SusGlobal Energy Corp. (SNRG) 2024 10-K Review

Executive Summary

SusGlobal Energy Corp. ("SusGlobal" or the "Company") is a renewable energy firm focused on converting organic waste into energy and regenerative products. In 2024, SusGlobal faced multiple operational setbacks, incurred a net loss of $7.86 million, and closed its primary Belleville, Ontario composting facility for environmental compliance repairs. Mounting debt, legal challenges and heavy reliance on external financing have cast significant doubt on the Company’s ability to continue as a going concern. Our detailed review assigns SusGlobal a 2.5/10 investment score.

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1. Company Overview

• Headquarters: Toronto, Ontario, Canada
• Established: 2014 (Domesticated to Delaware, 2017)
• Business model: Acquire, develop and commercialize waste-to-energy and regenerative product technologies
• Facilities: 49-acre Belleville composting & processing plant (currently offline), 5.3-acre Hamilton liquid fertilizer site
• Key technologies: Anaerobic digestion, thermophilic digestion, composting, organic liquid fertilizer

2. Industry and Market Opportunity

• Global organic waste volumes are growing, and bans on landfilling organics in Ontario and other jurisdictions create demand for processing alternatives.
• Carbon credit generation from landfill diversion offers a secondary revenue stream.
• Future growth driven by stringent environmental regulations and the circular economy trend.

3. Recent Business Developments

1. Belleville Facility shutdown (Jan 2024): Ordered by Ontario’s Ministry of Environment, Conservation, & Parks (MECP) over high ammonia levels and stormwater discharge. The facility has not accepted new waste since January 10, 2024.
2. Belleville remediation agreements: On August 30, 2024 the City of Belleville and SusGlobal settled a spill claim for CAD 130,000 (US $90,350), with payment tied to a pending sale of the Hamilton site.
3. Land acquisitions: Purchased 2.03 acre Hamilton site for CAD 3.1 million in late 2023, financed via vendor take-back mortgages bearing interest at 7%–13%.
4. Convertible note financings: Raised ~US $0.33 million via amended promissory notes in Q2 2024; aggregate convertible debt now US $8.73 million.
5. Carbon credits sale: Generated revenue of US $58,200 from selling 16,000 VERRs in Q4 2024.
6. 2025 plans: Signed a service agreement on March 10, 2025 to rehabilitate Belleville Facility and outsource its operations to a third party operator.

4. 2024 Financial Performance

Revenue and Gross Margin

• Revenue: US $79,886 (vs. US $610,461 in 2023)
• Cost of sales: US $1.29 million (vs. US $2.17 million)
• Gross loss: US $1.21 million (vs. US $1.56 million)
• Margin contraction: Facility shutdown erased tipping-fee revenue; ongoing maintenance costs drove negative margins.

Operating Expenses

• Total OPEX: US $4.70 million (vs. US $3.72 million)
• Professional fees (legal, engineering) rose +18% to US $0.68 million
• Interest expense increased +46% to US $1.21 million
• Foreign exchange loss: US $1.17 million (vs. gain of US $0.33 million) on USD denominated liabilities
• Stock-based/management compensation: US $0.22 million

Other Expenses

• Convertible note mark-to-market: US $1.45 million loss (vs. US $3.06 million)
• Litigation provisions & settlements: net US $(0.15) million
• Property & equipment disposals: US $0.15 million gain
• Net other: US $(0.39) million (vs. US $(2.95) million)

Net Loss and EPS

• Net loss: US $(7.86) million (vs. US $(8.23) million)
• EPS: US $(0.06) per share (fully diluted)

5. Balance Sheet & Liquidity

• Total assets: US $8.71 million (vs. US $11.76 million)
• PPE & land: US $3.08 million
• Assets held for sale (Hamilton): US $5.56 million
• Total liabilities: US $33.51 million
• Convertible notes: US $12.09 million
• Related party & mortgage debt: US $22.42 million
• Working capital deficit: US $(33.44) million
• Cash: US $1,295
• Going concern: Significant doubt; requires equity/debt financing of ~$10 million in next 12 months.

6. Cash Flow Analysis

• Operating cash flow: US $(1.85) million (vs. US $(1.47) million)
• Investing cash flow: US $0.15 million (asset sales) vs. US $(2.34) million)
• Financing cash flow: US $0.53 million (conversion + debt raises) vs. US $3.74 million

7. Key Risks & Red Flags

1. Going Concern Doubt: No revolving credit; current liabilities exceed assets by 3.8×.
2. Regulatory shutdown: MECP orders halted operations, requiring substantial CapEx and working capital to remediate.
3. Legal proceedings: Lawsuits from investors, contractors and city claims could exceed CAD 8 million.
4. Debt burden: Debt service costs rising; cross defaults place all mortgages & notes in default status.
5. Revenue concentration: Three customers comprised 96% of 2024 revenue; loss of one exacerbates risk.
6. Related-party financing: Heavy reliance on affiliated loans (Haute Inc., Travellers International).
7. Limited insurance: Inadequate coverage for environmental liabilities.

8. Potential Upside

• Belleville restart: Remediation and third-party operator could restore tipping fees and carbon credits.
• Carbon credits: Belleville project sold ~137 k credits; another sale may generate ~$0.3 million in 2025.
• Hamilton sale: Listing could unlock up to US $5 million and improve liquidity.
• Niche expertise: Proprietary waste-to-energy processes may command premium margins with scale.

9. Management & Governance

• CEO & Founder: Marc Hazout, 25+ years in public markets and renewable assets.
• CFO: Ike Makrimichalos, CPA with 25+ years in regulated industries.
• Independent Board: Calla (real estate/development), Herman (capital markets), Harte (incentives/site selection).
• Controls: Material weakness due to limited segregation of duties.

10. Investment Score: 2.5/10

On a scale of 1–10, SusGlobal scores a 2.5. The high debt load, cash flow deficits, ongoing regulatory remediation and legal liabilities create a highly risky investment profile. Only a successful Belleville restart or Hamilton site sale could significantly change this outlook. Potential investors should weigh the speculative upside against severe short-term liquidity and operational risks.

Disclaimer: This analysis is provided for informational purposes only and does not constitute trading advice. Investors should conduct their own due diligence and consult a qualified financial adviser before making any investment decisions.