{"url_path":"/sec/snrg/10-k/2026/item-8","section_key":"item-8","section_title":"Item 8 *****Financial Statements and Supplementary Data.***","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-07-14","source_url":"https://www.sec.gov/Archives/edgar/data/1652539/0001062993-26-003641-index.html","accession_number":"0001062993-26-003641","cik":"0001652539","ticker":"SNRG","issuer_name":"SusGlobal Energy Corp.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1652539/0001062993-26-003641-index.html","primary_entity_key":"0001652539","primary_entity_name":"SusGlobal Energy Corp."},"word_count":16545,"has_tables":true,"body_markdown":"**Item 8.*****Financial Statements and Supplementary Data.***\n\n35\n\n**SUSGLOBAL ENERGY CORP.**\n**CONSOLIDATED FINANCIAL STATEMENTS**\n**December 31, 2025 and 2024**\n(Expressed in United States Dollars)\n\n**CONTENTS**\n\n[Report of the Independent Registered Public Accounting Firm-M&K(PCAOB ID 2738)](#page_37)\n[37](#page_37)\n\n[Consolidated Balance Sheets](#page_39)\n[39](#page_39)\n\n[Consolidated Statements of Operations and Comprehensive Loss](#page_40)\n[40](#page_40)\n\n[Consolidated Statements of Stockholders' Deficiency](#page_41)\n[41](#page_41)\n\n[Consolidated Statements of Cash Flows](#page_42)\n[42](#page_42)\n\n[Notes to the Consolidated Financial Statements](#page_44)\n[44](#page_44)\n\n \n\n36\n\nREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\n\nTo the Board of Directors and\nStockholders of SusGlobal Energy Corp.\n\n**Opinion on the Financial Statements**\n\nWe have audited the accompanying consolidated balance sheets of SusGlobal Energy Corp. (the Company) as of December 31, 2025 and 2024, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2025, and the related consolidated notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.\n\n**Going Concern**\n\nThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company suffered a net loss from operations and used cash in operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty\n\n**Basis for Opinion**\n\nThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\nWe conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.\n\nOur audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.\n\n**Critical Audit Matter**\n\nThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.\n\n37\n\n*Going Concern*\n\nDue to factors such as the net loss for the year, negative cash flows from operations, and the net capital deficiency, the Company evaluated the need to include a going concern qualification in the financial statements. See discussion in Note 2. \n\nAuditing management’s determination regarding the inclusion of a going concern qualification requires significant judgement given the fact that the Company uses management estimates of future revenues and expenses, as well as assumptions about future fundraising activity, which are not able to be substantiated.\n\nTo evaluate the appropriateness of the going concern qualification, we examined and evaluated the financial information, including management’s plans to mitigate the going concern qualification, and management’s disclosure on going concern.\n\n/s/ M&K CPAS, PLLC\n\nWe have served as the Company's auditor since 2022.\n\nThe Woodlands, TX\n\nJuly 14, 2026\n\n38\n\n**SusGlobal Energy Corp.**\n**Consolidated Balance Sheets**\n**As at December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n \n \n**2025**\n \n \n2024\n \n\n**ASSETS**\n \n \n \n \n \n \n\n**Current Assets**\n \n \n \n \n \n \n\nCash\n**$**\n**-**\n \n$\n1,295\n \n\nGovernment remittances receivable\n \n**9,581**\n \n \n25,881\n \n\nPrepaid expenses and deposits (note 6)\n \n**23,177**\n \n \n41,820\n \n\n**Total Current Assets**\n \n**32,758**\n \n \n68,996\n \n\n \n \n \n \n \n \n \n\nLong-lived Assets, net (note 7)\n \n**2,971,262**\n \n \n3,080,422\n \n\nLong-lived Assets held for sale (note 7)\n \n**5,836,800**\n \n \n5,560,000\n \n\n**Long-Term Assets**\n \n**8,808,062**\n \n \n8,640,422\n \n\n**Total Assets**\n**$**\n**8,840,820**\n \n$\n8,709,418\n \n\n**LIABILITIES AND STOCKHOLDERS' DEFICIENCY**\n \n \n \n \n \n \n\n**Current Liabilities**\n \n \n \n \n \n \n\nAccounts payable (note 8)                                                                                                                                                                       \n \n**6,012,657**\n \n \n5,195,602\n \n\nGovernment remittances payable\n \n**414,156**\n \n \n390,621\n \n\nAccrued liabilities (notes 8, 9, 10, 11, and 12)\n \n**9,051,377**\n \n \n6,193,283\n \n\nCurrent portion of long-term debt (note 9)-in default\n \n**9,730,662**\n \n \n8,920,726\n \n\nConvertible promissory notes (note 11)-in default\n \n**14,458,322**\n \n \n12,088,911\n \n\nLoans payable to related parties (note 12)\n \n**781,591**\n \n \n721,154\n \n\n**Total Current Liabilities**\n \n**40,448,765**\n \n \n33,510,297\n \n\n**Total Liabilities**\n \n**40,448,765**\n \n \n33,510,297\n \n\n**Stockholders' Deficiency**\n \n \n \n \n \n \n\nPreferred stock, $.0001 par value, 10,000,000 authorized, none issued and outstanding\n \n-\n \n \n-\n \n\nCommon stock, $.0001 par value, 150,000,000 authorized, 142,332,019 (2024- 131,332,019) shares issued and outstanding (note 13)\n \n**14,237**\n \n \n13,137\n \n\nAdditional paid-in capital\n \n**19,979,030**\n \n \n19,760,130\n \n\nAccumulated deficit\n \n**(52,116,571**\n**)**\n \n(46,429,702\n)\n\nAccumulated other comprehensive income\n \n**515,359**\n \n \n1,855,556\n \n\n**Stockholders' deficiency**\n \n**(31,607,945**\n**)**\n \n(24,800,879\n)\n\n**Total Liabilities and Stockholders' Deficiency**\n**$**\n**8,840,820**\n \n$\n8,709,418\n \n\n**Going concern**(note 2)\n \n \n \n \n \n \n\n**Commitments**(note 14)\n \n \n \n \n \n \n\n**Subsequent events** (note 20)\n \n \n \n \n \n \n\n*The accompanying notes are an integral part of these consolidated financial statements.*\n\n39\n\n **SusGlobal Energy Corp.**\n**Consolidated Statements of Operations and Comprehensive Loss**\n**For the years ended December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n \n \n**2025**\n \n \n2024\n \n\n \n \n \n \n \n \n \n\n**Revenue**\n**$**\n**32,340**\n \n$\n79,886\n \n\n**Cost of Sales**\n \n \n \n \n \n \n\nDepreciation\n \n**257,516**\n \n \n290,866\n \n\nDirect wages and benefits\n \n**54,972**\n \n \n72,928\n \n\nEquipment rental, delivery, fuel and repairs and maintenance\n \n**422,672**\n \n \n923,610\n \n\nUtilities\n \n**3,810**\n \n \n311\n \n\nOutside contractors\n \n**-**\n \n \n5,111\n \n\n \n \n**738,970**\n \n \n1,292,826\n \n\n**Total cost of sales**\n \n**738,970**\n \n \n1,292,826\n \n\n**Gross loss**\n \n**(706,630**\n**)**\n \n(1,212,940\n)\n\n**Operating expenses**\n \n \n \n \n \n \n\nManagement compensation-stock- based compensation (notes 8 and 13)\n \n**-**\n \n \n216,000\n \n\nManagement compensation-fees (note 8)\n \n**536,775**\n \n \n547,650\n \n\nProfessional fees\n \n**266,317**\n \n \n682,965\n \n\nMarketing\n \n**-**\n \n \n501\n \n\nInterest expense (notes 8, 9 and 12)\n \n**1,468,955**\n \n \n1,214,288\n \n\nOffice and administration\n \n**423,428**\n \n \n312,216\n \n\nRent and occupancy (note 8)\n \n**232,264**\n \n \n240,643\n \n\nInsurance\n \n**-**\n \n \n42,988\n \n\nFiling fees\n \n**38,256**\n \n \n34,520\n \n\nAmortization of financing costs\n \n**-**\n \n \n165,878\n \n\nRepairs and maintenance\n \n**445**\n \n \n709\n \n\nDirector compensation (note 8)\n \n**53,678**\n \n \n68,456\n \n\nForeign exchange (income) loss\n \n**(757,288**\n**)**\n \n1,168,768\n \n\n**Total operating expenses**\n \n**2,262,830**\n \n \n4,695,582\n \n\n**Net Loss from Continued Operations Before Other Expenses**\n \n**(2,969,460**\n**)**\n \n(5,908,522\n)\n\n**Other Expenses**(note 15)\n \n**(2,717,409**\n**)**\n \n(386,248\n)\n\n**Net Loss from Continued Operations**\n \n**(5,686,869**\n**)**\n \n(6,294,770\n)\n\n**Net Loss from Assets Held for Sale**\n \n**-**\n \n \n(1,564,401\n)\n\n**Net Loss**\n \n**(5,686,869**\n**)**\n \n(7,859,171\n)\n\n**Other comprehensive loss**\n \n \n \n \n \n \n\nForeign exchange (loss) income\n \n**(1,340,197**\n**)**\n \n1,905,222\n \n\n**Comprehensive loss**\n**$**\n**(7,027,066**\n**)**\n$\n(5,953,949\n)\n\n**Net loss per share-basic and diluted from continuing operations and from assets held for sale**\n**$**\n**(0.04**\n**)**\n$\n(0.06\n)\n\n \n \n \n \n \n \n \n\n**Weighted average number of common shares outstanding- basic and** **diluted**\n \n**139,485,444**\n \n \n126,975,736\n \n\n*The accompanying notes are an integral part of these consolidated financial statements.*\n\n40\n\n**SusGlobal Energy Corp.**\n**Consolidated Statements of Changes in Stockholders' Deficiency**\n**For the years ended December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \nAccumulated\n \n \n \n \n\n \n \n \n \n \n \n \n \nAdditional\n \n \n \n \n \nOther\n \n \n \n \n\n \n \nNumber\n \n \nCommon\n \n \nPaid-\n \n \nAccumulated\n \n \nComprehensive\n \n \n \n \n\n \n \nof Shares\n \n \nShares\n \n \nin Capital\n \n \nDeficit\n \n \n(Loss) Income\n \n \nTotal\n \n\nBalance-December 31, 2023\n \n125,272,975\n \n$\n12,531\n \n$\n19,539,606\n \n$\n(38,570,531\n)\n$\n(49,666\n)\n$\n(19,068,060\n)\n\nShares issued on conversion of related party accounts payable to equity\n \n809,044\n \n \n81\n \n \n101,049\n \n \n-\n \n \n-\n \n \n101,130\n \n\nShares issued on private placement\n \n6,000,000\n \n \n600\n \n \n119,400\n \n \n-\n \n \n-\n \n \n120,000\n \n\nCancellation of shares for professional services\n \n(750,000\n)\n \n(75\n)\n \n75\n \n \n-\n \n \n-\n \n \n-\n \n\nOther comprehensive loss\n \n-\n \n \n-\n \n \n-\n \n \n-\n \n \n1,905,222\n \n \n1,905,222\n \n\nNet loss\n \n-\n \n \n-\n \n \n-\n \n \n(7,859,171\n)\n \n-\n \n \n(7,859,171\n)\n\nBalance-December 31, 2024\n \n131,332,019\n \n$\n13,137\n \n$\n19,760,130\n \n$\n(46,429,702\n)\n$\n1,855,556\n \n$\n(24,800,879\n)\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n \n\n** **\n \n**Number**\n \n \n**Common**\n \n \n**Paid-in Capital**\n \n \n**Accumulated**\n**Deficit**\n \n \n**Accumulated**\n**Other**\n**Comprehensive**\n**Income**\n \n \n**Total**\n \n\n**Balance-December 31, 2024**\n \n**131,332,019**\n \n**$**\n**13,137**\n \n**$**\n**19,760,130**\n \n**$**\n**(46,429,702**\n**)**\n**$**\n**1,855,556**\n \n**$**\n**(24,800,879**\n**)**\n\n**Shares issued on private placement**\n \n**11,000,000**\n \n \n**1,100**\n \n \n**218,900**\n \n \n-\n \n \n**-**\n \n \n**220,000**\n \n\n**Other comprehensive loss**\n \n**-**\n \n \n**-**\n \n \n**-**\n \n \n-\n \n \n**(1,340,197**\n**)**\n \n**(1,340,197**\n**)**\n\n**Net loss**\n \n**-**\n \n \n**-**\n \n \n**-**\n \n \n**(5,686,869**\n**)**\n \n**-**\n \n \n**(5,686,869**\n**)**\n\n**Balance-December 31, 2025**\n \n**142,332,019**\n \n**$**\n**14,237**\n \n**$**\n**19,979,030**\n \n**$**\n**(52,116,571**\n**)**\n**$**\n**515,359**\n \n**$**\n**(31,607,945**\n**)**\n\n*The accompanying notes are an integral part of these consolidated financial statements.*\n\n41\n\n**SusGlobal Energy Corp.**\n**Consolidated Statements of Cash Flows**\n**For the years ended December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n \n \n**2025**\n \n \n2024\n \n\n**Cash flows from operating activities**\n \n \n \n \n \n \n\nNet loss\n**$**\n**(5,686,869**\n**)**\n \n$(7,859,171\n)\n\nAdjustments for:\n \n \n \n \n \n \n\nDepreciation\n \n**257,516**\n \n \n292,078\n \n\nGain on disposal of long-lived assets\n \n**-**\n \n \n(151,128\n)\n\nGain on forgiveness of long-term debt\n \n**-**\n \n \n(22,242\n)\n\nProvision for losses\n \n**440,424**\n \n \n(1,191,033\n)\n\nImpairment loss on long-lived assets\n \n**-**\n \n \n1,564,401\n \n\nLoss on settlement of claim\n \n**-**\n \n \n300,565\n \n\nAmortization of financing fees\n \n**-**\n \n \n165,878\n \n\nStock-based compensation\n \n**-**\n \n \n216,000\n \n\nInsurance recovery\n \n**(92,426**\n**)**\n \n-\n \n\nLoss on revaluation of convertible promissory notes\n \n**2,369,411**\n \n \n1,450,086\n \n\nChanges in non-cash working capital:\n \n** **\n \n \n \n \n\nTrade receivables\n \n**-**\n \n \n53,676\n \n\nGovernment remittances receivable\n \n**17,253**\n \n \n12,722\n \n\nPrepaid expenses and deposits\n \n**(13,033**\n**)**\n \n(27,770\n)\n\nAccounts payable\n \n**640,052**\n \n \n1,732,928\n \n\nGovernment remittances payable\n \n**4,010**\n \n \n(47,059\n)\n\nAccrued liabilities\n \n**2,060,767**\n \n \n1,660,130\n \n\n**Net cash used in operating activities**\n \n**(2,895**\n**)**\n \n(1,849,939\n)\n\n**Cash flows from investing activities**\n \n \n \n \n \n \n\nProceeds on disposal of long-lived assets\n \n**-**\n \n \n151,128\n \n\n**Net cash provided by investing activities**\n \n**-**\n \n \n151,128\n \n\n**Cash flows from financing activities**\n \n \n \n \n \n \n\nAdvance of long-term debt (net of financing fees)\n \n**358,855**\n \n \n205,363\n \n\nRepayment of long-term debt\n \n**-**\n \n \n(103,033\n)\n\nRepayments of obligations under capital lease\n \n**-**\n \n \n(63,775\n)\n\nAdvances of convertible promissory notes\n \n**-**\n \n \n110,500\n \n\nAdvances of loans payable to related parties (net of financing fees)\n \n**48,326**\n \n \n301,891\n \n\nRepayments of loans payable to related parties\n \n**(17,964**\n**)**\n \n(45,491\n)\n\nShares issue on private placement\n \n**220,000**\n \n \n120,000\n \n\n**Net cash provided by financing activities**\n \n**609,217**\n \n \n525,455\n \n\n**Effect of exchange rate on cash**\n \n**(607,617**\n**)**\n \n1,173,388\n \n\n**(Decrease) increase in cash**\n \n**(1,295**\n**)**\n \n32\n \n\n**Cash-beginning of year**\n \n**1,295**\n \n \n1,263\n \n\n**Cash-end of year**\n**$**\n**0**\n \n$\n1,295\n \n\n*The accompanying notes are an integral part of these consolidated financial statements.