UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For
the quarterly period ended |
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from _____to _____ |
Commission
file number:
(Exact name of registrant as specified in its charter)
| 7349 | ||||
(State or other Jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
Reporting Company | |
| Emerging
Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐
Yes
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
As of September 13, 2024, there were shares of the registrant’s common stock outstanding.
DEEP GREEN WASTE & RECYCLING, INC.
TABLE OF CONTENTS
| 2 |
USE OF MARKET AND INDUSTRY DATA
This Quarterly Report on Form 10-Q includes market and industry data that we have obtained from third-party sources, including industry publications, as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which we operate (including our management’s estimates and assumptions relating to such industries based on that knowledge). Management has developed its knowledge of such industries through its experience and participation in these industries. While our management believes the third-party sources referred to in this Quarterly Report on Form 10-Q are reliable, neither we nor our management have independently verified any of the data from such sources referred to in this Quarterly Report on Form 10-Q or ascertained the underlying economic assumptions relied upon by such sources. Furthermore, internally prepared and third-party market prospective information, in particular, are estimates only and there will usually be differences between the prospective and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. Also, references in this Quarterly Report on Form 10-Q to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report, survey or article is not incorporated by reference in this Quarterly Report on Form 10-Q.
Solely for convenience, we refer to trademarks in this Quarterly Report on Form 10-Q without the ® or the ™ or symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our own trademarks. Other service marks, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, if any, are the property of their respective owners, although for presentational convenience we may not use the ® or the ™ symbols to identify such trademarks.
OTHER PERTINENT INFORMATION
Unless the context otherwise indicates, when used in this Quarterly Report on Form 10-Q, the terms “Deep Green” “we,” “us,” “our,” the “Company” and similar terms refer to Deep Green Waste & Recycling, Inc., a Wyoming corporation formerly known as Critic Clothing, Inc., and affiliates.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the period ended June 30, 2024 (the “Quarterly Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to future events (including, without limitation, the terms, timing and closing of our proposed acquisitions or our future financial performance). We have attempted to identify forward-looking statements by using terminology such as “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Quarterly Report is filed, and we do not intend to update any of the forward-looking statements after the date this Quarterly Report is filed to confirm these statements to actual results, unless required by law.
You should not place undue reliance on forward looking statements. The cautionary statements set forth in this Quarterly Report identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:
| ● | Our ability to effectively execute our business plan; | |
| ● | Our ability to manage our expansion, growth and operating expenses; | |
| ● | Our ability to protect our brands and reputation; |
| 3 |
| ● | Our ability to repay our debts; | |
| ● | Our ability to evaluate and measure our business, prospects and performance metrics; | |
| ● | Our ability to compete and succeed in a highly competitive and evolving industry; | |
| ● | Our ability to respond and adapt to changes in technology and customer behavior; | |
| ● | Risks in connection with completed or potential acquisitions, dispositions and other strategic growth opportunities and initiatives; | |
| ● | Risks related to the anticipated timing of the closing of any potential acquisitions; | |
| ● | Risks related to the integration with regards to potential or completed acquisitions; | |
| ● | Various risks related to health epidemics, pandemics and similar outbreaks, such as the coronavirus disease 2019 (“COVID-19”) pandemic, which may have material adverse effects on our business, financial position, results of operations and/or cash flows. |
