Deep Green Waste & Recycling, Inc. - Quarter Report: 2021 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2021
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: 001-38448
DEEP GREEN WASTE & RECYCLING, INC.
(Exact name of registrant as specified in its charter)
| Wyoming | 7349 | 30-1035174 | ||
(State or other Jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
13110 NE 177th Place, Suite 293, Woodinville, WA 98072
(833) 304-7336
(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.
☒ Yes ☐ No
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).
☒ Yes ☐ No
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 ☐ |
| Non-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 ☒ No
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 August 14, 2021, there were shares of the registrant’s common stock outstanding.
DEEP GREEN WASTE & RECYCLING, INC.
TABLE OF CONTENTS
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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, 2021 (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; | |
| ● | 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.
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PART I
INDEX TO FINANCIAL STATEMENTS
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DEEP GREEN WASTE & RECYCLING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2021 | December 31, 2020 | |||||||
(Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 39,993 | $ | 757 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $545,420 at June 30, 2021 and $545,420 at December 31, 2020 | 5,549 | - | ||||||
| Prepaid expenses and other current assets | 40,963 | - | ||||||
| Total current assets | 86,505 | 757 | ||||||
| Property and equipment, net | 189,802 | 9,798 | ||||||
| Intangible assets, net | 100,683 | - | ||||||
| Deposit | 5,000 | 5,000 | ||||||
| Total other assets | 294,485 | 14,798 | ||||||
| Total assets | $ | 381,990 | $ | 15,555 | ||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Current portion of debt | $ | 959,423 | $ | 896,584 | ||||
| Convertible notes payable, net of debt discounts of $140,181 and $5,238 at June 30, 2021 and December 31, 2020, respectively | 34,790 | 10,762 | ||||||
| Accounts payable | 2,963,045 | 2,948,964 | ||||||
| Accrued expenses | 154,183 | 156,051 | ||||||
| Deferred compensation | 89,372 | 86,307 | ||||||
| Accrued interest | 187,181 | 162,074 | ||||||
| Customer deposits payable | 68,851 | 68,851 | ||||||
| Derivative liability | 365,964 | 43,444 | ||||||
| Total current liabilities | 4,822,809 | 4,373,037 | ||||||
| Long-term liabilities: | ||||||||
| Long-term portion of debt | - | - | ||||||
| Total long-term liabilities | - | - | ||||||
| Total liabilities | 4,822,809 | 4,373,037 | ||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | $ | 16,940 | $ | 12,984 | ||||
| Preferred Stock, $ par value, $ per share stated value, shares authorized; and shares of Series B Convertible Preferred Stock issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | 31,000 | 31,000 | ||||||
| Additional paid-in capital | 4,291,077 | 3,374,888 | ||||||
| Accumulated deficit | (8,779,836 | ) | (7,776,354 | ) | ||||
| Total stockholders’ deficit | (4,440,819 | ) | (4,357,482 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 381,990 | $ | 15,555 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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DEEP GREEN WASTE & RECYCLING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For
the three and six months ended June 30, 2021 and 2020
(Unaudited)
| For
the Three Months Ended June 30, |
For
the Six Months Ended June 30, |
|||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues | $ | 51,428 | $ | $ | 76,265 | $ | ||||||||||
| Total revenues | 51,428 | - | 76,265 | - | ||||||||||||
| Cost of revenues | 21,144 | - | 28,165 | - | ||||||||||||
| Gross profit | 30,284 | - | 48,100 | - | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | 94,062 | 1,867 | 120,872 | 3,023 | ||||||||||||
| Officers and directors compensation (including stock-based compensation of $, $, $ and $ respectively) | 45,149 | 10,000 | 90,939 | 53,600 | ||||||||||||
| Professional and consulting | 50,403 | 15,670 | 117,653 | 59,286 | ||||||||||||
| Provision for doubtful accounts | - | - | 2,675 | |||||||||||||
| Depreciation and Amortization | 16,208 | 3,003 | 25,883 | 6,007 | ||||||||||||
| Total operating expenses | 205,822 | 30,540 | 355,347 | 124,591 | ||||||||||||
| Operating loss | (175,538 | ) | (30,540 | ) | (307,247 | ) | (124,591 | ) | ||||||||
| Other (expense) income: | ||||||||||||||||
| Derivative liability income (expense) | 255,416 | (63,818 | ) | 97,480 | (76,521 | ) | ||||||||||
| Loss on conversions of debt | (442,829 | ) | - | (442,829 | ) | - | ||||||||||
| Interest expense (including amortization of debt discounts of $294,733, $9,911, $315,057 and $14,803 respectively) | (312,393 | ) | (29,418 | ) | (350,886 | ) | (54,220 | ) | ||||||||
| Total other (expense) income | (499,806 | ) | (93,236 | ) | (696,235 | ) | (130,741 | ) | ||||||||
| Net loss | $ | (675,344 | ) | $ | (123,776 | ) | $ | (1,003,482 | ) | $ | (255,332 | ) | ||||
| Net loss per common share: | ||||||||||||||||
| Basic and diluted net loss per common share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | ||||
| Weighted average number of common shares outstanding – basic and diluted | 141,483,432 | 105,891,540 | 136,768,307 | 105,780,771 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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DEEP GREEN WASTE & RECYCLING, INC.
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICIENCY)
(Unaudited)
For the three and six months ended June 30, 2021:
| Series B | Additional | |||||||||||||||||||||||||||
| Preferred stock | Common Stock | Paid in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balances at January 1, 2021 | 31,000 | $ | 31,000 | 129,836,060 | $ | 12,984 | $ | 3,374,888 | $ | (7,776,354 | ) | $ | (4,357,482 | ) | ||||||||||||||
| Issuance of common stock for consulting services | - | 750,000 | 75 | 29,775 | - | 29,850 | ||||||||||||||||||||||
| Issuance of common stock to directors for accrued compensation | - | 2,382,758 | 238 | 56,541 | - | 56,779 | ||||||||||||||||||||||
| Issuance of common stock for Amwaste asset purchase | - | - | 2,000,000 | 200 | 98,800 | - | 99,000 | |||||||||||||||||||||
| Net loss for the three months ended March 31, 2021 | - | - | - | - | - | (328,138 | ) | (328,138 | ) | |||||||||||||||||||
| Balances at March 31, 2021 | 31,000 | $ | 31,000 | 134,968,818 | $ | 13,497 | $ | 3,560,004 | $ | (8,104,492 | ) | $ | (4,499,991 | ) | ||||||||||||||
| Issuance of common stock in satisfaction of notes payable and accrued interest | - | 34,425,972 | 3,443 | 731,073 | - | 734,516 | ||||||||||||||||||||||
| Net loss for the three months ended June 30, 2021 | - | - | - | - | (675,344 | ) | (675,344 | ) | ||||||||||||||||||||
| Balances at June 30, 2021 | 31,000 | $ | 31,000 | 169,394,790 | $ | 16,940 | $ | 4,291,077 | $ | (8,779,836 | ) | $ | (4,440,819 | ) | ||||||||||||||
For the three and six months ended June 30, 2020:
| Series B | Additional | |||||||||||||||||||||||||||
| Preferred stock | Common Stock | Paid in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balances at January 1, 2020 | $ | 105,051,540 | $ | 10,505 | $ | 2,913,369 | $ | (7,043,784 | ) | $ | (4,119,910 | ) | ||||||||||||||||
| Issuance of Preferred B stock in satisfaction of deferred compensation | 25,000 | 25,000 | - | - | - | - | 25,000 | |||||||||||||||||||||
| Issuance of common stock to an officer for services | - | - | 840,000 | 84 | 33,516 | - | 33,600 | |||||||||||||||||||||
| Net loss for the three months ended March 31, 2020 | - | - | - | - | - | (131,556 | ) | (131,556 | ) | |||||||||||||||||||
| Balances at March 31, 2020 | 25,000 | $ | 25,000 | 105,891,540 | $ | 10,589 | $ | 2,946,885 | $ | (7,175,340 | ) | $ | (4,192,866 | ) | ||||||||||||||
| Issuance of Preferred B stock in satisfaction of loan payable to officer | 6,000 | 6,000 | - | - | - | 6,000 | ||||||||||||||||||||||
| Net loss for the three months ended June 30, 2020 | - | - | - | - | - | (123,776 | ) | (123,776 | ) | |||||||||||||||||||
| Balances at June 30, 2020 | 31,000 | $ | 31,000 | 105,891,540 | $ | 10,589 | $ | 2,946,885 | $ | (7,299,116 | ) | $ | (4,310,642 | ) | ||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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DEEP GREEN WASTE & RECYCLING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2021 and 2020
(Unaudited)
| June 30, 2021 | June 30, 2020 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income (loss) for the period | $ | (1,003,482 | ) | $ | (255,332 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 25,883 | 6,007 | ||||||
| Provision for doubtful accounts | - | 2,675 | ||||||
| Amortization of debt discounts | 315,057 | 14,803 | ||||||
| Derivative liability (income) expense | (97,480 | ) | 76,521 | |||||
| Loss on conversions of debt | 442,829 | - | ||||||
| Stock-based compensation | 29,850 | 33,600 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (5,549 | ) | - | |||||
| Prepaid expenses and other current assets | (40,963 | ) | - | |||||
| Accounts payable | 13,696 | 27,670 | ||||||
| Accrued expenses | 54,911 | 20,001 | ||||||
| Deferred compensation | 3,065 | 3,020 | ||||||
| Accrued interest | 25,765 | 36,396 | ||||||
| Net cash used in operating activities | (236,418 | ) | (34,639 | ) | ||||
| INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (197,185 | ) | - | |||||
| Purchase of intangible assets | (10,000 | ) | - | |||||
| Net cash used in investing activities | (207,185 | ) | - | |||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible notes | 530,000 | 120,000 | ||||||
| Proceeds from other debt - net | 62,839 | 13,965 | ||||||
| Repayment of convertible note | (110,000 | ) | - | |||||
| Net cash provided by financing activities | 482,839 | 133,965 | ||||||
| NET INCREASE (DECREASE) IN CASH | 39,236 | 99,326 | ||||||
| CASH, BEGINNING OF PERIOD | 757 | 735 | ||||||
| CASH, END OF PERIOD | $ | 39,993 | $ | 100,061 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-Cash investing and financing activities: | ||||||||
| Initial derivative liability charged to debt discounts | $ | 420,000 | $ | 120,000 | ||||
| Issuance of 25,000 shares, Series B Convertible Preferred Stock in satisfaction of deferred compensation liability | $ | $ | 25,000 | |||||
| Issuance of shares, Series B Convertible Preferred Stock in satisfaction of loans payable to officer | $ | $ | 6,000 | |||||
| Issuance of common stock to directors for accrued compensation | $ | 56,779 | $ | |||||
| Issuance of common stock and note payable to Seller of Amwaste, Inc. assets | ||||||||
| Common stock | $ | 99,000 | $ | |||||
| Note payable | 110,000 | - | ||||||
| Total | $ | 209,000 | $ | |||||
| Issuance of common stock (fair value of $734,516) in satisfaction of notes payable ($291,029) and accrued interest ($658) | $ | 291,687 | $ | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE A – ORGANIZATION
Deep Green Waste & Recycling, Inc. (f/k/a Critic Clothing, 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 reverse stock split of 1 share for 1000 shares) of common stock of the Company.
