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

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ________________

Commission file number 333-209143

SUSGLOBAL ENERGY CORP.
(Exact name of registrant as specified in its charter)

Delaware 38-4039116
(State or other jurisdiction of incorporation or (I. R. S. Employer Identification No.)
organization)  

200 Davenport Road M5R 1J2
Toronto, ON  
(Address of principal executive offices) (Zip Code)

416-223-8500
(Registrant’s telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ ]           No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ ]           No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).
Yes [ ]           No [X]

The number of shares of the registrant’s common stock outstanding as of November 14, 2017 was 37,278,031 shares.


SusGlobal Energy Corp.
INDEX TO FORM 10-Q
For the Three and Nine-Month Periods Ended September 30, 2017 and 2016

Part I FINANCIAL INFORMATION  
Item 1 Financial Statements 5
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
Item 3 Quantitative and Qualitative Disclosures About Market Risk 30
Item 4 Controls and Procedures 30
Part II OTHER INFORMATION 30
Item 1A Legal Proceedings 30
Item 1B Risk Factors 30
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 30
Item 3 Defaults Upon Senior Securities 31
Item 4 Mine Safety Disclosures 31
Item 5 Other Information 31
Item 6 Exhibits 31


SusGlobal Energy Corp.
September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

Table of contents

Consolidated Balance Sheets 5
   
Interim Condensed Consolidated Statements of Loss and Comprehensive Loss 6
   
Interim Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) 7
   
Interim Condensed Consolidated Statements of Cash Flows 8
   
Notes to the Interim Condensed Consolidated Financial Statements 9-18


SusGlobal Energy Corp.
Interim Condensed Consolidated Balance Sheets
As at September 30, 2017 and December 31, 2016
(Expressed in United States Dollars)
(unaudited)

    September 30, 2017     December 31, 2016  
             
ASSETS            
Current Assets            
Cash $  37,397   $  1,774  
Term deposit   -     148,960  
Trade receivables, no allowance   152,216     9,127  
Other receivable-insurance proceeds   50,482     -  
Harmonized sales taxes receivable   7,320     16,084  
Prepaid expenses and deposits   73,989     19,586  
Total Current Assets   321,404     195,531  
             
Intangible Assets (note 6)   148,779     1,670  
             
Long-lived Assets, net (note 7)   5,967,142     880  
Total Assets $  6,437,325   $  198,081  
             
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
Current Liabilities            
Accounts payable (note 8) $  221,863   $  292,595  
Accrued liabilities (note 8)   203,882     173,157  
Current portion of long-term debt (note 9)   1,840,112     -  
Loans payable to related party (note 10)   56,091     217,482  
Total Current Liabilities   2,321,948     683,234  
             
Long-term debt (note 9)   2,479,958     -  
Total Liabilities   4,801,906     683,234  
             
Stockholders’ Equity (Deficiency)            
             
Preferred stock, $.0001 par value, 10,000,000 authorized, none issued and outstanding        
Common stock, $.0001 par value, 150,000,000 authorized, 37,253,031 (2016-34,128,910) shares issued and outstanding and outstanding (note 11)   3,726     2,004,407  
Additional paid-in capital   5,569,005     -  
Subscription payable   23,000     -  
Stock compensation reserve   247,500     -  
Accumulated deficit   (4,204,760 )   (2,447,815 )
Accumulated other comprehensive loss   (3,052 )   (41,745 )
             
Stockholders’ equity (deficiency)   1,635,419     (485,153 )
             
Total Liabilities and Stockholders’ Equity (Deficiency) $  6,437,325   $  198,081  

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

Page | 05


SusGlobal Energy Corp.
Interim Condensed Consolidated Statements of Loss and Comprehensive Loss
For the three and nine-month periods ended September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

    For the three-month periods     For the nine-month periods  
    ended     ended  
    September 30,     September 30,     September 30,     September 30,  
    2017     2016     2017     2016  
                         
Revenue $  25,608   $  7,788   $ 25,608   $  7,788  
                         
Operating expenses                        
                         
Financing costs (note 9)   -     -     882,153     -  
Contribution to Advanced Water Technology Program (note 12 (d))   -     -     71,017     -  
Operations and maintenance   31,345     30,975     31,345     30,975  
Professional fees   92,434     49,700     180,793     138,804  
Office and administration (note 8)   72,218     24,755     165,837     66,946  
Management fees (note 8)   43,016     32,180     123,962     95,432  
Interest expense (note 8)   40,363     4,905     83,049     8,721  
Stock-based compensation (notes 8 and 11)   86,500     -     277,750     -  
Filing fees   5,499     1,081     14,855     4,240  
Total operating expenses   371,375     143,596     1,830,761     345,118  
                         
Net loss before other income   (345,767 )   (135,808 )   (1,805,153 )   (337,330 )
Other income-insurance proceeds   48,208     -     48,208     -  
Net loss after other income   (297,559 )   (135,808 )   (1,756,945 )   (337,330 )
Other comprehensive loss                        
Foreign exchange gain (loss)   86,420     946     38,693     (24,521 )
                         
Comprehensive loss $  (211,139 ) $  (134,862 ) $   (1,718,252 ) $ (361,851 )
                         
Net loss per share-basic and diluted $  (0.01 ) $ (0.00 ) $ (0.05 ) $  (0.01 )
                         
Weighted average number of common shares outstanding- basic and diluted   36,658,490     33,131,618     36,185,790     27,004,368  

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

Page | 06


SusGlobal Energy Corp.
Interim Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)
For the nine-month period ended September 30, 2017 and year ended December 31, 2016
(Expressed in United States Dollars)
(unaudited)

    Number of     Common     Additional Paid-     Share     Stock     Accumulated     Accumulated Other     Stockholders’  
                                              Equity  
    Shares     Shares     in Capital     Subscription     Compensation     Deficit     Comprehensive     (Deficiency )  
                      Payable     Reserve           Loss        
                                                 
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  
Shares issued for consulting services   -     -     -     -     -     -     -     -  
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 )
                                                 
Shares issued to directors   40,000     11,600     -     -     -     -     -     11,600  
Shares issued to employee   5,000     1,450     -     -     -     -     -     1,450  
Shares issued for consulting services   15,000     4,950     -     -     -     -     -     4,950  
Shares issued on exercise offer to acquire shares   115,000     11,500     -     -     -     -     -     11,500  
Shares issued to agents on financing   1,620,000     469,800     -     -     -     -     -     469,800  
Shares issued on private placement, net of share issue costs   329,176     98,048     -     -     -     -     -     98,048  
Reallocation between common shares and additional paid-in capital   -     (2,598,130 )   2,598,130     -     -     -     -     -  
Shares issued to directors   40,000     4     13,196     -     -     -     -     13,200  
Shares issued as compensation for director nomination   20,000     2     6,598     -     -     -     -     6,600  
Shares issued to employee   4,000     1     3,999     -     -     -     -     4,000  
Shares issued for consulting services   20,000     2     19,998     -     -     -     -     20,000  
Shares issued for private placement compensation   5,000     1     4,999     -     -     -     -     5,000  
Shares issued on acquisition of assets   529,970     53     2,649,797                     2,649,850  
Shares issued on private placement, net of share issue costs   380,975     38     272,288     -     -     -     -     272,326  
Stock compensation expensed on vesting of stock award   -     -     -     -     247,500     -     -     247,500  
Proceeds received on shares yet to be issued   -     -     -     23,000     -     -     -     23,000  
Other comprehensive loss   -     -     -     -     -     -     38,693     38,693  
Net loss   -     -     -     -     -     (1,756,945 )   -     (1,756,945 )
Balance – September 30, 2017   37,253,031    $ 3,726   $  5,569,005   $   23,000   $  247,500   $   (4,204,760 ) $ (3,052 ) $ 1,635,419  

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

Page | 07


SusGlobal Energy Corp.
Interim Condensed Consolidated Statements of Cash Flows
For the nine-month periods ended September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

    For the nine-month     For the nine-month  
    period ended September 30,     period ended September 30,  
    2017     2016  
             
Cash flows from operating activities            
Net loss $  (1,756,945 ) $  (337,330 )
Adjustments for:            
Depreciation   15,108     457  
Amortization of intangible asset   150     140  
Non-cash financing costs and professional fees   501,350     -  
Stock-based compensation   277,750     -  
Changes in non-cash working capital:            
Trade receivables   (2,723 )   (8,801 )
Other receivable-insurance proceeds   (48,208 )   -  
Harmonized sales taxes receivable   9,535     (4,422 )
Prepaid expenses   (12,273 )   (13,341 )
Accounts payable   (88,742 )   92,875  
Accrued liabilities   16,797     8,846  
Net cash used in operating activities   (1,088,201 )   (261,576 )
             
Cash flows from investing activities            
Disposal (purchase) of term deposit   152,400     (151,480 )
Purchase of accounts receivable   (132,701 )   -  
Purchase of deposit   (38,100 )   -  
Purchase of long-lived assets   (3,019,281 )   -  
Purchase of intangible assets   (140,625 )   -  
Net cash used in investing activities   (3,178,307 )   (151,480 )
             
Cash flows from financing activities            
Bank indebtedness   -     38,264  
Advances on long-term debt   4,584,564     -  
Repayment of long-term debt   (459,120 )   -  
Advances of loans payable to related parties   -     204,498  
Repayments of loans payable to related parties   (169,874 )   -  
Private placement proceeds (net of share issue costs)   386,874     179,267  
Subscription payable proceeds   23,000     -  
Net cash provided by financing activities   4,365,444     422,029  
Effect of exchange on cash   (63,313 )   (8,973 )
Increase in cash   35,623     -  
Cash-beginning of period   1,774     -  
Cash-end of period $  37,397   $  -  

Other items-see note 11 for non-cash financing costs and professional fees relating to share based payment charged to financing costs and professional fees and non-cash issuance of common shares on the purchase of long-lived assets

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

Page | 08


SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

1. Nature of Business and Basis of Presentation

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

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

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

These unaudited interim condensed consolidated financial statements of SusGlobal Energy Corp. and its wholly-owned subsidiaries, SusGlobal Energy Canada Corp., SusGlobal Energy Canada I Ltd. and SusGlobal Energy Belleville Ltd. (“SGECI”) (together, the “Company”), have been prepared following generally accepted accounting principles in the United States (“US GAAP”), and are expressed in United States Dollars. The Company’s functional currency is the Canadian Dollar (“CAD”). In the opinion of management, all adjustments necessary for a fair presentation have been included. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report for the Company filed on Form 10-K for the years ended December 31, 2016 and 2015.

2. Going Concern

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

As at September 30, 2017, the Company had a working capital deficit of $2,000,544, (December 31, 2016-$487,703), incurred a net loss of $1,756,945 (2016-$337,330) for the nine-month period ended September 30, 2017 and had an accumulated deficit of $4,204,760 (December 31, 2016-$2,447,815) 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. On February 2, 2017, the Company received an advance in the amount of $1,232,960 ($1,600,000 CAD) on its corporate line of credit (“Line of Credit”) of up to $4,407,150 ($5,500,000 CAD) with PACE Savings & Credit Union Limited (“PACE”). The Line of Credit was obtained to fund the BioGrid Project, which was a project described in the expansion and operation agreement (the “BioGrid Agreement”) between the Company and the Township of Georgian Bluffs and the Township of Chatsworth (the “Municipalities”). The Municipalities terminated the BioGrid Agreement on November 4, 2016. There are no further advances available on the Line of Credit and it is due February 2, 2018. The Company’s ability to continue as a going concern is dependent on its ability to generate new revenue and external capital, along with securing new debt to achieve profitable operations while maintaining current fixed expense levels. If the Company is not able to refinance the Line of Credit or repay when due, the Company will encounter a liquidity crisis.

Page | 09


SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

2. Going Concern , continued

These interim condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result if the Company was unable to continue as a going concern.

3. Significant Accounting Policies

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the years ended December 31, 2016 and 2015.

During the nine months ended September 30, 2017, the Company adopted the following significant accounting policies:

Business Combinations

The Company has chosen to early adopt Audit Standards Update No. 2017-01 (“ASU 2017-01”), which clarifies the definition of a business, with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.

Intangible Assets

Intangible assets, consisting of a technology license, which is stated at cost less accumulated amortization and is amortized on a straight-line basis over the useful life, which is 10 years. Intangible assets also include environmental compliance approvals, which are stated at cost, have an indefinite useful life and are not amortized until their useful lives are determined to be no longer indefinite. The Company evaluates the intangible assets for permanent impairment when triggering events are identified and whether events and circumstances continue to support the indefinite useful life.

Long-lived Assets

The Company introduced three new classes of long-lived assets, all of which are depreciated on a straight-line basis as follows:

Organic composting facility-term of lease, which expires March 31, 2034
Machinery and equipment-30%
Computer software-20%

Debt Issuance Costs

Debt issuance costs related to a recognized debt liability are presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability.

Stock-based Compensation

The Company records compensation costs related to stock-based awards in accordance with Accounting Standards Codification 718, Compensation-Stock Compensation, whereby the Company measures stock-based compensation cost at the grant date based on the estimated fair value of the award. Compensation cost is recognized on a straight-line basis over the requisite service period of the award. The Company utilizes the Black-Scholes option-pricing model to estimate the fair value of stock options granted, which requires the input of highly subjective assumptions including: the expected option life, the risk-free rate, the dividend yield, the volatility of the Company’s stock price and an assumption for employee forfeitures. The risk-free rate is based on the U.S. treasury bill rate at the date of the grant with maturity dates approximately equal to the expected term of the option. The Company has not historically issued any dividends and does not expect to in the near future. Changes in any of these subjective input assumptions can materially affect the fair value estimates and the resulting stock-based compensation recognized.

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SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

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.

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842 ) . The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. ASU 2016-02 requires the recognition on the balance sheet of a lease liability to make lease payments by lessees and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance will also require significant additional disclosure about the amount, timing and uncertainty of cash flows from leases. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018 (January 1, 2019 for the Company). The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of adopting ASU No. 2016-02.

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents are to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance is to be effective for the Company as of March 1, 2018, and requires a retrospective transition method. The Company is currently evaluating the impact of ASU No. 2016-18.

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 is to be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The standard is to be effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU No. 2017-04.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation : Topic 718: Scope of Modification Accounting (ASU 2017-09) to provide clarity and reduce both the (1) diversity in practice and (2) cost and complexity when changing the terms or conditions of share-based payment awards. Under ASU 2017-09, modification accounting is required to be applied unless all of the following are the same immediately before and after the change:

1. The award’s fair value (or calculated value or intrinsic value, if those measurement methods are used).

2. The award’s vesting conditions.

3. The award’s classification as an equity or liability instrument.

ASU 2017-09 is effective for annual and interim periods beginning after December 15, 2017 on a prospective basis, and early adoption is permitted. The Company has evaluated the impact of its pending adoption of ASU 2017-09 and does not expect that this guidance will have a significant impact on its financial statements.

In May 2014, the FASB issued ASU 2014-09, “ Revenue from Contracts with Customers (Topic 606),” and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016 and December 2016, within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20 and ASU 2017-13 respectively (ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20, and ASU 2017-13, collectively, “Topic 606”). Topic 606 supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Topic 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. These estimates include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. The guidance is effective for fiscal and

Page | 11


SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

4. Recent Accounting Pronouncements , continued

interim periods beginning on or after December 15, 2017, using either of two methods: (1) retrospective application of Topic 606 to each prior reporting period presented with the option to elect certain practical expedients as defined within Topic 606 or (2) retrospective application of Topic 606 with the cumulative effect of initially applying Topic 606 recognized at the date of initial application and providing certain additional disclosures as defined per Topic 606. The Company is currently evaluating the impact of adopting Topic 606.

5. Financial Instruments

The carrying value of cash, term deposit, trade receivables, other receivable-insurance proceeds, certain deposits under prepaid expenses and deposits, accounts payable and accrued liabilities approximated their fair values as of September 30, 2017 and December 31, 2016 due to their short-term nature. The carrying value of the long-term debt and the loans payable to related party approximated their fair value due to their market interest rates.

Fair value of financial instruments

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.

Interest, Credit and Concentration Risk

In the opinion of management, the Company is exposed to significant interest rate risk on its variable rate credit facilities of $4,306,304 ($5,374,147 CAD) and is not exposed to credit risks arising from its other financial instruments. As at September 30, 2017, the Company had four customers (December 31, 2016-two customers) representing greater than 5% of total trade receivables and these four customers (December 31, 2016-two customers) represented 79% (December 31, 2016-99%) of trade receivables.

Liquidity Risk

Liquidity risk is the risk that the Company is unable to meet its obligations as they fall due. The Company takes steps to ensure it has sufficient working capital and available sources of financing to meet future cash requirements for capital programs and operations. At September 30, 2017 and December 31, 2016, the Company had a working capital deficit.

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SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

5. Financial Instruments , continued

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 September 30, 2017, $9,626 (December 31, 2016-$5,108) 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. Intangible Assets

    September 30, 2017     December 31, 2016  
             
Technology License (net of accumulated amortization of $481 (2016 - $331) $  1,520   $  1,670  
Environmental compliance approvals-indefinite life   147,259     -  
  $  148,779   $  1,670  

On May 6, 2015, the Company acquired an exclusive license from Syngas SDN BHD (“Syngas”), a Malaysian company to use Syngas intellectual property within North America for a period of five years for $1 consideration, renewable every five years upon written request. Syngas manufactures equipment that produces liquid transportation fuel from plastic waste material. The Company issued 20,000 common shares of the Company to an introducing party, determined to be valued at $2,000.

On September 15, 2017, the Company purchased certain environmental compliance approvals in connection with the asset purchase agreement (“APA”), noted below, totaling $147,259 ($183,775CAD).

7 . Long-lived Assets, net

    September 30, 2017     December 31, 2016  
    Cost     Accumulated     Net book value     Net book value  
          Depreciation              
Organic composting facility $  5,873,147   $  14,698   $  5,858,449   $  -  
Machinery and equipment   99,469     397     99,072     -  
Computer equipment   7,403     1,707     5,696     880  
Computer software   4,007     82     3,925     -  
                         
  $  5,984,026   $  16,884   $  5,967,142   $  880  

Included above are certain assets acquired from BDO Canada Limited, the court appointed receiver of Astoria Organic Matters Ltd., and Astoria Organic Matters Canada LP (“Astoria”), under an APA, which closed on September 15, 2017. The purchase price for the organic composting facility, certain machinery and equipment, certain computer equipment and computer software consisted of cash of $3,138,071 ($3,916,225 CAD) and 529,970 restricted common shares of the Company, determined to be valued at $2,649,850 ($3.500,000 CAD). In addition, legal costs in connection with acquiring the assets of $24,014 ($29,253 CAD), are included in the cost of the organic composting facility.

