


I0. INSPECTION
     
(1)

The Municipalities shall, at all times upon two (2) Business Days' prior notice, at any time after the fiftieth (50 1 h) Business Day following the Effective Date, have access to the Property, Existing Facility, Plant and Site and every part thereof during regular business hours and the Company shall, and shall cause all personnel operating and managing the Existing Facility and Plant, to furnish the Municipalities with all reasonable assistance in inspecting the Existing Facility and Plant for the purpose of ascertaining compliance with this Agreement; provided that such access and assistance shall be carried out in accordance with and subject to the reasonable safety and security requirements of the Company and all personnel operating and managing the Existing Facility and Plant, as applicable, and shall not interfere with the operation of the Existing Facility and Plant.

     
(2)

The inspection of the Existing Facility and Plant by or on behalf of the Municipalities shall not relieve the Company any of its obligations to comply with the terms of this Agreement or Applicable Law. No Event of Default of the Company will be waived or deemed to have been waived by any inspection by or on behalf of the Municipalities. In no event will any inspection by the Municipalities hereunder be a representation that there has been or will be compliance with this Agreement and Laws and Regulations.

     
(3)

Failure by the Municipalities to inspect the Existing Facility or Plant or any part thereof shall not constitute a waiver of any of the rights of the Municipalities hereunder. An inspection not followed by a notice of an Event of Default to the Company shall not constitute or be deemed to constitute a waiver of any Event of Default of the Company, nor shall it constitute or be deemed to constitute an acknowledgement that there has been or will be compliance by the Company with this Agreement.

     
(4)

The Municipalities shall bear its costs of the inspections carried out pursuant to Section 1 0(1).


11.

REPRESENTATIONS AND WARRANTS

     
(1)

The Company represents to the Municipalities as follows, and acknowledges that the Municipalities are relying on such representations in entering into this Agreement:

17



  (a)

The Company is a corporation incorporated under the laws of the Province of Ontario, is registered or otherwise qualified to carry on business in the Province of Ontario, and has the requisite power to enter into this Agreement and to perform its obligations hereunder.

     
  (b)

This Agreement has been duly authorized, executed, and delivered by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms except as such enforcement may be limited by bankruptcy, insolvency and other laws affecting the rights of creditors generally and except that equitable remedies may only be granted in the discretion of a court of competent jurisdiction.

     
  (c)

The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated by this Agreement will not result in the breach or violation of any of the provisions of, or constitute a default under, or conflict with or cause the termination, cancellation or acceleration of any material obligation of the Company under:


  (1)

any contract or obligation to which the Company is a party or by which it or its assets may be bound, except for such defaults or conflicts as to which requisite waivers or consents have been obtained;

     
  (2)

the articles, by-laws or other constating documents, or resolutions of the directors or shareholders of the Company;

     
  (3)

any judgment, decree, order or award of any Governmental Authority or arbitrator;

     
  (4)

any licence, permit, approval, consent or authorization held by the Company; or

     
  (5)

any Laws and Regulations,

that could have a Material Adverse Effect on the Company.

  (d)

There are no bankruptcy, insolvency, reorganization, receivership, seizure, realization, arrangement or other similar proceedings pending against or being contemplated by the Company or, to the knowledge of the Company, threatened against the Company.

     
  (e)

There are no actions, suits, proceedings, judgments, rulings or orders by or before any Governmental Authority or arbitrator, or, to the knowledge of the Company, threatened against the Company that could have a Material Adverse Effect on the Company.

18



  (f)

All requirements for the Company to make any filing, declaration or registration with, give any notice to or obtain any licence, permit, certificate, registration, authorization, consent or approval of, any Governmental Authority as a condition to entering into this Agreement have been satisfied.

     
  (g)

The Company is not a non-resident of Canada for the purposes of the ITA, unless it has notified the Municipalities of such non-resident status as per Section 6.

     
  (h)

All statements, specifications, data confirmations and information that have been set out in the Schedules to this Agreement are complete and accurate in all material respects and are hereby restated and reaffirmed by the Company as representations made to the Municipalities hereunder and there is no material information omitted from the Schedules to this Agreement which makes the information in such Schedules misleading or inaccurate.

     
  (i)

The Company is in compliance with all Laws and Regulations, other than acts of non-compliance which, individually or in the aggregate, would not have a Material Adverse Effect on the Company or on its obligations under this Agreement.


  (2)

The Company is not aware of any facts or circumstances that would reasonably be expected to prevent the fulfilment of any of its obligations under this Agreement.

     
  (3)

The Municipalities represent to the Company as follows, and acknowledges that the Company is relying on such representations in entering into this Agreement:


  (a)

The Municipalities are corporations without share capital created under the laws of Ontario, and have the requisite power to enter into this Agreement and to perform its obligations hereunder.

     
  (b)

This Agreement has been duly authorized, executed, and delivered by each of the Municipalities and is a valid and binding obligation of the Municipalities enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency and other laws affecting the rights of creditors generally and except that equitable remedies may be granted solely in the discretion of a court of competent jurisdiction.

     
  (c)

The execution and delivery of this Agreement by each of the Municipalities and the consummation of the transactions contemplated by this Agreement will not result in the breach or violation of any of the provisions of, or constitute a default under, or conflict with or cause the termination, cancellation or acceleration of any material obligation of such Municipality under:

19



  (1)

any contract or obligation to which the Municipality is a party or by which it or its assets may be bound, except for such defaults or conflicts as to which requisite waivers or consents have been obtained;

     
  (2)

the by-laws of the Municipality;

     
  (3)

any judgment, decree, order or award of any Governmental Authority or arbitrator;

     
  (4)

any licence, permit, approval, consent or authorization held by the Municipality; or

     
  (5)

any Applicable Laws,


 

that could have a Material Adverse Effect on the Municipality.

     
  (d)

There are no bankruptcy, insolvency, reorganization, receivership, seizure, realization, arrangement or other similar proceedings pending against, or being contemplated by the Municipalities or, to the knowledge of the Municipalities, threatened against the Municipalities.