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 reverse stock split of 1 share for 1000 shares) of the Company’s common stock. The transaction was accounted for as a “reverse merger” where DGWR LLC was considered the accounting acquiror and the Company was considered the accounting acquiree.
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 100% of the common stock for $902,700. $586,890 was paid in cash at closing and a promissory note was executed in the amount of $315,810.
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 100% of the common stock for $597,300. $418,110 was paid in cash at closing and a promissory note was executed in the amount of $179,190.
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 7.5% equity interest in Mirabile Corporate Holdings, Inc.
On August 7, 2018, the Company ceased its waste recycling business.
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.
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 $160,000 and issued the Seller shares of the Company’s restricted common stock. The Buyer remitted $50,000 at Closing and issued the Seller a Promissory Note (the “Note”) in the amount of $110,000, which was paid April 9, 2021. The Note was secured by the Assets purchased through the Agreement. The transaction closed on February 11, 2021.
| 9 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE A – ORGANIZATION (continued)
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. |
Some potential merger/acquisition candidates have been identified and discussions initiated. These candidates are within the Company’s core business model, serving commercial properties, accretive to cash flow, and geographically favorable. While seeking to identify acquisition candidates, the Company seeks to identify target entities with a similar core business model or a model which naturally integrates with its own, and which are situated in opportunistic geographic locations.
We have unrestricted discretion in seeking and participating in a business opportunity, subject to the availability of such opportunities, economic conditions, and other factors.
The selection of a business opportunity in which to participate is complex and risky. Additionally, we have only limited resources and may find it difficult to locate good opportunities. There can be no assurance that we will be able to identify and acquire any business opportunity which will ultimately prove to be beneficial to us and our shareholders. We will select any potential business opportunity based on our management’s best business judgment.
Our activities are subject to several significant risks, which arise primarily as a result of the fact that we have limited current business and may acquire or participate in a business opportunity based on the decision of management, which potentially could act without the consent, vote, or approval of our shareholders. The risks faced by us are further increased as a result of our lack of resources and our inability to provide a prospective business opportunity with significant capital.
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 three and six month periods ended June 30, 2021 and 2020 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, 2020 was derived from the audited financial statements included in the Company’s financial statements as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 8, 2021. 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”), DGWR, LLC and Deep Green’s wholly owned subsidiaries, DG Research, Inc. and DG Treasury, Inc. All inter-company balances and transactions have been eliminated in consolidation.
| 10 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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, 2021 and December 31, 2020, 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 H), 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 I), we used Level 2 inputs.
| 11 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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, 2021, 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 | 5 years | |
| Containers | 5 years | |
| Software | 2-3 Years | |
| Office Equipment | 3-7 Years | |
| Furniture and Fixtures | 8 Years | |
| Waste and Recycling Equipment | 5 Years | |
| Leasehold Improvements | Varies by Lease |
| 12 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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 G and NOTE H) and the warrants (see NOTE I) from our diluted net loss per share calculation as the effect of their inclusion would be anti-dilutive.
| 13 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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 I - 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.
| 14 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE C - PROPERTY AND EQUIPMENT
Property and Equipment consist of the following at:
June 30, 2021 (Unaudited) | December 31, 2020 | |||||||
| Trucks | $ | 90,832 | $ | |||||
| Containers | 104,181 | |||||||
| Software | 99,025 | 99,025 | ||||||
| Office equipment | 60,974 | 60,974 | ||||||
| Furniture and Fixtures | 948 | 948 | ||||||
| Waste and Recycling Equipment | 20,972 | 18,800 | ||||||
| Total | 376,932 | 179,747 | ||||||
| Accumulated depreciation and amortization | (187,130 | ) | (169,949 | ) | ||||
| Net | $ | 189,802 | $ | 9,798 | ||||
NOTE D – INTANGIBLE ASSETS
Intangible assets consist of the following at:
June 30, 2021 (Unaudited) | December 31, 2020 | |||||||
| Customer list and covenant not to compete acquired in connection with the Asset Purchase Agreement with Amwaste, Inc. closed on February 11, 2021 | $ | 109,000 | $ | |||||
| Total | 109,000 | |||||||
| Accumulated amortization | (8,317 | ) | ||||||
| Net | $ | 100,683 | $ | |||||
The customer list and covenant not to compete is being amortized using the straight-line method over their estimated useful life of . For the six months ended June 30, 2021 and 2020, amortization of intangible assets expense was $8,317 and $0, respectively.
At June 30, 2021, the expected future amortization of intangible assets expense is:
| Amount | ||||
| Fiscal year ending December 31: | ||||
| 2021 (excluding the six months ended June 30, 2021) | $ | 10,900 | ||
| 2022 | 21,800 | |||
| 2023 | 21,800 | |||
| 2024 | 21,800 | |||
| 2025 | 21,800 | |||
| Thereafter | 2,583 | |||
| Total | $ | 100,683 | ||
NOTE E – ACCOUNTS PAYABLE
Accounts payable consist of the following at:
| June
30, 2021 (Unaudited) | December 31, 2020 | |||||||
| August 1, 2018 Default Judgment payable to Ohio vendor | $ | 37,536 | $ | 32,832 | ||||
| January 14, 2019 Default Judgment payable to Tennessee customer | 423,152 | 423,152 | ||||||
| January 24, 2019 Default judgment payable to Florida vendor | 31,631 | 31,631 | ||||||
| Other vendors of materials and services | 2,250,420 | 2,241,043 | ||||||
| Credit card obligations | 220,306 | 220,306 | ||||||
| Total | $ | 2,963,045 | $ | 2,948,964 | ||||
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.