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SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

8. Related Party Transactions

During the nine-month period ended September 30, 2017, the Company incurred $34,434 ($45,000 CAD) (2016-$34,083; $45,000 CAD) in management fees expense with Travellers International Inc. (“Travellers”), an Ontario company controlled by a director and president of the Company (the “President”) and $34,434 ($45,000 CAD) (2016-$34,083; $45,000 CAD) in management fees expense with Landfill Gas Canada Limited (“LFGC”), an Ontario company controlled by a director and chief executive officer of the Company (the “CEO”); $27,547 ($36,000 CAD) (2016-$27,266; $36,000 CAD) in management fees expense with the Company’s chief financial officer (the “CFO”); and $27,547 ($36,000 CAD) (2016-$nil) in management fees expense with the company’s vice-president of corporate development (the “VPCD”). As at September 30, 2017, unpaid remuneration and unpaid expenses payable to officers in the amount of $98,431 ($122,839 CAD) (December 31, 2016-$95,396; $128,083 CAD) is included in accounts payable and $88,944 ($111,000 CAD) (December 31, 2016-$61,982; $83,220 CAD) is included in accrued liabilities.

In addition, the Company incurred interest expense of $14,052 ($18,363 CAD) (2016-$8,721; $11,541 CAD) on the outstanding loans from Travellers.

Furthermore, the Company granted the CEO 3,000,000 restricted stock units (“RSU”), under a new consulting agreement effective January 1, 2017. The RSUs are to vest in three equal installments annually on January 1, 2018, 2019 and 2020. For the nine-month period ended September 30, 2017, the Company recognized stock-based compensation expense of $247,500 on this award, representing one quarter of the total value of the award of $990,000, based on a recent private placement pricing.

For the nine-month period ended September 30, 2017, the Company incurred $50,348 ($65,797 CAD) (2016-$23,858; $31,500 CAD) in rent expense under a rental agreement with Haute Inc. (“Haute”), an Ontario company controlled by the Company’s President, who is also a director.

9. Long-term Debt

    Credit     Credit     Credit     Corporate     Equipment     Total  
                      Term     Loan        
    Facility     Facility     Facility     Loan              
    (a)     (b)     (c)     (d)     (e)        
Balance, December 31, 2016   -     -     -     -     -     -  
Advanced $ 1,232,960   $  462,360   $   39,563   $  3,055,836   $  13,923   $  4,804,642  
                                     
                                     
Repayment of principal   (428,417 )   -     -     -     -     (428,417 )
Impact of foreign exchange   17,699     (2,522 )   502     (71,677 )   (157 )   (56,155 )
Sub-total   822,242     459,838     40,065     2,984,159     13,766     4,320,070  
Less: current portion   (822,242 )   (459,838 )   (40,065 )   (506,227 )   (11,740 )   (1,840,112 )
Balance-September 30, 2017 $  -   $  -   $   -   $  2,477,932   $  2,026   $  2,479,958  

Repayments are as follows:

For the three months ending December 31, 2017 $  125,812  
For the year ending December 31, 2018   1,849,433  
For the year ending December 31, 2019   559,251  
For the year ending December 31, 2020   605,276  
For the year ending December 31, 2021   655,906  
For the year ending December 31, 2022   524,392  
Total $  4,320,070  

For the nine-month period ended September 30, 2017, $68,997 ($90,169 CAD); (December 31, 2016-$nil) in interest was charged.

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SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

9. Long-term Debt , continued

(a)

Effective January 1, 2017, the Company obtained a Line of Credit to a maximum of $4,407,150 ($5,500,000 CAD) with PACE. The Line of Credit was to 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. On February 2, 2017, the company received the first advance in the amount of $1,232,960 ($1,600,000 CAD). The balance of the Line of Credit is no longer available to be drawn against and is due as noted below on February 2, 2018. The Line of Credit is now one of multiple credit facilities.

   

The credit facility bears interest at the PACE base rate plus1.25% per annum, currently 8% per annum, payable on a monthly basis, interest only. The credit facility is due February 2, 2018 and is secured by a business loan general security agreement, a $1,232,960 ($1,600,000 CAD) personal guarantee from the President and a charge against the Company’s premises lease. Also pledged as security are the shares of the wholly-owned subsidiaries and a pledge of the Company’s shares held by LFGC, the CFO and a director’s company, and a limited recourse guarantee by each of these parties. The credit facility is fully open for prepayment at any time without notice or bonus.

   

A total commitment fee of $83,105 ($110,000 CAD) was paid to PACE. In addition, the agents who assisted in establishing the Line of Credit received 1,620,000 common shares of the Company determined to be valued at $469,800, based on the pricing of a recent private placement offering and cash of $300,000, on closing, for their services. Other closing costs in connection with the credit facility included legal fees of $29,248 ($38,713 CAD).

   
(b)

On June 15, 2017, PACE loaned the Company $462,360 ($600,000 CAD) under a variable rate business loan agreement, for its bid for the purchase of the assets of Astoria on the same terms and conditions to the Line of Credit above, except that the loan is due May 31, 2018.

   
(c)

On August 4, 2017, PACE loaned the Company $39,563 ($50,000 CAD) under a variable rate business loan agreement to satisfy an outstanding liability on the same terms and conditions to the Line of Credit above, except that the loan is due February 4, 2018.

   
(d)

On September 13, 2017, PACE loaned the Company $3,055,836 ($3,724,147) under a corporate term loan. The funds were used for the purpose of acquiring certain assets of Astoria from the court appointed receiver on September 15, 2017. The corporate term loan bears interest at the PACE base rate plus 1.25% per annum, currently 8% per annum, payable in monthly blended instalments of principal and interest of $60,549 ($75,564 CAD), due September 13, 2022. The corporate term loan is secured by a business loan general security agreement representing a floating charge over the assets and undertakings of the Company, a first priority charge under a registered debenture in the amount of $3,282,989 ($4,000,978 CAD) against the assets, including inventory, accounts receivable and equipment. The total charge includes a credit in the favor of the Ministry of the Environment and Climate Change (“MOECC”) in the amount of $221,824 ($276,831 CAD), a registered charge of lease over the premises, located at 704 Phillipston Road, Roslin, Ontario, Canada. The corporate term loan also included an assignment of existing contracts included in the APA, and a lien in the amount of $3,282,989 ($4,000,978 CAD) to be registered under the Personal Properties Securities Act.

   
(e)

On September 21, 2017, the Company finalized a finance contract for certain mobile equipment for its organic composting Facility in the amount of $13,923 ($17,180 CAD). The finance contract requires monthly blended instalments of principal and interest of $1,020 ($1,273 CAD) at a monthly interest rate of 5.95%, due November 10, 2018.

In addition, the Company is required to provide for environmental remediation and clean-up costs for its organic composting facility in Roslin, Ontario, Canada. In this regard, the Company has provided a letter of credit, prepared by PACE, in the amount of $221,824 ($276,831 CAD), in favor of the MOECC. The letter of credit is a requirement of the MOECC and is in connection with the financial assurance provided by the Company, for it to be in compliance with the MOECCs environmental objectives. The MOECC regularly evaluates the Company’s organic composting facility to ensure compliance is adhered to and the letter of credit is subject to change by the MOECC. Since the fair value of the environmental remediation costs cannot be determined at this time, no estimate of such costs has been recorded in the accounts.

Page | 15


SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

10. Loans Payable to Related Party

    September 30,     December 31,  
    2017     2016  
             
Travellers $  56,091   $  217,482  

Loans payable in the amount of $56,091 ($70,000 CAD) (December 31, 2016-$217,482; $292,000 CAD), owing to Travellers and bearing interest at the rate of 12% per annum are due on demand and unsecured. As at September 30, 2017, $21,285 ($26,563 CAD) (December 31, 2016-$15,043; $20,197 CAD) in interest is included in accrued liabilities. One of the loans owing to Travellers, in the amount of $62,746 ($82,000 CAD) was repaid on February 9, 2017, including accrued interest. And, during the nine months ended September 30, 2017, the Company repaid $107,128 ($140,000 CAD) of the remaining loan.

11. Capital Stock

At September 30, 2017, the Company had 150,000,000 authorized common shares, with a par value of $.0001 and 37,253,031 (December 31, 2016-34,128,910) issued and outstanding common shares and 10,000,000 preferred shares are authorized, with a par value of $.0001, none of which are issued and outstanding.

During the nine-month period ended September 30, 2017, the Company raised $370,374 (December 31, 2016-$358,316) cash on a private placement, net of cash share issue costs of $35,100 (2016-$28,690), on the issuance of 710,151 (December 31, 2016-2,581,564) common shares of the Company.

On January 5, 2017 and January 30, 2017, the Company issued, in total, 1,620,000 common shares of the Company, determined to be valued at $469,800, to agents for their services in assisting in establishing the Line of Credit (see note 9(a)). On each of January 30, 2017 and June 8, 2017, the Company issued a total of 40,000 common shares to two new directors, determined to be valued at $11,600 and $13,200 respectively. On February 6, 2017, the Company issued 5,000 common shares and on August 23, 2017, the Company issued 4,000 common shares to employees, determined to be valued at $1,450 and $4,000, respectively, for their services. On May 9, 2017, the Company issued 15,000 common shares, on June 8, 2017, another 20,000 common shares and then on August 23, 2017, a further 20,000 common shares to consultants for their services, determined to be valued at $4,950, $6,600 and $20,000 respectively, these services were included in professional fees in the interim condensed consolidated statements of loss and comprehensive loss. On May 9, 2017, the Company issued 115,000 common shares on the exercise of the offer to acquire common shares at a price of $0.10 per common share by the VPCD. On September 5, 2017, the Company issued 5,000 common shares as compensation for a private placement, determined to be valued at $5,000. The services provided by the four new directors and the employees are included as share-based compensation in the interim condensed consolidated statements of loss and comprehensive loss. In addition, on September 11, 2017, the Company issued 529,970 common shares on the acquisition of assets, determined to be valued at $2,649,850 ($3,500,000 CAD).

All non-cash transactions were valued based on the proceeds of a recent private placement.

The Company also granted the CEO 3,000,000 restricted stock units (“RSU”), under a new consulting agreement effective January 1, 2017. The RSUs are to vest in three equal installments annually on January 1, 2018, 2019 and 2020. As at September 30, 2017, the Company has recognized a stock compensation reserve of $247,500, representing one quarter of the total value of the award of $990,000, based on the pricing for a recent private placement offering.

Page | 16


SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

12 . Commitments

a)

On October 21, 2016, the Company hired a contractor to assume the role of VPCD, effective November 1, 2016, for a period of fourteen months, at the rate of $3,205 ($4,000 CAD) per month, plus applicable taxes. The future minimum commitment under this consulting agreement for the three months ending December 31, 2017 is $9,615.

   
b)

Effective January 1, 2017, new consulting agreements were finalized for the services of the President and the CEO. The consulting agreements are for a period of three years, commencing January 1, 2017. For each of these two executive officers, the monthly fees are to be as follows: $4,007 ($5,000 CAD) plus applicable taxes for 2017 and $12,020 ($15,000 CAD) plus applicable taxes for 2018 and 2019. In addition, the CEO was granted 3,000,000 Restricted Stock Units (“RSU”). The RSUs are to vest in three equal installments annually on January 1, 2018, 2019 and 2020. The future minimum commitment under these consulting agreements is as follows:


  For the three months ending December 31, 2017 $  24,042  
  For the year ending December 31, 2018   288,480  
  For the year ending December 31, 2019   288,480  
    $  601,002  

c)

Effective January 1, 2017, the Company entered into a new three-year premises lease agreement with Haute Inc., at a monthly amount of $3,205 ($4,000 CAD) for 2017, $4,007 ($5,000 CAD) for 2018 and $4,808 ($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:


  For the three months ending December 31, 2017 $  9,615  
  For the year ending December 31, 2018   48,084  
  For the year ending December 31, 2019   57,696  
    $  115,395  

d)

The Company is a partner in business led collaboration in the water sector, a program known as the Advanced Water Technologies (“AWT”) 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:


  For the three months ending December 31, 2017 $  5,052  
  For the year ending December 31, 2018   24,167  
    $  29,219  

The Company has already completed and provided its commitment for the first year of the program which ended March 31, 2017, which consisted of professional fees of $7,217 ($9,432 CAD) and a contribution to the capital requirements of the program, totaling $71,017 ($94,000 CAD), for equipment to be used in the AWT Program and to be retained by Fleming College, the academic institution.

Page | 17


SusGlobal Energy Corp.
Notes to the Interim Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Expressed in United States Dollars)
(unaudited)

12. Commitments, continued

e)

The Company’s was assigned the land lease on the purchase of certain assets of Astoria. The land lease, which comprises 13.88 acres in Roslin, Ontario, Canada, has a term expiring March 31, 2034. The basic monthly rent on the net lease is $2,404 ($3,000 CAD) and is subject to adjustment based on the consumer price index as published by statistics Canada (“CPI”). To date, no adjustment for CPI has been charged by the landlord. The Company is also responsible for any property taxes, maintenance, insurance and utilities. In addition, the Company has the right to extend the lease for five further terms of five years each and one further term of five years less one day. The future minimum commitment under this land lease (excluding any CPI adjustment) is as follows:


  For the three months ending December 31, 2017 $  7,212  
  For the year ending December 31, 2018   28,848  
  For the year ending December 31, 2019   28,848  
  For the year ending December 31, 2020   28,848  
  For the year ending December 31, 2021   28,848  
  For the year ending December 31, 2022   28,848  
  Thereafter   324,540  
    $  475,992  

f)

On May 11, 2017, the Company signed a posting agreement with CrowdVest LLC (“CrowdVest”), a Tennessee limited liability company to act as the Company’s online intermediary technology platform in connection with the Company’s offering of common stock under Rule 506 of Regulation D under the Securities Act of 1933. As compensation, CrowdVest received 20,000 restricted common shares of the Company, based on an issue price of $5 per share, once the 506(c)-general solicitation offering commences. The offering terminated on October 27, 2017 and was not extended.

13. 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.

14. Subsequent Events

(a)

On October 30, 2017, the Company arranged to lease certain equipment commencing on October 30, 2017 and ending on September 30, 2021. The first payment due October 30, 2017 is $8,814 ($11,000 CAD) plus applicable harmonized sales taxes and the monthly payments thereafter are to be $4,680 ($5,840 CAD), plus applicable harmonized sales taxes.

   
(b)

On October 6, October 11 and October 23, 2017, the Company repaid a further $23,800 ($30,000) on the Travellers loan.

15. Comparative Figures

Certain of the prior period’s comparative figures have been reclassified to conform to the current period’s presentation.

Page | 18


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

Certain statements in this Management's Discussion and Analysis ("MD&A"), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "would," "expect," "intend," "could," "estimate," "should," "anticipate," or "believe," and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers should carefully review the risk factors and related notes included on our Registration Statement on Form S-4 filed with the Securities and Exchange Commission on April 5, 2017.

The following MD&A is intended to help readers understand the results of our operation and financial condition, and is provided as a supplement to, and should be read in conjunction with, our Interim Unaudited Financial Statements and the accompanying Notes to Interim Unaudited Financial Statements under Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Growth and percentage comparisons made herein generally refer to the three and nine-month periods ended September 30, 2017 compared with the three and nine-month periods ended September 30, 2016 unless otherwise noted. Unless otherwise indicated or unless the context otherwise requires, all references in this document to "we, "us, "our," the "Company," and similar expressions refer to SusGlobal Energy Corp., and depending on the context, its subsidiaries.

SPECIAL NOTICE ABOUT GOING CONCERN AUDIT OPINION

OUR AUDITOR ISSUED AN OPINION EXPRESSING SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE IN BUSINESS AS A GOING CONCERN FOR THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015. YOU SHOULD READ THIS QUARTERLY REPORT ON FORM 10-Q WITH THE “GOING CONCERN” ISSUES IN MIND.

This Management’s Discussion and Analysis should be read in conjunction with the unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (the “Financial Statements”). The financial statements have been prepared in accordance with generally accepted accounting policies in the United States (“GAAP”). Except as otherwise disclosed, all dollar figures included therein and in the following management discussion and analysis are quoted in United States dollars.

OVERVIEW

The following organization chart sets forth our wholly-owned subsidiaries:


Page | 19


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. (“SusGlobal”). We are a renewable energy company focused on acquiring, developing and monetizing a global portfolio of proprietary technologies in the waste to energy application.

On January 29, 2016, SusGlobal filed a Registration Statement on Form S-4 (the “Registration Statement”), which relates to the Company’s intent to change its jurisdiction of incorporation by discontinuing SusGlobal Energy Corp. from Ontario, Canada and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware. The Registration Statement was declared effective on May 12, 2017.

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

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 through its proprietary technology and processes is equipped and confident to deliver this objective.

Management believes renewable energy is the energy of the future. Sources of this type of energy are more evenly distributed over the earth’s surface than finite energy sources, making it an attractive alternative to petroleum based energy. Biomass, one of the renewable resources, is derived from organic material such as forestry, food, plant and animal residuals. SusGlobal can therefore help you turn what many consider waste into precious energy. The portfolio will be comprised of four 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. (d) process digestate to produce a pathogen free organic fertilizer.

The convertibility of organic material into valuable end products such as biogas, liquid biofuels, organic fertilizers 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.

The Company can provide peace of mind that the full lifecycle of organic material is achieved, global benefits are realized and stewardship for total sustainability is upheld.

The 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.

The Company can provide a full range of services for handling organic residuals in a period where innovation and sustainability are paramount. From start to finish we offer in-depth knowledge, a wealth of experience and cutting-edge technology for handling organic waste.

Page | 20


The primary focus of the services SusGlobal provides 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, the 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 CEO 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, SusGlobal submits applications to the respective authorities for approval prior to any necessary engineering being carried out.

RECENT BUSINESS DEVELOPMENTS

Asset Purchase

On September 15, 2017, the Company closed the purchase of certain assets from Astoria Organic Matters Ltd., and Astoria Organic Matters Canada LP (“Astoria”), under the asset purchase agreement (the “APA”) from the court appointed receiver of Astoria, BDO Canada Limited. The purchase price for the organic composting facility, certain machinery and equipment, computer equipment, computer software and intangible assets consisted of cash of $3,365,690 ($4,100,000 CAD), funded by PACE Savings and Credit Union Limited (“PACE”) and 529,970 restricted common shares of the Company, determined to be valued at $2,649,850 ($3,500,000 CAD). In addition, legal costs in connection with acquiring the assets of $24,014 ($29,253 CAD) are included in the cost of the organic composting facility. In addition, the Company purchased certain accounts receivable which it was required to collect, totaling $142,957 ($174,147 CAD) and a deposit with a local municipality in the amount of $41,045 ($50,000 CAD).