*\n\n42\n\n**SusGlobal Energy Corp.**\n**Consolidated Statements of Cash Flows**\n**For the years ended December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n** **\n \n**2025**\n \n \n2024\n \n\n**Supplemental Cash Flow Disclosure:**\n \n \n \n \n \n \n\n**Interest paid**\n**$**\n**83,498**\n \n$\n174,021\n \n\n**Supplementary Non-Cash Disclosure:**\n \n \n \n \n \n \n\n**Common stock issued at fair value for conversion of related party debt and accounts payable**\n**$**\n**-**\n \n$\n101,130\n \n\n*The accompanying notes are an integral part of these consolidated financial statements.*\n\n43\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**1. Nature of Business and Basis of Presentation**\n\nSusGlobal Energy Corp. (\"SusGlobal\") was formed by articles of amalgamation on December 3, 2014, in the Province of Ontario, Canada and its executive office is in Toronto, Ontario, Canada. SusGlobal, a company in the start-up stages and Commandcredit Corp. (\"Commandcredit\"), an inactive Canadian public company, amalgamated to continue business under the name of SusGlobal Energy Corp.\n\nOn May 23, 2017, SusGlobal filed an Application for Authorization to continue in another Jurisdiction with the Ministry of Government Services in Ontario and a certificate of corporate domestication and certificate of incorporation with the Secretary of State of the State of Delaware under which it changed its jurisdiction of incorporation from Ontario to the State of Delaware (the \"Domestication\"). In connection with the Domestication each of the currently issued and outstanding common shares were automatically converted on a one-for-one basis into common shares compliant with the laws of the state of Delaware (the \"Shares\"). As a result of the Domestication, pursuant to Section 388 of the General Corporation Law of the State of Delaware (the \"DGCL\"), SusGlobal continued its existence under the DGCL as a corporation incorporated in the State of Delaware. The business, assets and liabilities of SusGlobal and its subsidiaries on a consolidated basis, as well as its principal location and fiscal year, were the same immediately after the Domestication as they were immediately prior to the Domestication. SusGlobal filed a Registration Statement on Form S-4 to register the Shares and this registration statement was declared effective by the Securities and Exchange Commission on May 12, 2017.\n\nOn December 11, 2018, the Company began trading on the OTCQB venture market exchange, under the ticker symbol SNRG.\n\nSusGlobal is a renewables company focused on acquiring, developing and monetizing a global portfolio of proprietary technologies in the waste to energy and regenerative products application.\n\nThese consolidated financial statements of SusGlobal and its wholly-owned subsidiaries, SusGlobal Energy Canada Corp. (\"SGECC\"), SusGlobal Energy Canada I Ltd. (\"SGECIL\"), SusGlobal Energy Belleville Ltd. (\"SGEBL\"), SusGlobal Energy Hamilton Ltd. (\"SGEHL\") and 1684567 Ontario Inc. (\"1684567\") (together, the \"Company\"), have been prepared following generally accepted accounting principles in the United States (\"US GAAP\") for annual financial information and the Securities Exchange Commission (\"SEC\") instructions to Form 10-K and Article 8 of SEC Regulation S-X, and are expressed in United States Dollars.\n\n \n\n**2. Going Concern**\n\nThe 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.\n\nThe Company incurred a net loss of $5,686,869 (2024-$7,859,171) for the year ended December 31, 2025 and as at that date had a working capital deficit of $40,416,007 (December 31, 2024-$33,441,301) and an accumulated deficit of $52,116,571 (December 31, 2024-$46,429,702) and expects to incur further losses in the development of its business.\n\nOn January 10, 2024, the Company stopped receiving waste at its waste processing and composting operation in Belleville, Ontario Canada, to address several non-compliance matters described in orders from the Ministry of the Environment, Conservation and Parks (the \"MECP\"). The Company continues to seek investors to raise funds through debt or equity. The Company was unsuccessful in raising funds with a firm through an advisory and distribution agreement announced on December 14, 2023.\n\n9\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**2. Going Concern**, (continued)\n\nThese factors cast substantial doubt as to the Company's ability to continue as a going concern, which is dependent upon its ability to obtain the necessary financing to further the development of its business, satisfy its obligations to its creditors, and upon achieving profitable operations through revenue growth. There is no assurance of funding being available or available on acceptable terms. Realization values may be substantially different from carrying values as shown.\n\nThese 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.\n\n \n\n**3. Recently Adopted Accounting Pronouncements**\n\nThe following section provides a description of new accounting pronouncements (\"Accounting Standard Update\" or \"ASU\") issued by the Financial Accounting Standards Board (\"FASB\") that are applicable to the Company.\n\nIn December 2023, the FASB issued ASU No. 2023-09 (\"ASU 2023-09\"), Income Taxes (Topic 740): Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis and early adoption is permitted. The Company adopted ASU No, 2023-09 on January 1, 2025 and the adoption of ASU 2023-09 did not have a material impact on the Company's financial statements and disclosures.\n\nThere were no new accounting pronouncements issued and not yet adopted that were expected to have a material impact on the Company's consolidated financial position or results of operations in the current or future periods.\n\n \n\n**4. Significant Accounting Policies**\n\na)    Principles of consolidation\n\nThe consolidated financial statements include the accounts of SusGlobal and its wholly owned subsidiaries, SGECC, incorporated on December 14, 2015, SGECIL, incorporated on December 15, 2015, SGEBL, incorporated on July 27, 2017, SGEHL, incorporated on August 10, 2021 and 1684567, acquired effective May 24, 2019. All significant inter-company balances and transactions have been eliminated on consolidation.\n\n \n\nb)    Business combinations\n\nThe Company adopted ASU No. 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.\n\n10\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**4. Significant Accounting Policies,**(continued)\n\nA business combination is a transaction or other event in which control over one or more businesses is obtained. A business in an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits. A business consists of inputs and processes applied to those inputs that have the ability to create outputs that provide a return to the Company and its shareholders. A business need not include all the inputs and processes that were used by the acquiree to produce outputs if the business can be integrated with the inputs and processes of the Company to continue to produce outputs. The Company considers several factors to determine whether the set of activities and assets is a business.\n\nBusiness acquisitions are accounted for using the acquisition method whereby acquired assets and liabilities are recorded at fair value as at the date of acquisition with the excess of the purchase consideration over such value being recorded as goodwill and allocated to reporting units (\"RUs\"). If the fair value of the net assets acquired exceeds the purchase consideration, the difference is recognized immediately as a gain in the consolidated statements of operations. Acquisition-related costs are expensed in the period in which they are incurred, except for the cost of debt or equity instruments issued in relation to the acquisition which is included in the carrying amount of the related instrument.\n\nCertain fair values may be estimated at the acquisition date pending confirmation or completion of the valuation process. Where provisional values are used in accounting for a business combination, they are adjusted retrospectively in subsequent periods. However, the measurement period will not exceed one year from the acquisition date. If the assets acquired are not a business, the transaction is accounted for as an asset acquisition. The Company's acquisition of 1684567, effective May 24, 2019, was accounted for as an asset acquisition whereby the total acquisition price was allocated on assets acquired based on relative fair values and acquisition-related costs are considered a part of the acquisition price.\n\n \n\nc)    Use of estimates\n\nThe preparation of the Company's consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on management's best knowledge of current events and actions the Company may undertake in the future. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Areas involving significant estimates and assumptions include: the allowance for doubtful accounts, inventory valuation, useful lives of long-lived and intangible assets, impairment of long-lived assets and intangible assets, valuation of asset acquisition, accruals, fair value of convertible promissory notes, deferred income tax assets and related valuation allowance, environmental remediation costs, stock-based compensation and going concern. Actual results could differ from these estimates. These estimates are reviewed periodically and as adjustments become necessary, they are reported in earnings in the period in which they become available.\n\n \n\nd)      Cash\n\nCash consists of deposits held in financial institutions.\n\n \n\n11\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**4. Significant Accounting Policies,**(continued)\n\ne)      Trade receivables\n\nTrade receivables, which are recorded when billed and when services are performed, are claims against third parties that will be settled in cash. The carrying value of trade receivables, net of an allowance for doubtful accounts, represents the estimated realizable value. An estimate of allowance for doubtful accounts is based on historical trends; type of customer, such as commercial or municipal; the age of outstanding trade receivables; and existing economic conditions. If events or changes in circumstances indicate that specific trade receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. Past-due trade receivable balances are written off when internal collection efforts have been unsuccessful.\n\n \n\n(f)      Fair value of financial instruments\n\nThe Company measures the fair value of financial assets and liabilities based on ASC 820 \"Fair Value Measurements and Disclosures\", which determines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.\n\nFair 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:\n\n \na.\nLevel 1 - Quoted prices in active markets for identical assets or liabilities.\n\n \nb.\nLevel 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.\n\n \n\nc.\n\nLevel 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.\n\nThe carrying amounts of the Company's financial instruments, such as cash, trade receivables, accounts payable and accrued liabilities approximate fair value due to the short-term nature of these instruments. The carrying amount of the long-term term debt, mortgages payable and loans payable to related parties also approximates fair value due to their market interest rate.\n\nIn determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and also considers counterparty credit risk in its assessment of fair value. The Company had no financial assets or liabilities recorded at fair value on a recurring basis as at December 31, 2025 and December 31, 2024 except for the convertible promissory notes for which the Company elected the fair value option. The convertible promissory notes for which the fair value option has been elected are carried at fair value based on Level 3 inputs (see note 11).