This Quarterly Report on Form 10-Q also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other industry data. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified the statistical and other industry data generated by independent parties and contained in this Quarterly Report and, accordingly, we cannot guarantee their accuracy or completeness, though we do generally believe the data to be reliable. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including, but not limited to, the possibility that we may fail to preserve our expertise in consumer product development; that existing and potential distribution partners may opt to work with, or favor the products of, competitors if our competitors offer more favorable products or pricing terms; that we may be unable to maintain or grow sources of revenue; that we may be unable maintain profitability; that we may be unable to attract and retain key personnel; or that we may not be able to effectively manage, or to increase, our relationships with customers; that we may have unexpected increases in costs and expenses. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
| 4 |
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
| 5 |
DEEP GREEN WASTE & RECYCLING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts
receivable, net of allowance for doubtful accounts of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Goodwill and Intangible assets, net | ||||||||
| Right of use Asset | ||||||||
| Deposits | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Current portion of debt | $ | $ | ||||||
| Secured
notes and convertible notes payable, net of debt discounts of $ | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Deferred compensation | ||||||||
| Accrued interest | ||||||||
| Customer deposits payable | ||||||||
| Derivative liability | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Long-term portion of debt | ||||||||
| Long- term portion of operating lease liabilities | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common stock, $ and $ par value; and and shares authorized; and shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| Preferred Stock, $ and $ par value, $ and $ per share stated value, and shares authorized; and shares of Series B Convertible Preferred Stock issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
DEEP GREEN WASTE & RECYCLING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six months ended June 30, 2024 and 2023
(Unaudited)
For the Three months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Total revenues | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross margin | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative, including stock based compensation of $, $, $, and $ respectively. | ||||||||||||||||
| Officers and directors’ compensation (including stock-based compensation of $, $, $, and $ respectively) | ||||||||||||||||
| Professional and consulting | ||||||||||||||||
| Provision for doubtful accounts | ( | ) | ( | ) | ||||||||||||
| Depreciation and Amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) income: | ||||||||||||||||
| Derivative liability income (expense) | ||||||||||||||||
| Loss on conversions of debt | ( | ) | ( | ) | ||||||||||||
| Gain on settled accounts payable | ||||||||||||||||
| Interest
income (expense) (including amortization of debt discounts of $ | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other (expense) income | ( | ) | ( | ) | ||||||||||||
| Income (loss) from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Discontinued operations (Note C): | ||||||||||||||||
| Operations
of DG Research Inc | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain
on sale of assets of DG Research Inc | ||||||||||||||||
| Income
(loss) from discontinued operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share- basic and diluted: | ||||||||||||||||
| Continuing operations | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Discontinued operations | ) | ) | ) | |||||||||||||
| Total | $ | ) | $ | ) | ) | $ | ) | |||||||||
| Weighted average number of common shares outstanding – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 7 |
DEEP GREEN WASTE & RECYCLING, INC.
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICIENCY)
(Unaudited)
For the three and six months ended June 30, 2024:
| Series B | Additional | |||||||||||||||||||||||||||
| Preferred stock | Common Stock | Paid in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balances at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss for the three months ended March 31, 2024 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances at March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss for the three months ended June 30,2024 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at June 30,2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
For the three and six months ended June 30, 2023:
| Series B | Additional | |||||||||||||||||||||||||||
| Preferred stock | Common Stock | Paid in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balances at December 31, 2022 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Issuance of common stock in satisfaction of notes payable and accrued interest | - | |||||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2023 | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Issuance of common stock incentives for officers and directors | - | |||||||||||||||||||||||||||
| Issuance of common stock incentives for employees | - | |||||||||||||||||||||||||||