Financing Agreement with PACE

Effective January 1, 2017, the Company obtained a Line of Credit of up to $4,407,150 ($5,500,000 CAD) with PACE. The Line of Credit was to 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. On February 2, 2017, the company received the first advance in the amount of $1,232,960 ($1,600,000 CAD). The balance of the Line of Credit is no longer available to be drawn against and is due, as noted below on February 2, 2018. The Line of Credit is now one of multiple credit facilities.

The Line of Credit bears interest at the PACE base rate plus 1.25% per annum, currently 8% per annum, payable on a monthly basis, interest only. The Line of Credit is due February 2, 2018 and is secured by a business loan general security agreement, a $1,232,960 ($1,600,000 CAD) personal guarantee from the President and a charge against the Company’s premises lease. Also pledged as security are the shares of the wholly-owned subsidiaries and a pledge of shares of the Company held by Landfill Gas Canada Limited (“LFGC”), an Ontario company controlled by a director and chief executive officer of the Company (the “CEO”), the chief financial officer (the “CFO”) and a director’s company, and a limited recourse guarantee by each. The Line of Credit is fully open for prepayment at any time without notice or bonus. A total commitment fee of $83,105 ($110,000 CAD) was paid to PACE. In addition, the agents who assisted in establishing the Line of Credit received 1,620,000 common shares of the Company determined to be valued at $469,800, based on the pricing of a recent private placement offering and cash of $300,000, on closing, for their services. Other closing costs in connection with the Line of Credit included legal fees of $29,248 ($38,713 CAD). During the nine -month period ended September 30, 2017, the Company incurred interest charges of $47,463 ($62,027 CAD) on the Line of Credit.

On June 15, 2017, PACE loaned the Company $462,360 ($600,000 CAD) under a variable rate business loan agreement, for its bid for the purchase of certain assets of Astoria on the same terms and conditions to the Line of Credit above, except that the loan is due May 31,2018. During the nine-month period ended September 30, 2017, the Company incurred interest charges of $10,438 ($13,641 CAD) on this credit facility

On August 4, 2017, PACE loaned the Company $39,563 ($50,000 CAD) under a variable business loan agreement, to satisfy an outstanding liability on the same terms and conditions to the Line of Credit above, except that the loan is due February 4, 2018. During the nine-month period ended September 30, 2017, the Company incurred interest charges of $478 ($625 CAD) on this credit facility.

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On September 13, 2017, PACE loaned the Company $3,055,836 ($3,724,147) under a corporate term loan. The funds were used for the purpose of acquiring certain assets of Astoria from the court appointed receiver on September 15, 2017. The corporate term loan bears interest at the PACE base rate plus 1.25% per annum, currently 8% per annum, payable in monthly blended instalments of principal and interest of $60,549 ($75,564 CAD), due September 13, 2022. The corporate term loan is secured by a business loan general security agreement representing a floating charge over the assets and undertakings of the Company, a first priority charge under a registered debenture in the amount of $3,282,989 ($4,000,978 CAD) against the assets, including inventory, accounts receivable and equipment. The total charge includes a credit in the favor of the Ministry of the Environment and Climate Change (“MOECC”) in the amount of $221,824 ($276,831 CAD), a registered charge of lease over the premises, located at 704 Phillipston Road, Roslin, Ontario, Canada. The corporate term loan also included an assignment of existing contracts included in the APA, and a lien in the amount of $3,282,989 ($4,000,978) to be registered under the Personal Properties Securities Act.

During the nine-month period ended September 30, 2017, the Company incurred interest charges of $10,618 ($13,876 CAD) on this corporate term loan.

Other

On September 21, 2017, the company finalized a finance contract for certain mobile equipment for its organic composting facility, in the amount of $13,923 ($17,180 CAD). The finance contract requires monthly blended instalments of principal and interest of $1,020 ($1,273 CAD) at a monthly interest rate of 5.95%, due November 10, 2018.

On May 11, 2017, the Company signed a posting agreement with CrowdVest, a Tennessee limited liability company to act as the Company’s online intermediary technology platform in connection with the Company’s offering of common stock under Rule 506 of Regulation D under the Securities Act of 1933. As compensation, CrowdVest received 20,000 restricted common shares of the Company, based on an issue price of $5 per share, once the 506(c)-general solicitation offering commenced. The offering terminated on October 27, 2017 and was not extended.

On May 9, 2017, the company signed a memorandum of agreement (the “Agreement”) with Kentech, a corporation existing under the laws of the province of Ontario, Canada. The Agreement provides the Company the right to acquire and the right to use the equipment and innovative processes of Kentech in relation to the production of liquid fertilizer from organic waste material. The Agreement is for a period of five years, commencing on the date of the Agreement. The Agreement may be terminated by either party on providing six months’ notice.

Effective January 1, 2017, new consulting agreements were finalized for the services of the executive chairman and president and for the CEO. The consulting agreements are for a period of three years, commencing January 1, 2017. For each of these two executive officers, the monthly fees are to be as follows: $4,007 ($5,000 CAD) plus applicable taxes for 2017 and $12,020 ($15,000 CAD) plus applicable taxes for 2018 and 2019. In addition, the CEO was granted 3,000,000 Restricted Stock Units (“RSU”). The RSUs are to vest in three equal installments annually on January 1, 2018, 2019 and 2020.

On December 7, 2016, the Company was awarded funding for the 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 to leverage world-class research facilities and academic expertise to develop and demonstrate water technologies for successful introduction to market. In addition, the program 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 CAWT at Fleming College in Lindsay, Ontario, Canada. The program budget is for $641,040 ($800,000 CAD), of which the Company contributes 50% in cash and in-kind contributions and CAWT contributes 50%.

On October 21, 2016, the Company hired the services of a contractor to assume the role of vice-president of corporate development (“VPCD”), effective November 1, 2016, for a period of fourteen months, at the rate of $3,205 ($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 April 30, 2017, the contractor exercised the offer to purchase 115,000 common shares of the Company.

On November 4, 2016, the Company’s BioGrid Project, a project described in the expansion and operation agreement (the “BioGrid Agreement”) with the Township of Georgian Bluffs and the Township of Chatsworth, was terminated.

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On August 19, 2016, Travellers, an Ontario company controlled by the President, provided a further loan in the amount of 161,826 ($210,000 CAD) which was required to initiate a letter of credit in the amount of $154,120 ($200,000 CAD), in favor of the Municipalities. As at September 30, 2017, Travellers is owed $56,091 ($70,000 CAD). Subsequent to September 30, 2017 and up to the date of this filing, the Company repaid a further $23,800 ($30,000) on this Travellers loan.

The letter of credit was a requirement of the BioGrid Agreement noted above. Fees for the letter of credit included $7,652 ($10,000 CAD) incurred and charged by Travellers and $2,296 ($3,000 CAD) charged by the Company’s chartered bank. There is no written agreement evidencing this loan or the previous loan with Travellers. The interest-bearing loans with Travellers are due on demand and were approved by the Board of Directors of the Company.

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 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 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 are effective January 2017.

On May 6, 2015, the Company finalized an agreement with 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.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2017, the Company had a cash balance of $37,397 (December 31, 2016-$1,774) and current debt obligations in the amount of $2,321,948 (December 31, 2016-$683,234). As at September 30, 2017, the Company had a working capital deficit of $2,000,544 (December 31, 2016-$487,703). 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.

The Company’s total assets at September 30, 2017 were $6,437,825 and total current liabilities were $2,321,948. Significant losses from operations have been incurred since inception and there is an accumulated deficit of $4,204,760 as of September 30, 2017. Continuation as a going concern is dependent upon generating significant new revenue and generating external capital and securing debt to achieve profitable operations while maintaining current fixed expense levels.

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 $2,321,948 in current debt obligations, the Company estimates that approximately $5,000,000 must be raised to fund capital requirements and general corporate expenses for the next 12 months.

Effective January 1, 2017, the Company obtained a Line of Credit of up to $4,407,150 ($5,500,000 CAD) with PACE, described above. The Line of Credit was to 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. On February 2, 2017, the company received the first advance in the amount of $1,232,960 ($1,600,000 CAD). The balance of the Line of Credit is no longer available to be drawn against and is due on February 2, 2018. The Line of Credit is now one of multiple credit facilities.

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On June 15, 2017, PACE loaned the Company $462,360 ($600,000 CAD) for its bid for the purchase of the assets of Astoria on the same terms and conditions to the Line of Credit above, except that the loan is due May 31, 2018. During the nine-month period ended September 30, 2017, the Company incurred interest charges of $10,438 ($13,641 CAD) on this credit facility.

On August 4, 2017, PACE loaned the Company $39,563 ($50,000 CAD) under a variable business loan agreement, to satisfy an outstanding liability on the same terms and conditions to the Line of Credit above, except that the loan is due February 4, 2018. During the nine-month period ended September 30, 2017, the Company incurred interest charges of $478 ($625 CAD) on this credit facility.

On September 13, 2017, PACE loaned the Company $3,055,836 ($3,724,147) under a corporate term loan. The funds were used for the purpose of acquiring certain assets of Astoria from the court appointed receiver on September 15, 2017. The corporate term loan bears interest at the PACE base rate plus 1.25% per annum, currently 8% per annum, payable in monthly blended instalments of principal and interest of $60,549 ($75,564 CAD), due September 13, 2022. The corporate term loan is secured by a business loan general security agreement representing a floating charge over the assets and undertakings of the Company, a first priority charge under a registered debenture in the amount of $3,282,989 ($4,000,978 CAD) against the assets, including inventory, accounts receivable and equipment. The total charge includes a credit in the favor of the Ministry of the Environment and Climate Change (“MOECC”) in the amount of $221,824 ($276,831 CAD), a registered charge of lease over the premises, located at 704 Phillipston Road, Roslin, Ontario, Canada. The corporate term loan also included an assignment of existing contracts included in the APA, and a lien in the amount of $3,282,989 ($4,000,978) to be registered under the Personal Properties Securities Act.

During the nine-month period ended September 30, 2017, the Company incurred interest charges of $10,618 ($13,876 CAD) on this corporate term loan.

On September 21, 2017, the company finalized a finance contract for certain mobile equipment for its organic composting Facility, in the amount of $13,923 ($17,180 CAD). The finance contract requires monthly blended instalments of principal and interest of $1,020 ($1,273 CAD) at a monthly interest rate of 5.95%, due November 10, 2018.

Refer to notes 9 and 12 to the interim condensed consolidated financial statements for details on the long-term debt and commitments respectively, as at September 30, 2017.

CONSOLIDATED RESULTS OF OPERATIONS – FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2016

    For the Nine Months Ended  
    September 30,     September 30,  
    2017     2016  
             
Revenue $  25,608   $  7,788  
             
Operating expenses:            
             
Financing costs   882,153     -  
Contribution to Advanced Water Technology Program   71,017     -  
Operations and maintenance   31,345     30,975  
Professional fees   180,793     138,804  
Office and administration   165,837     66,946  
Management fees   123,962     95,432  
Interest expense   83,049     8,721  
Stock-based compensation   277,750     -  
Filing fees   14,855     4,240  
Total operating expenses   1,830,761     345,118  
             
Net loss before other income   (1,805,153 )   (337,330 )
Other income-insurance proceeds   48,208     -  
Net loss $  (1,756,945 $ (337,330 )

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During the nine-month period ended September 30, 2017, the Company generated $25,608 of revenue from its organic composting facility included in the asset purchase which closed on September 15, 2017. In the prior nine-month period ended September 30, 2016, the Company generated $7,788 of revenue from its BioGrid Project. The BioGrid Project was subsequently terminated on November 4, 2016. The insurance proceeds of $48,208 included under other income represents the receipt of an insurance claim for the catastrophic engine failure in the Company’s BioGrid Project, submitted in the prior year.

The net loss for the nine months ended September 30, 2017 was $1,756,945, significantly higher than the net loss of $337,330 in the prior nine-month period, primarily due to the financing costs, the contribution to the Advanced Water Technology Program and the stock-based compensation expenses recorded.

Our operating expenses increased by $1,485,643 from $345,118 for the nine months ended September 30, 2016 to $1,830,761 for the nine months ended September 30, 2017. This was primarily due to the financing costs of $882,153 in connection with the PACE financing, the contribution of $71,017 to the Advanced Water Technology Program and the stock-based compensation of $277,750. Operations and maintenance increased slightly by $370 during the nine months ended September 30, 2017, compared to the prior nine-month period. The current operations and maintenance expenses related to the Company’s organic composting facility and consisted primarily of heavy machinery and equipment rentals and staff wages and benefits. In the prior nine-month period, the operations and maintenance expenses related to the Company’s BioGrid Project, whose operations were terminated on November 4, 2016. Professional fees increased by $41,989 during the nine months ended September 30, 2017 compared to the prior nine-month period, primarily due to higher audit and review fees and additional consulting fees relating to the Company’s new organic composting facility and professional fees in connection with the Advanced Water Technology Program. Office and administration increased by $98,891 during the nine months ended September 30, 2017 compared to the prior nine-month period, primarily due to an increase in insurance expense of $51,546, an increase in office rent of $26,490 and an increase in bookkeeping and payroll costs of $20,563 and an increase in other office and administration expenses of $292. The increased insurance of $51,546 related primarily to the insurance coverage for the BioGrid Project, which expired during the period and liability insurance coverage for the directors and officers. Interest expense increased by $74,328 during the nine months ended September 30, 2017 compared to the prior nine-month period, as a result of the new line of credit, credit facility and the corporate term loan with PACE of $68,997 and an increase in interest expense of $5,331 relating to the interest on the related party loans. Management fees increased by $28,530 for the nine months ended September 30, 2017 compared to the prior nine-month period, due to the hiring of the VPCD during the fourth quarter of 2016. During the nine months ended September 30, 2017, stock-based compensation of $277,750 was recorded on the issuance of common shares of the Company to four new directors, two employees, and the stock-based compensation for the CEO’s RSUs. No stock-based compensation was recorded in the prior nine-month period ended September 30, 2016. Filing fees increased by $10,615 for the nine months ended September 30, 2017 compared to the prior nine-month period, as a result of an increase in press releases and filings during the current nine-month period ended September 30, 2017.

CONSOLIDATED RESULTS OF OPERATIONS – FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2016

    For the Three Months Ended  
    September 30,     September 30,  
    2017     2016  
             
Revenue $  25,608   $  7,788  
             
Operating expenses            
             
Financing costs   -     -  
Contribution to Advanced Water Technology Program   -     -  
Operations and maintenance   31,345     30,975  
Professional fees   92,434     49,700  
Office and administration   72,218     24,755  
Management fees   43,016     32,180  
Interest expense   40,363     4,905  
Stock-based compensation   86,500        
Filing fees   5,499     1,081  
Total expenses   371,375     143,596  
             
Net loss before other income   (345,767 )   (135,808 )
Other income-insurance proceeds   48,208     -  
Net loss $   (297,559 ) $  (135,808 )

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During the three-month period ended September 30, 2017, the Company generated $25,608 of revenue from its organic composting facility included in the asset purchase which closed on September 15, 2017. In the prior nine-month period ended September 30, 2016, the Company generated $7,788 of revenue from its BioGrid Project. The BioGrid Project was subsequently terminated on November 4, 2017. The insurance proceeds of $7,788 included under other income represents the receipt of an insurance claim for the catastrophic engine failure in the Company’s BioGrid Project, submitted in the prior year.

The net loss for the three months ended September 30, 2017 was $297,559, significantly higher than the net loss of $135,808 in the prior three-month period, primarily due to the increased professional fees, office and administration, interest expense and stock-based compensation expenses.

Our operating expenses increased by $227,779 from $143,596 for the three months ended September 30, 2016 to $371,375 for the three months ended September 30, 2017. Operations and maintenance increased slightly by $370 during the nine months ended September 30, 2017, compared to the prior three-month period. The current operations and maintenance expenses related to the Company’s new organic composting facility and consisted primarily of heavy machinery and equipment rentals and staff wages and benefits. In the prior three-month period, the operations and maintenance expenses related to the Company’s BioGrid Project, whose operations were terminated on November 4, 2016. Professional fees increased by $42,734 during the three months ended September 30, 2017 compared to the prior three-month period, primarily due to higher audit and review fees of $38,645 and higher legal and consulting fees totaling $4,089. Office and administration increased by $47,463 during the three months ended September 30, 2017 compared to the prior three-month period, primarily due to an increase in insurance expense of $18,462, an increase in office rent of $17,125 and an increase in bookkeeping and payroll costs of $7,865 and other office and administration expenses of $4,011. The increased insurance is primarily the liability insurance coverage for the directors and officers. Management fees increased by $10,836 for the three months ended September 30, 2017 compared to the prior three-month period, primarily due to the hiring of the VPCD during the fourth quarter of 2016. Interest expense increased by $35,458 during the three months ended September 30, 2017 compared to the prior three-month period, as a result of the new line of credit, credit facility and the corporate term loan from PACE of $36,465 offset by a decrease in the interest expense of $1,007 relating to the interest on the related party loans. During the three months ended September 30, 2017, stock-based compensation of $86,500 was recorded on the issuance of common shares of the Company to a new employee and the stock-based compensation for the CEO’s RSUs. No stock-based compensation was recorded in the prior three-month period ended September 30, 2016. Filing fees increased by $4,418 for the three months ended September 30, 2017 compared to the prior three-month period, as a result of an increase in press releases and filings during the current three-month period ended September 30, 2017.

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

As at September 30, 2017, the Company had a working capital deficit of $2,000,544 (December 31, 2016-$487,703), incurred a net loss of $1,756,945 (2016-$201,522) for the nine-month period ended September 30, 2017 and had an accumulated deficit of $4,204,760 (December 31, 2016-$2,447,815) 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.

On February 2, 2017, the Company received an advance in the amount of $1,232,960 ($1,600,000 CAD) on its corporate line of credit (“Line of Credit”) of up to $4,407,150 ($5,500,000 CAD) with PACE Savings & Credit Union Limited (“PACE”). The Line of Credit was obtained to fund the BioGrid Project, which was a project described in the expansion and operation agreement (the “BioGrid Agreement”) between the Company and the Township of Georgian Bluffs and the Township of Chatsworth (the “Municipalities”). The Municipalities terminated the BioGrid Agreement on November 4, 2016. There are no further advances available on the Line of Credit and it is due February 2, 2018. The Company’s ability to continue as a going concern is dependent on its ability to generate new revenue and external capital, along with securing new debt to achieve profitable operations while maintaining current fixed expense levels. If the Company is not able to refinance the Line of Credit or repay when due, the Company will encounter a liquidity crisis.

The interim condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result if the Company was unable to continue as a going concern.

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CRITICAL ACCOUNTING ESTIMATES

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.