\n\n \n\ng)      Inventory\n\nInventory, which consists of screened organic compost, is stated at the lower of cost and net realizable value. Cost is represented by production cost, which includes equipment rental, delivery, fuel and repairs and maintenance, direct wages and benefits, outside contractors, utilities and manufacturing overhead. Inventory quantities on hand are reviewed on a\n\n12\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**4. Significant Accounting Policies,**(continued)\n\nweekly basis and typically there is no need to record provisions for excess or obsolete inventory as the inventory has a long shelf life. The inventory is stored outdoors and accumulated in piles. There has been no cost recorded for any inventory as at December 31, 2025 and 2024.\n\n \n\nh)      Intangible assets\n\nIntangible assets included a technology license, which was stated at cost less accumulated amortization and was amortized on a straight-line basis over the useful life which was the contract term of five years plus the renewal option of five years and customer lists, which were stated at cost less accumulated amortization and are amortized on a straight-line basis over the useful lives of the customer contracts, which ranged between forty-five and sixty-six months. Intangible assets also included environmental compliance approvals and trademarks, which were stated at cost, had indefinite useful lives and were not amortized until their useful lives were determined to be no longer indefinite. The Company evaluates the intangible assets for impairment annually in the fourth quarter or when triggering events are identified and whether events and circumstances continue to support the indefinite useful life.\n\n \n\ni)      Goodwill\n\nGoodwill arising on an acquisition of a business represents the excess of the purchase price over the fair value of the net identifiable assets of the acquired business. Goodwill is carried at cost as established at the date of acquisition of the acquired business less accumulated impairment losses, if any. Management assesses goodwill impairment annually in the fourth quarter or more frequently if events or changes in circumstances indicate that it might be impaired by comparing its carrying value to the fair value of the acquired business.\n\n \n\nj)      Long-lived assets\n\nLong-lived assets are stated at cost. Equipment awaiting installation on site is not depreciated until it is commissioned. Depreciation is based on the estimated useful life of the asset and depreciated annually on a straight-line basis at the following annual rates:\n\n**Category**\n**Rate**\n\nComputer equipment\n30%\n\nComputer software\n50%\n\nOfficer trailer and vacuum trailer\n30%\n\nSignage\n20%\n\nMachinery and equipment, including under capital lease\n30%\n\nAutomotive equipment\n30%\n\nComposting buildings\n6%\n\nGore cover system\n10%\n\nDriveway and paving\n8%\n\n \n\n13\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**4. Significant Accounting Policies,**(continued)\n\nk)      Impairment of long-lived assets\n\nIn accordance with ASC 360, \"Property, Plant and Equipment\", long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.\n\nThe Company evaluates at each balance sheet date whether events or circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the carrying amounts are recoverable. In the event that such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. On December 31, 2025, the Company tested the long-lived assets for impairment to determine whether the carrying value exceeded the fair value. The Company used quoted market values and independent appraisals of its long-lived assets and determined that no impairment loss was required to be recognized.\n\n \n\nl)      Debt issuance costs\n\nDebt 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. Debt issuance costs related to convertible promissory notes which are valued at fair value are expensed once incurred.\n\n \n\nm)      Environmental remediation costs\n\nThe Company accrues for costs associated with environmental remediation and clean-up obligations when such costs are probable and reasonably estimable. Such accruals are adjusted as further information develops or circumstances change.\n\n \n\nn)      Income taxes\n\nThe Company accounts for income taxes in accordance with Financial Accounting Standards Board (\"FASB\") ASC 740, \"Income Taxes.\" Deferred tax assets and liabilities are recorded for differences between the accounting and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or receivable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.\n\n \n\no)      Revenue recognition\n\nThe Company's revenues are from the tipping fees charged for waste delivery to the Company's organic composting facility and from the sale of organic compost. The Company recognizes revenue when it satisfies a performance obligation when transferring control over a product or service to a customer. The tipping fees charged for services are generally defined in service agreements or arrangements and vary based on contract-specific terms such as frequency of service, type of waste, weight, volume and the general market factors influencing a region's rates. The Company also generated revenue from fees charged for garbage collection services and landfill management services, based on agreements with customers. Revenue is recognized as waste is accepted and collection is reasonably assured for the tipping fees charged and monthly for the other services and collection is assured. The waste collected is processed, cured and screened before being sold as organic compost. The cost of these processes is accrued at the time of revenue recognition. Further, the Company recognizes revenue from the sale of carbon credits which are marketed by an independent party.\n\n \n\n14\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**4. Significant Accounting Policies,**(continued)\n\np)      Loss per share\n\nBasic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus potentially dilutive securities outstanding for each year. The computation of diluted loss per share has not been presented as its effect would be anti-dilutive.\n\n \n\nq)      Convertible promissory notes\n\nThe Company had elected the fair value option to account for its convertible promissory notes issued during 2021 and subsequently. In accordance with ASC 825, the convertible promissory notes are marked-to-market at each reporting date with changes in fair value recorded as a component of other expenses, in the consolidated statements of operations and comprehensive loss. The Company has elected to include interest expense in the changes in fair value. Transaction costs are incurred as expensed. The Company did not elect the fair value option for the convertible promissory notes issued in 2019. The notes were measured at amortized cost.\n\n \n\nr)      Stock-based compensation\n\nThe Company records compensation costs related to stock-based awards in accordance with ASC 718, Compensation-Stock Compensation, whereby the Company measures stock-based compensation cost at the grant date based on the estimated fair value of the award. Compensation cost is recognized on a straight-line basis over the requisite service period of the award. Where necessary, the Company utilizes the Black-Scholes option-pricing model to estimate the fair value of stock options granted, which requires the input of highly subjective assumptions including: the expected option life, the risk-free rate, the dividend yield, the volatility of the Company's stock price and an assumption for employee forfeitures. The risk-free rate is based on the U.S. Treasury bill rate at the date of the grant with maturity dates approximately equal to the expected term of the option. The Company has not historically issued any dividends and does not expect to in the near future. Changes in any of these subjective input assumptions can materially affect the fair value estimates and the resulting stock-based compensation recognized. The Company has not issued any stock options and has no stock options outstanding at December 31, 2025 and 2024.\n\n \n\ns)      Comprehensive Loss\n\nThe Company accounts for comprehensive loss in accordance with ASC 220, \"Comprehensive Income,\" which establishes standards for reporting and presentation of comprehensive loss and its components. Comprehensive loss is presented in the consolidated statements of stockholders' deficiency and consists of net loss and foreign currency translation adjustments.\n\n \n\nt)      Foreign currency translation\n\nThe functional currency of the Company is the Canadian dollar (the \"C$\") and its presentation or reporting currency is the United States dollar (\"$\"). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net income (loss) for the year. In translating the financial statements of the Company's Canadian subsidiaries from their functional currency into the Company's reporting currency of $, balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in cumulative other comprehensive income (loss) in stockholders' deficiency. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments.\n\n \n\n15\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**5. Financial Instruments**\n\nInterest, Credit and Concentration Risk\n\nInterest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company is not exposed to significant interest rate risk on the current portion of its long-term debt as the interest rates are fixed.\n\nCredit risk is the risk of loss associated with a counterparty's inability to perform its payment obligations. As at December 31, 2025, the Company's credit risk is primarily attributable to cash. As at December 31, 2025, the Company's cash was held with a Canadian chartered bank and a United States of America bank.\n\nWith regards to credit risk with customers, the customers' credit evaluation is reviewed by management and account monitoring procedures are used to minimize the risk of loss. The Company believes that no additional credit risk beyond the amounts provided for by the allowance for doubtful accounts is inherent in accounts receivable. As at December 31, 2025 and 2024, the allowance for doubtful accounts was $nil (C$nil).\n\nAs at December 31, 2025 and 2024, the Company is exposed to concentration risk as it had no customers representing greater than 5% of total trade receivables and no customers as at December 31, 2025 and 2024. The Company had certain customers whose revenue individually represented 10% or more of the Company's total revenue.  These customers (one for 2025) accounted for 100% (2024-96%; 73% 13% and 10%) of total revenue.\n\nLiquidity Risk\n\nLiquidity risk is the risk that the Company will be unable to meet its obligations as they fall due. The Company takes steps to ensure it has sufficient working capital and available sources of financing to meet future cash requirements for capital programs and operations. Management is considering all its options to refinance its obligations and repay creditors. Refer also to going concern, note 2 and subsequent events, note 20.\n\nThe 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. To continue operations, the Company will need to raise capital, repay all of its outstanding obligations and complete the refinancing of its real property and organic waste processing and composting facility. There is no assurance of funding being available or available on acceptable terms. Realization values may be substantially different from carrying values as shown. Refer also to going concern, note 2 and subsequent events note 20.\n\nCurrency Risk\n\nAlthough the Company's functional currency is the C$, the Company realizes a portion of its expenses in United States Dollars (\"$\"). Consequently, certain assets and liabilities are exposed to foreign currency fluctuations. As at December 31, 2025, $2,746,425 (2024-$2,323,951) of the Company's net monetary liabilities were denominated in $. The Company has not entered into any hedging transactions to reduce the exposure to currency risk.\n\n \n\n16\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**6. Prepaid Expenses and Deposits**\n\nIncluded in prepaid expenses and deposits are costs related to prepaid rent and professional services retainers along with administrative services to be expensed after December 31, 2025.\n\n \n\n**7. Long-lived Assets, net**\n\n \n \n \n \n \n**2025**\n \n \n \n \n \n2024\n \n\n \n \n**Cost**\n \n \n**Accumulated**\n \n \n**Net book value**\n \n \nNet book value\n \n\n \n \n \n \n \n**depreciation**\n \n \n \n \n \n \n \n\nLand\n**$**\n**1,537,997**\n \n**$**\n**-**\n \n**$**\n**1,537,997**\n \n**$**\n**1,465,060**\n \n\nComposting buildings\n \n**2,212,234**\n \n \n**1,092,876**\n \n \n**1,119,358**\n \n \n**1,192,714**\n \n\nGore cover system\n \n**1,027,293**\n \n \n**827,236**\n \n \n**200,057**\n \n \n**288,427**\n \n\nDriveway and paving\n \n**338,169**\n \n \n**224,319**\n \n \n**113,840**\n \n \n**134,221**\n \n\n \n**$**\n**5,115,693**\n \n**$**\n**2,144,431**\n \n**$**\n**2,971,262**\n \n**$**\n**3,080,422**\n \n\nDuring the year ended December 31, 2025, depreciation is disclosed in cost of sales in the amount of $257,516 (C$359,810) (2024-$290,866; C$398,337) and in office and administration in the amount of $nil (C$nil) (2024-$1,212; C$1,656) in the consolidated statements of operations and comprehensive loss. In addition, the Company realized a gain on the disposal of long-lived assets, in the amount of $nil (2024-$151,128). Refer also to other expenses, note 15(f).