     
  (e)

There are no actions, suits, proceedings, judgments, rulings or orders by or before any Governmental Authority or arbitrator, or, to the knowledge of either of the Municipalities, threatened against either of the Municipalities, that could have a Material Adverse Effect on either of the Municipalities.

     
  (f)

Each of the Municipalities are in compliance with Applicable Laws other than acts of non-compliance which, individually or in the aggregate, would not have a Material Adverse Effect on the Municipality or on its obligations under this Agreement.


12.

INSURANCE


  (1)

To protect each of the Parties against liability, loss, or expense arising out of, in connection with, or resulting from the respective duties of the Parties provided for hereunder, the Company shall, on the fiftieth (50 1 h) Business Day following the Effective Date and thereafter throughout the term of this Agreement, at its own expense, in reliable insurance companies authorized to do business in the Province and approved by Municipalities, maintain insurance in the amount and type of a prudent owner/operator of similar facilities with at least the following minimum insurance coverages:


  (a)

Comprehensive General Liability Insurance, including contractor's contingent coverage, with limits of not less than five million dollars ($5,000,000) per occurrence for Bodily Injury and five million ($5,000,000) per occurrence for Property Damage;

20



  (b)

Contractual Bodily Injury Liability and contractual Property Damage Liability Insurance covering liability assumed under this Agreement, with limits the same as that provided for comprehensive General and Environmental Liability Insurance;

     
  (c)

All risks property insurance for an amount of at least the full replacement cost of the Insuring Party's property;

     
  (d)

To the extent applicable, Workers Compensation Insurance as required by law and Employers Liability Insurance limits of not less than one hundred thousand dollars ($100,000) for any accident covering the location(s) of all work places involved in this Agreement;

     
  (e)

Personal injury, broad Form Property Damage, Non-Owned Automobile, Products-Completed Operations, Cross Liability, Severability of Interest Clause.


  (2)

Any and all deductibles in the above-described insurance policies shall be assumed by, for the account of and at the Company's sole risk. The deductible shall not exceed five percent (5%) of the coverage amount.

     
  (3)

The Company's policies shall name the Municipalities as an additional insured and provide proof of insurance to each of the Municipalities with five (5) Business Days of being requested to provide such information.


13.

EVENTS OF DEFAULT

     
(1)

Each of the following will constitute an Event of Default by the Company (each, a "Company Event of Default"):


  (a)

The Company fails to make any payment when due, if such failure is not remedied within five (5) Business Days after written notice of such failure from the Municipalities.

     
  (b)

The Company fails to replenish the Letter of Credit within the timeframe stipulated herein.

     
  (c)

The Company fails to perform any material covenant or obligation set forth in this Agreement (except to the extent constituting a separate Company Event of Default) if such failure is not remedied within twenty (20) Business Days after written notice of such failure from the Municipalities, provided that such cure period shall be extended by a further fifteen (15) Business Days if the Company is diligently remedying such failure and such failure is capable of being cured during such extended cure period.

     
  (d)

The Company fails or ceases to hold a valid licence, permit, certificate, registration, authorization, consent or approval issued by a Governmental Authority where such failure or cessation results in, or could be reasonably expected to result in, a Material Adverse Effect on the Company and is not remedied within thirty (30) Business Days after receipt by the Company of written notice of such failure or cessation from the Municipalities, provided that such cure period shall be extended by a further thirty (30) Business Days if the Company is diligently remedying such failure or cessation and such failure or cessation is capable of being corrected during such extended cure period.

21



  (e)

Any representation made by the Company in this Agreement is not true or correct in any material respect when made and is not made true or correct in all material respects within thirty (30) Business Days after receipt by the Company of written notice of such fact from the Municipalities, provided that such cure period (i) shall be extended for a further period of thirty (30) Business Days and (ii) may be extended by such further period of time as the Municipalities in its sole and absolute discretion determines is reasonable, if, in each case, the Company is diligently correcting such breach and such breach is capable of being corrected during such extended cure period.

     
  (f)

An effective resolution is passed or documents are filed in an office of public record in respect of, or a judgment or order is issued by a court of competent jurisdiction ordering, the dissolution, termination of existence, liquidation or winding up of the Company, unless such filed documents are immediately revoked or otherwise rendered inapplicable, or unless there has been a permitted and valid assignment of this Agreement by the Company under this Agreement to a person which is not dissolving, terminating its existence, liquidating or winding up and such person has assumed all of the Company's obligations under this Agreement.

     
  (g)

The Company amalgamates with, or merges with or into, or transfers the Facility or all or substantially all of its assets to, another person unless, at the time of such amalgamation, merger or transfer, there has been a permitted and valid assignment hereof by the Company under this Agreement to the resulting, surviving or transferee Person and such person has assumed all of the Company's obligations under this Agreement.

     
  (h)

A receiver, manager, receiver-manager, liquidator, monitor or trustee in bankruptcy of the Company or of any of the Company's property is appointed by a Governmental Authority or pursuant to the terms of a debenture or a similar instrument, and such receiver, manager, receiver- manager, liquidator, monitor or trustee in bankruptcy is not discharged or such appointment is not revoked or withdrawn within thirty (30) days of the appointment. By decree, judgment or order of a Governmental Authority, the Company is adjudicated bankrupt or insolvent or any substantial part of the Company's property is sequestered, and such decree, judgment or order continues undischarged and unstayed for a period of thirty (30 days after the entry thereof. A petition, proceeding or filing is made against the Company seeking to have the Company declared bankrupt or insolvent, or seeking adjustment or composition of any of its debts pursuant to the provisions of any Insolvency Legislation, and such petition, proceeding or filing is not dismissed or withdrawn within thirty (30) days.

22



\
  (i)

The Company makes an assignment for the benefit of its creditors generally under any Insolvency Legislation, or consents to the appointment of a receiver, manager, receiver-manager, monitor, trustee in bankruptcy, or liquidator for all or part of its property or files a petition or proposal to declare bankruptcy or to reorganize pursuant to the provisions of any Insolvency Legislation.


14.