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 February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842 ) . The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. ASU 2016-02 requires the recognition on the balance sheet of a lease liability to make lease payments by lessees and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance will also require significant additional disclosure about the amount, timing and uncertainty of cash flows from leases. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018 (January 1, 2019 for the Company). The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of adopting ASU No. 2016-02.

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance will be effective for the Company as of March 1, 2018, and requires a retrospective transition method. The Company is currently evaluating the impact of adopting ASU No. 2016-18.

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 is currently evaluating the impact of adopting ASU No. 2017-04.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation : Topic 718: Scope of Modification Accounting (ASU 2017-09) to provide clarity and reduce both the (1) diversity in practice and (2) cost and complexity when changing the terms or conditions of share-based payment awards. Under ASU 2017-09, modification accounting is required to be applied unless all of the following are the same immediately before and after the change:

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1.

The award’s fair value (or calculated value or intrinsic value, if those measurement methods are used).

2.

The award’s vesting conditions.

3.

The award’s classification as an equity or liability instrument.

ASU 2017-09 is effective for annual and interim periods beginning after December 15, 2017 on a prospective basis, and early adoption is permitted. The Company has evaluated the impact of its pending adoption of ASU 2017-09 and does not expect that this guidance will have a significant impact on its financial statements.

In May 2014, the FASB issued ASU 2014-09, “ Revenue from Contracts with Customers (Topic 606),” and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016 and December 2016, within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20 and ASU 2017-13 respectively (ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20, and ASU 2017-13, collectively, “Topic 606”). Topic 606 supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Topic 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. These estimates include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. The guidance is effective for fiscal and interim periods beginning on or after December 15, 2017, using either of two methods: (1) retrospective application of Topic 606 to each prior reporting period presented with the option to elect certain practical expedients as defined within Topic 606 or (2) retrospective application of Topic 606 with the cumulative effect of initially applying Topic 606 recognized at the date of initial application and providing certain additional disclosures as defined per Topic 606. The Company is currently evaluating the impact of adopting Topic 606.

NEW ACCOUNTING POLICIES

During the nine months ended September 30, 2017, the Company adopted the following significant accounting policies:

Business Combinations

The Company has chosen to early adopt Audit Standards update No. 2017-01 (“ASU 2017-01”), which clarifies the definition of a business, with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.

Intangible Assets

Intangible assets, consisting of a technology license, which is stated at cost less accumulated amortization and is amortized on a straight-line basis over the useful life, which is 10 years. Intangible assets also include environmental compliance approvals, which are stated at cost, have an indefinite useful life and are not amortized until their useful lives are determined to be no longer indefinite. The Company evaluates the intangible assets for permanent impairment when triggering events are identified and whether events and circumstances continue to support the indefinite useful life.

Long-lived Assets

The Company introduced three new classes of long-lived assets, all of which are depreciated on a straight-line basis as follows: Organic composting facility-term of lease, which expires March 31, 2034; machinery and equipment-30%; and computer software-20%

Debt Issuance Costs

Debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.

Stock-based Compensation

The Company records compensation costs related to stock-based awards in accordance with Accounting Standards Codification 718, Compensation-Stock Compensation, whereby the Company measures stock-based compensation cost at the grant date based on the estimated fair value of the award. Compensation cost is recognized on a straight-line basis over the requisite service period of the award. The Company utilizes the Black-Scholes option-pricing model to estimate the fair value of stock options granted, which requires the input of highly subjective assumptions including: the expected option life, the risk-free rate, the dividend yield, the volatility of the Company’s stock price and an assumption for employee forfeitures. The risk-free rate is based on the U.S. treasury bill rate at the date of the grant with maturity dates approximately equal to the expected term of the option. The Company has not historically issued any dividends and does not expect to in the near future. Changes in any of these subjective input assumptions can materially affect the fair value estimates and the resulting stock-based compensation recognized.

Page | 28


EQUITY

As at September 30, 2017, the Company had 37,253,031 common shares issued and outstanding. At the date of this filing, the Company had 37,278,031 common shares issued and outstanding.

STOCK OPTIONS AND WARRANTS

The Company’s VPCD 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 was effective November 1, 2016. The offer was exercised on April 30, 2017. In addition, effective January 1, 2017, the Company’s CEO was granted 3,000,000 RSUs. The RSUs are to vest in three equal instalments annually on January 1, 2018, 2019 and 2020. The Company has recorded a stock compensation reserve of $247,500 as at September 30, 2017, representing one quarter of the total value of the RSU of $990,000, based on a private placement pricing at the time of the grant. In addition, the Company granted a new employee 6,000 RSUs under an employee agreement effective September 1, 2017. The RSUs are to vest in two equal instalments annually on January 1, 2019 and 2020.

The Company has no other stock options or warrants outstanding as at September 30, 2017 and as of the date of this filing.

RELATED PARTY TRANSACTIONS

The Company transacts with related parties in the normal course of business.

During the nine-month period ended September 30, 2017, the Company incurred $34,434 ($45,000 CAD) (2016-$34,083; $45,000 CAD) in management fees expense with Travellers International Inc. (“Travellers”), an Ontario company controlled by a director and president of the Company (the “President”) and $34,434 ($45,000 CAD) (2016-$34,083; $45,000 CAD) in management fees expense with Landfill Gas Canada Limited (“LFGC”), an Ontario company controlled by a director and chief executive officer of the Company (the “CEO”); $27,547 ($36,000 CAD) (2016-$27,266; $36,000 CAD) in management fees expense with the Company’s chief financial officer (the “CFO”); and $27,547 ($36,000 CAD) (2016-$nil) in management fees expense with the company’s VPCD. As at September 30, 2017, unpaid remuneration and unpaid expenses payable to officers in the amount of $98,431 ($122,839 CAD) (December 31, 2016-$95,396; $128,083 CAD) is included in accounts payable and $88,944 ($111,000 CAD) (December 31, 2016-$61,982; $83,220 CAD) is included in accrued liabilities.

In addition, the Company incurred interest expense of $14,052 ($18,363 CAD) (2016-$8,721; $11,541 CAD) on the outstanding loans from Travellers.

As at September 30, 2017, loans payable in the amount of $56,091 ($70,000 CAD) (December 31, 2016-$217,482; $292,000 CAD), owing to Travellers and bearing interest at the rate of 12% per annum are due on demand and unsecured. As at September 30, 2017, $21,285 ($26,563 CAD) (December 31, 2016-$15,043; $20,197 CAD), in interest is included in accrued liabilities. One of the loans owing to Travellers, in the amount of $62,746 ($82,000 CAD) was repaid on February 9, 2017, including accrued interest. And, during the nine-months ended September 30, 2017, the Company repaid $107,128 ($140,000 CAD) of the remaining loan. On October 6, October 11 and October 23, 2017, the Company repaid a further $23,800 ($30,000) on the Travellers loan.

Furthermore, the Company granted the CEO 3,000,000 restricted stock units (“RSU”), under a new consulting agreement effective January 1, 2017. The RSUs are to vest in three equal installments annually on January 1, 2018, 2019 and 2020. For the nine-month period ended September 30, 2017, the Company recognized stock-based compensation expense of $247,500 on this award, representing one quarter of the total value of the award of $990,000, based on a recent private placement pricing. And, the Company granted a new employee 6,000 RSUs under an employment agreement effective September 1, 2017. The RSUs are to vest in two equal instalments annually on January 1, 2019 and 2020.

For the nine-month period ended September 30, 2017, the Company incurred $50,348 ($65,797 CAD) (2016-$23,858; $31,500 CAD) in rent expense under a rental agreement with Haute Inc. (“Haute”), an Ontario company controlled by the Company’s President, who is also a director.

Page | 29


OFF-BALANCE SHEET ARRANGEMENTS

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk .

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Based on our evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective due primarily to the small size of the Company and the lack of a segregation of duties.

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

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1A. Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. We are not currently aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results.

Item 1B. Risk Factors.

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

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

During the three months ended September 30, 2017, the Company issued 286,200 common shares for net proceeds of $260,480 for working capital purposes.

The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since, among other things, the transactions did not involve a public offering.

Page | 30


Item 3. Defaults upon Senior Securities .

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information .

None.

Item 6. Exhibits .

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

Exhibit No. Description   
   
10.1 Variable Rate Business Loan Agreement*
10.2 Agreement for Line of Credit Loan*
10.3 Irrevocable Letter of Credit*
10.4 Business Loan Security Agreement between Pace Savings and SusGloba lEnergy Corp.*
10.5 Business Loan Security Agreement between Pace Savings and SusGlobal Energy Canada Corp.*
10.6 Business Loan Security Agreement between Pace Savings and SusGlobal Energy Canada I LTD*
10.7 Business Loan Security Agreement between Pace Savings and SusGlobal Energy Belleville LTD*
10.8 Asset Purchase Agreement*
10.9 Amendment to Asset Purchase Agreement*
10.10 Second Amendment to the Asset Purchase Agreement*
10.11 Third Amendment to the Asset Purchase Agreement*
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1 Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS XBRL Instance Document*
101.SCH XBRL Taxonomy Extension Schema Document*
101.CAL XBRL Taxonomy Calculation Linkbase Document*
101.DEF XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB XBRL Taxonomy Label Linkbase Document*
101.PRE XBRL Taxonomy Presentation Linkbase Document*

*Filed herewith.
**Furnished herewith.

Page | 31


SIGNATURES

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

  SUSGLOBAL ENERGY CORP.
     
November 14, 2017 By: /s/ Gerald Hamaliuk
    Gerald Hamaliuk
    Chief Executive Officer
     
     
November 14, 2017 By: /s/ Ike Makrimichalos
    Ike Makrimichalos
    Chief Financial Officer (Principal
    Financial and Accounting Officer)

Page | 32














































ASSET PURCHASE AGREEMENT
 
BETWEEN
 
BDO CANADA LIMITED, solely in its capacity as Court
appointed receiver of ASTORIA ORGANIC MATTERS LTD. and ASTORIA ORGANIC
MATTERS CANADA LP, and not in any other capacity
 
AND
 
SUSGLOBAL ENERGY BELLEVILLE LTD.
 
AND
 
FOR THE PURPOSES OF SECTION 8.18,
 
SUSGLOBAL ENERGY CANADA CORP.
 
MADE AS OF
 
JULY 27, 2017


TABLE OF CONTENTS

    Page
     
ARTICLE 1 - INTERPRETATION 2
   
                   1.01 Definitions 2
                   1.02 Headings 6
                   1.03 Extended Meanings 6
                   1.04 Capacity of Receiver 6
                   1.05 Statutory References 7
                   1.06 Currency 7
                   1.07 Exhibits 7
     
ARTICLE 2 - SALE AND PURCHASE 7
   
                   2.01 Assets to be Sold and Purchased 7
                   2.02 Excluded Assets 8
                   2.03 Purchase Price 9
                   2.04 Allocation of Purchase Price 9
                   2.05 Elections 9
                   2.06 Property Taxes 9
                   2.07 Transfer Taxes 9
                   2.08 Assumption of Liabilities 10
                   2.09 Assigned Contracts 10
                   2.10 Payment of Purchase Price 11
                   2.11 Delivery of Purchased Assets 12
                   2.12 Payment of the Receivables Purchase Agreement Price 12
     
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES 13
   
                   3.01 Receiver’s Representations and Warranties 13
                   3.02 Purchaser’s Representations and Warranties 13
                   3.03 “As Is, Where Is” 15
     
ARTICLE 4 - COVENANTS 16
   
                   4.01 Covenants of the Receiver 16
                   4.02 Covenants of the Purchaser 16
     
ARTICLE 5 - CONDITIONS AND TERMINATION 18
   
                   5.01 Conditions for the Benefit of the Purchaser 18
                   5.02 Conditions for the Benefit of the Receiver 19
                   5.03 Waiver of Condition 19
                   5.04 Termination 19
                   5.05 Effect of Termination 20
     
ARTICLE 6 - CLOSING ARRANGEMENTS 20
   
                   6.01 Closing 20

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TABLE OF CONTENTS
(continued)

    Page
     
                   6.02 Receiver’s Closing Deliveries 20
                   6.03 Purchaser’s Closing Deliveries 21
                   6.04 Confidentiality 21
                   6.05 Delivery of Receiver’s Certificate 22
                   6.06 Planning Act 22
                   6.07 Risk of Loss 22
     
ARTICLE 7 - SURVIVAL 23
   
                   7.01 Survival 23
     
ARTICLE 8 - GENERAL 23
   
                   8.01 Further Assurances 23
                   8.02 Time of the Essence 23
                   8.03 Fees, Commissions and other Costs and Expenses 23
                   8.04 Public Announcements 23
                   8.05 Benefit of the Agreement 24
                   8.06 Entire Agreement 24
                   8.07 Amendments and Waivers 24
                   8.08 Assignment 24
                   8.09 Notices 24
                   8.10 Remedies Cumulative 26
                   8.11 No Third Party Beneficiaries 26
                   8.12 Governing Law 26
                   8.13 Attornment 26
                   8.14 Severability 26
                   8.15 No Registration of Agreement 26
                   8.16 Counterparts 27
                   8.17 Electronic Execution 27
                   8.18 Parent Guarantee 27

-ii-


ASSET PURCHASE AGREEMENT

THIS AGREEMENT is made as of July 27, 2017,

BETWEEN

SUSGLOBAL ENERGY BELLEVILLE LTD. , a corporation
incorporated under the laws of Ontario (the “ Purchaser ”),
 
-and-
 
For the purposes of Section 8.18, SUSGLOBAL ENERGY
CANADA CORP. , a corporation incorporated under the laws of
Canada (the “ Parent ”),
 
-and-
 
BDO CANADA LIMITED , solely in its capacity as court
appointed receiver of ASTORIA ORGANIC MATTERS LTD. and
ASTORIA ORGANIC MATTERS CANADA LP, and not in any
other capacity

WHEREAS on April 13, 2017, the Ontario Superior Court of Justice [Commercial List] (the “ Court ”) granted an Order (the “ Receivership Order ”) appointing BDO Canada Limited (the “ Receiver ”) as receiver of the assets, undertakings and properties of Astoria Organic Matters Ltd. (“ Astoria Ltd. ”) and Astoria Organic Matters Canada LP (“ Astoria Canada ” together with Astoria Ltd. “ Astoria ”).

AND WHEREAS pursuant to the Receivership Order, the Receiver was authorized to market and sell the assets, undertakings and properties of Astoria.

AND WHEREAS the Receivership Order, providing for, among other things, a process under which offers would be solicited for the sale of all, substantially all of Astoria’s assets and business.

AND WHEREAS the Purchaser desires to purchase the Purchased Assets (as defined herein) and assume the Assumed Liabilities (as defined herein) upon and subject to the terms and conditions set out in this Agreement.

NOW THEREFORE , in consideration of the covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties (and for the purposes of Section 8.18, the Parent) hereto agree as follows:


- 2 -

ARTICLE 1 - INTERPRETATION

1.01

Definitions

In this Agreement, unless something in the subject matter or context is inconsistent therewith:

Affiliates ” means, with respect to any Person, any other Person that controls or is controlled by or is under common control with the referent Person.

Agreement ” means this agreement, including its recitals and schedules, as amended from time to time.

Applicable Law ” means:

  (i)

any applicable domestic or foreign law including any statute, law, regulation, code, ordinance, rule, restriction, subordinate legislation, by- law or treaty, as well as the common law; and

     
  (ii)

any applicable and enforceable rule, requirement, order, judgment, injunction, award or decree of any Governmental Authorities.

Approval and Vesting Order ” means an order of the Court substantially in the form attached hereto as Exhibit A : (i) approving the sale of the Purchased Assets by the Receiver to the Purchaser pursuant to the terms of this Agreement, and (ii) providing for the vesting of the right, title, benefit and interest of Astoria in and to the Purchased Assets in and to the Purchaser, free and clear of all Liens, other than the Permitted Encumbrances.

Assigned Contracts ” means those Contracts and Permits set out in Exhibit B .

Assignment and Assumption Agreement ” means an agreement pursuant to which the Receiver will assign the Assigned Contracts to the Purchaser and the Purchaser will assume the Assumed Liabilities at the Time of Closing, substantially in the form of the document set out in Exhibit C .

Assumed Capital Leases ” means the capital lease obligations relating to the financed equipment under the Loan and Security Agreement #BAO9580A-003 between Astoria Canada and ECN Financial Inc. dated December 23, 2016, as amended, set out in Exhibit D with respect to the following financed equipment:

  (i)

2013 Liebherr Model A316LI wheeled material handler with TCD 127hp capacity diesel engine, hydraulic lifting cab, s/n 1041-63129; and

     
  (ii)

2013 RotoChopper model B66T portable grinder, s/n 13-2632.

Assumed Liabilities ” has the meaning set out in Section 2.08.

Books and Records ” means all personnel records, inspection records, financial records, and other records, books, documents and data bases recorded or stored by means of any device, including in electronic form, relating to the business and the Purchased Assets as are in the possession or under the control of Astoria.


- 3 -

Business Day ” means a day other than a Saturday, Sunday, statutory or civic holiday in Toronto, Ontario.

Claim ” means any actual or threatened civil, criminal, administrative, regulatory, arbitral or investigative inquiry, action, suit, investigation or proceeding and any loss, claim or demand relating thereto or resulting therefrom, or any other claim or demand of whatever nature or kind.

Closing Date ” means seven (7) Business Days following the date of the Approval and Vesting Order, or such other date as may be agreed in writing between the parties hereto.

Contract ” means any contract, agreement, license, instrument or commitment recognized at law or equity, whether written, oral, express or implied, or arising by a course of conduct or usage of trade, and all amendments thereto.

Court ” has the meaning set out in the Recitals hereto.

Cure Costs ” means all amounts, including, but not limited to, contractual payments in arrears and accrued and unpaid professional fees arising from any previous defaults, if any, required to be paid in order to reinstate, place in good standing, or obtain the consent necessary to permit the assignment of, the Assigned Contracts as of the Closing Date.

““ Employee ” means individuals employed by Astoria, on a full-time, part-time or temporary basis, and “ Employees ” means every Employee”.

Environmental Law ” means any Applicable Law relating to the natural or indoor environment including those pertaining to (i) reporting, licensing, permitting, investigating, remediating or controlling the presence or Release or threatened Release of Hazardous Substances, or (ii) the use, treatment, storage, disposal, transport, handling and the like of Hazardous Substances, including, for greater certainty, any such Applicable Law pertaining to occupational health and safety.

Equipment ” means the equipment owned by Astoria and listed in Exhibit E .

Estimated Receivable Purchase Payment ” means the estimated amount of the Receivables Purchase Payment.

Excluded Assets ” has the meaning set out in Section 2.02.

Excluded Contracts ” means any Contracts or Permits that are not assignable as contemplated in Section 2.09(3), and any other Contracts or Permits that are not Assigned Contracts.