\n\nLong-lived Assets-held for sale\n\nOn July 28, 2024, the Company's real estate broker listed the Company's two properties located in Hamilton, Ontario, Canada, (the \"Hamilton Facility\") for sale. On the recommendation of the real estate broker, there was no selling price noted. Refer also to subsequent events, notes 20 (b) and (e).\n\nIn accordance with ASC 205-20, a disposal of a component or a group of components should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when a component of or group of components meets the initial criteria for classification of held for sale to be classified as held for sale. Per the initial criteria for classification of held for sale, a component or a group of components, or a business or nonprofit activity (the entity to be sold), should be classified as held for sale in the period in which all of the following criteria are met:\n\n• Management, having the authority to approve the action, commits to a plan to sell the long-lived assets to be sold.\n\n17\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**7. Long-lived Assets, net,**(continued)\n\n• The long-lived assets to be sold are available for immediate sale in their present condition subject only to terms that are usual and customary for sales of such long-lived assets to be sold.\n\n• An active program to locate a buyer or buyers and other actions required to complete the plan to sell the long-lived assets to be sold have been initiated.\n\n• The sale of the long-lived assets to be sold is probable (the future event or events are likely to occur), and transfer of the long-lived assets to be sold is expected to qualify for recognition as a completed sale, within one year, unless events or circumstances beyond an entity's control extend the period required to complete the sale as discussed below.\n\n• The long-lived assets to be sold are being actively marketed for sale at a price that is reasonable in relation to its current fair value.\n\nActions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.\n\n \n\n**8. Related Party Transactions**\n\nFor the year ended December 31, 2025, the Company incurred $429,420 (C$600,000) (2024-$438,120; C$600,000) respectively, in management fees expense with Travellers International Inc. (\"Travellers\"), an Ontario company controlled by a director and the president and chief executive officer (the \"CEO\"); and $107,355 (C$150,000) (2024-$109,530; C$150,000) in management fees expense with the Company's chief financial officer (the \"CFO\"). As at December 31, 2025, unpaid remuneration and unpaid expenses in the amount of $1,007,247 (C$1,380,547) (2024-$488,294; C$702,581) is included in accounts payable and $332,724 (C$456,036) (2024-$212,695; C$306,036) in accrued liabilities in the consolidated balance sheets.\n\nFor the year ended December 31, 2025, the Company incurred $106,281 (C$148,500) (2024-$114,064; C$156,209) in rent expense paid under a lease agreement, currently under a month-to-month lease with Haute Inc. (\"Haute\"), an Ontario company controlled by the CEO. As at December 31, 2025, $62,411 (C$85,541) (December 31, 2024-$7,881; C$11,338) in outstanding rent expense including the related goods and services tax is included in accounts payable in the consolidated balance sheets.\n\nIn addition, during the year ended December 31, 2025, Travellers converted $nil (C$nil) (December 31, 2024-$101,130; C$135,600 in outstanding accounts payable) in outstanding accounts payable for nil (December 31, 2024-809,044) common shares of the Company, based on closing trading prices on the day prior to each conversion.\n\nFor those independent directors providing their services throughout 2025, the Company recorded directors' compensation in the amount of $53,678 (C$75,000) (2024-$68,456; C$93,750). As of December 31, 2025, outstanding directors' compensation of $313,395 (C$429,543) (2024-$246,407; C$354,543) is included in accrued liabilities in the consolidated balance sheets.\n\nFurthermore, for the year ended December 31, 2025, the Company recognized management stock-based compensation expense of $nil (2024-$216,000), on the common stock issued to the CEO in 2023\n\n \n\n18\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**9. Long-Term Debt**\n\n \n \n**2025**\n \n \n2024\n \n\n**(a)i.)** **Mortgage Payable-Past due June 1, 2024**\n**$**\n**4,097,638**\n \n$\n3,903,315\n \n\n**(a)ii)** **Mortgage Payable-Past due March 1, 2024**\n \n**1,094,400**\n \n \n1,042,500\n \n\n**(a)iii)****Mortgage Payable-Past due November 2, 2025**\n \n**1,459,200**\n \n \n1,390,000\n \n\n**(a)iv)** **Mortgage Payable-Past due November 2, 2024**\n \n**766,080**\n \n \n729,750\n \n\n**(a)v)** **Mortgage Payable-Past due December 14, 2024**\n \n**1,629,413**\n \n \n1,552,141\n \n\n**(a)vi.)** **Mortgage Payable-Past due October 2, 2024**\n \n**683,931**\n \n \n303,020\n \n\n** **\n \n**9,730,662**\n \n \n8,920,726\n \n\n**Current portion**\n \n**(9,730,662**\n**)**\n \n(8,920,726\n)\n\n**Long-Term portion**\n**$**\n**-**\n \n$\n-\n \n\n(a) i On December 1, 2023, this 1st mortgage was renewed with a new maturity date of June 1, 2024, now past due and a fixed interest rate of 13% per annum. On renewal, the 1st mortgage was increased by $303,718 (C$416,280), from $3,793,920 (C$5,200,000) to $4,097,638 (C$5,616,280), to account for increased interest based on the previous variable rate, three months of prepaid interest and a financing fee. The 1st mortgage is secured by the shares held of 1684567, a 1st mortgage on the Belleville Facility and a general assignment of rents. Financing fees on the 1st mortgage, fully amortized by the end of the previous year, totaled $316,516 (C$455,419).\n\nii On March 1, 2023, the Company obtained a 2nd mortgage in the amount of $1,094,400 (C$1,500,000) bearing interest at the annual rate of 12%, repayable monthly, interest only with a maturity date of March 1, 2024, now past due, secured as noted under paragraph i) above. The Company incurred financing fees of $41,700 (C$60,000), fully amortized by the end of the previous year.\n\niii On November 2, 2023, the Company completed the purchase of additional land, consisting of a 2.03-acre site in Hamilton, Ontario, Canada for $2,261,760 (C$3,100,000), prior to an additional disbursement of $42,663 (C$58,475) representing land transfer tax. The Company obtained a vendor take-back mortgage in the amount of $1,459,200 (C$2,000,000) bearing interest at 7% annually, payable monthly, interest only and maturing November 2, 2025, now past due. An additional mortgage, as noted below under paragraph iv), was arranged to complete the purchase. Refer also to subsequent events, note 20(a).\n\niv In connection with the purchase of additional land noted above under paragraph iii) above, a 2nd mortgage was obtained in the amount of $766,080 (C$1,050,000) bearing interest at 13% annually, payable monthly interest only and secured by a 3rd mortgage on the property at the Belleville Facility.\n\nv On December 14, 2023, the Company made arrangements to repay the previous 1st mortgage on the first property purchased in Hamilton, Ontario, Canada on August 17, 2021, for a new 1st mortgage in the amount of $1,629,413 (C$2,233,298) with new creditors. The original 1st mortgage was a vendor take back mortgage, as noted below under paragraph vi). \n\n19\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**9. Long-Term Debt,** (continued)\n\nvi On April 2, 2024, the Company received funds in the amount of $143,022 (C$196,028) for a $236,234 ($323,786) 4th mortgage secured by the Belleville Facility bearing interest at 12% annually payable monthly interest only maturing October 2, 2024, cross collateralized by a 3rd mortgage secured by the additional land in Hamilton, Ontario, Canada, net of unpaid interest, a financing fee of $18,765 (C$27,000), fully amortized at the end of the previous year and six months of capitalized interest. Further, additional sums totaling $447,697 (C$613,619) were advanced after April 2, 2024, resulting in a balance of $683,931 (C$937,405) at December 31, 2025. The additional advances by the private lenders were used to fund general and administrative expenses.\n\nAs at December 31, 2025, $1,934,432 (C$2,651,359) (December 31, 2024-$867,045; C$1,247,547) of accrued interest is included in accrued liabilities in the consolidated balance sheets.\n\nFor the year ended December 31, 2025, $1,096,557 (C$1,532,145) (2024-$1,126,326; C$1,542,490) in interest was incurred on the mortgages payable.\n\nAll the long-term debt is in default. Refer also to going concern, note 2 and subsequent events, note 20(e).\n\n \n\n**10. Convertible Promissory Notes**\n\n** **\n \n**2025**\n \n \n2024\n \n\n** **\n \n**  **\n \n \n \n \n\n**(a) Convertible promissory notes-October 28 and 29, 2021**\n**$**\n**4,224,384**\n \n$\n3,432,025\n \n\n**(b) Convertible promissory notes-March 3 and 7, 2022**\n \n**8,424,964**\n \n \n6,927,508\n \n\n**(c) Convertible promissory note-June 23, 2022**\n \n**1,604,733**\n \n \n1,564,475\n \n\n**(d) Convertible promissory note-April 12, 2024, amended May 23, 2024**\n \n**204,241**\n \n \n164,903\n \n\n \n**$**\n**14,458,322**\n \n$\n12,088,911\n \n\nThe convertible promissory notes, which are in default, are accounted for under the fair value option in the consolidated financial statements.\n\nThe actual principal outstanding on the balance of the convertible promissory notes as at December 31, 2025 is $9,907,272 (December 31, 2024-$8,733,833), including accrued interest of $3,564,889 (2024-$2,391,450).\n\n(a) On October 28 and 29, 2021, the Company entered into two securities purchase agreement (the \"October 2021 SPAs) with two investors (the \"October 2021 Investors\") pursuant to which the Company issued to the October 2021 Investors two 15% OID unsecured convertible promissory notes (the \"October 2021 Investor Notes\") in the principal amount of $1,765,118. The October 2021 Investor Notes are convertible, with accrued interest, from time to time on notice of a liquidity event (a \"Liquidity Event\"). A Liquidity Event is defined as a public offering of the Company's common stock resulting in the listing for trading of the common stock on any one of several exchanges. The October 2021 Investor Notes can be prepaid prior to maturity for an amount of 120% of the prepayment amount.\n\n20\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**10. Convertible Promissory Notes,** (continued)\n\nThe maturity date of the October 2021 Investor Notes is the earlier of (i) July 28 and 29, 2022 and (ii) the occurrence of a Liquidity Event, as described above (the \"Maturity Date\"). Upon the occurrence of a Liquidity Event, the October 2021 Investors are entitled to convert all or a portion of their October 2021 Investor Notes including any accrued and unpaid interest at a conversion price (the \"Conversion Price\") equal to 70% (representing a 30% discount) multiplied by the price per share of the Common Stock at the public offering associated with the Liquidity Event.\n\nUpon the occurrence of an event of default, the interest rate on the October 2021 Investor Notes will immediately accrue at 24% per annum and be paid in cash monthly to the October 2021 Investors, until the default is cured. And the Conversion Price will be reset to 85% of the lowest volume weighted average price for the ten consecutive trading days ending on the trading day that is immediately prior to the applicable conversion date.\n\nOn May 11, 2022, the holder of the October 29, 2021, investor note, provided an amendment for an optional conversion of his investor notes. The conversion price was amended to be (i) the product of the Liquidity Event price multiplied by the discount of 35% (previously 30%) or (2) the greater of (i) the product of the closing price per share of the Company's Common Stock as reported by the applicable trading market on the trading day immediately prior to the conversion date multiplied by the discount (35%) or $1.70 multiplied by the discount (35%), provided that in the event of a conversion, of investor note, at a time that a Liquidity Event shall not have previously occurred and be continuing, the conversion price for such conversion shall be as provided in the amendment.\n\nOn August 16, 2022, the Company was sent a notice of default from one of the October 2021 Investors, whose investor note was issued on October 29, 2021. On September 15, 2022, the Company and the investor of the October 2021 investor note entered into an amendment to the October 2021 investor note which served as a cure to the previously issued default notice.