| Issuance of common stock in satisfaction for consulting services | - | |||||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2023 | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at June 30,2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 8 |
DEEP GREEN WASTE & RECYCLING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2024 and 2023
(Unaudited)
| June 30, 2024 | June 30, 2023 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income (loss) for the period | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Gain on sale of assets of DG Research Inc. | ( | ) | ||||||
| Gain on asset disposition | ( | ) | ||||||
| Gain on settled accounts payable | ||||||||
| Provision for doubtful accounts | ( | ) | ||||||
| Amortization of debt discounts | ||||||||
| Derivative liability (income) expense | ( | ) | ( | ) | ||||
| Loss on conversion of notes | ||||||||
| Stock based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Deposits | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses | ||||||||
| Deferred compensation | ( | ) | ||||||
| Accrued interest | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Proceeds from sale of assets of DG Research Inc. | ||||||||
| Proceeds from disposition of asset | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Net cash provided in investing activities | ||||||||
| FINANCING ACTIVITIES: | ||||||||
| Repayment of secured notes and convertible notes payable | ( | ) | ||||||
| Increase (decrease) in other debt -net | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ( | ) | ||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-Cash investing and financing activities: | ||||||||
| Issuance of common stock in satisfaction of debt: | ||||||||
| Fair Value of Common Stock Issued | $ | $ | ||||||
| Notes Payable Satisfied | ( | ) | ||||||
| Accrued Interest Satisfied | ||||||||
| Loss on conversions of notes payable | $ | $ | ||||||
| Issuance of common stock in satisfaction of consulting services accounts payable | ||||||||
| Fair value of common stock issued | $ | $ | ||||||
| Accounts payable satisfied | ( | ) | ||||||
| Loss on satisfaction of accounts payable | $ | $ | ||||||
| Right of use asset acquired January 1, 2024 | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 9 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2024 and 2023
(Unaudited)
NOTE A – ORGANIZATION
Deep Green Waste & Recycling, Inc. (“Deep Green”, the “Company”, “we”, “us”, or “our”) is a publicly quoted company seeking to create value for its shareholders by seeking to acquire other operating entities for growth in return for shares of our common stock.
The Company was organized as a Nevada Corporation on August 24, 1995 under the name of Evader, Inc. On May 25, 2012, the Company filed its Foreign Profit Corporation Articles of Domestication to change the domicile of the Company from Nevada to Wyoming. On November 4, 2015, the Company filed an Amendment to its Articles of Incorporation to change the name of the Company to Critical Clothing, Inc. and on August 28, 2017 an Amendment was filed to change the Company name to Deep Green Waste & Recycling, Inc.
On
August 24, 2017, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations
(the “Agreement”) with St. James Capital Management, LLC. Under the terms of the Agreement, the Company transferred and assigned
all of the assets of the Company related to its extreme sports apparel design and manufacturing business in exchange for the assumption
of certain liabilities and cancellation of shares (as adjusted for the September 27, 2017
On
August 24, 2017, the Company acquired all the membership units of Deep Green Waste and Recycling, LLC (“DGWR LLC”), a Georgia
limited liability company engaged in the waste recycling business since 2011, in exchange for shares (as adjusted for the September
27, 2017
Effective
October 1, 2017, Deep Green acquired Compaction and Recycling Equipment, Inc. (CARE), a Portland, Oregon based company that sells and
services waste and recycling equipment. Deep Green purchased
Effective
October 1, 2017, Deep Green acquired Columbia Financial Services, Inc, (CFSI), a Portland, Oregon based company that finances the purchases
of waste and recycling equipment. Deep Green purchased
On
August 7, 2018, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Subsidiaries and Assumption of Obligations
(the “Agreement”) with Mirabile Corporate Holdings, Inc. Under the terms of the Agreement, the Company transferred all capital
stock of its two wholly owned subsidiaries, Compaction and Recycling Equipment, Inc. and Columbia Financial Services, Inc., to Mirabile
Corporate Holdings, Inc. in exchange for the assumption and cancellation of certain liabilities. Deep Green’s then Chief Executive
Officer owned a
In the quarterly period ended March 31, 2021, the Company re-launched its waste and recycling services operation and has begun to re-engage with customers, waste haulers and recycling centers, which are critical elements of its historically successful business model: designing and managing waste programs for commercial and institutional properties for cost savings, ease of operation, and minimal administrative stress for its clients.