Final Receivable Purchase Payment ” means the final amount of the Receivables Purchase Payment.


- 4 -

Governmental Authorities ” means governments, regulatory authorities, governmental departments, agencies, commissions, bureaus, officials, ministers, Crown corporations, courts, bodies, boards, tribunals or dispute settlement panels or other law, rule or regulation-making organizations or entities:

  (i)

having or purporting to have jurisdiction on behalf of any nation, province, territory or state or any other geographic or political subdivision of any of them; or

     
  (ii)

exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power.

Hazardous Substance ” means any substance, material or emission whose storage, handling, use, transportation or Release is prohibited, controlled or regulated by any Governmental Authorities having jurisdiction pursuant to Environmental Laws, including any contaminant or pollutant as defined in the Environmental Protection Act (Ontario).

HST ” means all Taxes payable under the Excise Tax Act (Canada), including goods and services taxes and any applicable harmonized sales taxes.

Intellectual Property ” means intellectual property of any nature and kind including all domestic and foreign trade-marks, business names, trade names, domain names, trading styles, patents, trade secrets, confidential information, software, industrial designs and copyrights, whether registered or unregistered, and all applications for registration thereof, and inventions, formulae, recipes, product formulations and chemistries, processes and processing methods, technology and techniques and know-how.

Inventories ” means all inventories owned by and in possession of Astoria including all supplies, goods, work in progress, raw materials and spare parts.

Lands ” means the lands municipally known as 704 Phillipston Road, Belleville, Ontario and described as Part of Lot 20, Concession 8, Thurlow designated as Part 1, Plan 21R19513, City of Belleville (PIN 40532-0032 (LT)).

Land Lease ” means the land lease between 1684567 Ontario Inc., as landlord, and Astoria Organic Matters Canada LP, as lessee, dated June 24, 2013 in respect of all or part of the Lands, including, without limitation, the Leased Premises.

Leased Premises ” means the business activities and operations formerly carried on by Astoria located at the address municipally known as 704 Phillipston Road, Belleville, Ontario.

Liabilities ” means all costs, expenses, charges, debts, liabilities, commitments and obligations of any nature or kind, whether accrued or fixed, actual, absolute, contingent, latent or otherwise, matured or unmatured or determined or undeterminable, including those arising under any Applicable Law or Claim and those arising under any Contract or undertaking or otherwise, including any tax liability or tort liability of Astoria.


- 5 -

Liens ” means any lien (statutory or otherwise), mortgage, pledge, security interest (whether contractual, statutory or otherwise), hypothecation, trust or deemed trust (whether contractual, statutory, or otherwise), execution, levy, charge, encumbrance, interest in property, or other financial or monetary claim which, in each case, in substance, secures payment or performance of an obligation, or similar charge of any kind.

MOECC ECA ” means any and all Environmental Compliance Approvals issued by the Ministry of the Environment and Climate Change in the name of or in favour of Astoria and 1684567 Ontario Inc., as the case may be, as at the Closing Date.

Non-Disclosure Agreement ” means the non-disclosure agreement dated May 18, 2017 between the Purchaser and the Receiver.

Outside Date ” has the meaning set out in Section 5.04(b) .

Permits ” means all permits, licences, certificates, approvals, authorizations, consents, waivers, orders, exemptions, quotas and registrations, or any item with a similar effect, issued or granted by any Governmental Authorities.

Permitted Encumbrances ” means only those Liens related to the Purchased Assets set forth on Exhibit F .

Person ” means any individual, corporation, limited liability company, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authorities or other entity.

Proceeds ” has the meaning set out in Section 6.07(1)(b)(i) .

Purchase Price ” has the meaning set out in Section 2.03.

Purchased Assets ” has the meaning set out in Section 2.01.

Receivables Purchase Payment ” means 70% of the dollar amount of the accounts receivable of Astoria recorded in the books and records of Astoria that are less than 90 days overdue, as at the Closing Date.

Receiver ” has the meaning set out in the Recitals hereto.

Receiver’s Certificate ” means a certificate signed by the Receiver substantially in the form attached as Schedule A to the Approval and Vesting Order confirming that: (i) the Purchaser has paid, and the Receiver has received payment of, the Purchase Price in relation to the purchase by the Purchaser of the Purchased Assets, and (ii) the conditions to be complied with at or prior to the Time of Closing as set out in Sections 5.01 and 5.02, respectively, have been satisfied or waived by the Receiver or the Purchaser, as applicable, pursuant to Section 5.03.

Receivership Order ” has the meaning set out in the recitals hereto.


- 6 -

Release ” means any release or discharge of any Hazardous Substance including any discharge, spray, injection, inoculation, abandonment, deposit, spillage, leakage, seepage, pouring, emission, emptying, throwing, dumping, placing, exhausting, escape, leach, migration, dispersal, dispensing or disposal.

Sale Process ” means the marketing process approved by the Receivership Order.

Tax Act ” means the Income Tax Act (Canada).

Taxes ” means all taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authorities, including any interest, additions to tax or penalties applicable to them.

Time of Closing ” means 10:00 a.m. (Toronto Time) on the Closing Date or such other time as may be agreed in writing between the parties hereto.

Transfer Taxes ” has the meaning set out in Section 2.07.

Ultimate Parent ” has the meaning set out in Section 2.03(b) .

US Dollar Share Consideration Amount ” means US$2,649,850, being $3,500,000 multiplied by 0.7571, which number was the Bank of Canada closing exchange rate at the close of business on Wednesday, June 14, 2017.

1.02

Headings

The division of this Agreement into Articles and Sections and the insertion of a table of contents and headings are for convenience of reference only and do not affect the construction or interpretation of this Agreement. The terms “hereof”, “hereunder” and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles, Sections and Exhibits are to Articles and Sections of and Exhibits to this Agreement.

1.03

Extended Meanings

In this Agreement words importing the singular number include the plural and vice versa, words importing any gender include all genders and words importing persons include individuals, corporations, limited and unlimited liability companies, general and limited partnerships, associations, trusts, unincorporated organizations, joint ventures and Governmental Authorities. The term “including” means “including without limiting the generality of the foregoing” and the term “third party” means any Person other than the Receiver and the Purchaser.

1.04

Capacity of Receiver

The Receiver, in executing this Agreement, is entering into this Agreement solely in its capacity as Court appointed receiver of Astoria, and not in its personal or any other capacity. The Receiver shall have no personal or corporate liability of any kind whether in contract, tort or otherwise.


- 7 -

1.05

Statutory References

In this Agreement, unless something in the subject matter or context is inconsistent therewith or unless otherwise herein provided, a reference to any statute is to that statute as now enacted or as the same may from time to time be amended, re-enacted or replaced and includes any regulations made thereunder.

1.06

Currency

All references to currency herein are to lawful money of Canada.

1.07

Exhibits

The following are the Exhibits to this Agreement:

Exhibit A - Form of Approval and Vesting Order
Exhibit B - Assigned Contracts and Permits
Exhibit C - Form of Assignment and Assumption Agreement
Exhibit D - Assumed Capital Leases
Exhibit E - Equipment
Exhibit F - Permitted Encumbrances
Exhibit G - Other Excluded Assets
Exhibit H - Allocation of Purchase Price

ARTICLE 2 - SALE AND PURCHASE

2.01

Assets to be Sold and Purchased

Upon and subject to the terms and conditions hereof, the Receiver will sell to the Purchaser and the Purchaser will purchase from the Receiver, as of and with effect from the Time of Closing, all of the right, title, benefit and interest of Astoria in and to the following assets (collectively, the “ Purchased Assets ”):

  (a)

the Land Lease;

     
  (b)

the MOECC ECA, to the extent transferable;

     
  (c)

the outstanding accounts receivable at the Time of Closing;

     
  (d)

all structures, erections, improvements, appurtenances and fixtures situate on or forming part of the Lands, other than the fixed machinery and fixed equipment referred to in Section 2.01(e) and other than the Equipment;

     
  (e)

all fixed machinery and fixed equipment situate on or forming part of the Lands, other than the Equipment;

     
  (f)

all Inventories;



- 8 -

  (g)

subject to Sections 2.08 and 2.09(3), and to the extent not otherwise included in this Section 2.01, the Assigned Contracts;

     
  (h)

all Intellectual Property owned by Astoria that was used in connection with the Purchased Assets;

     
  (i)

all pre-paid expenses and deposits relating to the Purchased Assets (other than deposits paid to suppliers, Governmental Authorities or customers of Astoria) including all pre-paid Taxes, local improvement rates and charges, water rates and other operating costs, all pre-paid purchases of gas, oil and hydro, and all pre-paid lease payments;

     
  (j)

any and all customer lists;

     
  (k)

the Books and Records; and

     
  (l)

the Equipment,

but excluding, for greater certainty, in each and every case the Excluded Assets (as hereinafter defined).

2.02

Excluded Assets

Notwithstanding Section 2.01 or any other provision in this Agreement to the contrary, Astoria will retain its right, title, benefit and interest in and to, and the Purchaser will have no rights with respect to the right, title, benefit and interest of Astoria in and to the following assets (collectively, the “ Excluded Assets ”):

  (a)

the cash and cash equivalents, short-term investments, bank account balances, bank deposits, including any deposits posted in respect of letters of credit, and petty cash of Astoria;

     
  (b)

all rights of Astoria to tax refunds, credits, rebates or similar benefits relating to the Purchased Assets;

     
  (c)

the Excluded Contracts;

     
  (d)

shares and other interests or capital of Astoria;

     
  (e)

the tax records and insurance policies of Astoria;

     
  (f)

any Claim of Astoria to reimbursement under any insurance policy applicable to Astoria;

     
  (g)

any Books and Records not pertaining primarily to the Purchased Assets;

     
  (h)

all funds or deposits held by suppliers, any Governmental Authorities, customers or any other person in trust for or on behalf of Astoria, including without limitation the existing deposit with the City of Bellville, the existing Guaranteed Investment Certificate in support of the Financial Assurance posted by Astoria in favour of the Ministry of Environment and Climate Change and the existing performance bond receivable with the City of Peterborough; and



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  (i)

any other assets listed in Exhibit G .


2.03

Purchase Price

The aggregate purchase price payable by the Purchaser to the Receiver for the Purchased Assets excluding all applicable Taxes (such amount being hereinafter referred to as the “ Purchase Price ”) is an amount equal to a sum of the following:

  (a)

cash in an aggregate amount equal to $4,000,000 plus the Receivables Purchase Payment; plus

     
  (b)

issuance of 529,970 common shares in the capital of SusGlobal Energy Corp. (the “ Ultimate Parent ”), being a number equal to the US Dollar Share Consideration Amount divided by $5.00 per common share; plus

     
  (c)

the amount of the Assumed Liabilities.


2.04

Allocation of Purchase Price

The Purchase Price will be allocated among the Purchased Assets as set out in Exhibit H such allocation to be agreed upon by the parties hereto, acting reasonably, before the Closing Date. The Receiver and the Purchaser will make and file all Tax returns and filings on a basis which is consistent with the amount and allocation of the Purchase Price.

2.05

Elections

The Receiver and the Purchaser will on or before the Time of Closing jointly execute an election (if applicable), in the prescribed form and containing the prescribed information, to have subsection 167(1.1) of the Excise Tax Act (Canada) apply to the sale and purchase of the Purchased Assets hereunder so that no HST is payable by the Purchaser in respect of such sale and purchase. The Purchaser will file such election with the Minister of National Revenue within the time prescribed by the Excise Tax Act (Canada).

2.06

Property Taxes

The Purchaser shall be liable for all applicable property Taxes payable under any Applicable Law on and after the Time of Closing .

2.07

Transfer Taxes

(1)      The Purchaser will be liable for and, subject to Section 2.05, will pay, or will cause to be paid, all transfer, value added, ad-valorem , excise, sales, use, consumption, goods or services, harmonized sales, retail sales, social services, or other similar taxes or duties (collectively, “ Transfer Taxes ”) payable under any Applicable Law on or with respect to the sale and purchase of the Purchased Assets under this Agreement. The Purchaser will prepare and file any affidavits or returns required in connection with the foregoing at its own cost and expense.


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(2)      The Purchaser shall indemnify and save harmless the Receiver and its employees, advisors and agents from all Claims incurred, suffered or sustained as a result of a failure by the Purchaser:

  (a)

to pay any Transfer Taxes payable by the Purchaser; and/or

     
  (b)

to file any returns, certificates, filings, elections, notices or other documents required to be filed by the Purchaser with any federal, provincial or other taxing authorities in connection with the conveyance or transfer of the Purchased Assets.


2.08

Assumption of Liabilities

(1)      At the Time of Closing, the Purchaser will assume and thereafter fulfil, perform and discharge when due the following Liabilities of Astoria outstanding as at the Closing Date (collectively, the “ Assumed Liabilities ”):

  (a)

all Liabilities arising from or in connection with the Assigned Contracts (including the Assumed Capital Leases), excluding any Cure Costs, from and after the Closing Date;

     
  (b)

all Liabilities arising from or in connection with any Taxes for which the Purchaser is responsible pursuant to Sections 2.06 and 2.07 and any Permitted Encumbrances from and after the Closing Date; and

     
  (c)

all Liabilities relating to or arising from the Purchased Assets under Environmental Laws from and after the Closing Date including, without limitation, any costs and expenses associated with any ongoing work in process from and after the Time of Closing required to be carried out in order to comply with any Environmental Laws provided that it is agreed by the parties hereto that such ongoing work shall not include the work described in Section 4.02(9) below.

(2)      In addition to any other provision for indemnification by the Purchaser contained in this Agreement, the Purchaser will, from and after the Closing Date, indemnify and save harmless the Receiver on its own behalf and as trustee for its Affiliates and their current and former directors and officers, employees, agents, advisors and representatives (including the Receiver) (collectively, the “ Indemnitees ”) from and against all Claims asserted against any of the Indemnitees in any way directly or indirectly arising from, relating to or in connection with any of the Assumed Liabilities.

2.09

Assigned Contracts

(1)      Subject to Section 2.09(2), the Purchaser, with the Receiver’s consent, will request any consents necessary to permit the assignment to the Purchaser of the Assigned Contracts. The Receiver will provide its reasonable cooperation to assist the Purchaser to obtain such consents, including providing financial and other information of Astoria requested by the Purchaser or party to such Assigned Contract.


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(2)      The Receiver will be responsible for all Cure Costs in respect of any Assigned Contracts.

(3)      Nothing in this Agreement will constitute an agreement to assign or an attempted assignment of any non-assignable rights or any Contracts or Permits for which any requisite consent or approval has not been obtained or which as a matter of Applicable Law or by its terms is not assignable.

2.10

Payment of Purchase Price

(1)      Subject to Section 2.12, the Purchase Price will be satisfied by the Purchaser on the Closing Date as follows:

  (a)

an amount equal to 15% of the Purchase Price (the “ Deposit ”) forthwith upon the Purchaser submitting a Binding APA (as defined in the Sale Process), by wire transfer of immediately available funds to an account specified by the Receiver, in trust, as a deposit to be held in a bank account at a Canadian chartered bank and paid as provided in Section 2.10(2);

     
  (b)

cash by way of a wire transfer at the Time of Closing of immediately available funds to an account specified by the Receiver equal to $3,400,000 plus the Estimated Receivable Purchase Payment;

     
  (c)

delivery of an original share certificate issued in the name of the Receiver or such other person or entity as directed in writing by the Receiver representing 529,970 common shares in the capital of the Ultimate Parent to the Receiver; and

     
  (d)

by the Purchaser assuming the Assumed Liabilities.

(2)      The Deposit paid to the Receiver by the Purchaser pursuant to Section 2.10(1)(a) will be paid by the Receiver as follows:

  (a)

to the Receiver at the Time of Closing, with any interest that has been paid by the applicable bank thereon being paid to the Purchaser, in each case net of any applicable bank fees or charges, if the sale and purchase of the Purchased Assets provided for herein is completed in accordance with the terms and conditions hereof;

     
  (b)

to the Receiver on or after the fifth Business Day after the date of termination of this Agreement, together with any interest that has been paid by the applicable bank thereon (net of any applicable bank fees or charges), if this Agreement is terminated by the Receiver pursuant to Section 5.04(a), Section 5.04(c) (unless with respect to a condition in Section 5.02(c) or (d)), or Section 5.04(f) (where the Purchaser has failed to comply with its obligations under this Agreement); or



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  (c)

to the Purchaser on or after the fifth Business Day after the date of termination of this Agreement, together with any interest that has been paid by the applicable bank thereon (net of any applicable bank fees or charges), if this Agreement is terminated by the Purchaser pursuant to Section 5.04(a) or Section 5.04(b), or by the Receiver pursuant to Section 5.04(c) (solely with respect to a condition in Section 5.02(c) or (d)) or Section 5.04(f) (unless the Purchaser has failed to comply with its obligations under this Agreement),

provided that if the sale and purchase of the Purchased Assets provided for herein is not completed in accordance with the terms and conditions hereof and, prior to 10:00 a.m. on the fifth Business Day referred to in Section 2.10(2)(b) or (c), as the case may be, written notice is given by either the Receiver or the Purchaser to the other counterparty that such party in good faith disputes that the other is entitled to receive the deposit and/or any accrued interest thereon, then such deposit and all accrued interest thereon may, at the option of the Receiver, be paid into Court as soon as reasonably possible (net of any applicable bank fees or charges), and further provided that the Receiver shall be entitled to seek the direction of the Court at any time in respect of any matter relating to the deposit, including the payment thereof to any Person.

2.11

Delivery of Purchased Assets

At the Time of Closing, the Purchaser will take possession of the Purchased Assets where situated. The Purchaser acknowledges that the Receiver has no obligation to deliver possession of the Purchased Assets to the Purchaser at any location other than the Leased Premises.

2.12

Payment of the Receivables Purchase Agreement Price


  (a)

The Purchase Price shall be increased, if the Final Receivables Purchase Price exceeds the Estimated Receivables Purchase Price, by an amount equal to the amount of such excess, or decreased, if the Estimated Receivables Purchase Price exceeds the Final Receivables Purchase Price, by an amount equal to the amount of such excess (such net increase or decrease to the Purchase Price, the “ Final Receivables Payment Adjustment ”). Either the Purchaser or the Receiver, as applicable, shall, within three (3) Business Days after the determination of the Final Receivables Payment Adjustment, make payment to the Receiver or the Purchaser, as applicable, by wire transfer in immediately available funds of the amount payable by the Purchaser or the Receiver, as applicable, in respect of the Final Receivables Payment Adjustment to an account designated in writing by the Receiver or the Purchaser, as applicable.

     
  (b)

The parties agree that any payments made pursuant to this Section 2.12 will be treated for tax purposes as an adjustment to the Purchase Price, unless otherwise prohibited by applicable Law.