\n\nPursuant to the September 15, 2022 amendment, the Company and the October 29, 2021 investor agreed that the outstanding principal amount of the October 29, 2021 investor note would increase by 10% to $1,618,100 from the previously issued principal amount of $1,471,000. The new agreed upon maturity date was changed to November 15, 2022, subject to certain conditions and the maturity date would automatically be extended to January 15, 2023, provided that the October 29, 2021 investor does not notify the Company in writing prior to the maturity date that the automatic extension of the maturity date has been cancelled. In connection with this amendment, the Company agreed to use its best efforts to promptly facilitate the conversion of the October 29, 2021 investor note into shares of the Company's common stock.\n\nAs a result of the default on November 15, 2022, the Company was informed that the October 29, 2021 investor will now be accruing interest at the default rate of 24% per annum.  In addition, on October 4, 2023, an action was launched by the October 29, 2021 investor, who claimed he was owed $1,300,000 plus accrued interest which is after conversions of $318,100 during 2022 and 2023 and accrued interest of $969,337 as at December 31, 2025 (December 31, 2024-$657,337). The fair value of this convertible promissory note, included in the total in the table above, is $3,449,419 (December 31, 2024-$2,835,298). The Company intends to repay the balance owed when it is financially able to do so.\n\nFurther, the October 29, 2021 investor agreed not to convert more than $100,000 in any one conversion notice and the October 29, 2021 investor agreed not to issue an additional conversion notice unless and until any previously issued conversion shares have been sold by the October 29, 2021 investor or exceed 10% of the daily trading volume in selling the shares of the Company's common stock.\n\n21\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**10. Convertible Promissory Notes,** (continued)\n\nOn September 21, 2022 and November 10, 2022, the October 29, 2021 investor issued conversion notices to the Company and the Company issued 372,090 common shares at conversion prices ranging from $0.1885 to $0.2339 per share respectively, on the conversion of $25,000 and $50,000 respectively, of the October 29, 2021 investor note, having a fair market value of $97,129 on conversion. The October 29, 2021 investor has not informed the Company of an extension to the current maturity date but continued to issue conversion notices to the Company prior to the default notice of June 8, 2023, noted below.\n\nOn December 22, 2022, the October 28, 2021 investor, whose October 28, 2021 investor note had a previous Principal Amount of $294,118 and a maturity date of July 28, 2022, provided the Company with an amendment whereby the maturity date of the October 28, 2021 investor note was extended to the earlier of July 28, 2023 or the occurrence of a Liquidity Event. In addition, the Company agreed that the investor could convert his October 28, 2021, investor note into shares of the Company's common stock at any time at the investor's option. Previously, the October 28, 2021 Note was only convertible upon the occurrence of the Liquidity Event. The Company also agreed to change the conversion price to be the lowest trading bid price of the Company's common stock on the trading day immediately prior to the conversion date multiplied with a 35% discount to that lowest price.\n\nPreviously, the conversion price was a 30% discount to the price at which the securities were sold in connection with the Liquidity Event. In consideration for the extension of the maturity date, the Company agreed to issue the investor 500,000 shares of the Company's common stock. The Company used the with-and-without method to allocate the proceeds between the convertible promissory note and the common shares. As a result, all the proceeds were allocated to the convertible promissory note and $nil to the common shares. As a result of the default on July 28, 2023, the Company is now incurring interest at the default rate of 24%. As at December 31, 2025, this note had a principal balance of $509,841 (December 31, 2024-$432,523) including accrued interest of $187,681 (December 31, 2024-$110,363). The fair value of this convertible promissory note, included in the table above, is $774,965 (December 31, 2024-$596,727).\n\nOn June 8, 2023, the October 29, 2021 investor's counsel sent the Company a notice of default on the October 29, 2021 investor note and the March 2022 Investor Notes, described below. The default was caused by the holders of these promissory notes not being able to receive shares of the Company's common stock, par value $0.0001 (the \"Common Stock\") pursuant to the conversion terms of these promissory notes. All cure periods available pursuant to the promissory notes had expired prior to June 8, 2023. The October 29, 2021, investor note had a principal balance of $1,300,000 before the default and the March 2022 Investor Notes, whose principal balance totaled $2,640,000 prior to the notice of default, increased by 20% or $528,000 in total as a result of the notice of default. In addition, default interest at the rate of 24% per annum continues to accrue on the October 29, 2021 investor note and the March 2022 Investor Notes.\n\nThe Company initially reserved 1,905,000 of its authorized and unissued Common Stock (the \"October 2021 Reserved Amount\"), free from pre-emptive rights, to be issued upon conversion of the October 2021 Investor Notes.\n\n(b) On March 3 and 7, 2022, the Company executed two unsecured convertible promissory notes with two investors (the \"March 2022 Investors\"), who purchased 25% original issue discount (the \"OID\") unsecured convertible promissory notes (the \"The March 2022 Investor Notes\") in the aggregate principal amount totaling $2,000,000 (the \"Principal Amount\") with such Principal Amount convertible into shares of the Company's common stock (the \"Common Stock\") from time to time triggered by the occurrence of certain events. The March 2022 Investor Notes carried an OID totaling $500,000 which is included in the principal balance of the Notes. The funds were received on March 7, 2022 and March 11, 2022 in the total amount of $1,425,000, net of the OID and professional fees.\n\n22\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**10. Convertible Promissory Notes,** (continued)\n\nThe maturity date of the Notes is the earlier of (i) June 3 and 7, 2022, and (ii) the occurrence of a Liquidity Event (as defined in the Notes) (the \"Maturity Date\"). The final payment of the Principal Amount (and default interest, if any) shall be paid by the Company to the Investors on the Maturity Date. On an event of default, the principal amount of the March 2022 Investor Notes will increase to 120% of their original principal amounts. The Investors are entitled to, following an event of default, (as defined in the March 2022 Investor Notes) to convert all or any amount of the Principal Amount and any interest accruing at the default interest rate of 24% per annum into Common Stock, at a conversion price (the \"Conversion Price\") equal to 70% (representing a 30% discount) multiplied by the price per share of the Common Stock at any national security exchange or over-the-counter marketplace for the five (5) trading days immediately prior to the March 2022 Investors' notice of conversion.\n\nOn May 11, 2022, the holder of the March 3, 2022 Investor Note and on May 13, 2022, the holder of the March 7, 2022 Investor Note, each provided an amendment for an optional conversion of their investor notes. The conversion price was amended to be (i) the product of the Liquidity Event price multiplied by the discount of 35% (previously 30%) or (2) the greater of (i) the product of the closing price per share of the Company's Common Stock as reported by the applicable trading market on the trading day immediately prior to the conversion date multiplied by the discount (35%) or $1.70 multiplied by the discount (35%), provided that in the event of a conversion, of his investor note, at a time that a Liquidity Event shall not have previously occurred and be continuing, the conversion price for such conversion shall be as provided in amendment for each\n\nFurther, on June 29, 2022, the March 2022 Investors revised their March 2022 Investor Notes, to extend the maturity date to August 15, 2022 and increase the principal amount of each of the March 2022 Investor Notes by twenty percent (20%), from a Principal Amount of $2,000,000 to $2,400,000. In addition, the Company agreed to issue 100,000 common shares to the March 2022 Investor. These restricted shares of the Company's common stock will survive a reverse stock split prior to listing. The common shares were issued on July 11, 2022. The restructurings were accounted for as extinguishments as they were renegotiated after maturity.\n\nOn August 16, 2022, the Company was sent notices of default from the March 2022 Investors. And, on September 15, 2022, the Company and the March 2022 Investors entered into an amendment to the March 2022 Investor Notes which served as a cure to the previously issued default notices.\n\nPursuant to the September 15, 2022 amendment, the Company and the March 2022 Investors agreed that the outstanding principal amount totaling $2,400,000 would increase by 10% to $2,640,000. The new agreed upon maturity date was November 15, 2022, subject to certain conditions and the maturity date was extended to January 15, 2023. In connection with this amendment, the Company agreed to use its best efforts to promptly facilitate the conversion of the March 2022 Investor Notes into shares of the Company's common stock only after the October 29, 2021 investor note, as described under paragraph (a) above, has been fully converted.\n\nFurther, in the event that the October 29, 2021 investor note has been fully converted and the conversion shares sold, thereafter, the March 2022 Investor Notes may both be converted at the March 2022 Investors' discretion on a pari-passu basis, provided, however, that no conversion shall exceed $50,000 for each of the March 2022 Investor Notes and each of the March 2022 Investors shall not sell more than 5% of the daily trading volume in selling the Company's shares of common stock.\n\nAs noted above, on June 8, 2023 the counsel for the March 2022 Investors provided the Company with a notice of default. This resulted in the principal balance of the March 2022 Investor Notes increasing in principal from $2,640,000 in total to $3,168,000, in total. In addition, interest is accruing at the rate of 24% per annum. As at December 31, 2025, the principal balance of the March 2022 investor notes totaled $5,542,698, including accrued interest of $2,374,698 (2024-$4,782,378 including accrued interest of $1,614,378) is included in the convertible promissory notes balance.\n\n23\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**10. Convertible Promissory Notes,** (continued)\n\n(c) On June 23, 2022, the Company executed one convertible promissory note (the \"June 2022 Investor Note\") with an investor (the \"June 2022 Investor\") in the amount of $1,200,000 bearing interest at 10% per annum and having an OID of 10%. The maturity date of the June 2022 Investor Note is the earlier of December 23, 2022 and the date of the Company's uplist to a national securities exchange. The proceeds from the June 2022 Investor Note were used to repay this investor's June 2021 Investor Note and their December 2021 Investor Note which matured June 16, 2022 and June 2, 2022 respectively, plus accrued interest. The net proceeds, after repaying the December 2021 Investor Note and the June 2021 Investor Note with accrued interest and related disbursements totaled approximately $204,000. The net proceeds were received on June 28, 2022. In addition, the Company issued 1,333,333 common shares to the June 2022 Investor on June 29, 2022 which have been included in the determination of the extinguishment gain and recognized at fair value. The restructuring was accounted for as extinguishments as it was renegotiated after maturity.\n\nThe June 2022 Investor may convert the principal amount and any accrued but unpaid interest into the Company's common stock from time to time following an event of default ('Event of Default\"), as defined in the June 2022 Investor Note, with interest accruing at the default interest rate of 15% per annum from the Event of Default, at a conversion price (the \"Conversion Price\") equal to the lesser of 90% (representing a 10% discount) multiplied by the price per share of the Common Stock at the public offering associated with the Event of Default.