| 10 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2024 and 2023
(Unaudited)
NOTE A – ORGANIZATION (continued)
Asset Purchase Agreement
On
February 8, 2021, the Company, through its wholly owned subsidiary DG Research, Inc. (the “Buyer”), entered into an Asset
Purchase Agreement (the “Agreement”) with Amwaste, Inc. (the “Seller”). Under the terms of the Agreement, the
Buyer agreed to purchase from the Seller certain assets (the “Assets”) utilized in the Seller’s waste management business
located in Glynn County, Georgia. In consideration for the purchase of the Assets, the Buyer paid the seller $
Securities Purchase Agreement
On
August 11, 2021, the Company entered into a Securities Purchase Agreement (the “Agreement”) with Jeremy Lyell (the “Shareholder”)
and Lyell Environmental Services, Inc. (hereinafter “LES”). On October 19, 2021, the Company closed on the Securities Purchase
Agreement (the “Agreement”) with Jeremy Lyell (the “Shareholder”). In consideration for the purchase of all Lyell
Environmental Services, Inc. shares from the Shareholder, the Company was to pay the Shareholder (i) $
In order to further grow its business, the Company plans to:
| ● | expand its service offerings to provide additional sustainable waste management solutions that further minimize costs based on volume and content of waste streams, and methods of disposal, including landfills, transfer stations and recycling centers; | |
| ● | Acquire profitable waste and recycling services companies with similar or compatible and synergistic business models, that can help the Company achieve these objectives; | |
| ● | Offer innovative recycling services that significantly reduce the disposal of plastics, electronic wastes, food wastes, and hazardous wastes in the commercial property universe; | |
| ● | Establish partnerships with innovative universities, municipalities and companies; and | |
| ● | Attract investment funds who will actively work with the Company to achieve these goals and help the Company grow into a leading waste and recycling services supplier in North America. |
| 11 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2024 and 2023
(Unaudited)
NOTE A – ORGANIZATION (continued)
Reverse Stock Split
On
June 20, 2023, the Company effectuated a
Sale of AMWASTE
On
March 20, 2024, Deep Green Waste & Recycling, Inc. and its subsidiary DG Research Inc. dba AMWASTE (“DGRI”), along with
Tyler’s Couch, LLC, a single member LLC owned by Bill Edmonds, Deep Green’s Chairman and CEO, (collectively, the “Sellers”)
completed the sale of substantially all of the assets of DGRI to Amwaste of Georgia, LLC (“Buyer”) for a total purchase price
of $
The sale was governed by the terms of the Purchase and Sale Agreement dated February 19, 2024. Key assets transferred included trucks, containers, equipment, the “Amwaste” trade name and related intellectual property, customer lists, contracts and open work orders. Excluded assets were minimal. The agreement contained customary representations, warranties and covenants by the Sellers.
The transaction allows Deep Green to divest its Amwaste subsidiary and assets in Georgia. Bill Edmonds, as an affiliate of Deep Green and the owner of the single member Tyler’s Couch LLC, was a key party to the agreement on the sell side. The sale indicates Deep Green is streamlining its business and provides it with additional cash proceeds.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Summary of Significant Accounting Policies
This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied in the preparation of the financial statements.
Interim Financial Statements
The unaudited condensed financial statements of the Company for the six month periods ended June 30, 2024 and 2023 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2023 was derived from the audited financial statements included in the Company’s financial statements as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 22, 2024. These financial statements should be read in conjunction with that report.
Principles of Consolidation
The consolidated financial statements include the accounts of Deep Green Waste & Recycling, Inc. (“Deep Green”) and Deep Green’s wholly owned subsidiaries, DG Research, Inc., DG Treasury, Inc. and Lyell Environmental Services Inc. All inter-company balances and transactions have been eliminated in consolidation.
Cash Equivalents
Investments having an original maturity of 90 days or less that are readily convertible into cash are considered to be cash equivalents. For the periods presented, the Company had no cash equivalents.
| 12 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2024 and 2023
(Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
In accordance with Accounting Standards Codification (ASC) 740 - Income Taxes, the provision for income taxes is computed using the asset and liability method. The asset and liability method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the financial statements. The resulting deferred tax assets or liabilities are adjusted to reflect changes in tax laws as they occur. A valuation allowance is provided when it is not more likely than not that a deferred tax asset will be realized.