INDEMNITY

     
(1)

The Company agreed to indemnify and hold harmless the Municipalities and any and all agents, directors, officers, employees, sub-contractors or servants of Municipalities against any and all losses, costs or expenses (including all legal expenses), claims, demands, suits or judgments (including, but not limited to claims, demands, suits or judgments for bodily injury, death, or loss of services, property or wages) which may be brought against the Municipalities or in which the Municipalities is named a party defendant, or in which any or all such agents, directors, officers, employees, subcontractors, or servants of the Municipalities are named party defendant or parties defendant, as the case may be, by any employee, licensee or invitee of the Company or by any employee, licensee or invitee of the Company's subcontractors, or the legal representative or successor of such employee, licensee or invitee or by any claimant, in any way arising out of or incidental to the work performed by or under the direction of the Company under this Agreement, irrespective of whether such suits are based on the relationship of master and servant, third party, or otherwise, or are based upon strict liability or in tort; provided, however, that the Company shall not be liable for the negligence of the Municipalities or any and all agents, directors, officers, employees, sub-contractors or servants of the Municipalities. The Company further agrees to investigate, handle, respond to, provide defence for and defend any such claim, demand, or suit as its sole expense, and agrees to bear all other costs and expenses related thereto, even if the same is groundless, false, or fraudulent; and the Company may make such investigation, negotiation, and settlement of any such claim, demand, or suit as it deems expedient.

     
(2)

The Company hereby specifically agrees to indemnify, defend and hold the Municipalities and their respective present and future councilors, employees, agents, representatives, successors and assigns harmless from and against any and all losses, liabilities, claims, demands, damages, causes of action, fines, penalties, costs and expenses (including, but not limited to, all reasonable consulting, engineering, attorneys' or other professional fees), that they may incur or suffer by reason of:

23



  (a)

any introduction, release, discharge or deposit of a Hazardous Material by the Company or its subcontractors, agents or representatives;

     
  (b)

any enforcement or compliance proceeding commenced by or in the name of any Governmental authority because of an alleged, threatened or actual violation of any Environmental Law by contractor or its subcontractors; and

     
  (c)

any action reasonably necessary to abate, remediate or prevent a violation or threatened violation of any Environmental Law by contractor or its subcontractors.


  (3)

Notwithstanding the foregoing Section 14(2), the Company shall not be responsible for any Hazardous Materials that are brought on Site by the Municipalities or for any Hazardous Materials that were present on any Site prior to the commencement of the construction of the work by the Company, and the Company will promptly notify the Municipalities if any Hazardous Materials are found on any Site prior to the commencement of the work.

     
  (4)

No Party will be liable under this Agreement, or under any cause of action relating to the subject matter of this Agreement, for any special, indirect, incidental, punitive, exemplary or consequential damages, including loss of profits, loss of use of property or claims of customers or contractors of the Parties for any such damages.


15.

REPORTING & PUBLIC STATEMENTS

     
(1)

The Company shall provide the Municipalities with a monthly facility performance report is required within twenty (20) Business Days of the completion of each month. The reports will consist of, at a minimum, the following:


  (a)

Treatment plant influent flows, average day, maximum day, total month Volumes (treated and bypassed);

     
  (b)

Raw sewage and effluent concentrations and loadings for parameters samples as required by the MOECC and ECA;

     
  (c)

Facility and equipment repair and maintenance details including scheduled and unscheduled maintenance;

     
  (d)

Complaints and other public inquiries received and action taken;

     
  (e)

Regulatory issues (inspections, orders, reports) filed with regulators;

     
  (t)

Health and Safety issues;

     
  (g)

Status of capital projects; and

24



  (h)

Other noteworthy occurrences/inspections of the facility.


  (2)

Within ninety (90) days of the end of each fiscal year end, the Company shall annually provide to the Municipalities:

       
  (a)

copies of its audited financial statements; and

       
  (b)

a copy of the business plan for the operation of the Plant for the following year;


  (3)

The Company shall attend meetings of the Joint Board when requested to do so by the Joint Board. The Company may be requested and shall attend a maximum of two (2) meetings with the Council of each Municipality in a calendar year. Except in exigent circumstances, the Municipality shall provide the Company with five (5) Business Days' notice with details of the purpose, time and location of the meeting.

     
  (4)

Annual reporting as per the MOECC specifications is required to be provided to both of Municipalities and the MOECC no later than the date specified under Regulation 170/03. Such report is to be submitted to the Municipalities no later than sixty (60) days following the end of each calendar year.


16.

NOTICE

     
(1)

All notices, consents, approvals, requests, reports and other information pertaining to this Agreement not explicitly permitted to be in a form other than writing shall be in writing and shall be addressed to the other Party as follows (each, a "Notice"):


  If to the Company: SusGlobal Energy Canada I Ltd.
    200 Davenport Avenue,
    Toronto, Ontario, MSR 112
     
    Attention:      CEO, Gerald P. Hamaliuk
    Facsimile:       (416) 223-8507
    E-mail:             ghamaliuk@susglobalenergy.com
     
  With a copy to: SusGlobal Energy Canada I Ltd.
    200 Davenport Avenue,
    Toronto, Ontario, MSR J J2
     
    Attention:      Marc M. Hazout,
    Facsimile:       (4 J 6) 223-8507
    E-mail:             mhazout@susglobalenergy.com
     
  If to Georgian Bluffs: Township of Georgian Bluffs
    177964 Grey Road 18, R.R. #3
    Owen Sound, Ontario, N4K 5N5

25



    Attention:     Clerk
    Facsimile:      519-372-1620
    E-mail:            office@georgianbluffs.on.ca
     
  If to Chatsworth: Township of Chatsworth
    316837 Highway 6, R.R. 1
    Chatsworth, Ontario, NOH I GO
     
    Attention:      Clerk
    Facsimile:        (519) 794-4499
    E-mail:              office@chatsworth.ca

 

Any Party may, by written Notice to the other, change its respective Representative or the address to which Notices are to be sent.