\n\nOn December 29, 2022, the Company and the investor agreed to extend the maturity date to the earlier of June 23, 2023 or the occurrence of a Liquidity Event. In consideration for the extension of the maturity date, the Company agreed to: (i) increase the principal amount to $1,320,000.00 (the \"Increased Principal Amount\"); (ii) that interest is payable on the Increased Principal Amount and that such interest (but not any default interest that becomes due) is paid in full and in advance by the Company issuing to the June 2022 Investor 450,000 shares of the Company's common stock and (iii) issue to the June 2022 Investor 666,667 shares of the Company's common stock (the \"Modification Fee Shares\"). The parties agreed that the Modification Fee Shares served as an increase in the amount of commitment fee shares issued to the investor pursuant to the securities purchase agreement signed by the Company and the June 2022 Investor on June 23, 2022, in connection with the issuance of the June 2022 Investor Note. The Company used the with-and-without method to allocate the proceeds between the convertible promissory note and the common shares. As a result, all the proceeds were allocated to the convertible promissory note and $nil to the common shares.\n\nOn June 29, 2023, the June 2022 Investor provided a 45-day extension of the June 2022 Investor Note in exchange for an increase in the principal balance of the June 2022 Investor Note of $100,000, from $1,320,000 to $1,420,000.\n\nThe Company initially reserved 8,000,000 of its authorized and unissued Common Stock (the \"June 2022 Reserved Amount\"), free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of the June 2022 Investor Note.\n\n(d) On April 12, 2024, the Company executed one convertible promissory note (the \"April 2024 Investor Note\") with the June 2022 in the amount of $120,000 bearing interest at 10% per annum and having an OID of 10%. The April 2024 Investor Note was amended by the June 2022 Investor on May 23, 2024 resulting in a principal increase of $12,223. The maturity date of the April 2024 Investor Note is October 12, 2024. The proceeds from the April 2024 Investor Note were used to repay certain outstanding accounts. If this April 2024 Investor Note is not repaid by the maturity date, it will bear interest at the lesser of 18% and the maximum amount permitted under the law from the due date until paid. The June 2022 Investor may convert this April 2024 Investor Note on an event of default. The conversion price, only upon an event of default, will be 90% (a 10% discount) based on the lowest trading price on the previous twenty trading days ending on the date of conversion. The initial reserved amount shall be 5,000,000 shares of common stock. The Company also incurred professional fees of $8,500 which reduced the net proceeds on this April 2024 Investor Note. As at December 31, 2025, the principal balance of the April 2024 Investor Note totaled $165,396 (December 31, 2024- $141,595), including accrued interest of $33,173 (December 31, 2024-$9,372). The Company has disclosed the fair value of this convertible promissory note as $204,241 (December 31, 2024-$164,903).\n\n24\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**10. Convertible Promissory Notes,** (continued)\n\nPursuant to the terms of the security purchase agreements for the convertible promissory notes described above, for so long as the noted investors own any shares of Common Stock issued upon the conversion of the applicable investor notes, the Company has covenanted to secure and maintain the listing of such shares of Common Stock. The Company is also subject to certain customary negative covenants under the investor notes and the security purchase agreements, including but not limited to the requirement to maintain its corporate existence and assets, require registration of or stockholder approval for the investor notes or the Common Stock upon the conversion of the applicable investor notes.\n\nThe convertible promissory notes described above contain certain representations, warranties, covenants and events of default including if the Company is delinquent in its periodic report filings with the Securities and Exchange Commission which would increase the amount of the principal and interest rates under the convertible promissory notes in the event of such defaults. In the event of a default, at the option of the applicable investor and in their sole discretion, the applicable investor may consider any of their convertible promissory notes immediately due and payable.\n\nRefer also to going concern, note 2.\n\n*Fair value option for the convertible promissory notes*\n\nThe Company is eligible to elect the fair value option under ASC 825, *Financial Instruments* and bypass analysis of the potential embedded derivative features described above. The Company believes that the fair value option better reflects the underlying economics of the convertible promissory notes issued after December 31, 2020. As a result, the 2021 and 2022 promissory notes were recorded at fair value upon issuance and subsequently remeasured at each reporting date until settled or converted. The Company recognized the notes initially at fair value, which exceeded the proceeds received resulting in a day one loss that has been recognized in net loss. Transaction and other issuance costs have been expensed as incurred. Subsequently, the Company recognizes the notes at fair value with changes in net loss.\n\nGains and losses attributable to changes in credit risk were insignificant during the years ended December 31, 2025 and 2024. The Company recognized a loss of $2,369,411 (2024-$1,450,086) on the convertible promissory notes attributed to the change in fair value of the convertible promissory notes for the year ended December 31, 2025.  In addition, for the year ended December 31, 2025, the Company incurred debt issuance costs of $nil (2024-$8,500), which were expensed as incurred.\n\n \n\n**11. Fair Value Measurement**\n\nThe following table presents information about the Company's financial assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation:\n\n25\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**11. Fair Value Measurement** (continued)\n\n \n \n**Fair Value Measurements as of December 31, 2025 and 2024**\n \n\n \n \n**Using**\n \n \n \n \n \n \n \n \n**Total**\n \n \nTotal\n \n\n \n \n**Level 1**\n \n \n**Level 2**\n \n \n**Level 3**\n \n \n**2025**\n \n \n2024\n \n\nAssets:\n$\n-\n \n \n-\n \n \n-\n \n$\n-\n \n$\n-\n \n\nLiabilities:\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nConvertible promissory notes\n \n**-**\n \n \n-\n \n \n**14,458,322**\n \n \n**14,458,322**\n \n \n12,088,911\n \n\n \n**$**\n**-**\n \n \n-\n \n \n**14,458,322**\n \n**$**\n**14,458,322**\n \n$\n12,088,911\n \n\nDuring the years ended December 31, 2025 and 2024, there were no transfers between Level 1, Level 2, or Level 3. There were no other financial assets or liabilities measured at fair value on a recurring basis as of December 31, 2025.\n\nThe following table summarizes the change in Level 3 financial instruments during the years ended December 31, 2025 and 2024.\n\n \n \n**2025**\n \n \n2024\n \n\n**Fair value at December 31, 2024 and 2023**\n**$**\n**12,088,911**\n \n$\n10,519,824\n \n\n**Fair value at issuance**\n \n**-**\n \n \n182,143\n \n\n**Amendments**\n \n-\n \n \n13,191\n \n\n**Mark to market adjustment**\n \n**2,369,411**\n \n \n1,373,753\n \n\n**Fair value at December 31, 2025 and 2024**\n**$**\n**14,458,322**\n \n$\n12,088,911\n \n\nFinancial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The fair value of the convertible promissory notes at issuance and subsequent financial reporting dates was estimated based on significant inputs not observable in the market, which represent level 3 measurements within the fair value hierarchy.\n\nThe fair value of the convertible promissory notes at issuance and at each reporting period was estimated based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company used a scenario-based binomial model to estimate the fair value of the convertible promissory notes. The model determines the fair value from a market participant's perspective by evaluating the payouts under hold, convert, or call decisions. The most significant estimates and assumptions used as inputs are those concerning type, timing and probability of specific scenario outcomes. Specifically, the Company assigned a probability of default, which would increase the required payout as described in Note 11 and calculated the fair value under each scenario.\n\nAt the issuance dates of the convertible promissory notes, the probability of default (\"PD\") was assumed to be 75% (2024-75%), except for those which were amended post maturity, which were assumed to be 100%. The probability of default was determined in reference to a 1-year PD rate for a 'CCC+' rating at issuance, and a combination of 'CC' and 'CCC-' credit ratings at December 31, 2025 and 2024. Increasing (decreasing) the probability of default would result in a significantly higher (lower) fair value measurement.\n\n26\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**11. Fair Value Measurement** (continued)\n\nOther significant unobservable inputs include the expected volatility and the credit spread. The expected volatility was based on the historical volatility over a look-back period that was consistent with the balance-remaining term of the instruments. Expected  volatility of 320.8% was used  (2024-range of 220.4% to 247.8%). The discount for lack of marketability was determined using a range of option pricing methodologies using the remaining restriction term corresponding to each instrument on the relevant valuation date. The credit spread was determined in reference to credit yields of companies with similar credit risk at the date of valuation. A premium of 10% (2024-10%) was added to the credit spread as an instrument specific adjustment to reflect the Company's risk of default. A rate of 22.28% (2024-range of 22.95% to 22.95%) was used for the credit spread.\n\n \n\n**12. Loans Payable to Related Parties**\n\n \n \n**2025**\n \n \n2024\n \n\n \n \n \n \n \n \n \n\n**Directors**\n**$**\n**48,500**\n \n$\n48,500\n \n\n**Officers**\n \n**54,804**\n \n \n23,533\n \n\n**Shareholders**\n \n**-**\n \n \n3,000\n \n\n**Haute Inc.**\n \n**678,287**\n \n \n646,121\n \n\n**Total**\n**$**\n**781,591**\n \n$\n721,154\n \n\nThe loans owing to directors were received by the Company on June 6, 2022, March 16, 2023 and June 21, 2024, are unsecured, bearing interest at 5% per annum and due on demand.\n\nOn December 5, 2023, the Company received a loan from Haute Inc., in the amount of $437,760 (C$600,000) bearing interest at 13% per annum, past due June 5, 2024. The net proceeds were $245,507 (C$336,495) after deducting outstanding interest on existing mortgages for a wholly owned subsidiary, 1684567, and other disbursements in the amount of $148,959 (C$204,165), a financing fee in the amount of $12,510 (C$18,000) plus the applicable harmonized sales taxes of $1,707 (C$2,340). In addition, six months of interest in the amount of $28,454 (C$39,000) was capitalized. During the year ended December 31, 2025 $2,546 (2024-$2,578) was incurred on the directors' loans. As at December 31, 2025, $8,271 (2024-$5,935) of accrued interest is included in accrued liabilities in the consolidated balance sheets.\n\nOn January 9, 2024, the Company received a loan from Haute Inc., in the amount of $240,527 (C$329,670) bearing interest at 13% per annum due July 9, 2024. The proceeds received on January 9, 2024 net of capitalized interest of $14,227 (C$19,500) for six months and a financing fee of $6,566 (C$9,000) plus the applicable harmonized sales taxes of $854 (C$1,170) amounted to $218,880 (C$300,000).\n\nDuring the year ended December 31, 2025, Travellers converted $nil (C$nil (December 31, 2024-$101,130; C$135,600) in outstanding accounts payable for nil (December 31, 2024-809,044) common shares of the Company, based on closing trading prices on the day prior to each conversion.\n\nIn addition, in the prior year two shareholders provided $1,500 each to assist in funding certain outstanding accounts.\n\n \n\n27\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**13. Capital Stock**\n\nAs at December 31, 2025, the Company had 150,000,000 common shares authorized with a par value of $.0001 per share and 142,332,019 (December 31, 2024-131,332,019) common shares issued and outstanding.\n\nIn addition, the Company raised $220,000 (December 31, 2024-$120,000), on a private placement for 11,000,000 (December 31, 2024-6,000,000) common shares at a price of $0.02 (December 31, 2024-price of $0.02) per share.