| 15 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE F – DEBT
Debt consists of the following at:
| June
30, 2021 (Unaudited) | December 31, 2020 | |||||||
| Note payable to Seller of CARE dated October 20, 2017, interest at 7% per annum, payable in 16 quarterly installments of principal and interest commencing on January 1, 2018 and ending October 1, 2021, in technical default (1) | $ | 315,810 | $ | 315,810 | ||||
| Note payable to Seller of CFSI dated October 20, 2017, interest at 7% per annum, payable in 16 quarterly installments of principal and interest commencing on January 1, 2018 and ending October 1, 2021, in technical default (1) | 179,190 | 179,190 | ||||||
| Claimed amount due to Factor (AEC Yield Capital, LLC) pursuant to Factor’s Notice of Default dated July 31, 2018 | 387,535 | 387,535 | ||||||
| Short-term capital lease- 5 compactor leases (in technical default) | 5,574 | 5,574 | ||||||
| Loans payable to officers and directors, non-interest bearing, due on demand | 42,947 | |||||||
| Other | 28,367 | 8,475 | ||||||
| Total | 959,423 | 896,584 | ||||||
| Current portion of debt | (959,423 | ) | (896,584 | ) | ||||
| Long-term portion of debt | $ | $ | ||||||
| (1) | The Company disputes these liabilities based on Seller’s misrepresentations in connection with the sale of CARE and CFSI to Deep Green effective October 1, 2017. The Company has not made any of the payments required under these notes. |
NOTE G – CONVERTIBLE NOTES PAYABLE
Convertible Note Payables consist of:
| June
30, 2021 (Unaudited) | December 31, 2020 | |||||||
| Unsecured Convertible Promissory Note payable to GPL Ventures, LLC: Issue date June 23, 2020 – net of unamortized debt discount of $0 and $5,238 at June 30, 2021 and December 31, 2020, respectively (i) | $ | 16,000 | $ | 10,762 | ||||
| Unsecured Convertible Promissory Note payable to GPL Ventures, LLC: Issue date February 5, 2021 – net of unamortized debt discount of $9,041 and $0 at June 30, 2021 and December 31, 2020, respectively (ii) | 5,959 | |||||||
| Unsecured Convertible Promissory Note payable to Quick Capital, LLC: Issue date February 5, 2021 – net of unamortized debt discount of $0 and $0 at June 30, 2021 and December 31, 2020, respectively (iii) | ||||||||
| Unsecured Convertible Promissory Note payable to GPL Ventures, LLC: Issue date March 2, 2021 – net of unamortized debt discount of $6,712 and $0 at June 30, 2021 and December 31, 2020, respectively (iv) | 3,288 | |||||||
| Unsecured Convertible Promissory Note payable to GPL Ventures, LLC: Issue date June 4, 2021 – net of unamortized debt discount of $32,823 and $0 at June 30, 2021 and December 31, 2020, respectively (v) | 2,517 | |||||||
| Unsecured Convertible Promissory Note payable to Quick Capital, LLC: Issue date June 4, 2021 – net of unamortized debt discount of $91,605 and $0 at June 30, 2021 and December 31, 2020, respectively (vi) | 7,026 | - | ||||||
| Total | $ | 34,790 | $ | 10,762 | ||||
| (i) | On June 23, 2020, the Company issued GPL Ventures LLC (“GPL”) a Convertible Promissory Note (the “Note”) in the amount of One Hundred Thousand and NO/100 Dollars ($100,000). The Note is convertible, in whole or in part, at any time and from time to time before maturity (June 23, 2021) at the option of the holder at the Conversion Price that shall equal the lesser of a) $0.01 or b) Sixty Percent (60%) of the lowest Trading Price (defined below) during the Valuation Period (defined below), and the Conversion Amount shall be the amount of principal or interest electively converted in the Conversion Notice. The total number of shares due under any conversion notice (“Notice Shares”) will be equal to the Conversion Amount divided by the Conversion Price. “Trading Price” means, for any security as of any date, any trading price on the OTC Markets, or other applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal securities exchange or trading market where such security is listed or traded. The “Valuation Period” shall mean twenty (20) Trading Days, commencing on the first Trading Day following delivery and clearing of the Notice Shares in Holder’s brokerage account, as reported by Holder (“Valuation Start Date”). The Note has a term of one (1) year and bears interest at 10% annually. The Company and GPL also entered into a Registration Rights Agreement (“RRA”) that provided for the Company to file a Registration Statement with the SEC covering the resale of shares underlying the Note and the warrant and to have declared effective such Registration Statement (which occurred on July 13, 2020). In the event that the Company doesn’t maintain the registration requirements provided for in the RRA, the Company is obligated to pay GPL certain payments for such failures. As of June 30, 2021, $16,000 principal plus $2,397 interest were due. |
| 16 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE G – CONVERTIBLE NOTES PAYABLE (continued)
| (ii) | On February 5, 2021, the Company issued GPL Ventures, LLC (“GPL”) a Convertible Promissory Note (the “Note”) in the amount of Seventy-Five Thousand and NO/100 Dollars ($75,000). The Note is convertible, in whole or in part, at any time and from time to time before maturity (February 5, 2022) at the option of the holder at the Conversion Price that shall equal the lesser of: a) $0.01 or b) Sixty Percent (60%) of the lowest Trading Price (defined below) during the Valuation Period (defined below), and the Conversion Amount shall be the amount of principal or interest electively converted in the Conversion Notice. The total number of shares due under any conversion notice (“Notice Shares”) will be equal to the Conversion Amount divided by the Conversion Price. “Trading Price” means, for any security as of any date, any trading price on the OTC Markets, or other applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal securities exchange or trading market where such security is listed or traded. The “Valuation Period” shall mean twenty (20) Trading Days, commencing on the first Trading Day following delivery and clearing of the Notice Shares in Holder’s brokerage account, as reported by Holder (“Valuation Start Date”). The Note has a term of one (1) year and bears interest at 10% annually. The Company and GPL also entered into a Registration Rights Agreement (“RRA”) that provided for the Company to file a Registration Statement with the SEC covering the resale of up to shares underlying the Note and to have filed such Registration Statement within 30 days of the RRA. In the event that the Company doesn’t maintain the registration requirements provided for in the RRA, the Company is obligated to pay GPL certain payments for such failures. The transaction closed on February 10, 2021. As of June 30, 2021, $15,000 principal plus $201 interest were due. | |
| (iii) | On February 5, 2021, the Company issued Quick Capital, LLC (“Quick”) a Convertible Promissory Note (the “Note”) in the amount of Twenty-Five Thousand and NO/100 Dollars ($25,000). The Note is convertible, in whole or in part, at any time and from time to time before maturity (February 5, 2022) at the option of the holder at the Conversion Price that shall equal the lesser of a) $0.01 or b) Sixty Percent (60%) of the lowest Trading Price (defined below) during the Valuation Period (defined below), and the Conversion Amount shall be the amount of principal or interest electively converted in the Conversion Notice. The total number of shares due under any conversion notice (“Notice Shares”) will be equal to the Conversion Amount divided by the Conversion Price. “Trading Price” means, for any security as of any date, any trading price on the OTC Markets, or other applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal securities exchange or trading market where such security is listed or traded. The “Valuation Period” shall mean twenty (20) Trading Days, commencing on the first Trading Day following delivery and clearing of the Notice Shares in Holder’s brokerage account, as reported by Holder (“Valuation Start Date”). The Note has a term of one (1) year and bears interest at 10% annually. The Company and Quick also entered into a Registration Rights Agreement (“RRA”) that provided for the Company to file a Registration Statement with the SEC covering the resale of up to shares underlying the Note and to have filed such Registration Statement within 30 days of the RRA. In the event that the Company doesn’t maintain the registration requirements provided for in the RRA, the Company is obligated to pay Quick certain payments for such failures. The transaction closed on February 12, 2021. As of June 30, 2021, $0 principal plus $618 interest were due. | |
| (iv) | On March 2, 2021, the Company issued GPL Ventures, LLC (“GPL”) a Convertible Promissory Note (the “Note”) in the amount of Fifty Thousand and NO/100 Dollars ($50,000). The Note is convertible, in whole or in part, at any time and from time to time before maturity (March 2, 2022) at the option of the holder at the Conversion Price that shall equal the lesser of: a) $0.01 or b) Sixty Percent (60%) of the lowest Trading Price (defined below) during the Valuation Period (defined below), and the Conversion Amount shall be the amount of principal or interest electively converted in the Conversion Notice. The total number of shares due under any conversion notice (“Notice Shares”) will be equal to the Conversion Amount divided by the Conversion Price. “Trading Price” means, for any security as of any date, any trading price on the OTC Markets, or other applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal securities exchange or trading market where such security is listed or traded. The “Valuation Period” shall mean twenty (20) Trading Days, commencing on the first Trading Day following delivery and clearing of the Notice Shares in Holder’s brokerage account, as reported by Holder (“Valuation Start Date”). The Note has a term of one (1) year and bears interest at 10% annually. The Company and GPL also entered into a Registration Rights Agreement (“RRA”) that provided for the Company to file a Registration Statement with the SEC covering the resale of up to shares underlying the Note and to have filed such Registration Statement within 30 days of the RRA. In the event that the Company doesn’t maintain the registration requirements provided for in the RRA, the Company is obligated to pay GPL certain payments for such failures. The transaction closed on March 9, 2021. As of June 30, 2021, $10,000 principal plus $132 interest were due. | |