     
  (2)

Notices shall be delivered or transmitted as set out below, and shall be considered to have been received by the other Party:


  (a)

on the date of delivery if delivered by hand or by courier prior to 5:00 p.m. (local time of the recipient) on a Business Day and otherwise on the next following Business Day, it being agreed that the onus of establishing delivery shall fall on the Party delivering the notice;

     
  (b)

in those circumstances where electronic transmission (other than transmission by facsimile) is expressly permitted under this Agreement, on the date of delivery if delivered prior to 5:00 p.m. (local time of the recipient) on a Business Day and otherwise on the next following Business Day, provided that a copy of such notice is also delivered by regular post within a reasonable time thereafter;

     
  (c)

on the third (3rd) Business Day following the date of transmission by facsimile, if transmitted prior to 5:00 p.m. (local time of the recipient) on a Business Day and otherwise on the fourth (4th) following Business Day, provided that a copy of such notice is also delivered by regular post within a reasonable time thereafter; and

     
  (d)

on the fifth (5th) Business Day following the date of mailing by registered post.


  (3)

Notwithstanding Section 16(2)16(2):

       
  (a)

any Notices of an Event of Default and termination of this Agreement shall only be given by hand or courier delivery; and

       
  (b)

if regular post service, facsimile, or other form of electronic communication is interrupted by strike, slowdown, a Force Majeure event or other cause, a notice, direction or other instrument sent by the impaired means of communication will not be deemed to be received until actually received, and the Party sending the notice shall utilize any other such service which has not been so interrupted to deliver such notice.

26


   
17.

FORCE MAJEURE

     
(1)

No Party shall be or shall be deemed to be in default of this Agreement where the failure to perform or the delay in performing any obligation is due to a cause beyond its reasonable control. Causes beyond the reasonable control of a Party ("Force Majeure Event") include an act of God, an act of any federal, provincial, regional, municipal or other government, an order of any court or administrative or regulatory authority, civil commotion, strikes, lockouts and other labour disputes, shortages of materials other than SSO material, equipment or labour, fires, floods, sabotage, earthquakes, windstorms, ice storms, snow storms and other storms and epidemics. In no event shall shortages of SSO material, insolvency, bankruptcy or lack of money constitute a Force Majeure Event.

     
(2)

A Party subject to a Force Majeure Event must:


  (1)

give each other Party Notice immediately upon the occurrence thereof providing detailed particulars thereof, the anticipated or actual commencement of a Force Majeure Event, the cause thereof and the anticipated or actual postponement of performance or inability to perform and the anticipated length of the Force Majeure Event;


  (2)

give each other Party prompt Notice of any material changes in the Force Majeure Event, including when the Force Majeure Event is at an end; and

     
  (3)

use commercially reasonable efforts to avoid, minimize and remove the cause of the Force Majeure Event and to eliminate or minimize the consequences thereof, including utilizing all resources reasonably required in the circumstances including obtaining supplies or services from other resources if they are reasonably available.


  (3)

The time for performing any obligation affected by a Force Majeure Event shall be extended for a period equal to the time during which the Party was subject to the Force Majeure Event. The Parties not subject to the Force Majeure Event shall be excused from any of their obligations that are dependent or consequent upon the performance by any other Party of any obligation that is subject to the Force Majeure Event. The obligation to make a payment shall not be delayed by a Force Majeure Event.

     
  (4)

Notwithstanding the other provisions of this Article, the settlement of any strike, lockout, restrictive work practice or other labour disturbance constituting a Force Majeure Event shall be within; sole discretion of the Party in such strike, lockout, restrictive work practice or other labour disturbance and nothing in this Article shall require such Party to mitigate or alleviate the effects of such strike, lockout, restrictive work practice or other labour disturbance.

27




  (5)

Where a Force Majeure Event or series of Force Majeure Events is ongoing for twelve (12) consecutive months, either Party may terminate this Agreement as provided in Paragraph 2(3) (a) of this Agreement by giving thirty (30) days written notice of such termination.


18.

CONFIDENTIALITY, PUBLIC STATEMENTS AND MFIPPA RECORDS

     
(1)

The Parties acknowledge and agree that the Municipalities are subject to MFIPPA and that MFI PPA applies to and governs all records in the custody or control of the Municipalities ("MFIPPA Records") and may, subject to MFIPPA, require the disclosure of such MFIPPA Records to third parties. Each Municipality, as appropriate, agrees to provide a copy of any MFIPPA Records that it previously provided to the Municipality if the Company continues to possess such MFIPPA Records in a deliverable form at the time of the Municipality's request. If the Company does possess such MFIPPA Records in a deliverable form, it shall provide the same within a reasonable time after being directed to do so by the Municipality. The provisions of this Section 18 shall survive any termination or expiry of this Agreement and shall prevail over any inconsistent provisions in this Agreement.

     
(2)

The Company and the Municipalities shall both keep complete and accurate records and all other data required by either of them for the purpose of proper administration of this Agreement. All such records shall be maintained as required by Applicable Laws but for no less than for seven (7) years after the creation of the record or data. Each Party shall provide reasonable access to the relevant and appropriate financial and operating records and data kept by it relating to this Agreement reasonably required for any other Party to comply with its obligations to Governmental Authorities or to verify or audit billings or to verify or audit information provided in accordance with this Agreement, including the provision of copies of documents and all other information reasonably required by the Municipalities, which shall be delivered to the premises of the Municipalities as may be directed. A Party may at its own expense appoint an auditor to conduct its audit. The Party seeking access to such records in this manner shall pay the fees and expenses associated with use of the third party auditor.

     
(3)

Except as required by Applicable Law, no Party shall make or allow any public announcements, press releases, sales brochures, advertising or other publicity materials, or other public disclosure (a "Public Statement"): (i) in which the name or logo of a Municipality or the Company is used; or (ii) that relates to this Agreement or the transactions contemplated in this Agreement except with the prior written consent of all Parties which may, having regard to the nature of the relationship of the Parties and the transaction provided for herein, bear bitrarily or unreasonably withheld or subjected to any conditions solely determined by the Party granting the consent. Where the Public Statement is required by Applicable Laws, the Party required to make the Public Statement will use commercially reasonable efforts to obtain the approval of the other Parties as to the form, nature and extent of the disclosure. Notwithstanding the foregoing, the Municipality may, without the consent of the Company, be permitted to make public announcements and press releases of a type commonly made by municipal governments with respect to community developments provided that any such public announcement or press release does not disclose any confidential information of the Company that would be of competitive advantage to the Company's competitors.