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ARTICLE 3 - REPRESENTATIONS AND WARRANTIES

3.01

Receiver’s Representations and Warranties

The Receiver represents and warrants to the Purchaser that, as at the date hereof and as of the Closing Date:

  (a)

subject to the entry of the Approval and Vesting Order and any other orders required by the Court in connection with the transactions contemplated herein, the Receiver has the power, authority and right to enter into and deliver this Agreement and to carry out its obligations hereunder;

     
  (b)

subject to the entry of the Approval and Vesting Order and any other orders required by the Court in connection with the transactions contemplated herein, this Agreement constitutes a valid and legally binding obligation of the Receiver, enforceable against the Receiver in accordance with its terms;

     
  (c)

Astoria Ltd. and Astoria Canada are registered under Part IX of the Excise Tax Act (Canada) with registration number 840185730 RT0001 and 845748037 RT0001, respectively; and

     
  (d)

each of Astoria Ltd. and Astoria Canada is not a non-resident of Canada within the meaning of section 116 of the Tax Act.


3.02

Purchaser’s Representations and Warranties

The Purchaser represents and warrants to the Receiver that:

  (a)

the Purchaser is a corporation duly incorporated, organized and existing under the laws of Ontario;

     
  (b)

the Purchaser has the power, authority and right to enter into and deliver this Agreement and to carry out its obligations hereunder;

     
  (c)

this Agreement constitutes a valid and legally binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms;

     
  (d)

the Purchaser has taken all necessary corporate action to authorize the entering into and performance by it of this Agreement and completion of the transactions contemplated herein and the entering into of this Agreement in completion of the transactions contemplated herein will not breach its constating documents, any agreement binding on the Purchaser, or Applicable Laws relating to the Purchaser;

     
  (e)

there are no orders of or proceedings before or pending before any Governmental Authorities, or threatened to be brought by or before any Governmental Authorities by or against the Purchaser affecting the legality, validity or enforceability of this Agreement or the consummation of the transactions contemplated hereby by the Purchaser;



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  (f)

no authorizations, consents or approvals of, or filing with or notice to, any Governmental Authorities is required in connection with the execution, delivery or performance of this Agreement;

     
  (g)

except for the Approval and Vesting Order, no consent, waiver, authorization or approval of any Person and no declaration to or filing or registration with any Governmental Authorities is required in connection with the execution and delivery by the Purchaser of this Agreement;

     
  (h)

the Purchaser has available, or prior to the delivery of the Binding APA (as defined in the Sale Process) and at the Time of Closing will have, sufficient funding to enable the Purchaser to consummate the purchase of the Purchased Assets on the terms set forth herein and otherwise to perform all of the Purchaser’s obligations under this Agreement;

     
  (i)

the Purchaser is registered under Part IX of the Excise Tax Act (Canada) with registration number that will be provided within one (1) Business Day of the date hereof;

     
  (j)

the Purchaser is not a non-resident of Canada within the meaning of section 116 of the Tax Act;

     
  (k)

there are no shareholder agreements, voting trusts or other agreements or understandings to which the Ultimate Parent, the Parent or any of its subsidiaries is a party with respect to the voting of the capital stock or other equity interests of the Ultimate Parent, the Parent or any of its subsidiaries or that the Receiver will be required to execute and deliver in connection with the issuance of the common shares in the capital of the Ultimate Parent to be issued to the Receiver contemplated by this Agreement;

     
  (l)

other than the hold period prescribed by applicable U.S. securities laws and the legend prohibiting the transfer of the common shares in the capital of the Ultimate Parent to be issued to the Receiver pursuant to this Agreement until the date that is six months from the Closing Date, there are no other restrictions, whether imposed by applicable law or by Contract, on the transfer of such common shares;

     
  (m)

the issued and outstanding common shares in the capital of the Ultimate Parent are not listed on any stock exchange or quotation system;

     
  (n)

the Ultimate Parent has taken all necessary action to authorize the issuance of the common shares in the capital of the Ultimate Parent to be issued to the Receiver contemplated by this Agreement, and such common shares will, at the time of issuance, be validly issued and fully paid and non-assessable common shares in the capital of the Ultimate Parent; and



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  (o)

the common shares in the capital of the Ultimate Parent to be issued to the Receiver contemplated by this Agreement will be allotted and issued fully paid, free from all claims, encumbrances and equities whatsoever and with all rights attached thereto. Such shares will rank pari passu in all respects with, and be identical to, the existing common shares in the capital of the Ultimate Parent then issued and will rank in full for all dividends and other distributions declared, made or paid on the common shares in the capital of the Ultimate Parent after the date of issue.


3.03

“As Is, Where Is”

(1)      The Purchaser acknowledges and agrees that it is purchasing the Purchased Assets on an “as is, where is” basis and on the basis that the Purchaser has conducted to its satisfaction an independent inspection, investigation and verification of the Purchased Assets (including a review of title), Assumed Liabilities and all other relevant matters and has determined to proceed with the transaction contemplated herein and will accept the same at the Time of Closing in their then current state, condition, location, and amounts, subject to all Permitted Encumbrances.

(2)      Except as otherwise expressly provided in Section 3.01, no representation, warranty or condition whether statutory (including under the Sale of Goods Act (Ontario), the International Sale of Goods Contracts Convention Act (Canada) and the International Sale of Goods Act (Ontario) or any international equivalent act which may be applicable to the subject matter pursuant to the provisions of this Agreement, including but not limited to the United Nations Convention on Contracts for the International Sale of Goods ), or express or implied, oral or written, legal, equitable, conventional, collateral, arising by custom or usage of trade, or otherwise is or will be given including as to title, outstanding liens or encumbrances, description, fitness for purpose, merchantability, merchantable quality, quantity, condition (including physical and environmental condition), suitability, durability, assignability, or marketability thereof or any other matter or thing whatsoever, and all of the same are expressly excluded and disclaimed and any rights pursuant to such statutes have been waived by the Purchaser. The Purchaser acknowledges and agrees that it has relied entirely and solely on its own investigations as to the matters set out above and in determining to purchase the Purchased Assets and assume the Assumed Liabilities pursuant to this Agreement.

(3)      The description of the Purchased Assets and Assumed Liabilities contained herein is for the purpose of identification only and the inclusion of any item in such description does not confirm the existence of any such items or that any such item is owned by Astoria. Except as otherwise explicitly set forth in Section 3.01, no representation, warranty or condition has been given by the Receiver concerning the completeness or accuracy of such descriptions and the Purchaser acknowledges and agrees that any other representation, warranty, statements of any kind or nature, express or implied, (including any relating to the future or historical financial condition, results of operations, prospects, assets or liabilities of Astoria or the quality, quantity or condition of the Purchased Assets) are specifically disclaimed by the Receiver.

(4)      Any documents, materials and information provided by or on behalf of the Receiver to the Purchaser with respect to the Purchased Assets or Assumed Liabilities (including any confidential information memorandums, management presentations, or material made available in the electronic data room) have been provided to the Purchaser solely to assist the Purchaser in undertaking its own due diligence, and the Receiver has not made and is not making any representations or warranties, implied or otherwise, to or for the benefit of the Purchaser as to the accuracy and completeness of any such documents, materials or information or the achievability of any valuations, estimates or projections. The Purchaser acknowledges that it has not and will not rely upon any such documents, materials or information in any manner, whether as a substitute for or supplementary to its own due diligence, searches, inspections and evaluations. The Receiver and their respective affiliates, directors, officers, employees, agents and advisors shall not be liable for any inaccuracy, incompleteness or subsequent changes to any such documents, materials or information.


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ARTICLE 4 - COVENANTS

4.01

Covenants of the Receiver

(1)      The Receiver will ensure that the representations and warranties of the Receiver set out in Section 3.01 are true and correct in all material respects at the Time of Closing and use reasonable commercial efforts to ensure that the conditions of closing for the benefit of the Purchaser set out in Section 5.01 over which it has reasonable control have been performed or complied with in all material respects by the Time of Closing.

(2)      The Receiver shall file with the Court, as soon as practicable after its execution and delivery of this Agreement, a motion seeking the Court’s issuance of the Approval and Vesting Order.

(3)      At least two (2) Business Days prior to the Closing Date, the Receiver shall provide the Purchaser with a written notification of the Estimated Receivable Purchase Payment, including the identification of the accounts receivable of Astoria that are less than 90 days overdue.

(4)      The Receiver shall, on behalf of Astoria, terminate the employment of the Employees on or before the Closing Date and the Receiver shall provide confirmation on Closing that it has effected such terminations. Astoria shall be responsible for all wages, notice of termination and other obligations including entitlement to benefit coverage, vacation pay and overtime pay to all of the Employees, to the extent applicable. Any indemnity given by the Purchaser in favour of the Receiver under this Agreement shall exclude any indemnity in respect of the foregoing Employee-related liabilities. For greater certainty, nothing herein derogates from the Purchaser’s obligations and liabilities or affords any right in favour of the Purchaser to claim over to the Receiver or Astoria for any liability arising as a result of the Purchaser becoming a successor employer of Astoria.

4.02

Covenants of the Purchaser

(1)      The Purchaser will ensure that the representations and warranties of the Purchaser set out in Section 3.02 are true and correct in all material respects at the Time of Closing and use reasonable commercial efforts to ensure that the conditions of closing for the benefit of the Receiver set out in Section 5.02 over which it has reasonable control have been performed or complied with in all material respects by the Time of Closing.


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(2)      The Purchaser will provide the Receiver with all information within its possession or control that the Receiver may reasonably request to assist the Receiver in obtaining the Approval and Vesting Order.

(3)      The Purchaser will preserve the Books and Records delivered to it at the Time of Closing for a period of six years from the Closing Date, or for such other period as is required by any Applicable Law, and will permit the Receiver and their respective authorized representatives reasonable access thereto in connection with the affairs of Astoria, and the right to make copies thereof at their expense.

(4)      The Purchaser shall make the necessary arrangements to replace any letters of credit or other security deposits posted or received by Astoria, the Receiver, or any other Person on their behalf, on or prior to Closing.

(5)      Not more than ten (10) Business Days following the Closing Date, the Purchaser shall provide the Receiver with written notification of the Final Receivable Purchase Payment, including the identification of the accounts receivable of Astoria that are less than 90 days overdue as at the Closing Date. Following receipt of the foregoing notification, Receiver shall have a period of five (5) Business Days to review the books and records of Astoria setting forth the accounts receivable of Astoria as at the Closing Date, at no cost, during regular business hours to satisfy itself as to the recorded amount of such account receivable, following which five (5) Business Day period the Receiver shall either: (a) provide written confirmation to the Purchaser of its satisfaction with its review; or (b) provide written objection to the Purchaser of its review. In the event that the Receiver objects to such review of the books and records of Astoria, the applicable five (5) Business Day period shall be extended until all such disputes have been resolved to the satisfaction of the Receiver, acting reasonably.

(6)      The Purchaser will comply with the Personal Information Protection and Electronic Documents Act (Canada) and other similar Applicable Laws relating to privacy and the protection of personal information in respect of the Books and Records, Contracts and any other business and financial records related to the Purchased Assets.

(7)      In the event that the common shares in the capital of the Ultimate Parent are listed or quoted on any stock exchange or quotation system at any time following the Time of Closing, the Purchaser shall take all actions required to permit the Receiver to sell the common shares in the capital of the Ultimate Parent issued to the Receiver pursuant to this Agreement without restriction, whether imposed by applicable law or by Contract, other than the hold period prescribed by applicable U.S. securities laws and the legend prohibiting the transfer of the common shares in the capital of the Ultimate Parent to be issued to the Receiver pursuant to this Agreement until the date that is six months from the Closing Date, as applicable.

(8)      In the event that the common shares in the capital of the Ultimate Parent are listed or quoted on any stock exchange or quotation system at any time following the date that is six months from the Closing Date, upon the reasonable written request of the Receiver, including to permit the wind-down of the estate of Astoria, the Purchaser shall take all actions required to permit the Receiver to sell or otherwise transfer the common shares in the capital of the Ultimate Parent issued to the Receiver pursuant to this Agreement to any Person permitted to acquire such common shares in accordance with applicable U.S. securities laws.


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(9)      The Purchaser hereby acknowledges that the Receiver has engaged and incurred costs with respect to certain re-grading work on the Leased Premises which may not be complete by the Closing Date which work is required to be completed by the City of Belleville and which work requirements are supported by a cash deposit posted in favour of the City of Belleville. For the avoidance of any doubt, the aforementioned cash deposit is an Excluded Asset. In the event that the foregoing work is not complete by the Closing Date, the Purchaser hereby agrees to provide the Receiver and its contractors continued access to the Leased Premises, at no costs, during regular business hours and upon 24 hours’ notice in order to complete the required re-grading work. Furthermore. The Receiver acknowledges and agrees that it shall remain solely responsible for any and all costs relating to the re-grading work described in this Section 4.02(9) .

ARTICLE 5 - CONDITIONS AND TERMINATION

5.01

Conditions for the Benefit of the Purchaser

The sale by the Receiver and the purchase by the Purchaser of the Purchased Assets is subject to the following conditions, which are for the exclusive benefit of the Purchaser and which are to be performed or complied with at or prior to the Time of Closing:

  (a)

the representations and warranties of the Receiver set forth in this Agreement will be true and correct in all material respects at the Time of Closing with the same force and effect as if made at and as of such time;

     
  (b)

the Receiver will have performed or complied in all material respects with all of the obligations and covenants of this Agreement to be performed or complied with by the Receiver at or prior to the Time of Closing;

     
  (c)

to the best of the Receiver’s knowledge, no action or proceeding in Canada will be pending by any third party to enjoin or prohibit the sale and purchase of the Purchased Assets;

     
  (d)

the MOECC ECA shall have been assigned and transferred to the Purchaser at the Time of Closing;

     
  (e)

the Land Lease shall have been assigned to the Purchaser or alternative arrangements satisfactory to the Purchaser shall been entered into with landlord at the Time of Closing; and

     
  (f)

the Approval and Vesting Order will have been granted by the Court and such order will not have been stayed, varied in any material respect, set aside or appealed (or any such appeal shall have been dismissed with no further appeal therefrom); and

     
  (g)

the Receiver will have paid or will have made arrangements, satisfactory to the Purchaser, acting reasonably, to pay all Cure Costs pursuant to Section 2.09(2).



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5.02

Conditions for the Benefit of the Receiver

The sale by the Receiver and the purchase by the Purchaser of the Purchased Assets is subject to the following conditions, which are for the exclusive benefit of the Receiver and which are to be performed or complied with at or prior to the Time of Closing:

  (a)

the representations and warranties of the Purchaser set forth in this Agreement will be true and correct in all material respects at the Time of Closing with the same force and effect as if made at and as of such time;

     
  (b)

the Purchaser will have performed or complied in all material respects with all of the obligations and covenants of this Agreement to be performed or complied with by the Purchaser at or prior to the Time of Closing;

     
  (c)

no action or proceeding in Canada will be pending by any third party to enjoin or prohibit the purchase and sale of the Purchased Assets; and

     
  (d)

the Approval and Vesting Order will have been granted by the Court and such order will not have been stayed, varied in any material respect, set aside or appealed (or any such appeal shall have been dismissed with no further appeal therefrom).


5.03

Waiver of Condition

The Purchaser, in the case of a condition set out in Section 5.01, and the Receiver, in the case of a condition set out in Section 5.02 (other than Section 5.02(d)), will have the exclusive right to waive the performance or compliance of such condition in whole or in part and on such terms as may be agreed upon without prejudice to any of its rights in the event of non-performance of or non-compliance with any other condition in whole or in part. Any such waiver will not constitute a waiver of any other conditions in favour of the waiving party. Such waiving party will retain the right to complete the purchase and sale of the Purchased Assets herein contemplated.

5.04

Termination

This Agreement may be terminated, by notice given prior to or on the Closing Date:

  (a)

by the Receiver or the Purchaser if a material breach of any representation, warranty, covenant, obligation or other provision of this Agreement has been committed by the other party and such breach has not been waived or cured within five days following the date on which the non-breaching party notifies the other party of such breach;

     
  (b)

by the Purchaser if a condition in Section 5.01 becomes impossible to satisfy prior to August 31, 2017 or such later date as the parties may determine (the “ Outside Date ”) (other than through the failure of the Purchaser to comply with its obligations under this Agreement) and the Purchaser has not waived such condition;



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  (c)

by the Receiver if a condition in Section 5.02 becomes impossible to satisfy prior to the Outside Date (other than through the failure of the Receiver to comply with its obligations under this Agreement) and the Receiver has not waived such condition;

     
  (d)

by the Receiver pursuant to Section 6.07(1)(a);

     
  (e)

by written agreement of the Purchaser and the Receiver;

     
  (f)

by the Receiver or the Purchaser if the completion of the sale of Purchased Assets herein contemplated has not occurred (other than through the failure of the party seeking termination to comply with its obligations under this Agreement) on or before the Outside Date.


5.05

Effect of Termination

Each party’s right of termination under Section 5.04 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 5.04, all further obligations of the parties under this Agreement will terminate, except that the obligations in Sections 2.10(2), 6.04, 8.03 and 8.04 will survive; provided, however, that if this Agreement is terminated by a party because of a material breach of a representation or warranty, covenant, obligation or other provision of this Agreement by the other party or because one or more of the conditions to the terminating party’s obligations under this Agreement is not satisfied as a result of the other party’s failure to comply with its obligations under this Agreement, the terminating party’s right to pursue all legal remedies with respect to such breach will survive such termination unimpaired.

ARTICLE 6 - CLOSING ARRANGEMENTS

6.01

Closing

The sale and purchase of the Purchased Assets will be completed at the Time of Closing at the offices of Aird & Berlis LLP, 181 Bay Street, Suite 1800, PO Box 754, Toronto, Ontario M5J 2T9.

6.02

Receiver’s Closing Deliveries

On or before the Time of Closing, the Receiver will deliver or cause to be delivered to the Purchaser the following:

  (a)

a certificate executed by the Receiver confirming that the representations and warranties of the Receiver in this Agreement are true and correct in all material respects as of the Time of Closing and that the obligations of the Receiver to be performed prior to the Time of Closing have been performed in all material respects;

     
  (b)

a copy of the issued and entered Approval and Vesting Order;



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  (c)

evidence, satisfactory to the Purchaser, acting reasonably, of the payment of or arrangements to pay all Cure Costs as contemplated by Section 2.09(2);

     
  (d)

if available, the tax election as contemplated by Section 2.05 executed by the Receiver;

     
  (e)

a bill of sale, duly executed by the Receiver, if necessary;

     
  (f)

the Assignment and Assumption Agreement executed by the Receiver; and

     
  (g)

such other documents or instruments as contemplated or required to be delivered by the Receiver pursuant to this Agreement, all of which shall be in form and substance satisfactory to the parties, acting reasonably.