| (v) | On June 4, 2021, the Company issued GPL Ventures, LLC (“GPL”) a Convertible Promissory Note (the “Note”) in the amount of One Hundred Fifty Thousand and NO/100 Dollars ($150,000). The Note is convertible, in whole or in part, at any time and from time to time before maturity (June 4, 2022) at the option of the holder at the Conversion Price that shall equal the lesser of: a) $0.01 or b) Sixty Percent (60%) of the lowest Trading Price (defined below) during the Valuation Period (defined below), and the Conversion Amount shall be the amount of principal or interest electively converted in the Conversion Notice. The total number of shares due under any conversion notice (“Notice Shares”) will be equal to the Conversion Amount divided by the Conversion Price. “Trading Price” means, for any security as of any date, any trading price on the OTC Markets, or other applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal securities exchange or trading market where such security is listed or traded. The “Valuation Period” shall mean twenty (20) Trading Days, commencing on the first Trading Day following delivery and clearing of the Notice Shares in Holder’s brokerage account, as reported by Holder (“Valuation Start Date”). The Note has a term of one (1) year and bears interest at 10% annually. The Company and GPL also entered into a Registration Rights Agreement (“RRA”) that provided for the Company to file a Registration Statement with the SEC covering the resale of up to shares underlying the Note and to have filed such Registration Statement within 30 days of the RRA. In the event that the Company doesn’t maintain the registration requirements provided for in the RRA, the Company is obligated to pay GPL certain payments for such failures. The transaction closed on June 8, 2021. As of June 30, 2021, $35,340 principal plus $1,069 interest were due. | |
| (vi) | On June 4, 2021, the Company issued Quick Capital, LLC (“Quick”) a Convertible Promissory Note (the “Note”) in the amount of One Hundred Fifty Thousand and NO/100 Dollars ($150,000). The Note is convertible, in whole or in part, at any time and from time to time before maturity (June 4, 2022) at the option of the holder at the Conversion Price that shall equal the lesser of: a) $0.01 or b) Sixty Percent (60%) of the lowest Trading Price (defined below) during the Valuation Period (defined below), and the Conversion Amount shall be the amount of principal or interest electively converted in the Conversion Notice. The total number of shares due under any conversion notice (“Notice Shares”) will be equal to the Conversion Amount divided by the Conversion Price. “Trading Price” means, for any security as of any date, any trading price on the OTC Markets, or other applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal securities exchange or trading market where such security is listed or traded. The “Valuation Period” shall mean twenty (20) Trading Days, commencing on the first Trading Day following delivery and clearing of the Notice Shares in Holder’s brokerage account, as reported by Holder (“Valuation Start Date”). The Note has a term of one (1) year and bears interest at 10% annually. The Company and Quick also entered into a Registration Rights Agreement (“RRA”) that provided for the Company to file a Registration Statement with the SEC covering the resale of up to shares underlying the Note and to have filed such Registration Statement within 30 days of the RRA. In the event that the Company doesn’t maintain the registration requirements provided for in the RRA, the Company is obligated to pay Quick certain payments for such failures. The transaction closed on June 8, 2021. As of June 30, 2021, $98,631 principal plus $411 interest were due. |
| 17 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE H - DERIVATIVE LIABILITY
The derivative liability at June 30, 2021 and December 31, 2020 consisted of:
| June
30, 2021 (Unaudited) | December 31, 2020 | |||||||
| Convertible Promissory Notes payable to GPL Ventures, LLC. Please see NOTE G – CONVERTIBLE NOTES PAYABLE for further information. | $ | 156,058 | $ | 43,444 | ||||
| Convertible Promissory Note payable to Quick Capital, LLC. Please see NOTE G – CONVERTIBLE NOTES PAYABLE for further information. | 209,906 | |||||||
| Total | $ | 365,964 | $ | 43,444 | ||||
The above Convertible Promissory Notes (the “Notes”) contain a variable conversion feature based on the future trading price of the Company’s common stock. Therefore, the number of shares of common stock issuable upon conversion of the Notes is indeterminate. Accordingly, we have recorded the fair value of the embedded conversion feature as a derivative liability at the respective issuance dates of the Notes and charged the applicable amounts to debt discount and the remainder to other expense. The increase (decrease) in the fair value of the derivative liability from the respective issuance date of the Notes to the measurement date is charged (credited) to other expense (income).
The fair value of the derivative liability was measured at the respective issuance date, at June 30, 2021 and December 31, 2020 using the Black Scholes option pricing model. Assumptions used for the calculation of the derivative liability of the Notes, (i) at June 30, 2021 were (1) stock price of $ per share, (2) conversion price of $0.0078 per share, (3) terms of 0-338 days, (4) expected volatility of 143.21% and (5) risk free interest rates of 0.05%-0.07%, and (ii) at December 31, 2020 were (1) stock price of $per share, (2) conversion price of $0.00906 per share, (3) term of 174 days, (4) expected volatility of 143.21% and (5) risk free interest rate of 0.09%.
NOTE I - CAPITAL STOCK
Preferred Stock
On July 18, 2010, the Board of Directors unanimously approved the designation of a series of preferred stock to be known as “Series A Convertible Preferred Stock” (hereinafter “Series A”) with a stated par value of $ per share. The designations, powers, preferences and rights, and the qualifications, limitations or restrictions hereof, in respect of the Series A shall be as hereinafter described. The holders of Series A, shall not be entitled to receive dividends, nor shall dividends be paid on common stock or any other Series of Preferred Stock while Series A shares are outstanding. The holders of Series A shall be entitled to vote on all matters submitted to a vote of the Shareholders of the Company. The holders of the Series A shall be entitled to one thousand (1,000) votes per one share of Series A held. Upon the availability of a sufficient number of authorized but unissued and unreserved shares of common stock, the holders of any Series A Preferred Stock shall be entitled to convert such shares in to fully paid and non-assessable shares of common stock at the rate of 1000 shares of common stock for each share of Series A. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntarily or involuntarily, after setting apart or paying in full the preferential amounts due the Holders of senior capital stock, if any, the Holders of Series A and parity capital stock, if any, shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the Holders of junior capital stock, including Common Stock, an amount equal to $0.125 per share.
On June 26, 2017, the Company entered into a conversion agreement with Saint James Capital Management LLC and agreed to convert shares of the Company’s Series A Preferred Stock held by Saint James into a warrant to purchase 5,000,000 shares of the Company’s common stock at an exercise price of $0.30 per share and a term of three years. On August 23, 2017, the Company’s Board of Directors approved a reduction of the warrant exercise price from $0.30 to $0.20 per share. On June 20, 2020, the warrant expired.
At June 30, 2021 and December 31, 2020, there were and shares of Series A issued and outstanding, respectively.
On January 22, 2020, the Board of Directors unanimously approved the designation of a series of preferred stock to be known as “Series B Convertible Preferred Stock” (hereinafter “Series B”) with a par value of $ per share and authorization of shares. The designations, powers, preferences and rights, and the qualifications, limitations or restrictions hereof, in respect of the Series B shall be as hereinafter described.
The holders of the Series B, shall not be entitled to receive dividends, nor shall dividends be paid on common stock or any other Series of Preferred Stock while Series B shares are outstanding. The holders of Series B shall be entitled to vote on all matters submitted to a vote of the Shareholders of the Company. The holders of the Series B shall be entitled to twenty thousand (20,000) votes per one share of Series B held. Upon the availability of a sufficient number of authorized but unissued and unreserved shares of common stock, the holders of any Series B Preferred Stock shall be entitled to convert such shares in to fully paid and non-assessable shares of common stock at the following conversion feature: the Conversion Price for each share of Series B Preferred Stock in effect on any Conversion Date shall be (i) eighty five percent (85%) of the average closing bid price of the Common Stock over the twenty (20) trading days immediately preceding the date of conversion, (ii) but no less than Par Value of the Common Stock. For purposes of determining the closing bid price on any day, reference shall be to the closing bid price for a share of Common Stock on such date on the NASD OTC Bulletin Board, as reported on Bloomberg, L.P. Any conversion shall be for a minimum Stated Value of $500.00 of Series B shares.
| 18 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE I - CAPITAL STOCK (continued)
If the Corporation shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event, the Corporation shall liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Corporation’s assets in one transaction or in a series of related transactions (a “Liquidation Event”), no distribution shall be made to the holders of any shares of capital stock of the Corporation (other than Senior Securities and Pari Passu Securities) upon liquidation, dissolution or winding up unless prior thereto the Holders of shares of Series B Preferred Stock shall have received the Liquidation Preference (equal to the stated value or $1.00 per share) with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the Holders of the Series B Preferred Stock and Holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Corporation legally available for distribution to the Series B Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares.
On January 22, 2020, the Company issued shares of Series B Preferred Stock to Bill Edmonds in satisfaction of $25,000 of the Company’s deferred compensation liability to Mr. Edmonds.
On June 3, 2020, the Company issued shares of its Series B Convertible Preferred Stock to Bill Edmonds in satisfaction of $6,000 loans payable to Mr. Edmonds.
At June 30, 2021 and December 31, 2020, there were and shares of Series B Preferred Stock issued and outstanding, respectively.
| 19 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE I - CAPITAL STOCK (continued)
Common Stock
Holders of the Company’s common stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of common stock do not have cumulative voting rights. A vote by the holders of a majority of the Company’s outstanding voting shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to the Company’s articles of incorporation.