28


   
19.

DISPUTES & RESOLUTIONS

     
(1)

If any Party considers that a dispute has arisen under or in connection with this Agreement that the Parties cannot resolve, then such Party may deliver a notice to the other Party describing the nature and the particulars of such dispute. Within twenty (20) Business Days following delivery of such notice to the other Party, a senior representative from each Party shall meet, either in person or by telephone (the "Resolution Conference"), to attempt to resolve the dispute. Each senior representative shall be prepared to propose a solution to the dispute. If, following the Resolution Conference, the dispute is not resolved, the dispute may be settled by arbitration pursuant to Section 19(2).

     
(2)

Except as otherwise specifically provided for in this Agreement, any matter in issue between the Parties as to their rights under this Agreement may be decided by arbitration provided, however, that the Parties have first completed a Resolution Conference pursuant to Section 19(1). Any dispute to be decided by arbitration will be decided by a single arbitrator appointed by the Parties or, if such Parties fail to appoint an arbitrator within fifteen (15) days following the agreement to refer the dispute to arbitration, upon the application of either of the Parties, the arbitrator shall be appointed by a Judge of the Superior Court of Justice (Ontario) sitting in the Judicial District of Toronto Region. The arbitrator shall not have any current or past business or financial relationships with any Party (except prior arbitration). The arbitrator shall provide each of the Parties an opportunity to be heard and shall conduct the arbitration hearing in accordance with the provisions of the Arbitration Act, 1991 (Ontario). Unless otherwise agreed by the Parties, the arbitrator shall render a decision within ninety (90) days after the end of the arbitration hearing and shall notify the Parties in writing of such decision and the reasons therefor. The arbitrator shall be authorized only to interpret and apply the provisions of this Agreement and shall have no power to modify or change this Agreement in any manner. The decision of the arbitrator shall be conclusive, final and binding upon the Parties. The decision of the arbitrator may be appealed solely on the grounds that the conduct of the arbitrator, or the decision itself, violated the provisions of the Arbitration Act, 1991 (Ontario) or solely on a question of law as provided for in the Arbitration Act, 1991 (Ontario). The Arbitration Act, 1991 (Ontario) shall govern the procedures to apply in the enforcement of any award made. If it is necessary to enforce such award, all costs of enforcement shall be payable and paid by the Party against whom such award is enforced. Unless otherwise provided in the arbitral award to the contrary, each Party shall bear (and be solely responsible for) its own costs incurred during the arbitration process, and each Party shall bear (and be solely responsible for) its equal share of the costs of the arbitrator. Each Party shall be otherwise responsible for its own costs incurred during the arbitration process.

29


   
20.

ASSIGNMENT & CHANGE OF CONTROL


  (1)

Except as otherwise provided in this Agreement, neither this Agreement nor any rights, remedies, liabilities or obligations arising under or by reason of this Agreement shall be assignable or assigned by a Party without the prior written consent of the other Party, which, having regard to the nature of the relationship of the Parties and the transaction provided for herein, may be arbitrarily or unreasonably withheld or subjected to any conditions solely determined by the Party granting the consent. Notwithstanding the foregoing, a Party may, without the prior consent of the other Party, assign this Agreement and any of its rights, remedies, liabilities or obligations to:


  (1)

any corporation or partnership which is on the effective date of the assignment and is intended to continue thereafter to be, controlled by, under the control of or under common control with the assigning Party; or

     
  (2)

a financial institution or other entity for purposes of obtaining financing.


  (2)

A Party making an assignment permitted by this Section 20(1) shall provide the other Party with prompt Notice of such assignment. An assignment shall not release the assigning Party from any liability or obligation under this Agreement to the other Party, unless and until such Party provides such release in writing.

     
  (3)

The Company shall not permit or allow a change of Control of the Company, except with the prior written consent of the Municipalities, which consent may not be unreasonably withheld. It shall not be unreasonable to withhold such consent if the change of Control will have or is likely to have, as determined by the Municipalities acting reasonably, a Material Adverse Effect on the Company's ability to perform its obligations under this Agreement, in which case such consent may be withheld by the Municipalities. For greater certainty, a change of Control shall include a change from no person having Control of the Company to any Person having Control of the Company, as well as a change from any person having Control of the Company to no Person having Control of the Company.


21.

GENERAL

     
(1)

Each Party shall be solely liable for the payment of all wages, taxes, and other costs related to the employment by such Party of persons who perform this Agreement, including all federal, provincial, and local income, social insurance, health, payroll and employment taxes and statutorily-mandated workers' compensation coverage. None of the persons employed by either Party shall be considered employees of the other Party for any purpose. Nothing in this Agreement shall create or be deemed to create a relationship of partners, joint venturers, fiduciary, principal and agent or any other relationship between the Parties.

30



  (2)

This Agreement may be executed in two (2) or more counterparts, and all such counterparts shall together constitute one and the same Agreement. It shall not be necessary in making proof of the contents of this Agreement to produce or account for more than one such counterpart. Any Party may deliver an executed copy of this Agreement by facsimile or electronic mail but such Party shall, within ten (10) Business Days of such delivery by facsimile or electronic mail, promptly deliver to the other Party an originally executed copy of this Agreement.

     
  (3)

In addition to the other rights of set-off under this Agreement or otherwise arising in law or equity, either Party may set off any amounts owing to such Party under this Agreement against any amounts owed to the other Party under this Agreement.

     
  (4)

If any provision of this Agreement is found by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision shall be deemed severed from this Agreement and shall not affect the validity, legality or enforceability of the remaining provisions of this Agreement, unless such invalidity or unenforceability frustrates the fundamental operation of this Agreement and in such case this Agreement shall terminate unless such invalidity or unenforceability frustrates the fundamental operation of this Agreement and i n such case this Agreement shall terminate.