6.03

Purchaser’s Closing Deliveries

On or before the Time of Closing, the Purchaser will deliver or cause to be delivered to the Receiver the following:

  (a)

payment of the Purchase Price to the Receiver as contemplated by Section 2.10(1);

     
  (b)

a certificate executed by a senior officer of the Purchaser confirming that the representations and warranties of the Purchaser in this Agreement are true and correct in all material respects as of the Time of Closing and that the obligations of the Purchaser to be performed prior to the Time of Closing have been performed in all material respects;

     
  (c)

if available, the tax election as contemplated by Section 2.05 executed by the Purchaser;

     
  (d)

consent of the Landlord for the Assignment of the Land Lease;

     
  (e)

the Assignment and Assumption Agreement executed by the Purchaser; and

     
  (f)

such other documents or instruments as contemplated or required to be delivered by the Purchaser pursuant to this Agreement, all of which shall be in form and substance satisfactory to the parties, acting reasonably.


6.04

Confidentiality

Subject to the terms of the Non-Disclosure Agreement, both prior to the Closing Date and, if the sale and purchase of the Purchased Assets hereunder fails to occur for whatever reason thereafter, the Purchaser will not disclose to anyone or use for its own or for any purpose other than the purpose contemplated by this Agreement any confidential information concerning Astoria or the operations obtained by the Purchaser pursuant hereto, and will hold all such information in the strictest confidence and, if the sale and purchase of the Purchased Assets hereunder fails to occur for whatever reason, will return all documents, records and all other information or data relating to Astoria or to the operations which the Purchaser obtained pursuant to this Agreement.


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6.05

Delivery of Receiver’s Certificate

When the Receiver is satisfied that all conditions hereunder have been satisfied or waived, and all documents to be delivered under the terms hereof have been delivered at or before the Time of Closing, the Receiver will deliver an executed copy of the Receiver’s Certificate to the Purchaser’s counsel in escrow upon the sole condition of receipt by the Receiver of the amounts referred to in Section 2.10(1) . All of the foregoing amounts will then be paid by the Purchaser, by wire transfer of immediately available funds to an account designated in writing by the Receiver for this purpose pursuant to Section 2.10(1) hereof. Following written confirmation of receipt by the Receiver of such funds (or such person directed by the Receiver to receive such funds), the Receiver’s Certificate will be released from escrow to the Purchaser. Upon such delivery, the closing will be deemed to have occurred at the Time of Closing. The Receiver will file a copy of the Receiver’s Certificate with the Court on the next Business Day following the Closing Date and provide evidence of such filing to the Purchaser.

6.06

Planning Act

This Agreement is subject to compliance with the Planning Act (Ontario). The parties agree that compliance with the Planning Act (Ontario) shall be the responsibility of the Purchaser at its costs. The Receiver agrees to execute all documents reasonably requested by the Purchaser in respect thereof.

6.07

Risk of Loss

(1)      Until the Time of Closing, the Purchased Assets will remain at the risk of the Receiver. If any destruction or damage in excess of $250,000 occurs to the Purchased Assets on or before the Time of Closing or if any or all of the Purchased Assets are appropriated, expropriated or seized by governmental or other lawful authority on or before the Time of Closing:

  (a)

the Receiver will forthwith give notice thereof to the Purchaser, and the Receiver shall have the right to terminate this Agreement prior to the Time of Closing and shall notify the Purchaser in a reasonable period of time whether it is exercising this right; and

     
  (b)

in the event the Receiver does not exercise its right of termination under Section 6.07(1)(a), the Purchaser will have the option, exercisable by notice to the Receiver on or before the Time of Closing:


  (i)

to reduce the Purchase Price by an amount equal to the proceeds of insurance (and, if any such policy provided for a deductible amount, by an amount equal to such deductible amount) or compensation for destruction or damage or appropriation, expropriation or seizure and business interruption with respect thereto (in this Section 6.07 referred to as the “ Proceeds ”), and to complete the purchase; or



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  (ii)

to complete the purchase without reduction of the Purchase Price, in which event all Proceeds will be payable to the Purchaser and all Claims of the Receiver to any such amounts not paid by the Closing Date will be assigned to the Purchaser.

(2)      If the Purchaser elects to reduce the Purchase Price pursuant to Section 6.07(1)(b)(i), the Receiver will at the Time of Closing determine the amount of the reduction to the extent that it is then determinable and will undertake to adjust such amount after the Closing Date, if necessary.

ARTICLE 7 - SURVIVAL

7.01

Survival

No covenants, representations and warranties of each party contained in this Agreement will survive the completion of the sale and purchase of the Purchased Assets and assumption of the Assumed Liabilities hereunder, except for the covenants that by their terms are to be satisfied or survive after the Time of Closing (including without limitation Sections 2.07, 2.10(2), 4.02(3), 8.03, 8.04, and 8.15), which covenants will continue in full force and effect in accordance with their terms.

ARTICLE 8 - GENERAL

8.01

Further Assurances

Each of the Receiver and the Purchaser will from time to time at the request and expense of the other execute and deliver all such further documents and instruments and do all acts and things as the other party may, either before or after the Closing Date, reasonably require to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement.

8.02

Time of the Essence

Time is of the essence of this Agreement.

8.03

Fees, Commissions and other Costs and Expenses

Each of the Receiver and the Purchaser shall be solely responsible for their respective legal and accounting costs and expenses and any real estate or other commissions incurred in connection with the preparation, execution and delivery of this Agreement and all documents and instruments executed pursuant to this Agreement and any other costs and expenses whatsoever and howsoever incurred and will indemnify and save harmless the other from and against any Claim resulting from any broker’s, finder’s or placement fee or commission alleged to have been incurred as a result of any action by it in connection with the transactions under this Agreement.

8.04

Public Announcements

Except as required by Applicable Law, no public announcement or press release concerning the sale and purchase of the Purchased Assets may be made by the Receiver or the Purchaser without the prior consent and joint approval of the Receiver and the Purchaser.


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8.05

Benefit of the Agreement

This Agreement will enure to the benefit of and be binding upon the successors and permitted assigns of the parties.

8.06

Entire Agreement

This Agreement (including the agreements contemplated hereby) and the Non-Disclosure Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and such agreements cancel and supersede any prior understandings and agreements between the parties with respect thereto. There are no representations, warranties, terms, conditions, undertakings or collateral agreements, express, implied or statutory, between the parties other than as expressly set forth in this Agreement (including the agreements contemplated hereby) or in the Non-Disclosure Agreement.

8.07

Amendments and Waivers

No amendment to this Agreement will be valid or binding unless set forth in writing and duly executed by both of the parties (and, in the case of any amendment or modification to Section 8.18, the Parent). No waiver of any breach of any provision of this Agreement will be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided, will be limited to the specific breach waived.

8.08

Assignment

This Agreement may not be assigned by the Receiver or the Purchaser without the written consent of the other provided that the Purchaser may assign this Agreement without the consent of the Receiver to an Affiliate of the Purchaser provided that: (i) such Affiliate enters into a written agreement with the Receiver to be bound by the provisions of this Agreement in all respects and to the same extent as the Purchaser is bound, (ii) that the Purchaser will continue to be bound by all the obligations hereunder as if such assignment had not occurred and perform such obligations to the extent that such Affiliate fails to do so, and (iii) such assignment occur prior to the issuance of the Approval and Vesting Order.

8.09

Notices

Any demand, notice or other communication to be given in connection with this Agreement must be given in writing and will be given by personal delivery or by electronic means of communication addressed to the recipient as follows:

  To the Receiver:
     
  BDO Canada Limited
  25 Main Street West, Suite 805
  Hamilton, ON L8P 1H1
     
  Fax No.: 905-570-0249


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  Attention : Christopher Mazur
     
  Email: cmazur@bdo.ca
     
  Attention : Angelo Consoli
  Email: aconsoli@bdo.ca
     
  With copies to (which will not constitute notice)
     
  Aird & Berlis LLP
  181 Bay Street, Suite 1800
  PO Box 754  
  Toronto, ON M5J 2T9
     
  Fax No: 416-863-1515
     
  Attention : Steve Graff
  Email: sgraff@airdberlis.com
     
  Attention : Kyle Plunkett
  Email: kplunkett@airdberlis.com
     
  To the Purchaser or the Parent:
     
  c/o SusGlobal Energy Belleville Ltd.
  200 Davenport Road
  Toronto, Ontario M5R 1J2
     
  Fax No.: 416-223-8507
     
  Attention : Gerald Hamaliuk
  Email: ghamaliuk@susglobalenergy.com
     
  With copies to (which will not constitute notice)
     
  Chachula Environmental Law
  Municipal Law Chambers
  Royal Building, Suite 211
  277 Lakeshore Road East
  Oakville, Ontario L6J 1H9
     
  Attention : Andrew T.R. Chachula
  Email: andrew@chachulalaw.com

or to such other street address, individual or electronic communication number or address as may be designated by notice given by either party to the other. Any demand, notice or other communication given by personal delivery will be conclusively deemed to have been given on the day of actual delivery thereof and, if given by electronic communication, on the day of transmittal thereof if given during the normal business hours of the recipient and on the Business Day during which such normal business hours next occur if not given during such hours on any day.


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8.10

Remedies Cumulative

The right and remedies of the parties under this Agreement are cumulative and are in addition to, and not in substitution for, any other rights and remedies available at law or in equity or otherwise. No single or partial exercise by a party of any right or remedy precludes or otherwise affects the exercise of any other right or remedy to which that party may be entitled.

8.11

No Third Party Beneficiaries

This Agreement is solely for the benefit of:

  (a)

the Receiver, and its successors and permitted assigns, with respect to the obligations of the Purchaser under this Agreement, and

     
  (b)

the Purchaser, and its successors and permitted assigns, with respect to the obligations of the Receiver under this Agreement,

and this Agreement will not be deemed to confer upon or give to any other person any Claim or other right or remedy.

8.12

Governing Law

This Agreement is governed by and will be construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.

8.13

Attornment

For the purpose of all legal proceedings this Agreement will be deemed to have been performed in the Province of Ontario and the courts of the Province of Ontario will have jurisdiction to entertain any action arising under this Agreement. The Receiver and the Purchaser each attorns to the jurisdiction of the courts of the Province of Ontario.

8.14

Severability

If any provision of this Agreement is determined by any court of competent jurisdiction to be illegal or unenforceable, that provision will be severed from this Agreement and the remaining provisions will continue in full force and effect.

8.15

No Registration of Agreement

The Purchaser agrees that it will not register or cause or permit to be registered this Agreement and that no reference to or notice of it or any caution, certificate of pending litigation or other similar court process in respect thereof shall be registered on title to the Lands and/or any part thereof. The Purchaser shall indemnify and save the Receiver harmless from and against any and all Claims whatsoever arising from or with respect to any such registration. This Section shall survive the expiration and/or termination of this Agreement for any reason.


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8.16

Counterparts

This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original and all of which taken together will be deemed to constitute one and the same instrument.

8.17

Electronic Execution

Delivery of an executed signature page to this Agreement by any party by electronic transmission will be as effective as delivery of a manually executed copy of this Agreement by such party.

8.18

Parent Guarantee


  (a)

The Parent is executing this Agreement to guarantee the performance of the Purchaser of its obligations hereunder and under any agreement executed pursuant to this Agreement. The Parent hereby guarantees unconditionally and as a primary obligation that the Purchaser shall perform all its obligations and assume and discharge all its liabilities contained in this Agreement and any agreement executed pursuant to this Agreement. No amendment, variation, alteration, waiver or extension to this Agreement or any agreement executed pursuant to this Agreement shall release this guarantee, whether or not the Parent received notice of the same and the Parent irrevocably and unconditionally waives all need for notice of the same.

     
  (b)

The Parent is a corporation duly incorporated, organized and existing under the laws of Canada.

     
  (c)

The Parent has the power, authority and right to enter into and deliver this Agreement and to carry out its obligations hereunder.

     
  (d)

This Agreement constitutes a valid and legally binding obligation of the Parent, enforceable against the Parent in accordance with its terms.

     
  (e)

The Parent has taken all necessary corporate action to authorize the entering into and performance by it of this Agreement and completion of the transactions contemplated herein and the entering into of this Agreement in completion of the transactions contemplated herein will not breach its constating documents, any agreement binding on the Parent, or Applicable Laws relating to the Parent.

[The balance of this page has been intentionally left blank]





EXHIBIT A
 
Form of Approval and Vesting Order
 
Court File No. CV-17-11760-00CL
 
ONTARIO
SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)

THE HONOURABLE JUSTICE ) DAY, THE [ __ ] DAY OF
     
  ) [ __ ], 2017
     
  )  

BETWEEN:
 
BUSINESS DEVELOPMENT BANK OF CANADA
 
Applicant
 
and
 
ASTORIA ORGANIC MATTERS LTD. and
 
ASTORIA ORGANIC MATTERS CANADA LP
 
Respondent
 
APPROVAL AND VESTING ORDER

THIS MOTION , made by BDO Canada Limited, in its capacity as Court appointed receiver (the “ Receiver ”), for an order approving the sale transaction (the “ Transaction ”) contemplated by an asset purchase agreement (the “ Asset Purchase Agreement ”) between the Receiver, SusGlobal Energy Belleville Ltd. (the “ Purchaser ”) and, for the purposes of Section 8.18 of the Asset Purchase Agreement, SusGlobal Energy Canada Corp. dated July 27, 2017, and vesting in the Purchaser Astoria Organic Matters Ltd. and Astoria Organic Matters Canada LP (collectively “ Astoria ”) right, title, benefit and interest in and to the assets described in the Asset Purchase Agreement (the “ Purchased Asset s”), was heard this day at 330 University Avenue, Toronto, Ontario.

ON READING the Affidavit of [ __ ] sworn [ __ ], 2017 and the [ __ ] Report of the Receiver dated [ __ ], 2017 (the “[ __ ] Report ”), and on hearing the submissions of counsel for the Receiver, the Applicant, and the Purchaser, and any such other counsel as were present, no one appearing for any other person on the service list, although properly served as appears from the affidavit of [ __ ] sworn [ __ ], 2017 filed:


- 31 -

1.      THIS COURT ORDERS that unless otherwise defined herein or the context otherwise requires, capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Asset Purchase Agreement.

2.      THIS COURT ORDERS AND DECLARES that the Transaction is hereby approved, and the execution of the Asset Purchase Agreement by the Receiver is hereby authorized and approved, with such minor amendments as the Receiver may deem necessary. The Receiver is hereby authorized and directed to take such additional steps and execute such additional documents as may be necessary or desirable for the completion of the Transaction and for the conveyance of the Purchased Assets to the Purchaser.

3.      THIS COURT ORDERS AND DECLARES that upon the delivery of a Receiver’s certificate to the Purchaser substantially in the form attached as Schedule A hereto (the “ Receiver’s Certificate ”), all of Astoria’s right, title, benefit and interest in and to the Purchased Assets described in the Asset Purchase Agreement shall vest absolutely in the Purchaser, free and clear of and from any and all security interests (whether contractual, statutory, or otherwise), hypothecs, mortgages, trusts or deemed trusts (whether contractual, statutory, or otherwise), liens, executions, levies, charges, or other financial or monetary claims, whether or not they have attached or been perfected, registered or filed and whether secured, unsecured or otherwise (collectively, the “ Claims ”) including, without limiting the generality of the foregoing: (i) any encumbrances or charges created by the Receivership Order dated February 24, 2017; (ii) all charges, security interests or claims evidenced by registrations pursuant to the Personal Property Security Act (Ontario) or any other personal property registry system; and (iii) those Claims listed on Schedule B hereto (all of which are collectively referred to as the “ Encumbrances ”, which term shall not include the permitted encumbrances, easements and restrictive covenants listed on Schedule C ) and, for greater certainty, this Court orders that all of the Encumbrances affecting or relating to the Purchased Assets are hereby expunged and discharged as against the Purchased Assets.


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4.      THIS COURT ORDERS that for the purposes of determining the nature and priority of Claims, the net proceeds from the sale of the Purchased Assets shall stand in the place and stead of the Purchased Assets, and that from and after the delivery of the Receiver’s Certificate all Claims and Encumbrances shall attach to the net proceeds from the sale of the Purchased Assets with the same priority as they had with respect to the Purchased Assets immediately prior to the sale, as if the Purchased Assets had not been sold and remained in the possession or control of the person having that possession or control immediately prior to the sale.

5.      THIS COURT ORDERS that, pursuant to clause 7(3)(c) of the Canada Personal Information Protection and Electronic Documents Act , the Receiver is authorized and permitted to disclose and transfer to the Purchaser all human resources and payroll information in the Company’s records pertaining to Astoria’s past and current employees. The Purchaser shall maintain and protect the privacy of such information and shall be entitled to use the personal information provided to it in a manner which is in all material respects identical to the prior use of such information by Astoria.

6.      THIS COURT ORDERS that, notwithstanding:

  (a)

the pendency of these proceedings;

     
  (b)

any applications for a bankruptcy order now or hereafter issued pursuant to the Bankruptcy and Insolvency Act (Canada) in respect of Astoria and any bankruptcy order issued pursuant to any such applications; and

     
  (c)

any assignment in bankruptcy made in respect of Astoria;

the vesting of the Purchased Assets in the Purchaser pursuant to this Order shall be binding on any trustee in bankruptcy that may be appointed in respect of Astoria and shall not be void or voidable by creditors of Astoria, nor shall it constitute nor be deemed to be a fraudulent preference, assignment, fraudulent conveyance, transfer at undervalue, or other reviewable transaction under the Bankruptcy and Insolvency Act (Canada) or any other applicable federal or provincial legislation, nor shall it constitute oppressive or unfairly prejudicial conduct pursuant to any applicable federal or provincial legislation.


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7.      THIS COURT ORDERS AND DECLARES that the Transaction is exempt from Section 6(3) of the Retail Sales Act (Ontario).

8.      THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal, regulatory or administrative body having jurisdiction in Canada or in the United States to give effect to this Order and to assist the Receiver and its agents in carrying out the terms of this Order. All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to make such orders and to provide such assistance to the Receiver, as an officer of this Court, as may be necessary or desirable to give effect to this Order or to assist the Receiver and its agents in carrying out the terms of this Order.

SEALING

9.      THIS COURT ORDERS that the Confidential Supplement to the First Report shall be sealed, kept confidential and not form part of the public record, but shall be placed separate and apart from all other contents of the Court file, in a sealed envelope attached to a notice that sets out the title of these proceedings and a statement that the contents are subject to a sealing order and shall only be opened upon further order of the Court.