We expect to recognize the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount to be recognized in the financial statements will be the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. As of June 30, 2024 and December 31, 2023, we had no uncertain tax positions. We recognize interest and penalties, if any, related to uncertain tax positions as general and administrative expenses. We currently have no federal or state tax examinations nor have we had any federal or state examinations since our inception. To date, we have not incurred any interest or tax penalties.
Financial Instruments and Fair Value of Financial Instruments
We adopted ASC Topic 820, Fair Value Measurements and Disclosures, for assets and liabilities measured at fair value on a recurring basis. ASC Topic 820 establishes a common definition for fair value to be applied to existing US GAAP that requires the use of fair value measurements that establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC Topic 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
| Level 1: | Observable inputs such as quoted market prices in active markets for identical assets or liabilities. | |
| Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data. | |
| Level 3: | Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. |
The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. Except for the derivative liability (see NOTE J), where Level 2 inputs were used, we had no financial assets or liabilities carried and measured at fair value on a recurring or nonrecurring basis during the periods presented.
For nonrecurring fair value measurements of issuances of common stock for services and in satisfaction of convertible notes payable and accrued interest (see NOTE K), we used Level 2 inputs.
Derivative Liabilities
We evaluate convertible notes payable, stock options, stock warrants and other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity.
| 13 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2024 and 2023
(Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.
Impairment of Long-Lived Assets
The Company’s long-lived assets (consisting primarily of property, equipment and intangible assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future net cash flows expected to be generated by that asset. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Through June 30, 2024, the Company has not experienced impairment losses on its long-lived assets.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Routine maintenance and repairs and minor replacement costs are charged to expense as incurred, while expenditures that extend the life of these assets are capitalized. Depreciation and amortization are provided for in amounts sufficient to write off the cost of depreciable assets to operations over their estimated service lives. The Company uses the straight-line method of depreciation for both financial reporting and tax purposes. Upon the sale or retirement of property and equipment, the cost and related accumulated depreciation and amortization will be removed from the accounts and the resulting profit or loss will be reflected in the statement of operations. The estimated lives used to determine depreciation and amortization are:
| Trucks | ||
| Containers | ||
| Software | ||
| Office Equipment | ||
| Furniture and Fixtures | ||
| Waste and Recycling Equipment | ||
| Leasehold Improvements |
Goodwill
Goodwill relates to the acquisition of Lyell Environmental Services, Inc. on October 19, 2021.
We test indefinite-lived intangibles and goodwill for impairment on an annual basis in the fourth quarter of our fiscal year, or more frequently if events or changes in circumstances indicate that the carrying value might be impaired. We have the option to first assess qualitative factors in order to determine if it is more likely than not that the fair value of our intangible assets or reporting units are greater than their carrying value. If the qualitative assessment leads to a determination that the intangible asset/ reporting unit’s fair value may be less than its carrying value, or if we elect to bypass the qualitative assessment altogether, we are required to perform a quantitative impairment test by calculating the fair value of the intangible asset/reporting unit and comparing the fair value with its associated carrying value. The estimated fair value of our reporting units is determined based upon the income approach using discounted future cash flows. In situations where the fair value is less than the carrying value, an impairment charge would be recorded for the shortfall.
| 14 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2024 and 2023
(Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Amortizable Intangible Assets
Amortizable intangible assets consist of the customer lists and covenants not to compete acquired in connection with the Lyell Environmental Services, Inc. acquisition on October 19, 2021.
We
test amortizable intangible assets for impairment if events or changes in circumstances indicate that the assets might be impaired. These
intangible assets are amortized on a straight-line basis over their estimated useful lives of
Equity Instruments Issued to Non-Employees for Acquiring Goods or Services
Issuances of our common stock or warrants for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete.
Although situations may arise in which counter performance may be required over a period of time, the equity award granted to the party performing the service may be fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist if the instruments are fully vested on the date of agreement, we determine such date to be the measurement date and will record the estimated fair market value of the instruments granted as a prepaid expense and amortize such amount to expense over the contract period. When it is appropriate for us to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values.