     
  (5)

Time is of the essence in the performance of the Parties' respective obligations under this Agreement. Where the Company is required to provide any information or documentation to the Municipalities and no timeframe has been specified in this Agreement, the Company shall provide such information or documentation promptly.

     
  (6)

Each of the Parties shall, from time to time on written request of the other Party, do all such further acts and execute and deliver or cause to be done, executed or delivered all such further acts, deeds, documents, assurances and things as may be required, acting reasonably, in order to fully perform and to more effectively implement and carry out the terms of this Agreement. The Parties agree to promptly execute and deliver any documentation required by any Governmental Authority in connection with any termination of this Agreement.

     
  (7)

The provisions of Sections 2(4), 2(5), 3(3), 4(1) (d), 4(3), 5(l) (d), 5(l) (i), 6(1), 6(2), 14, 18 and 19 shall survive the expiration of the Term or earlier termination of this Agreement. The expiration of the Term or a termination of this Agreement shall not affect or prejudice any rights or obligations that have accrued or arisen under this Agreement prior to the time of expiration or termination and such rights and obligations shall survive the expiration of the Term or the termination of this Agreement for a period of time equal to the applicable statute of limitations.

31



  (8)

Except where otherwise expressly provided, all amounts in this Agreement are stated, and shall be paid, in Dollars.

     
  (9)

The inclusion of headings and a table of contents in this Agreement are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. In this Agreement, unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders.

     
  (I0)

This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal Jaws of Canada applicable therein.

     
  (11)

Except as expressly provided in this Agreement, no amendment or waiver of any provision of this Agreement shall be binding unless executed in writing by the Party (or Parties). No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall any waiver of any provision of this Agreement constitute a continuing waiver or operate as a waiver of, or estoppel with respect to, any subsequent failure to comply unless otherwise expressly provided.

     
  (12)

This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter of this Agreement. There are no warranties, conditions, or representations (including any that may be implied by statute) and there are no agreements in connection with the subject matter of this Agreement except as specifically set forth or referred to in this Agreement. No reliance is placed on any warranty, representation, opinion, advice or assertion of fact made by a Party to this Agreement, or its directors, officers, employees or agents, to the other Party to this Agreement or its directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement.

     
  (13)

References in this Agreement to any legislation (including but not limited to regulations and by-laws) or any provision thereof include such legislation or provision thereof as amended, revised, re-enacted and/or consolidated from time to time and any successor legislation thereto.

     
  (14)

In the event that a change of Applicable Laws after the date of this Agreement imposes additional unforeseen material obligations or costs on a Party, or restricts the sale or price of electricity, the Parties agree to negotiate in good faith, an amendment to this Agreement which would attempt to maintain the economic benefits of this Agreement for each Party.

32



  (15)

In all aspects of this Agreement time is of the essence and the Parties agree that they will act in a commercially reasonable manner with due regard to the issue, context and circumstances in any event.

REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK.

33

 


 


 


SCHEDULE "A" - EQUIPMENT

Process Equipment

Equipment Brand Equipment Function Equipment Capacity Equipment Location
Honey Monster - Envirocan Screen septage and wastewater 1 .3 m 3 /min. Septage receiving station
MAVITEC Food Depacking system SSO pre-treatment 180 ml/day SSO receiving facility
MAVITEC SSO residue washing system Plastic cleaning 11 ml/day SSO receiving facility
Flygt Mechanical Mixer Septage and centrate mixing 25 HP Septage and Centrate tank
Flygt Submersible Sludge Pump Septage and centrate pump 130 ml/day. Septage and Centrate tank
Flygt Mechanical Mixer SSO and liquid waste mixing 25 HP Surry tank
Flygt Submersible Sludge Pump Digester feedstock pump 500 ml/day. Surry tank
Flottweg Primary digester sludge thickening 400 ml/day. Existing Control and septage dewatering Bldg.
Greatario Secondary digester 2000 m 3 At present concrete storage tank 6 m x 14 m
Hydraulix Process Mixing System Secondary digester mixing Mixing of 2000 m 3 of digester Secondary Digester
Flygt Submersible Sludge Pump Secondary digester digestate pump 500 m 3 /day Secondary Digester
Martin Machinery Electrical power generation and heat recovery 500kWelectricity - 500kWofheat Biogas Generator
Flottweg Secondarydigester - Thickening and dewatering 300 m 3 /day SSO Processing Building
Geomembrane Technologies Inc. Biagas Disposal 600 ml/day Biagas flare location

35


PLAN AND DESCRIPTION - SCHEDULE "B"

Our proposal is for treating the existing septage through the anaerobic digestion ("AD") system and to add 20,000 t/a source separated organics to feed the existing I 000 m 3 mesophilic digestor and an added 2,000m 3 thermophilic digestor as in the Block Flow Diagram attached to this section. Wastewater from the Sunset Strip will be screened and sent directly to the aerated lagoon.

The front end system to process source separated organics C’SSO") is supplied in two trains of me 0,000+ t /a processing capacity to grind the food wastes, take out the plastics, clean the plastics and deliver ground food wastes to slurry tank. Equipment is from a European Company that has supplied many units in the U.S. Dilution water for the SSO processing will be supplied from centrate taken out of the digestrate from the thermophilic digestion stage and from the septage that will be screened and routed to a new holding tank before being sent to the SSO or AD systems. Plastics will be sent back to the SSO source for disposal in the trucks delivering the SSO material, so none of this material is a waste to be disposed of locally. Once the waste plastics are characterized, SusGlobal Energy Canada I Ltd. ("SusGlobal") plans to install two or three trains that covert the plastics to a low sulphur, high cetane diesel fuel at this site. SusGlobal Energy Corp. has the license to use this technology for any location in N. America, any number of units of 5,000 1/d diesel production.