Holders of the Company’s common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available funds. In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock. The Company’s common stock has no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to the Company’s common stock.
| 20 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE I - CAPITAL STOCK (continued)
Common Stock and Preferred Stock Issuances
For the six months ended June 30, 2021 and fiscal year ended December 31, 2020, the Company issued and/or sold the following securities:
Common Stock
For the six months ended June 30, 2021
On June 24, 2021, the Company issued shares of common stock in satisfaction of $114,660 principal. The $120,540 excess of the $235,200 fair value of the shares over the $114,660 liability reduction was charged to loss on conversion of debt in the three months ended June 30, 2021.
On June 24, 2021, the Company issued shares of common stock in satisfaction of $51,369 principal and $658 interest. The $63,589 excess of the $115,616 fair value of the shares over the $52,027 liability reduction was charged to loss on conversion of debt in the three months ended June 30, 2021.
On May 12, 2021, the Company issued shares of common stock in satisfaction of $60,000 principal. The $123,600 excess of the $183,600 fair value of the shares over the $60,000 liability reduction was charged to loss on conversion of debt in the three months ended June 30, 2021.
On May 12, 2021, the Company issued shares of common stock in satisfaction of $40,000 principal. The $83,600 excess of the $123,600 fair value of the shares over the $40,000 liability reduction was charged to loss on conversion of debt in the three months ended June 30, 2021.
On May 12, 2021, the Company issued shares of common stock in satisfaction of $25,000 principal. The $51,500 excess of the $76,500 fair value of the shares over the $25,000 liability reduction was charged to loss on conversion of debt in the three months ended June 30, 2021.
On March 19, 2021, the Company issued restricted shares of its common stock to a consultant for services rendered.
On February 17, 2021, the Company issued Lloyd Spencer (Company CEO) restricted shares of its common stock ( shares vested from August 2020 to December 2020 pursuant to the Employment Agreement dated December 4, 2019 and shares vested in 2020 pursuant to the Board of Directors Services Agreement dated January 9, 2020).
On February 17, 2021, the Company issued Bill Edmonds (Company CFO) restricted shares of its common stock which vested in 2020 pursuant to the Board of Directors Services Agreement dated January 9, 2020.
On February 16, 2021, the Company issued shares of its common stock to the Seller of the AmWaste assets as per the terms of the Asset Purchase Agreement.
For the year ended December 31, 2020
On January 24, 2020, the Company issued Lloyd Spencer shares of its common stock with an estimated fair value of $33,600 as per the terms of the Employment Agreement entered into between the Company and Mr. Spencer dated December 4, 2019.
On July 27, 2020, the Company issued a noteholder shares of common stock in satisfaction of $20,000 principal. The $52,800 excess of the $72,800 fair value of the 2,000,000 shares over the $20,000 liability reduction was charged to loss on conversion of debt in the year ended December 31, 2020.
On August 6, 2020, the Company issued a noteholder shares of common stock in satisfaction of $7,000 principal, $726 interest and $1,200 in fees. The $17,852 excess of the $26,778 fair value of the 892,592 shares over the $8,926 liability reduction was charged to loss on conversion of debt in the year ended December 31, 2020.
On August 17, 2020, the Company issued a noteholder shares of common stock in satisfaction of $40,000 principal. The $20,000 excess of the $60,000 fair value of the 4,000,000 shares over the $40,000 liability reduction was charged to loss on conversion of debt in the year ended December 31, 2020.
On August 18, 2020, the Company issued a noteholder shares of common stock as a partial cashless exercise of a warrant.
On September 9, 2020, the Company issued Lloyd Spencer shares of its common stock with an estimated fair value of $18,768 as per the terms of the Employment Agreement entered into between the Company and Mr. Spencer dated December 4, 2019.
On September 23, 2020, the Company issued a noteholder shares of common stock in satisfaction of $24,000 principal. The $24,000 excess of the $48,000 fair value of the 4,000,000 shares over the $24,000 liability reduction was charged to loss on conversion of debt in the year ended December 31, 2020.
On December 29, 2020, the Company issued a noteholder shares of common stock in satisfaction of $16,000 principal, $494 interest and $1,200 in fees. The $23,357 excess of the $41,051 fair value of the 1,769,447 shares over the $17,694 liability reduction was charged to loss on conversion of debt in the year ended December 31, 2020.
On December 30, 2020, the Company issued May Davis Partners Acquisition Company, LLC shares of its common stock as per the terms of the Services Settlement Agreement entered into between the Company and MD Global Partners, LLC dated November 27, 2020. The $163,000 fair value of the shares at November 27, 2020 was charged to professional and consulting fees in the year ended December 31, 2020.
The number of common shares authorized with a par value of $per share at June 30, 2021 and December 31, 2020 is and , respectively. At June 30, 2021 and December 31, 2020, there are and shares of common stock issued and outstanding, respectively.
Preferred Stock
For the six months ended June 30, 2021
None
For the year ended December 31, 2020
On January 22, 2020, the Company issued shares of Series B Preferred Stock to Bill Edmonds in satisfaction of $25,000 of the Company’s deferred compensation liability to Mr. Edmonds.
On June 3, 2020, the Company issued shares of its Series B Convertible Preferred Stock to Bill Edmonds in satisfaction of $6,000 loans payable to Mr. Edmonds.
The number of preferred shares authorized with a par value of $ per share at June 30, 2021 and December 31, 2020 is and , respectively. At June 30, 2021 and December 31, 2020, there are and shares of preferred stock issued and outstanding, respectively.
| 21 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE I - CAPITAL STOCK (continued)
Warrants and options
A summary of warrants and options activity follows:
| Shares Equivalent | ||||||||||||
| Options | Warrants | Total | ||||||||||
| Balance, December 31, 2020 | 80,000 | 80,000 | ||||||||||
| Warrants expired on February 19, 2021 | (30,000 | ) | (30,000 | ) | ||||||||
| Warrants expired on March 16, 2021 | (50,000 | ) | (50,000 | ) | ||||||||
| Balance, June 30, 2021 | ||||||||||||
As of June 30, 2021, the Company had 0 warrants issued and outstanding.
| 22 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE J - INCOME TAXES
The provision for (benefit from) income taxes differs from the amount computed by applying the statutory United States federal income tax rate for the periods presented to income (loss) before income taxes. The income tax rate was 21% for the periods presented. The sources of the difference are as follows:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June
30, 2021 (Unaudited) | June
30, 2020 (Unaudited) | June
30, 2021 (Unaudited) | June
30, 2020 (Unaudited) | |||||||||||||
| Expected tax at 21% | $ | (141,822 | ) | $ | (25,993 | ) | $ | (210,731 | ) | $ | (53,620 | ) | ||||
| Non-deductible stock-based compensation | 4,645 | 16,120 | 7,056 | |||||||||||||
| Non-deductible derivative liability expense (income) | (53,638 | ) | 13,402 | (20,471 | ) | 16,069 | ||||||||||
| Non-deductible amortization of debt discounts | 61,894 | 2,081 | 66,162 | 3,109 | ||||||||||||
| Non-deductible loss on conversions of notes payable and accrued interest | 92,994 | 92,994 | ||||||||||||||
| Increase (decrease) in Valuation allowance | 35,927 | 10,510 | 55,926 | 27,386 | ||||||||||||
| Provision for (benefit from) income taxes | $ | $ | $ | $ | ||||||||||||
All tax years remain subject to examination by the Internal Revenue Service.
Based on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred tax asset attributable to the future utilization of the net operating loss carryforward as of June 30, 2021 and December 31, 2020 will be realized. Accordingly, the Company has provided a 100% allowance against the deferred tax asset in the financial statements at June 30, 2021 and December 31, 2020. The Company will continue to review this valuation allowance and make adjustments as appropriate.
The net operating loss carryforward at June 30, 2021 for the years 2001 to 2017 expires in varying amounts from year 2021 to year 2037.
Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
| 23 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE K - COMMITMENTS AND CONTINGENCIES
Occupancy
On December 6, 2019, the Company entered into a rental agreement for a facility located at 13110 NE 177th Place, #293, Woodinville, WA 98072. The rental was for a term of one quarter with a quarterly rental rate of $70 and continues on a month-to-month basis. The Company anticipates that it will need to lease additional space as its business plan develops.