Stock-Based Compensation
We account for share-based awards to employees in accordance with ASC 718 “Stock Compensation”. Under this guidance, stock compensation expense is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the estimated service period (generally the vesting period) on the straight-line attribute method. Share-based awards to non-employees are accounted for in accordance with ASC 505-50 “Equity”, wherein such awards are expensed over the period in which the related services are rendered.
Related Parties
A party is considered to be related to us if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with us. Related parties also include our principal owners, our management, members of the immediate families of our principal owners and our management and other parties with which we may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties, or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests, is also a related party.
| 15 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2024 and 2023
(Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition
Revenue is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) the price is fixed or determinable, (3) collectability is reasonably assured, and (4) delivery has occurred.
Advertising Costs
Advertising costs, which were not significant for the periods presented, are expensed as incurred.
We compute net loss per share in accordance with FASB ASC 260. The ASC specifies the computation, presentation and disclosure requirements for loss per share for entities with publicly held common stock.
Basic loss per share amounts are computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as stock options, warrants and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net loss per share are excluded from the calculation.
For the periods presented, we have excluded the shares issuable from the convertible notes payable (see NOTE I) and the warrants (see NOTE K) from our diluted net loss per share calculation as the effect of their inclusion would be anti-dilutive.
Recently Enacted Accounting Standards
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which has superseded nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than was required under prior U.S. GAAP. We adopted ASU 2014-09 effective January 1, 2018. ASU 2014-09 has not had any significant effect on our financial statements for the periods presented.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to provide guidance on recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements, specifically differentiating between different types of leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from all leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. There continues to be a differentiation between finance leases and operating leases. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the balance sheet. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. We adopted ASU 2016-02 effective January 1, 2019. ASU No. 2016-02 has not had any significant effect on our financial statements for the periods presented.
| 16 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2024 and 2023
(Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
On July 13, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) 2017-11. Among other things, ASU 2017-11 provides guidance that eliminates the requirement to consider “down round” features when determining whether certain financial instruments or embedded features are indexed to an entity’s stock and need to be classified as liabilities. ASU 2017-11 provides for entities to recognize the effect of a down round feature only when it is triggered and then as a dividend and a reduction to income available to common stockholders in basic earnings per share. The guidance was effective for annual periods beginning after December 15, 2018; early adoption was permitted.
The Company early adopted ASU 2017-11. As a result, we have not recognized the fair value of the warrants containing down round features as liabilities. Please see NOTE K - CAPITAL STOCK for further information.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
NOTE C – LOSS FROM DISCONTINUED OPERATIONS
On
March 20, 2024, the Company and its subsidiary, DG Research Inc. (“Amwaste”), along with Tyler’s Couch, LLC, completed
the sale of substantially all of the assets of Amwaste for a total sale price of $
For the three and six months ended June 30, 2024 and June 30, 2023, the income (loss) from discontinued operations of Amwaste consisted of.