The slurried SSO will then be piped to the existing digestor along with septage if there is any not used for dilution. Digestrate from that first stage digestor will go to a Heat Treating Unit ("HTU") then to the smaller holding tank currently used to store biosolids that will be converted to a digestor for the thermophilic (75 C) digestion stage. We plan to run the first stage digestor at around l 0% solids loading, then route the digestrate through a centrifuge to get 18 to 20% solids to the HTU. Steam from a heat recovery steam generator ("HRSG") installed on the exhaust of the gensets will supply steam at 250 C to the HTU. Steam dilution will get us around 15% solids in the second digestor and we will install a hydraulic mixing system in the second stage digestor. We will recover exhaust heat from a 200 kW genset fuelled by biogas installed to make the plant net-zero for energy inputs. The HTU system is licensed from a Canadian patent holder, Eastern Power Ltd. Any excess biogas may be utilized by the existing diesel genset at the Harold Sutherland Construction site across the road from the A D site. Harold Sutherland Construction is considering modifying the diesel genset to be able to operate on dual fuels, firing both diesel and natural gas or biogas. SusGlobal will also install a flare to combust any biogas that cannot be used for beneficial purposes. This will both eliminate odor emissions from the site and reduce greenhouse gas emissions by emitting CO2 instead of CH4. CH4 has 25 times the global warming potential that CO2 does. Any environmental benefits from greenhouse gas emission reductions remain the property of SusGlobal and will be monetized if possible under Ontario's Cap and Trade regime. The amount of biogas recovered from the system is estimated to be the equivalent of generating 500 kW of electricity in biogas gensets.

Digestate from the second stage digestor will be around 20% solids and amounts to l O to 15,000 t/a total volume, or about 3,000 t/a solids. The rest of the organic material is converted into biogas. Since the solids have been subjected to a HTU at 230 to 250 C, then to l O to 15 days retention time in the thermophilic digestor at 55 C, the operating temperature recommended by consultation with U of Waterloo researchers for stable operation which the Company proposes to operate at ,all pathogens have been destroyed, so this digestrate will qualify as Class AA Organic Fertilizer that can be added to composting facilities or incorporated directly into fertilizer compounds. The site will have surplus heat energy, so the digestate could be dried and used directly as organic fertilizer. SusGlobal will apply for the Class AA fertilizer category as soon as material required testing is available. In the meantime, the existing land application of the digestate will be utilized. SusGlobal intends to install a 500kW genset with heat recovery.

36


Because SusGlobal is planning to install the SSO processing equipment and Plastic to Diesel equipment to augment the value of the existing assets, we are exploring leasing of a 2 hectare site across the road from the AD site to conduct those operations there. This would be slightly more expensive than building everything on the AD site, but our lender advises that this would be a more acceptable arrangement for such a large loan. Of course, the repurposing of the small storage tank, the HTU, the second genset, flare and biogas treating system will all be on the existing AD site. Permitting would be more complex, but the existing C. of A. needs to be reapplied for or amended because the through put for the facility would be in the order of 130m 3 /d for 5 days/week operation. We would likely be operating 7 days/week in our process, and, of course, the AD system operates 24/7, as the microbes never rest, they only die if undernourished, so our objective is to keep them well fed.

37

 


TRANSITION PROCEDURES - SCHEDULE "C"

Initial Transition Plan

The transition process starts with establishing a communications protocol among all parties involved. The operations manager will establish communications protocols.

(16) Overview

Aquatech Canadian Water Services - GSS Engineering will begin the Transition Plan based on many different activities:

  Management of the existing Facility
    o Initial Condition Survey
    o Implementation of specific procedures:
    Standard operational procedures (S0Ps)
    Emergency Plan
    Contingency Plan
    Health and Safety Plan with the COR (Certificate of Recognition)
         
  Design interface and input
         
  Construction interface and follow up
         
  Operation of the existing Facility during construction
     
  Start-up and Commissioning of new equipment and facility

(17) Activities

For the first activity, Management of the existing facility, different steps arc planned:

 

Preparation of the final Transition Plan (first week of the contract)

     
 

Kick off meeting with the other members of the joint venture

     
 

Meeting present workforce (transfer of the current operator to Aquatech-GSS)

     
 

Workforce scheduling

     
 

Condition survey of the existing facility and associated equipment

     
 

Implementation and Validation of the Contingency Plan

     
 

Maintenance planning

     
 

Validation of the compliance monitoring (sampling, follow up of the treatment. treatment efficiency, )

     
 

Validation of the current SOP's, modification for some of them and establish new ones when required

     
 

Sampling and Measurement

Within 30 days of the commencement of the contract, we will provide a comprehensive written inventory of the existing facilities and equipment. The inventory report will become the basis for our initial condition survey for the facility. This document will be supplied to the Joint Venture including the condition of the equipment with pictures and notes. This report will be used to provide a start-up baseline and a benchmark for the end-of-contract condition of the facilities.

We will also utilize a standard start and health and safety checklist to assist us with the transitioning to new facilities and identify any issues that must be addressed.

We will conduct assessments of the following:

38


>Monitoring equipment
>Health and Safety audit
>Availability of tools and equipment
>Inventory spare parts
>Alarms

The report will include a comprehensive written inventory of the existing facilities and equipment along with:

Transition Consideration

Aquatech-GSS Engineering will address the following requirements:

>Consumables;
>Individual process units are performing as designed;
>Status of sampling schedule; and past inspections (MOE, MOL, TSSA, ESA)

>Equipment data collection;
>Asset inventory;
>Implement preventative maintenance schedules;
>Asset renewal program; 
> Develop equipment renewal program (capital improvements)

We will expect the Townships to be involved in the following:

Recruitment and Staffing

Continuity of operations, staffing and knowledge will take priority in our initial strategy. Retaining existing operator is our preferred approach. We have a recruitment infrastructure in place to ensure we can fill any vacancies quickly.