Employment Agreements
On January 1, 2016, Deep Green Waste & Recycling, LLC (the “LLC”) entered into an Employment Agreement (the “Agreement”) with David A. Bradford as Chief Operating Officer. In connection with his appointment, the LLC and Mr. Bradford entered into a written Agreement for an initial five-year term, which provides for the following compensation terms for Mr. Bradford. Pursuant to the Agreement, Mr. Bradford will receive a base salary of $108,000 per year, subject to increase of not less than 10% per year. The LLC (i) shall remit payment of Eighty-Four Thousand Dollars ($84,000) of the Base Salary; and (ii) shall defer payment of Twenty-Four Thousand Dollars ($24,000) of the Base Salary, in a proportionate basis and allocated over each payment of the Base Salary so remitted (the “Deferred Base Salary”). The Deferred Base Salary shall earn seven percent (7%) simple interest per annum until paid in full. The Executive, in his sole and absolute discretion, shall determine when and how the Deferred Base Salary shall be paid, without limitation; and may also elect to acquire additional ownership interest in the LLC in exchange for all or any portion of the Deferred Base Salary then outstanding, at the lesser of (i) the then-current value of the ownership interest in the Company; or (ii) the price at which ownership interest in the LLC was most recently purchased by any party, including the LLC. Mr. Bradford is eligible for a cash bonus equal to 1.5% of Adjusted EBITDA over $2,000,000 at the end of each respective annual period. As an inducement to the Executive to enter into this Agreement, the LLC hereby granted the Executive an initial three and one-half percent (3.5%) ownership interest in the LLC. In addition, the executive has the right to purchase equity at the most recently traded rate. In 2016, the executive converted $19,947 of deferred compensation to 4.76% members’ equity. On July 17, 2017, Mr. Bradford and the LLC agreed to amend the terms of the Agreement, as follows: (i) upon initiation of its Incentive Stock Plan (ISP), the LLC hereby grants the Executive an additional one and one half percent (1.5%) ownership interest in the LLC, with 0.375% granted upon the date of initiation and 0.375% granted on the anniversary date of the ISP for each of the following three years, and (ii) for each year of the Agreement in which the Company’s after-tax profits exceed $2,000,000, the LLC will pay the Executive a Discretionary Incentive Bonus of no less than one and one-half percent (1.5%) of the LLC’s after-tax profits, as determined by the LLC’s independent certified public accountant(s) in accordance with generally accepted accounting principles. On August 24, 2017, simultaneous with the entry into the Merger Agreement between Deep Green Waste & Recycling, LLC, Critic Clothing, Inc. and Deep Green Acquisition, LLC dated August 24, 2017, Deep Green Waste & Recycling, Inc. (the “Company”) (f/k/a Critic Clothing, Inc.) entered into an Assignment and Assumption Agreement of Mr. Bradford’s Agreement. Effective May 1, 2018, Mr. Bradford agreed to forgo payment of his salary until circumstances allow a resumption. On December 3, 2019, Mr. Bradford submitted his resignation as President, Chief Executive Officer, Secretary and as a member of the Board of Directors of the Company, effectively immediately. Mr. Bradford retained his role as Chief Operating Officer of the Company. Commencing in July of 2020, the Company and Mr. Bradford agreed that the Company will pay Mr. Bradford $3,500 per month until such time as Company finances improve. On December 31, 2020, the Company extended Mr. Bradford’s employment agreement for an additional two-year period. For the six months ended June 30, 2021 and 2020, compensation to Mr. Bradford expensed under the above employment agreement was $and $, respectively. As of June 30, 2021 and December 31, 2020, accrued compensation due Mr. Bradford was $26,250 and $10,500, respectively. As of June 30, 2021 and December 31, 2020, the deferred compensation balance due Mr. Bradford was $0.
| 24 |
DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE K - COMMITMENTS AND CONTINGENCIES (continued)
On January 1, 2016, Deep Green Waste & Recycling, LLC (the “LLC”) entered into an Employment Agreement (the “Agreement”) with Bill Edmonds as Managing Member, President and Chief Financial Officer. Mr. Edmonds became Chief Executive Officer of the Company in 2011. In connection with his appointment, the LLC and Mr. Edmonds entered into a written Agreement for an initial five-year term, which provides for the following compensation terms for Mr. Edmonds. Pursuant to the Agreement, Mr. Edmonds will receive a base salary of $200,000 per year, subject to increase of not less than 10% per year. The Company (i) shall remit payment of One Hundred Sixty Thousand Dollars ($160,000) of the Base Salary; and (ii) shall defer payment of Forty Thousand Dollars ($40,000) of the Base Salary, in a proportionate basis and allocated over each payment of the Base Salary so remitted (the “Deferred Base Salary”). The Deferred Base Salary shall earn seven percent (7%) simple interest per annum until paid in full. The Executive, in his sole and absolute discretion, shall determine when and how Deferred Base Salary shall be paid, without limitation; and may also elect to acquire additional ownership interest in the LLC in exchange for all or any portion of the Deferred Base Salary then outstanding, at the lesser of (i) the then-current value of the ownership interest in the LLC; or (ii) the price at which ownership interest in the LLC was most recently purchased by any party, including the LLC. Mr. Edmonds is eligible for a cash bonus equal to 2.5% of Adjusted EBITDA over $2,000,000 at the end of each respective annual period. On July 17, 2017, Mr. Edmonds and the LLC agreed to amend the terms of the Agreement, as follows: (i) upon initiation of its Incentive Stock Plan, the LLC hereby grants the Executive an additional two and one-fourth percent (2.25%) ownership interest in the LLC, with 0.5625% granted upon the date of initiation and 0.5625% granted on the anniversary date of the ISP for each of the following three years, and (ii) for each year of the Agreement in which the LLC’s after-tax profits exceed $2,000,000, the LLC will pay the Executive a Discretionary Incentive Bonus of no less than two and one half percent (2.5%) of the LLC’s after-tax profits, as determined by the LLC’s independent certified public accountant(s) in accordance with generally accepted accounting principles. On August 24, 2017, simultaneous with the entry into the Merger Agreement between Deep Green Waste & Recycling, LLC, Critic Clothing, Inc. and Deep Green Acquisition, LLC dated August 24, 2017, Deep Green Waste & Recycling, Inc. (the “Company”) (f/k/a Critic Clothing, Inc.) entered into an Assignment and Assumption Agreement of Mr. Edmonds’ Agreement. Effective May 1, 2018, Mr. Edmonds agreed to forgo payment of his salary until circumstances allow a resumption. On December 31, 2020, the Company extended Mr. Edmond’s employment agreement for an additional two-year period. As of June 30, 2021 and December 31, 2020, the deferred compensation balance due Mr. Edmonds was $89,372 and $86,307, respectively.
On December 4, 2019, the Company entered into an agreement with Lloyd Spencer as President and Chief Executive Officer. In connection with his appointment, the Company and Mr. Spencer entered into a written employment agreement (the “Employment Agreement”) for an initial three-year term, which provides for the following compensation terms for Mr. Spencer. Pursuant to the Employment Agreement, Mr. Spencer is to receive a base salary of $10,000 per month starting when the corporation receives its first round of equity or debt financing. Mr. Spencer is to receive restricted shares of the Company’s common stock on or before January 31, 2020 as a sign-on bonus. In addition, the Company is to issue to Mr. Spencer restricted shares in the form of stock grants equivalent to shares of the Corporation’s Common Stock over a -year period. Stock Grant shares shall vest shares each month after the Stock Grant date, December 4, 2019, over a -year period, except that all unvested Stock Grant shares shall vest immediately if the Corporation terminates Executive’s employment without Just Cause, or Executive resigns for Good Reason. The number of shares vested shall be adjusted in the event of subsequent stock splits. On January 24, 2020, shares were issued to Mr. Spencer pursuant to the Employment Agreement. On September 9, 2020, shares were issued to Mr. Spencer pursuant to the Employment Agreement. Commencing in July of 2020, the Company and Mr. Spencer agreed that the Company will pay Mr. Spencer $3,500 per month until such time as Company finances improve. For the six months ended June 30, 2021 and 2020, compensation to Mr. Spencer expensed under the employment agreement was $and $, respectively. As of June 30, 2021 and December 31, 2020, accrued compensation due Mr. Spencer was $26,250 and $10,500, respectively.
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DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE K - COMMITMENTS AND CONTINGENCIES (continued)
Director Agreements
On January 9, 2020, the Company and Lloyd Spencer (the “Director”) entered into a Board of Directors Services Agreement whereby the Director shall receive compensation for serving on the Company’s Board of Directors equivalent to Five Thousand and no/100 dollars ($5,000.00) of the Company’s common stock, paid to the Director on the last calendar day of each fiscal quarter as long as Director continues to fulfill his duties and provide the services set forth above. The pricing of the stock to be delivered shall be calculated as: $/(Closing stock price on the last calendar day of the fiscal quarter x 0.8). The Director shall begin receiving compensation for services rendered under this Agreement beginning during the first calendar quarter of 2020. At June 30, 2021, the accrued compensation due Mr. Spencer under this agreement was $10,000.
On January 9, 2020, the Company and Bill Edmonds (the “Director”) entered into a Board of Directors Services Agreement whereby the Director shall receive compensation for serving on the Company’s Board of Directors equivalent to Five Thousand and no/100 dollars ($5,000.00) of the Company’s common stock, paid to the Director on the last calendar day of each fiscal quarter as long as Director continues to fulfill his duties and provide the services set forth above. The pricing of the stock to be delivered shall be calculated as: $/(Closing stock price on the last calendar day of the fiscal quarter x 0.8). The Director shall begin receiving compensation for services rendered under this Agreement beginning during the first calendar quarter of 2020. At June 30, 2021, the accrued compensation due Mr. Edmonds under this agreement was $10,000.