Three months ended Six months ended
| June 30 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Depreciation of property and equipment | ||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain in disposition of property | ||||||||||||||||
| Income (loss) from discontinued operations | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| The gain on sale of assets of Amwaste on March 20, 2024 was calculated as follows: | ||||||||||||||||
| Sales price received by Company | $
| |||||||||||||||
| Carrying cost of assets sold; | ||||||||||||||||
| Property and equipment, net | ||||||||||||||||
| Intangible assets, net | ||||||||||||||||
| Total carrying cost of assets sold | ||||||||||||||||
| Gain on sale of assets of Amwaste | $ | |||||||||||||||
| 17 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2024 and 2023
(Unaudited)
NOTE D - PROPERTY AND EQUIPMENT
Property and Equipment consist of the following at:
| June
30, 2024 (Unaudited) | December 31, 2023 | |||||||
| Office equipment | $ | $ | ||||||
| Waste and Recycling Equipment | ||||||||
| Furniture and Fixtures | ||||||||
| Total | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Net | $ | $ | ||||||
For
the six months ended June 30, 2024 and 2023, depreciation of property and equipment was $
NOTE E – GOODWILL AND INTANGIBLE ASSETS
Goodwill and Intangible assets consist of the following at:
June 30, 2024 (Unaudited) | December 31, 2023 | |||||||
| Customer list and covenant not to compete acquired in connection with the Stock Purchase Agreement with Lyell Environmental Service, Inc. closed on October 19,2021 | $ | $ | ||||||
| Goodwill acquired in connection with the Stock Purchase Agreement with Lyell Environmental Services, Inc. closed on October 19, 2021 | ||||||||
| Customer list and covenant not to compete acquired in connection with the Asset Purchase Agreement with Amwaste, Inc. closed on February 11, 2021 | ||||||||
| Total | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Net | $ | $ | ||||||
| 18 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2024 and 2023
(Unaudited)
NOTE E – GOODWILL AND INTANGIBLE ASSETS (continued)
The
customer lists and covenants not to compete are being amortized using the straight-line method over their estimated useful lives of
At June 30, 2024, the expected future amortization of intangible assets expense is:
| Amount | ||||
| Fiscal year ending December 31: | ||||
| 2024 (excluding the six months ended June 30, 2024) | $ | |||
| 2025 | ||||
| 2026 | ||||
| Total | $ | |||
NOTE F- RIGHT OF USE ASSET AND OPERATING LEASE LIABILITIES
Effective
January 1, 2024, Lyell executed a Lease Agreement with a lessor to rent approximately
At June 30, 2024 the future undiscounted minimum lease payments under the lease are:
| Year ending December 31, | As of June 30,2024 | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total | $ | |||
The
operating lease liabilities totaling $
For
the six months ended June 30, 2024, and June 30, 2023, rent expense attributable to leases was $
NOTE G – ACCOUNTS PAYABLE
Accounts payable consist of the following at:
| June
30, 2024 (Unaudited) | December 31, 2023 | |||||||
| August 1, 2018 Default Judgment payable to Ohio vendor | $ | $ | ||||||
| January 14, 2019 Default Judgment payable to Tennessee customer | ||||||||
| January 24, 2019 Default judgment payable to Florida vendor | ||||||||
| Other vendors of materials and services | ||||||||
| Credit card obligations | ||||||||
| Total | $ | $ | ||||||
Most of the accounts payable relate to services performed by subcontractors prior to the cessation of our waste recycling business on August 7, 2018. In many cases, these subcontractors have subsequently reached agreements with our former customers to continue the provision of services to such customers.
NOTE H – DEBT
Debt consists of the following at:
| June
30, 2024 (Unaudited) | December 31, 2023 | |||||||
| Claimed amount due to Factor (AEC Yield Capital, LLC) pursuant to Factor’s Notice of Default dated July 31, 2018 | $ | $ | ||||||
| Short-term capital lease | ||||||||
| Note issued in Lyell acquisition | ||||||||
| Loans payable to officers, interest at | ||||||||
| Sales Tax Payable and payroll tax withholdings and liabilities | ||||||||
| Due to seller of Lyell | ||||||||
| Note payable to short term funding company | ||||||||
| Note payable to officer,
interest at | ||||||||
| Total | ||||||||
| Current portion of debt | ( | ) | ( | ) | ||||
| Long-term portion of debt | $ | $ | ||||||
| 19 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2024 and 2023
(Unaudited)
NOTE I – SECURED NOTES AND CONVERTIBLE NOTES PAYABLE
Secured Notes and Convertible Notes Payable consist of:
June 30, 2024 (Unaudited) | December 31, 2023 | |||||||
| Unsecured Convertible Promissory Note payable to Quick Capital, LLC: Issue date October 14, 2021. (i) | $ | $ | ||||||
| Unsecured Convertible Promissory Note payable to BHP Capital NY Inc.: Issue date October 14, 2021. (ii) | ||||||||