Aquatech-GSS Engineering team staff will shadow the current operating authority for a period of two weeks in order to familiarize themselves with the operations of the systems. We are sensitive to issues related to operator transitions from the incumbent to our own organizations. Our goal and role is to ensure that the transition and operation of the facility is transparent to the Townships. For the second activity, Design interface and input, the Aquatech-GSS team will:

39


For the third activity, Construction interface and follow up, the Aquatech-GSS team will:

For the fourth activity, Commissioning of new equipments and facility, the Aquatech-GSS team will validate the process and verify the efficiency of the new installed equipment. We will look to see if there is any deficiencies to treat and will find if required some corrective actions to im prove the process. We will work closely in collaboration with the construction and the design team to obtain the optimum efficiency.

The commissioning is planned to be executed during 5 weeks in 5 different stages:

40



o

All Process Equipment, instrumentation, controls, SCADA System and unit processes are operating satisfactorily as intend and without incident and interruption or malfunction,

  o

The Effluent meets the Effluent Quality Requirements

  o

The Odor Emissions meet the Odor Quality Requirements

  o

The Sludge meets the Sludge Quality Requirements

o

All Sludge handling, dewatering, storage and truck loading are fully satisfactory, including odor control measures

o

The Performance of the new facility is within I 0% of the electrical and chemical consumption values represented and warranted in the life cycle cost estimate

Following the Performance Test, a deficiency list with solution and timeline to eliminate these deficiencies will be presented to the client by SusGlobal.

(18) Resources

To realize these different Interim Operation Plan's phases, the involved Resources with their Role and Responsibilities will be for the Aquatech-GSS Engineering team:

Andie Lebeuf, P. Eng. Interim Plant Manager:
As a Wastewater level 2 operator; Andre will be responsible of the O&M management, Staff scheduling, Reporting, Budget control and Quality Control implementation. Andre has been responsible of the Eastern Passage WWTF in Halifax from November 2011 to February 2015 where he had to operate a Biomethane burner unit from the anaerobic tank of the WWTF process. For this project Aquatcch was part of the Joint Venture with Maple Reinders. Andre is also presently involved in an optimization of the treatment project with GSS

Engineering at the Brighton Wastewater treatment facility in Ontario since April 2015.

Eric Joncas, P.Eng. Commissioning Manager:
With Responsibilities as Design-review, Construction witnessing, Equipment reception on site, Equipment start-up and testing, Process start-up and control, Performance testing, Quality Control implementation. Eric has been involved in a huge quantity of start-up and commissioning from 1992 to now.

Rakesh Sharma P. Eng.
With Responsibilities as overseeing the operation maintenance and management of the Township's facilities and directly supervise the operators, regularly meet with client and review plant operations data reports to ensure full compliance. Rakcsh has been involved in the operational maintenance and management of water and wastewater systems since 1997. He has been the operator in charge and overall responsible operator for water and wastewater facilities including 11 water systems in Amabel/Sauble area. Mr. Sharma was responsible for directing the plant operators to implement optimization of chemical treatment (turbidity variation from 5NTU to >200 NTU in few hours). He assisted other plant in filter optimization study by undertaking a full scale pilot study by adopting different combination of PAC and polymers.

(19) Budget

Aquatech-GSS Engineering during the Interim Operations Period will be fully responsible of all aspects of the Transition Work. Aquatech-GSS Engineering team will pay directly or reimburse the following operating incurred after the beginning of the operation and Maintenance period.

41


(20) Schedule

Duration: 25 years (end 2040 will be used)

The estimated Schedule will be the following and will be adapted accordingly to the request for the different steps and following the kick off meeting and the design and construction schedule:

I. Management of the existing facility: approximately 25 years
   
2. Design Interface and Input: less than 18 months
   
3. Construction Interface & Follow up: in place prior to 18 months
   
4. Commissioning of new equipment and facility: at 18 months

FINAL TRANSITION PERIOD

At the end of the operation period, after 25 years of operation or after any extension period ends without extending, the Aquatech-GSS team will organize with the client a transition period to transfer the information and the Operation and Maintenance back to the client.

This final transition period will last minimum one month to have time to give to the client all the required information. The client will have his staff present on site and shadowing the Aquatech- GSS staff to see every facet of the operation and any problem that can appear. During that period, Aquatech-GSS Team, will establish a final condition survey report with inventories and pictures associated. We will transfer the Company's account for chemical, spare parts and other to the client name and will see with client to order in their name. If required the required spare parts or product to be sure not to fall in back order just after the transition. We will execute the Maintenance in company of the client representative. We will fix everything that was not operating properly and will give some improvement information for future operation to the client. We will ensure that the operation and Maintenance manuals, the drawings, the SOP's, the Health and Safety procedures, and other documents have been updated in their more up-to-date version. We will remove the Aquatech-GSS signage onsite to install the one from the client. We will change the phone call numbers for the emergency operation call in. We will give back all the keys for the operation.

Aquatcch-GSS Team will transfer all the responsibilities to the client but will stay available to help or to give information on request.

42


SCHEDULE "D"

Property Description

062111, Side Road 3, Lot 4, Concession 6, Township of Georgian Bluffs as shown on attached (to be inserted).

43


SCHEDULE "E"

Site Description

The Parties shall, acting reasonably, agree to a description of the Site within the Property within a reasonable time after the application for the ECA has been submitted to the MOECC.

 

 

44


Schedule “F”
Sunset Strip Agreement Holders

Business Name
[+]
[+]
[+]
[+]
[+]
[+]
[+]
[+]
[+]
[+]
[+]
[+]
[+]
[+]
[+]
[+]
[+]
[+]

[+] Indicates confidential portion has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

45



 


 


 


 


 



 


 


 


 


 



 


 


 


 


 



 


 


 


 


 



 


 



 


 



 



 



 



 



 


 


 


 


 




CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

To the Board of Directors and Stockholders’ of
SusGlobal Energy Corp.

We consent to the use in this Registration Statement on Form S-4 of SusGlobal Energy Corp. of our report dated March 27, 2017, with respect to our audits of the consolidated financial statements of SusGlobal Energy Corp. as of December 31, 2016 and 2015.

We also consent to the reference to our firm under the captions “Experts” in this Registration Statement.

/s/ SF Partnership, LLP

Chartered Professional Accountants

Toronto, Ontario
April 5, 2017