Consulting Agreement
On May 10, 2021, the Company entered into a Consulting Agreement (the “Agreement”) with Sylios Corp (the “Consultant”) for preparation of the Company’s financial reports. Under the terms of the Agreement, the Consultant is to assist the Company in the preparation of its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Registration Statements on Form S-1 and Form S-8. The Agreement shall have a term of one (1) year or until the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 is filed with the Securities and Exchange Commission. As compensation, the Consultant, or its designee, was to receive shares of common stock. Pursuant to an Amendment to the Agreement dated June 4, 2021, instead of receiving 2,500,000 shares of common stock, the Consultant is to receive a total of $35,000 cash compensation: $15,000 payable on or before June 9, 2021 (which was paid and included in professional and consulting expenses in the three months ended June 30, 2021), $10,000 payable on or before September 10, 2021 and $10,000 payable on or before December 10, 2021.
Finder’s Fee Agreement
On May 13, 2021, the Company entered into a Finder’s Fee Agreement (the “Agreement”) with J.H. Darbie & Co., Inc. (hereinafter, “Darbie”), Under the terms of the Agreement, Darbie will use its best efforts to initiate an introductory meeting between principals of the Introduced Party and that of the Company with the goal of raising capital for the Company. The Agreement has a term of 120 days, but Darbie shall have the right to terminate the Agreement with five (5) days written notice to the Company. In consideration of the introduction, Darbie shall be entitled to receive a finder’s fee in the amount of four percent (4%) of the gross proceeds of an equity/convertible debt transaction and/or cash equal to four percent (4%) of the gross proceeds of a non-convertible debt transaction.
Legal
As indicated in NOTE E – ACCOUNTS PAYABLE, one customer and two vendors have received Default Judgments against Deep Green aggregating $492,319 that remain unpaid by Deep Green. Also, Deep Green has accounts payable to other vendors of materials and services and credit card companies aggregating $2,470,726, which are mostly past due and remain unpaid by Deep Green. Also, Deep Green has not paid any of the required installments due under the two notes payable aggregating $495,000 due the Seller of CARE and CFSI and has not paid any amounts to satisfy the $387,535 claimed by the factor pursuant to the Factor’s Notice of Default dated July 31, 2018 (Please see NOTE F – DEBT for further information).
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DEEP GREEN WASTE & RECYCLING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 2021 and 2020
(Unaudited)
NOTE L - GOING CONCERN UNCERTAINTY
Under ASC 205-40, we have the responsibility to evaluate whether conditions and/or events raise substantial doubt about our ability to meet our future financial obligations as they become due within one year after the date that the financial statements are issued. As required by this standard, our evaluation shall initially not take into consideration the potential mitigating effects of our plans that have not been fully implemented as of the date the financial statements are issued.
In performing the first step of this assessment, we concluded that the following conditions raise substantial doubt about our ability to meet our financial obligations as they become due. We have a history of net losses: As of June 30, 2021, we had cash of $39,993, current assets of $86,505, current liabilities of $4,822,809 and an accumulated deficit of $8,779,836. For the six months ended June 30, 2021 and 2020, we used cash from operating activities of $236,418 and $34,639, respectively. We expect to continue to incur negative cash flows until such time as our operating segments generate sufficient cash inflows to finance our operations and debt service requirements.
In performing the second step of this assessment, we are required to evaluate whether our plans to mitigate the conditions above alleviate the substantial doubt about our ability to meet our obligations as they become due within one year after the date that the financial statements are issued. Our future plans include securing additional funding sources that may include establishing corporate partnerships, establishing licensing revenue agreements, issuing additional convertible debentures and issuing public or private equity securities, including selling common stock through an at-the-market facility (ATM).
There is no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available through external sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material effect on the business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or they will not have a significant dilutive effect on the Company’s existing shareholders. We have therefore concluded there is substantial doubt about our ability to continue as a going concern through August 2022.
The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from our failure to continue as a going concern.
NOTE M – RELATED PARTY TRANSACTIONS
During the period January 1, 2018 to August 7, 2018 (the date of Deep Green’s cessation of its waste recycling business), Deep Green used an entity controlled by Deep Green’s then Chief Executive Officer as a subcontractor to service certain customers of Deep Green. Charges to cost of revenues from this related party totaled $29,190 for the year ended December 31, 2018. At June 30, 2021 and December 31, 2020, Deep Green had an account payable to this entity in the amount of $57,600.
On April 9, 2021, the Company issued Bill Edmonds (“Mr. Edmonds”), an officer and director of the Company, a Convertible Promissory Note (the “Note”) in the amount of One Hundred Ten Thousand and NO/100 Dollars ($110,000). The Note accrues interest at 12% if paid within 60 days and thereafter 15% compounding monthly. The Note was convertible, in whole or in part, at any time and from time to time before maturity (June 9, 2021) at the option of the holder. The conversion price for the principal and interest in connection with voluntary conversions by the Holder was 60% multiplied by the Market Price (as defined herein)(representing a discount rate of 40%), subject to adjustment as described herein (“Conversion Price”). Market Price” means the lowest one (1) Trading Prices (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. The Note was paid in full on June 9, 2021.
NOTE N – SUBSEQUENT EVENTS
On July 1, 2021, the Company issued shares of common stock in satisfaction of $64,554 principal and $189 interest. The $98,774 excess of the $163,517 fair value of the shares over the $64,743 liability reduction will be charged to loss on conversion of debt in the three months ended September 30, 2021.
On July 2, 2021, the Company issued shares of common stock in satisfaction of $35,340 principal and $774 interest. The $72,690 excess of the $108,804 fair value of the shares over the $36,114 liability reduction will be charged to loss on conversion of debt in the three months ended September 30, 2021.
On July 2, 2021, the Company issued shares of common stock in satisfaction of $33,888 principal. The $68,210 excess of the $102,098 fair value of the shares over the $33,888 liability reduction will be charged to loss on conversion of debt in the three months ended September 30, 2021.
On July 2, 2021, the Company entered into a Securities Purchase Agreement (“SPA”) with Labrys Fund, LP (“Labrys”) and issued Labrys a Promissory Note (the “Note”) in the amount of One Hundred Thousand and NO/100 Dollars ($100,000). The Note is convertible, in whole or in part, at any time and from time to time before maturity (July 2, 2022) at the option of the holder at the Conversion Price that shall equal $0.015. If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price. The Conversion Price is subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events. Holder shall be entitled to deduct $1,750.00 from the conversion amount in each Notice of Conversion to cover Holder’s fees associated with each Notice of Conversion. The Note has a term of one (1) year and bears interest at 12% annually. The transaction closed on July 2, 2021. As part and parcel of the foregoing transaction, Labrys was issued a warrant granting the holder the right to purchase up to 5,000,000 shares of the Company’s common stock at an exercise price of $0.02 for a term of 5-years. On July 8, 2021, the Company issued Labrys shares of common stock as Commitment Shares as per the terms of the SPA.
On July 9, 2021, the Company issued shares of common stock in satisfaction of $65,000 principal and $3,062 interest. However, the remaining principal of the notes payable to GPL Ventures, LLC totaled only $41,000 at July 9, 2021. The parties expect to resolve this over issuance of shares resulting from this over conversion of $24,000 principal of notes payable in the near future.
On July 11, 2021, the Company’s Board unanimously approved an Amendment to our Articles of Incorporation (the “Authorized Share Amendment”) to increase the number of authorized shares of Common Stock of the Company from to and to increase the number of authorized shares of Preferred Stock of the Company from to with the Board maintaining the discretion of whether or not to implement the increase in authorized shares of Common and Preferred Stock. On July 11, 2021, the Majority Stockholders delivered an executed written consent in lieu of a special meeting (the “Stockholder Consent”) authorizing and approving the Authorized Share Amendment and the increase in authorized shares of Common and Preferred Stock. On August 14, 2021, the Company filed its Information Statement on Form DEF 14C.
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”). Under the terms of the Agreement, the Company is to purchase all outstanding shares of common stock (hereinafter, the “LES Shares”) issued by LES and held by the Shareholder. In consideration for the purchase of the LES Shares, the Company shall pay to the Shareholder” (i) $50,000 upon execution of the Agreement that shall be held in escrow, (ii) $1,300,000 at Closing, and (iii) shares of the Company’s common stock. LES shall have a two-year audit completed during the due diligence period. Closing shall occur on or before 15 days after the Company receives the final audit letter. The Agreement includes customary representations, warranties and covenants, and customary conditions to closing, expense and reimbursement obligations and termination provisions.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
Deep Green Waste & Recycling, Inc. (f/k/a Critic Clothing, 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, St. James Capital Management, LLC 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 3,000,000 shares (as adjusted for the September 27, 2017 reverse stock split of 1 share for 1000 shares) of common stock of the Company.
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 85,000,000 shares (as adjusted for the September 27, 2017 reverse stock split of 1 share for 1000 shares) of the Company’s common stock. The transaction was accounted for as a “reverse merger” where DGWR LLC was considered the accounting acquiror and the Company was considered the accounting acquiree.