____________________________________



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Schedule A – Form of Receiver’s Certificate
 
Court File No. CV-17-11760-00CL
 
ONTARIO
 
SUPERIOR COURT OF JUSTICE
 
(COMMERCIAL LIST)

THE HONOURABLE JUSTICE ) DAY, THE [ __ ] DAY OF
     
  ) [ __ ], 2017
     
  )  
     
BETWEEN:    

BUSINESS DEVELOPMENT BANK OF CANADA
 
Applicant
 
and
 
ASTORIA ORGANIC MATTERS LTD. and
 
ASTORIA ORGANIC MATTERS CANADA LP
 
Respondent
 
RECEIVER’S CERTIFICATE
 
RECITALS

A.      Pursuant to an Order of the Honourable Mr. Justice Hainey of the Ontario Superior Court of Justice (the “ Court ”) dated April 13, 2017, BDO Canada Limited was appointed as receiver (the “ Receiver ”) of the assets, undertakings and properties of Astoria Organic Matter Ltd. and Astoria Organic Matters Canada LP (collectively “ Astoria ”).

B.      Pursuant to an Order of the Court dated [ __ ], 2017, the Court approved the asset purchase agreement made as of July 27, 2017 (the “ Asset Purchase Agreement ”) between the Receiver and SusGlobal Energy Belleville Ltd. (the “ Purchaser ”) and, for the purposes of Section 8.18 of the Asset Purchase Agreement, SusGlobal Energy Canada Corp. and provided for the vesting in the Purchaser of Astoria’s right, title and interest in and to the Purchased Assets, which vesting is to be effective with respect to the Purchased Assets upon the delivery by the Receiver to the Purchaser of a certificate confirming: (i) the payment by the Purchaser of the Purchase Price for the Purchased Assets, (ii) that the conditions to closing as set out in the Asset Purchase Agreement have been satisfied or waived by the Receiver and the Purchaser, and (iii) the Transaction has been completed to the satisfaction of the Receiver.


- 35 -

C.      Unless otherwise indicated herein, terms with initial capitals have the meanings set out in the Asset Purchase Agreement.

THE RECEIVER CERTIFIES the following:

1.      The Purchaser has paid and the Receiver has received the Purchase Price for the Purchased Assets payable on the Closing Date pursuant to the Asset Purchase Agreement;

2.      The conditions to closing as set out in the Asset Purchase Agreement have been satisfied or waived by the Receiver and the Purchaser, respectively; and

3.      The Transaction has been completed to the satisfaction of the Receiver.

4.      This Certificate was delivered by the Receiver at ________ [TIME] on ________ [DATE].

BDO CANADA LIMITED, solely in its capacity
as Court-appointed receiver of ASTORIA
ORGANIC MATTERS LTD. and ASTORIA
ORGANIC MATTERS CANADA LP, and not
in any other capacity
   
   
Per:  
Name:
Title:


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Schedule B – Claims to be deleted and expunged from title to Real Property

1.      Instrument No. HT146335

2.      Instrument No. HT182884

3.      Instrument No. HT195881

4.      Instrument No. HT201539

5.      Instrument No. HT202307

6.      Instrument No. HT202338

7.      Instrument No. HT202939

8.      Instrument No. HT203677

9.      Instrument No. HT206797


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Schedule C – Permitted Encumbrances, Easements and Restrictive Covenants
related to the Real Property

(unaffected by the Vesting Order)

1.      Instrument No. QR132067 registered on 1969/09/23 representing a By-Law

2.      Instrument No. 21R4365 registered on 1979/02/01 representing a Plan Reference

3.      Instrument No. 21R19513 registered on 2000/06/22 representing a Plan Reference

4.      Instrument No. QR595068 registered on 2001/06/12 representing an Agreement (Site Plan) with the City of Belleville

5.      Instrument No. HT40030 registered on 2007/10/19 representing a Charge from 1684567 Ontario Inc. to Bank of Montreal

6.      Instrument No. HT64541 registered on 2009/04/08 representing a Charge from 1684567 Ontario Inc. to Trenval Business Development Corporation

7.      Instrument No. HT180711 registered on 2015/11/05 representing a Notice from The Corporation of the City of Belleville in connection with instrument no. QR595068

8.      Instrument No. HT182759 registered on 2015/12/18 representing a Notice of Lease from 1684567 Ontario Inc. to Astoria Organic Matters Canada LP with an expiry date of 2034/12/31

9.      Instrument No. HT187838 registered on 2016/04/27 representing a Certificate of Requirement pursuant to the Environmental Protection Act and the Ontario Water Resources Act from the Ministry of Environment to 1684567 Ontario Inc.


EXHIBIT B

ASSIGNED CONTRACTS AND PERMITS

1.      The Assumed Capital Leases.

2.      Any and all agreements or arrangements, written or otherwise, with the following counterparties:

  (a)

Letter of Intent/Purchase Order between Manco Recycling Systems Inc. and Astoria Canada dated November 9, 2015;

     
  (b)

Letter of Intent/Purchase Order between Scaletta Group Inc. and Astoria Canada dated June 15, 2015;

     
  (c)

Letter of Intent/Purchase Order between Waste Management and Astoria Canada dated June 15, 2015;

     
  (d)

Letter of Intent/Purchase Order between OrgaPro Ltd. and Astoria Canada dated March 31, 2015;

     
  (e)

Letter of Intent/Purchase Order between Paragon Resource Management Inc. and Astoria Canada dated April 9, 2015; and

     
  (f)

Letter of Intent/Purchase Order between Third High Farms and Astoria Canada dated March 31, 2015.

3.      The Land Lease.

4.      Amended Environmental Compliance Approval Number 0031-7UTRSS issued to 1684567 Ontario Inc. and Astoria Organic Matters Ltd. o/a Astoria Organic Matters Canada LP on August 7, 2015 for the approval of (i) waste disposal site, (ii) composting facility, (iii) waste transfer station and material recovery facility, and (iv) outdoor storage for leaf and yard waste.

5.      Environmental Compliance Approval Number 0565-9WXGBY issued to 1684567 Ontario Inc. and Astoria Organic Matters Ltd. o/a Astoria Organic Matters Canada LP on August 7, 2015 for the approval of (i) material recovery facility; (ii) fully enclosed tipping building, (iii) enclosed up-flow biofilter, (iv) enclosed compost buildings, (v) outdoor aerobic windrows, (vi) outdoor windrows, (vii) outdoor screening and stockpiling, (viii) material storage area, and (ix) processing equipment.


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6.      Environmental Compliance Approval Number 5515-9VEL3J issued to 1684567 Ontario Inc. and Astoria Organic Matters Ltd. o/a Astoria Organic Matters Canada LP on August 10, 2015 for the approval of constructing a storm water management facility.

7.      Environment Compliance Approval Number 1876-A8RKAC issued to Astoria Organic Matters Ltd. o/a Astoria Organic Canada LP on April 19, 2016 for the approval of a mobile grinding plant.

8.      Amendment to Environmental Compliance Approval issued to 1684567 Ontario Inc. and Astoria Organic Matters Ltd. on November 17, 2016 amending Environmental Compliance Approval Number 0031-7UTRSS issued on April 7, 2015, such amendment for the approval of the inclusion of drywall and inert powders limited to clean gypsum and carbon powders.


EXHIBIT C

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS AGREEMENT is made as of _________________, 2017

BETWEEN

SUSGLOBAL ENERGY BELLEVILLE LTD., a corporation
incorporated under the laws of Ontario (the “Purchaser”),
 
-and-
 
BDO CANADA LIMITED, solely in its capacity as court
appointed receiver of ASTORIA ORGANIC MATTERS LTD.
and ASTORIA ORGANIC MATTERS CANADA LP and not
in any other capacity

WHEREAS the parties, and, for the purposes of Section 8.18 of the Asset Purchase Agreement (as hereinafter defined), SusGlobal Energy Canada Corp. hereto have entered into an asset purchase agreement dated as of July 27, 2017 (the “ Asset Purchase Agreement ”), pursuant to which BDO Canada Limited, solely in its capacity as court appointed receiver of Astoria Organic Matters Ltd. and Astoria Organic Matters Canada LP (“ Astoria ”) and not in any other capacity (the “ Receiver ”), has agreed to assign all of Astoria’s right, title, benefit and interest in and to the Assigned Contracts to the Purchaser, and the Purchaser has agreed to assume, perform and indemnify and hold harmless the Receiver and Astoria from the Assumed Liabilities, upon the terms and conditions set forth therein;

AND WHEREAS pursuant to Sections 6.02(f) and 6.03(e) of the Asset Purchase Agreement, the Purchaser and the Receiver are required to enter into and deliver this Agreement at the Time of Closing;

NOW THEREFORE in conjunction with and in consideration of the completion of the transactions to be effected at the Time of Closing as contemplated by the Asset Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Receiver and the Purchaser agree as follows:

ARTICLE 1 - INTERPRETATION

1.01

Definitions

Unless otherwise defined herein or the context otherwise requires, capitalized terms used and not otherwise defined herein have the meanings ascribed to them in the Asset Purchase Agreement.


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1.02

Headings

The division of this Agreement into Articles and Sections and the insertion of a table of contents and headings are for convenience of reference only and do not affect the construction or interpretation of this Agreement. The terms “hereof”, “hereunder” and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles, Sections and Schedules are to Articles and Sections of, and Schedules to, this Agreement.

1.03

Extended Meanings

In this Agreement words importing the singular number include the plural and vice versa, words importing any gender include all genders and words importing persons include individuals, corporations, limited and unlimited liability companies, general and limited partnerships, associations, trusts, unincorporated organizations, joint ventures and Governmental Authorities. The term “including” means “including without limiting the generality of the foregoing”.

ARTICLE 2 – ASSIGNMENT AND ASSUMPTION

2.01

Assignment by the Receiver

Upon and subject to the terms of the Asset Purchase Agreement, effective at the Time of Closing, the Receiver hereby assigns and transfers to the Purchaser all of Astoria’s right, title, benefit and interest under or in respect of the Assigned Contracts.

2.02

Assumption by the Purchaser

Upon and subject to the terms of the Asset Purchase Agreement, effective at the Time of Closing, the Purchaser hereby assumes and agrees to fulfill, perform and discharge the Assumed Liabilities.

2.03

Release by the Purchaser

The Purchaser hereby: (i) unconditionally and irrevocably fully releases and discharges the Receiver and Astoria from any Claim which the Purchaser may now or hereafter have against the Receiver or Astoria by reason of any matter or thing arising out of, or resulting from, any of the Assumed Liabilities, and (ii) agrees that the Purchaser will not make or take any Claim with respect to any matter released and discharged in this Section 2.03 which may result in any Claim against the Receiver or Astoria for contribution or indemnity or other relief.

2.04

Indemnity by the Purchaser

The Purchaser hereby indemnifies and saves harmless the Receiver on its own behalf and as trustee for its Affiliates and its and their current and former directors and officers, employees, agents, advisors, and representatives (collectively, the “ Indemnitees ”) from and against all Claims asserted against any of the Indemnitees in any way directly or indirectly arising from, relating to or in connection with any of the Assumed Liabilities from and after the Time of Closing. The Purchaser appoints the Receiver as the trustee for the Indemnitees of the covenants of indemnification of the Purchaser with respect to such Indemnitees specified in this Section 2.04 and the Receiver accepts such appointment.


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ARTICLE - GENERAL

3.01

Further Assurances

The Receiver and the Purchaser will from time to time execute and deliver all such further documents and instruments and do all acts and things as any of the other parties may reasonably require to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement.

3.02

Time of the Essence

Time is of the essence of this Agreement.

3.03

Benefit of the Agreement

This Agreement will enure to the benefit of and be binding upon the respective successors and permitted assigns of the parties.

3.04

Amendments and Waivers

No amendment to this Agreement will be valid or binding unless set forth in writing and duly executed by each of the parties. No waiver of any breach of any provision of this Agreement will be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided, will be limited to the specific breach waived.

3.05

Assignment

This Agreement may not be assigned by the Receiver or by the Purchaser without the consent of: (i) in the case of an assignment by the Receiver, the Purchaser; and (ii) in the case of an assignment by the Purchaser, the Receiver.

3.06

Notices

Any demand, notice or other communication to be given in connection with this Agreement must be given in writing and in accordance with Article 8.09 of the Asset Purchase Agreement.

3.07

Governing Law

This Agreement is governed by and will be construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.

3.08

Attornment

For the purpose of all legal proceedings this Agreement will be deemed to have been performed in the Province of Ontario and the courts of the Province of Ontario will have jurisdiction to entertain any action arising under this Agreement. The Receiver and the Purchaser each attorn to the jurisdiction of the courts of the Province of Ontario.


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3.09

Counterparts

This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original and all of which taken together will be deemed to constitute one and the same instrument.

3.10

Electronic Execution

Delivery of an executed signature page to this Agreement by any party by electronic transmission will be as effective as delivery of a manually executed copy of this Agreement by such party.

3.11

Severability

If any provision of this Agreement is determined by any court of competent jurisdiction to be illegal or unenforceable, that provision will be severed from this Agreement and the remaining provisions will continue in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any of the parties.

[The balance of this page has been intentionally left blank]


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IN WITNESS WHEREOF the parties have executed this Agreement as of the date first above written.

SUSGLOBAL ENERGY BELLEVILLE LTD.
   
Per:  
   
   
Per:  
   
   
   
BDO CANADA LIMITED, solely in its
capacity as receiver of ASTORIA ORGANIC
MATTERS LTD and. ASTORIA ORGANIC
MATTERS CANADA LP, and not in any other
capacity
   
Per:  


EXHIBIT D

ASSUMED CAPITAL LEASES

The Loan and Security Agreement #BAO9580A-003 between Astoria Canada and ECN Financial Inc. dated December 23, 2016, as amended, solely in respect of the following equipment:

1.      2013 Liebherr Model A316LI wheeled material handler with TCD 127hp capacity diesel engine, hydraulic lifting cab, s/n 1041-63129; and

2.      2013 RotoChopper model B66T portable grinder, s/n 13-2632.


EXHIBIT E

EQUIPMENT

1.      Maintenance shed with hand tools, Dewalt portable air compressor, gas powered pumps, vacuums, straps, heater, power washer etc.

2.      2015 Bard Industries Ltd. model DW 1000 fuel tank with 4550L capacity s/n A10347053 with small portable fuel tank on skid.

3.      Powered tarp winder with Deutz model TD 2.9L4 diesel engine, with 74hp capacity, s/n 1174962.

4.      (6) Gore cover system 8 meters x 50 meters Gore-Tex tarps, with (6) ATV UG windrow control system.

5.      2015 Active model Tuff Deck 100 ton truck scale with (2) digital read outs s/n 114832 10’ x 80’ deck.

6.      Portable office trailer with kitchen, office deck 14’ x 53’ with tandem axle.

7.      Office contents consisting of desks, chairs, computers, monitors, printers etc.

8.      (4) MegaDome steel structures with fabric buildings consisting of (2) 80’ x 420’ (1) 80’ x 200’ (1) 80’ x 117’.

Solely for the purpose of the conveyance of the Purchased Assets (including those specifically referenced in this paragraph), the Purchaser will prepare an itemized supplemental list of all tools, small equipment, electronic equipment and software licenses not specifically listed in this Exhibit E, and which are not Excluded Assets, and the components of the GORE composting control system (the “ Supplemental Exhibit E ”) as soon as possible after the date of this Agreement, and the Purchaser will deliver the Supplemental Exhibit E to the Receiver for its review and agreement. The Supplemental Exhibit E as agreed to by the parties hereto shall be incorporated by reference into this Exhibit E before the Closing Date. For the avoidance of any doubt, the items listed in the Supplemental Exhibit E are being sold on “as is, where is” basis in accordance with this Agreement.


EXHIBIT F

PERMITTED ENCUMBRANCES

Security/Registrations in favour of Element Financial Corporation solely in respect of the Assumed Capital Leases.


EXHIBIT G

OTHER EXCLUDED ASSETS

1.

Capital Leases:


  a.

2013 Liebherr model L550 wheel loaders with Liebherr model D934 diesel engine with 187hp capacity s/n 1287-034299.

     
  b.

2013 Liebherr model L550 wheel loaders with Leibherr model D934 diesel engine with 187hp capacity s/n 1287-034300.

     
  c.

2013 Komptech model Crambo 5000D duet shaft slow speed grinder s/n 167-281 with outfeed conveyor.

     
  d.

2009 Liebherr model R934C HDSL Litronic crawler excavator with Liebherr model D934, 7.0L diesel engine with 203hp capacity, s/n 918-024595.

     
  e.

2014 McCloskey model 621 REWT 4x4 screener s/n 81753, with Cat model C6.6 Acert diesel engine with 175hp s/n 66621463.

     
  f.

2014 McCloskey model ST 100, 100’ radial stacker s/n 82562 with Kabota diesel engine s/n CC2025

     
  g.

2013 Caterpillar model 246 skid steer s/n CAT0246CAJAY08918.



EXHIBIT H

ALLOCATION OF PURCHASE PRICE

[The Purchase Price allocation will be determined by the Purchaser and the Receiver prior to the Closing Date]






























Exhibit 31.1

CERTIFICATION

I, Gerald Hamaliuk, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of SusGlobal Energy Corp. (the “Company”);

   
2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

   
3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

   
4.

The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:


  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     
  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     
  (c)

Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     
  (d)

Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and


5.

The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the Company’s board of directors:


  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize, and report financial information; and

     
  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: November 14, 2017

  By: /s/ Gerald Hamaliuk
    Gerald Hamaliuk
  Chief Executive Officer
    (Principal Executive Officer)



Exhibit 31.2

CERTIFICATION

I, Ike Makrimichalos, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of SusGlobal Energy Corp. (the “Company”);

   
2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

   
3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

   
4.

The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:


  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     
  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     
  (c)

Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     
  (d)

Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and


5.

The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the Company’s board of directors:


  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize, and report financial information; and

     
  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: November 14, 2017

  By: /s/ Ike Makrimichalos
    Ike Makrimichalos
    Chief Financial Officer
    (Principal Financial and Accounting Officer)



Exhibit 32.1

CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350 ,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Gerald Hamaliuk, the Chief Executive Officer of SusGlobal Energy Corp. (the “Registrant”), and Ike Makrimichalos, the Chief Financial Officer of the Registrant, each hereby certifies that, to the best of his knowledge:

  1.

The Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2017, to which this Certification is attached as Exhibit 32.1 (the “Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

     
  2.

The information contained in the Report fairly presents, in all material respects, the financial condition of the Registrant at the end of the period covered by the Report and results of operations of the Registrant for the periods covered by the Report.

Date: November 14, 2017

  By: /s/ Gerald Hamaliuk
    Gerald Hamaliuk
    Chief Executive Officer
    (Principal Executive Officer)
     
  By: /s/ Ike Makrimichalos
    Ike Makrimichalos
    Chief Financial Officer
    (Principal Financial and Accounting Officer)