\n\nDuring the year ended December 31, 2025, Travellers converted $nil (C$nil) (December 31, 2024-$101,130; C$135,600 in outstanding accounts payable) in outstanding accounts payable for nil (December 31, 2024-809,044) common shares of the Company, based on closing trading prices on the day prior to each conversion.\n\nDuring the prior year, on January 3, 2023, the Company issued 3,000,000 common shares to the CEO and 100,000 common shares to the CFO in connection with their executive consulting agreements, valued at $14,400, based on the closing trading price on the effective date of their executive consulting agreements. Included under management stock-based compensation in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2025 is an amount of $nil (2024-$216,000) relating to 3,000,000 common shares issued to the CEO on January 3, 2023 in connection with his executive consulting agreement valued at $432,000, based on the closing trading price on the effective date of his consulting agreement.\n\nFurther, during the prior year ending December 31, 2024, the Company cancelled 750,000 common shares issued on January 27, 2023, in connection with a consulting agreement for professional services.\n\n \n\n**14. Commitments**\n\na) Effective January 1, 2023, new executive consulting agreements were finalized for the services of the CEO and the CFO, for two years and one year, respectively. There is no future minimum commitment under these consulting agreements since both the CEO and the CFO are providing their services on a month-to-month basis, for the CEO in the amount of $36,480 (C$50,000) and for the CFO in the amount of $9,120 (C$12,500).\n\nb) The Company has agreed to lease its office premises from Haute on a month-to-month basis, at the monthly rate of $7,296 (C$10,000).\n\nThe Company is responsible for all expenses and outlays in connection with its occupancy of the leased premises, including, but not limited to utilities, realty taxes and maintenance.\n\nc) Effective February 3, 2021, upon the successful completion of a Nasdaq listing, the Company has committed a payment of $300,000 to a consulting firm providing advisory and consulting services.\n\nd) On November 5, 2021 the Company committed to the design and construction of its Hamilton, Ontario, Canada facility, including architectural and general contracting fees in the amount of $6,658,464 (C$9,125,809) plus applicable harmonized sales taxes. As noted under note 7, Long-lived Assets, net, the Hamilton Facility, is now held for sale.\n\n28\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**14. Commitments,**(continued)\n\ne) Effective November 1, 2022, the Company acquired the exclusive rights to the use of a well-known athlete's name, endorsement and the like, for the purposes of advertisement, promotion and sale of the Company's products. In return, the Company issued 500,000 common shares of the Company and the individual's company is entitled to the following fees:\n\n• $125,000 sixty days subsequent to the Company's shares listed on the Nasdaq or another senior exchange.\n\n• $125,000 on the one-year anniversary of the first payment above and,\n\n• $125,000 on the one-year anniversary of the second payment above.\n\nThere is also an arrangement to issue 250,000 warrants to the company once the Company's shares are listed on the Nasdaq or another major exchange.\n\nThe current letter of credit required by the MECP for the Belleville Facility is $465,220 (C$637,637) but the MECP has requested a payment of $106,877 (C$146,487), no later than July 15, 2026, to satisfy the financial assurance with the MECP. The Company is preparing to make the payment before the deadline. Refer also to subsequent events, note 20(f).\n\nThe letter of credit is a requirement of the MECP and is in connection with the financial assurance provided by the Company for it to be in compliance with the MECPs environmental objectives. The MECP regularly evaluates the Company's Belleville Facility to ensure compliance is adhered to and the letter of credit is subject to change by the MECP. The financial assurance is based on the estimated environmental remediation and clean-up costs for the Belleville Facility. As a result of inspections carried out by the MECP during the prior years, some of which have resulted in MECP orders having been issued, the Company has accrued estimated and actual costs for corrective measures in orders issued by the MECP $2,824,245 (C$3,870,950) (December 31, 2024-$2,344,600; C$3,373,525). Refer also to subsequent events, note 20(f).\n\n \n\n**15. Other Expenses**\n\n \n \n**2025**\n \n \n2024\n \n\n**(a) Loss on revaluation of convertible promissory notes**\n**$**\n**(2,369,411**\n**)**\n$\n(1,450,086\n)\n\n**(b) Provision for loss**\n \n**(440,424**\n**)**\n \n-\n \n\n**(c) Insurance claim recovery**\n \n**92,426**\n \n \n-\n \n\n**(d) Adjustment to provision for loss**\n \n**-**\n \n \n1,191,033\n \n\n**(e) Loss on settlement of claim**\n \n**-**\n \n \n(300,565\n)\n\n**(f) Gain on disposal of long-lived assets**\n \n**-**\n \n \n151,128\n \n\n**(g) Gain on settlement of CEBA loans**\n \n**-**\n \n \n22,242\n \n\n \n**$**\n**(2,717,409**\n**)**\n$\n(386,248\n)\n\n(a) Loss on revaluation of convertible promissory notes.\n\n(b) The provision for loss relates to one of the March 2022 Investor Notes as disclosed under legal proceedings, note 19.\n\n(c) Relates to an insurance recovery on previously invoiced legal fees relating to a settled claim.\n\n29\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**15. Other Expenses,**(continued)\n\n(d) This adjustment on the provision for loss relates to one of the March 2022 Investor Notes, as described below under legal proceedings, note 19.\n\n(e) The loss is on the settlement of the claim with the general contractor for the property under construction at the Hamilton Facility. Refer also to legal proceedings, note 19.\n\n(f) The gain on the disposal of certain long-lived assets resulted from the net proceeds realized on the sale through the auctions arranged by the lessor and the creditor of the long-lived assets.\n\n(h) The gain on forgiveness is the result of repaying the required portion of the CEBA loans within the time required to allow for a forgiven amount of $22,242 (C$30,000).\n\n \n\n**16 Income Taxes**\n\nThe Company's income tax provision has been calculated as follows:\n\n \n \n**2025**\n \n \n2024\n \n\nLoss before income taxes\n**$**\n**(5,686,869**\n**)**\n$\n(7,859,171\n)\n\nExpected income tax recovery at the statutory rate of 21% (2024-21%)\n \n**(1,194,242**\n**)**\n \n(1,650,426\n)\n\nForeign tax rate differences\n \n**(189,164**\n**)**\n \n(322,065\n)\n\nPrior year adjustments\n \n**(235,274**\n**)**\n \n(707,108\n)\n\nForeign exchange effect on deferred tax assets and other\n \n**(170,396**\n**)**\n \n227,964\n \n\nPermanent differences\n \n**193,647**\n \n \n837,774\n \n\nChange in valuation allowance\n \n**1,595,429**\n \n \n1,613,861\n \n\nProvision for income taxes\n**$**\n**-**\n \n$\n-\n \n\nDeferred tax assets and liabilities\n\nThe tax effects of temporary differences that give rise to significant components of the deferred income tax assets and deferred income tax liabilities are presented below:\n\n \n \n**2025**\n \n \n2024\n \n\nNet operating loss carry forwards\n**$**\n**7,582,247**\n \n$\n6,034,337\n \n\nFinancing costs\n \n**29,079**\n \n \n53,071\n \n\nDepreciable and amortizable assets\n \n**237,767**\n \n \n171,062\n \n\nLand\n \n**(60,486**\n**)**\n \n(57,618\n)\n\nOther timing differences\n \n**259,058**\n \n \n251,384\n \n\nTotal gross deferred income tax assets\n \n**8,047,665**\n \n \n6,452,236\n \n\nLess: valuation allowance\n \n**8,047,665**\n \n \n6,452,236\n \n\nTotal deferred income tax liabilities\n**$**\n**-**\n \n$\n-\n \n\n \n\n30\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**16 Income Taxes,** (continued)\n\nAs at December 31, 2025 and 2024, the valuation allowance was due primarily to the history of losses generated. The valuation allowance is reviewed periodically and if the assessment of the more likely than not criteria changes, the valuation allowance is adjusted accordingly.\n\nPotential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company computes tax asset benefits for net operating losses (\"NOL\") carried forward.\n\nThe Company has US NOL available for carry forward of $14,309,423 (2024-$12,436,427) which can be carried forward indefinitely and Canadian NOL available for carry forward of $17,272,709 (C$23,674,218) (2024-$12,915,801; C$18,583,887) which expire in the years 2037 through 2045.\n\n \n\n**17. Segmented Information**\n\nASC 280-10, \"Disclosure about Segments of an Enterprise and Related Information\", establishes standards for the way that public business enterprises report information about operating segments in the Company's consolidated financial statements. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the \"CODM\"), in deciding how to allocate resources and in assessing performance.\n\nThe Company operates as one operating segment: renewable energy and operates in one country, Canada. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the CODM, which is the Company's CEO, in deciding how to allocate resources and assess performance. The Company's CODM evaluates the Company's financial information and resources and assesses the performance of these resources on a consolidated basis. There is no expense or asset information that is supplemental to those disclosed in these consolidated financial statements, that are regularly provided to the CODM. The allocation of resources and assessment of performance of the operating segment is based on consolidated net loss as shown in the consolidated statement of operations and comprehensive loss. The CODM considers net loss in the annual forecasting process and reviews actual results when making decisions about allocating resources. Since the Company operates as one operating segment, financial segment information, including profit or loss and asset information, can be found in the consolidated financial statements.\n\n \n\n**18. Economic Dependence**\n\nDuring the year ended December 31, 2025, the Company generated 100% (2024-96%) of its revenue from one (2024-three) customer.\n\n \n\n**19. Legal Proceedings**\n\nFrom time to time, the Company may become involved in litigation relating to claims arising from the ordinary course of business. Management believes that there are currently no claims or actions pending against us, the ultimate disposition of which would have a material adverse effect on our results of operations, financial condition or cash flows, except as follows:\n\nThe Company has a claim against it for unpaid legal fees in the amount of $47,600 (C$65,241). The amount is included in accounts payable on the Company's consolidated balance sheets.\n\n31\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**19. Legal Proceedings,**(continued)\n\nOn October 4, 2023, an action was launched by one of the October 2021 Investors, who claimed he was owed $1,300,000 plus accrued interest. The principal balance in the accounts and noted under convertible promissory notes, note 10(a) is $2,269,337 (December 31, 2024-$1,957,337), which is after conversions of $318,100 during 2022 and 2023 and includes accrued interest of $969,337 (December 31, 2024-$657,337). The Company has disclosed the fair value of this convertible promissory note as $3,449,419 (December 31, 2024-$2,835,298). The Company intends to repay the balance owed when it is financially able to do so.\n\nOn November 27, 2023 and March 6, 2024, the Company experienced an outflow of leachate impacted water from the stormwater pond at the Belleville Facility into the City of Belleville's (the \"City\") roadside ditch. The Company has been collaborating with its environmental consultants and its Canadian legal counsel to assess the damage caused, remediate this occurrence and report to the MECP.\n\nOn October 24, 2023, the Company received a letter from the utility company for unpaid hydro bills in the amount of $244,628 (C$335,291). The amount of this original claim and any amounts subsequently invoiced total $330,904 (C$453,542) as at December 31, 2025, included in accounts payable on the Company's consolidated balance sheets. On November 7, 2025, the Credit Bureau of Canada informed the Company that Hydro-One will consider settling for $264,724 (C$362,834) if settled by November 14, 2025. Management was not able to settle by this date and is considering all its options.\n\nOn November 17, 2023, the Company received an amended claim filed against it from 2023 by Tradigital in the sum of $219,834 in owed fees plus the difference in stock price, 300,000 common shares of the Company, plus attorney fees and expenses. The case went to arbitration on March 11, 2024 and the Company defended its position. On April 4, 2024, the International Centre for Dispute Resolution indicated that no additional evidence is to be submitted and the hearings were declared closed as of April 29, 2024. The tribunal endeavored to render the final decision within the timeframe provided for in the rules. Management agrees that outstanding fees, which are included in accounts payable in the consolidated balance sheets, are only in the amount of $30,000, which was agreed to by the parties in earlier communications and through various e-mail correspondence.  In addition, management has no issue with the outstanding common shares to be provided to the claimant totaling 300,000. Management believes that the additional claim amount of $189,834 is without merit. Of the total of 300,000 common shares, 50,000 have been issued and the remaining 250,000 were previously disclosed as shares to be issued in the consolidated statements of stockholders' deficiency. On April 26, 2024, the arbitrator for this claim awarded Tradigital the sum of $118,170 which had been accrued by the Company. In addition, the remaining 250,000 common shares were not required to be issued by the Company and are no longer disclosed as shares to be issued. On September 11, 2025, the Company received a judgement in the amount of $164,933. The Company does not have the funds currently to settle the judgement but had been in discussions with legal counsel to find a resolution.\n\nOn April 1, 2024, the Company received notice of a complaint filed against it by one of the March 2022 Investors, seeking damages of no less than $4,545,393. The Company had thirty calendar days to respond and on April 30, 2024, the Company was able to extend the time to respond with opposing counsel, a further fifteen days. The Company has been unable to retain counsel to represent it in this matter. The full amount of the complaint was included in the accounts at December 31, 2023, March 31, 2024 and June 30, 2024. On May 21, 2024, the counsel for the plaintiff requested an entry for a default judgement against the Company. On September 11, 2024, the default judgement was filed in the amount of $2,848,744. In addition, pre-judgement interest was granted in the amount of $87,414 at the rate of 10% per annum on the principal balance from May 22, 2024 through September 11, 2024. On the filing of this default judgement, the March 2022 Investor removed two causes of action previously filed in their complaint which the Company received notice of on April 1, 2024 and accrued for accordingly. The impact of the removal of the two causes of action totaling $2,250,000, plus the additional pre-judgement and other interest charged resulted in a reduction in the previous accrual for loss in the amount of $1,191,033, which was disclosed in the December 31, 2024 consolidated financial statements. During the current year, the Company has accrued interest of 15% on the outstanding balance, as noted in the default judgement. Refer also to other expenses, note 15(b).\n\n32\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**19. Legal Proceedings,**(continued)\n\nOn May 16, 2024, the Company was informed by its Canadian legal counsel that the City issued an order against the Belleville Facility, its numbered company, 1684567 and its officers for the repayment of the cost of pumping out contaminated water from the City's roadside ditch, along with legal and other associated costs. On May 31, 2024, the companies and the officers filed notices of appeal to the Ontario Land Tribunal. The Company and its Canadian legal counsel were in discussions with the legal representatives from the City, to come to a resolution before any action by the Ontario Land Tribunal. On August 30, 2024, minutes of settlement were finalized between the City and the Company to settle for an amount of $94,848 (C$130,000) ten days following the sale of the Hamilton Facility. There are certain events of default, including not meeting the timeline set above and if the sale of the Hamilton Facility does not occur before January 31, 2025, it would result in the actual cost incurred by the City to be paid by the Company. The actual costs noted in the minutes of settlement totaled $140,441 (C$192,490). In addition, in connection with the minutes of settlement, the Company and its officers subsequently withdrew their appeals with the Ontario Land Tribunal on September 4, 2024, and the Ontario Land Tribunal closed their case. The Company's Hamilton Facility was not sold by January 31, 2025 and on February 10, 2025, the City issued a second order to the Companies and its two officers for an additional sum of $27,146 (C$37,207) representing additional costs resulting from the spill. The Company's counsel had responded to the City's counsel. On March 10, 2025, the City provided 1684567, the owner of the property at the Belleville Facility with a statement of outstanding property taxes, annual road maintenance assessments, interest, penalties and related costs totaling $164,749 (C$225,807). The outstanding property taxes, including annual road maintenance costs, interest and penalties at December 31, 2025, are included in accounts payable in the consolidated balance sheets.\n\nOn June 10, 2024, the Company received a statement of claim from the general contractor, Gillam Construction Group Ltd. (\"Gillam\"), for the construction of the Hamilton Facility. Gillam also named the Company's two officers as defendants. The Company and its Canadian legal counsel were able to resolve the matter with the Plaintiff with a final settlement of $2,115,840 (C$2,900,000) if paid on or before November 30, 2024. Effective December 1, 2024, as a result of non-payment by the Company, the final settlement became $2,188,800 (C$3,000,000) and accrues interest at a variable rate using the Bank of Nova Scotia prime rate plus four percent (4%), compounded daily, due February 1, 2025. The settlement reached was over and above the original amount included in the accounts of the Company. The Company provided for this excess in the amount of $298,495 (C$409,122) as a loss on settlement during the year ended December 31, 2024. On February 1, 2025, the Company signed an extension to May 29, 2025, to repay the principal amount of $2,188,800 (C$3,000,000) plus accrued interest and legal fees. Effective February 1, 2025, the principal amount is accruing interest at a fixed rate of twelve and one-half percent (12.5%) annually, compounded daily. On May 29, 2025, the Company signed an extension with Gillam, extending the repayment date from May 29, 2025 to August 15, 2025 on the same terms and conditions as the previous extension dated February 1, 2025. The management of both Gillam and the Company are in discussions to settle the amounts owing tied into the sale of the Hamilton Facility. For the year ended December 31, 2025, interest in the amount of $306,096 (C$419,539) is included under interest expense in the consolidated statements of operations and comprehensive loss. Refer also to subsequent events, notes 20(c) and 20(e).\n\nOn September 5, 2024, one of the Company's subsidiaries was served with a construction lien on the property at the Belleville Facility in the amount of $166,279 (C$227,904) representing outstanding accounts payable for environmental services provided by the contractor.\n\nOn March 3, 2025, the Company received a notice from the Ontario Supreme Court of Justice for unpaid fees with the Company's prior auditors. The outstanding amount includes fees of $51,861 (C$71,081), which is included under accounts payable in the consolidated balance sheets and interest charged of $52,559 (C$72,038), which has been provided for, in total $104,420 (C$143,119). On May 6, 2025, the Company received an amended notice of motion returnable the week of May 19, 2025. The plaintiff would also seek to recover other costs and disbursements along with additional interest. On September 29, 2025, the Company received notice from the Ontario Superior Court of Justice that the Company's two bank accounts have been garnished for the total noted above.\n\n33\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**19. Legal Proceedings,**(continued)\n\nOn March 12, 2025, the City informed 1684567 for outstanding property taxes, other charges including the amounts described above for costs resulting from the spill at the Belleville Facility. The amount noted by the City includes certain costs relating to 2025, in total $314,218 (C$430,672). The City demanded payment on or before April 23, 2025. On April 22, 2025, the City and 1684567 signed an extension agreement to provide for the payment of the amounts noted above along with the property taxes to be invoiced by the City during the extension period and any additional interest and penalties. These outstanding costs are being paid monthly, commencing April 22, 2025 through to March 22, 2026 in the amount of $33,392 (C$45,767). The payments have been made monthly with funds provided by the mortgage holders and included in the mortgages payable. Refer also to long-term debt, note 9(a)vi.\n\nIn a letter dated March 20, 2025, the Canada Revenue Agency (the \"CRA\"), informed the Company of outstanding harmonized sales taxes and payroll remittance amounts, including interest and penalties, owing for the Belleville Facility. The total amount is $592,849 (C$812,567) and includes amounts relating to 2025. The Company has included under accounts payable and under accrued liabilities in the consolidated financial statements the amounts owing as at December 31, 2025. Management has been in discussions with the CRA to repay the outstanding amounts over a reasonable amount of time once funding is received.\n\nOn August 29, 2025, the Company received a claim from the architectural firm who designed the Hamilton Facility for outstanding accounts payable in the amount of $185,054 (C$253,638) which is included under accounts payable in the Company's consolidated balance sheets. The claimant names the Company and several subsidiaries, along with the Company’s officers and two directors. Management has been in discussions with the claimant's key principal and the architectural firm's counsel to resolve the timing of settlement of the outstanding accounts payable.\n\nOn November 5, 2025, the Company's Belleville subsidiary and the CEO received a summons from the Ontario Court of Justice (the \"Court\"), issued under the Provincial Offenses Act, served by the MECP. The appearance before the Court in Belleville, Ontario, was held on December 1, 2025. The Company has accrued the fine levied by the MECP, in the amount of $200,640 (C$275,000), included under accrued liabilities in the consolidated balance sheets. Management continues to be in discussions with the MECP. The judicial pre-trial date has been set for September 8, 2026.\n\n \n\n**20. Subsequent Events**\n\nThe Company's management has evaluated subsequent events up to the date the condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following to be material subsequent events:\n\n(a) On March 3, 2026, the mortgage disclosed under long-term debt, note 9(a) iii, in the amount of $1,459,200 (C$2,000,000) was assumed in an assignment by private lenders in the amount of $1,545,118 (C$2,117,760), including unpaid interest and other costs.\n\n(b) On March 9, 2026, the Company re-listed the Hamilton Facility for sale for a price of $9,120,000 (C$12,500,000).\n\n(c) On March 10, 2026, the Company's Belleville Facility and the CEO each received a summons from the Court, served by a representative of the MECP relating to the outstanding financial assurance. The financial assurance is due on or before July 15, 2026. In addition, there is also a court date scheduled for August 31, 2026.\n\n34\n\n**SusGlobal Energy Corp.**\n**Notes to the Consolidated Financial Statements**\n**December 31, 2025 and 2024**\n**(Expressed in United States Dollars)**\n\n**20. Subsequent Events,**(continued)\n\n(d) On March 16, 2026, the Company signed an extension to the arrangement with Gillam for their outstanding mortgage, to August 15, 2026. The terms and conditions are otherwise unchanged. The Company intends to settle this outstanding mortgage on the sale of the Hamilton Facility.\n\n(e) On June 30, 2026, the Company sold the Hamilton Facility for $7,843,200 (C$10,750,000). In connection with this sale, the Company settled claims and outstanding amounts as agreed to with Gillam and settled mortgages on the Hamilton Facility as agreed to by the private mortgagees.\n\n(f) On June 30, 2026, in connection with the above sale, the Company issued a cheque which was certified on July 2, 2026, for a cash deposit financial assurance to the MECP in the amount of $105,090 (C$146,487). The certified cheque will be delivered to the Client Services & Permissions Branch (CSPB) located in Toronto, Ontario , Canada, once agreed to with the MECP. In addition, the Company issued a certified cheque in the amount of $93,291 (C$130,040) to pay for an assessment from the Corporation of the County of Hastings, located in Hastings County, Ontario, Canada.\n\n70"}