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 100% of the common stock for $902,700. $586,890 was paid in cash at closing and a promissory note was executed in the amount of $315,810.
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 100% of the common stock for $597,300. $418,110 was paid in cash at closing and a promissory note was executed in the amount of $179,190.
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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 7.5% equity interest in Mirabile Corporate Holdings, Inc.
On August 7, 2018, the Company ceased its waste recycling business.
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.
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 $160,000 and issued the Seller 2,000,000 shares of the Company’s restricted common stock. The Buyer remitted $50,000 at Closing and issued the Seller a Promissory Note (the “Note”) in the amount of $110,000, which was paid April 9, 2021. The Note was secured by the Assets purchased through the Agreement. The transaction closed on February 11, 2021.
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. |
Some potential merger/acquisition candidates have been identified and discussions initiated. These candidates are within the Company’s core business model, serving commercial properties, accretive to cash flow, and geographically favorable. While seeking to identify acquisition candidates, the Company seeks to identify target entities with a similar core business model or a model which naturally integrates with its own, and which are situated in opportunistic geographic locations.
We have unrestricted discretion in seeking and participating in a business opportunity, subject to the availability of such opportunities, economic conditions, and other factors.
The selection of a business opportunity in which to participate is complex and risky. Additionally, we have only limited resources and may find it difficult to locate good opportunities. There can be no assurance that we will be able to identify and acquire any business opportunity which will ultimately prove to be beneficial to us and our shareholders. We will select any potential business opportunity based on our management’s best business judgment.
Our activities are subject to several significant risks, which arise primarily as a result of the fact that we have no specific business and may acquire or participate in a business opportunity based on the decision of management, which potentially could act without the consent, vote, or approval of our shareholders. The risks faced by us are further increased as a result of its lack of resources and our inability to provide a prospective business opportunity with significant capital.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements as well as the reported expenses during the reporting periods. The accounting estimates that require our most significant, difficult and subjective judgments have an impact on revenue recognition, the determination of share-based compensation and financial instruments. We evaluate our estimates and judgments on an ongoing basis. Actual results may differ materially from these estimates under different assumptions or conditions.
Our significant accounting policies are more fully described in NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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Discussion for the three months ended June 30, 2021 and June 30, 2020 (Unaudited):
Results of Operations:
| June 30, 2021 | June 30, 2020 | $ Change | ||||||||||
| Gross revenue | $ | 51,428 | $ | - | $ | 51,233 | ||||||
| Operating expenses | 205,822 | 30,540 | 175,282 | |||||||||
| Loss from Operations | (175,538 | ) | (30,540 | ) | (144,998 | ) | ||||||
| Other Income (Expense) | (499,806 | ) | (93,236 | ) | (406,570 | ) | ||||||
| Net Income (Loss) | (675,344 | ) | (123,776 | ) | (551,568 | ) | ||||||
| Net loss per share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | - | ||||
Revenues
For the three months ended June 30, 2021 and 2010, we generated $51,428 and $0 revenue, respectively.
Operating Expenses
Our operating expenses were $205,822 and $30,540 for the three months ended June 30, 2021 and 2020, respectively. The increase in operating expenses for the three months ended June 30, 2021 was largely attributable to officers and directors compensation in the amount of $45,149.
We anticipate that our cost of revenues will increase in 2021 and for the foreseeable future as we continue to build out our waste management services and identify acquisition opportunities in the waste and recycling sector.
We incurred $22,121 and $0 in stock-based compensation for the three months ended June 30, 2021 and 2020. Other officers and directors compensation for the three months ended June 30, 2021 and 2020 was $23,028 and $10,000 respectively
Loss from Operations
The Company’s loss from operations increased to $175,538 for the three months ended June 30, 2021 from $30,540 in 2020, an increase of $144,998.
Other Income (Expense)
Other income (expense) increased to ($499,806) for the three months ended June 30, 2021 and included derivative liability income of $255,416, loss on conversions of debt of $442,829, and interest expenses of $312,393. Other expense was ($93,236) for the three months ended June 30, 2020 and included derivative liability expense of $63,818 and interest expense of $29,418.
Net Loss
For the three months ended June 30, 2021, our net loss increased to $675,344, as compared to a net loss of $123,776 for three months ended June 30, 2020, an increase of $551,568. The increase in net loss was largely attributable to the Company’s increases in operating expenses and other expenses.
Discussion for the six months ended June 30, 2021 and June 30, 2020 (Unaudited):
Results of Operations:
| June 30, 2021 | June 30, 2020 | $ Change | ||||||||||
| Gross revenue | $ | 76,265 | $ | - | $ | 76,265 | ||||||
| Operating expenses | 355,347 | 124,591 | 230,756 | |||||||||
| Loss from Operations | (307,247 | ) | (124,591 | ) | (182,656 | ) | ||||||
| Other Income (Expense) | (696,235 | ) | (130,741 | ) | (565,494 | ) | ||||||
| Net Income (Loss) | (1,003,482 | ) | (255,332 | ) | (748,150 | ) | ||||||
| Net loss per share - basic and diluted | $ | (0.01 | ) | $ | (0.00 | ) | $ | - | ||||
Revenues
For the six months ended June 30, 2021 and 2010, we generated $76,265 and $0 revenue, respectively.
Operating Expenses
Our operating expenses were $355,347 and $124,591 for the six months ended June 30, 2021 and 2020, respectively.
We anticipate that our cost of revenues will increase in 2021 and for the foreseeable future as we continue to build out our waste management services and identify acquisition opportunities in the waste and recycling sector.
We incurred $46,911 and $33,600 in stock-based compensation for the six months ended June 30, 2021 and 2020. Other officers and directors compensation for the six months ended June 30, 2021 and 2020 was $44,028 and $20,000 respectively.
Loss from Operations
The Company’s loss from operations increased to $307,247 for the six months ended June 30, 2021 from $124,591 in 2020, an increase of $182,656.
Other Income (Expense)
Other income (expense) decreased to ($696,235) for the six months ended June 30, 2021 and included interest expense of $350,886, loss on conversions of debt of $442,829 and derivative liability expense of $97,480. Other income (expense) was ($130,741) for the six months ended June 30, 2020 and included interest expense of $54,220 and derivative liability expense of $76,521.
Net Loss
For the six months ended June 30, 2021, our net loss increased to $1,003,482, as compared to a net loss of $255,332 for six months ended June 30, 2020, an increase of $748,150. The increase in net loss was due to the $230,756 increase in operating expenses and the $565,494 increase in other expenses offset partially by the $48,000 increase in gross profit.
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Liquidity and Capital Resources
At June 30, 2021, we had current assets of $86,505 and current liabilities of $4,822,809 resulting in negative working capital of $4,736,304, of which $2,963,045 was accounts payable and $187,181 was included in accrued interest. At June 30, 2021, we had total assets of $381,990 and total liabilities of $4,822,809 resulting in stockholders’ deficit of $4,440,819.
At December 31, 2020, we had current assets of $757 and current liabilities of $4,373,037 resulting in negative working capital of $4,372,280, of which $2,948,964 was accounts payable and $86,307 was included in deferred compensation. At December 31, 2020, we had total assets of $15,555 and total liabilities of $4,373,037 resulting in stockholders’ deficit of $4,357,482.
Accounts Payable
At June 30, 2021, the Company had accounts payable of $2,963,045 that consisted of $492,319 in default judgments due to prior vendors, $2,250,420 due to vendors for materials and services and $220,306 due for credit card obligations.
At December 31, 2020, the Company had accounts payable of $2,948,964 that consisted of $487,615 in default judgments due to prior vendors, $2,241,043 due to vendors for materials and services and $220,306 due for credit card obligations.
Debt
At June 30, 2021, the Company had outstanding debt of $959,423 that consisted of $888,109 of debt in technical default, $42,947 in loans payable to officers and directors and $28,367 due to others. Please see NOTE F – DEBT for further information.
At December 31, 2020, the Company had outstanding debt of $896,584 that consisted of $888,109 of debt in technical default and $8,475 other debt. Please see NOTE F – DEBT for further information.
Capital Raising
For the six months ended June 30, 2021 and the twelve months ended December 31, 2020, the Company raised $592,839 and $131,475 through the issuance of Convertible Promissory Notes or loans from officers, respectively.
Cash on Hand
Our cash on hand as of June 30, 2021 and December 31, 2020 was $39,993 and $757, respectively.
Satisfaction of Outstanding Liabilities
As of June 30, 2021, the Company has a liability of $492,319 as a result of three (3) default judgments. The Company intends to negotiate settlements and establish payment plans with each creditor that will satisfy these judgements. Nonetheless, some or all of the creditors may elect to bring further litigation to protect their claims or perfect their judgments.
The Company accrued customer deposits in the form of advance payments for waste management services that could not be delivered when the Company suspended operations in August 2018. The Company intends to either resume waste management services with those customers or refund the advance payments through a repayment plan.
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There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources to satisfy these outstanding liabilities. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business.
We currently have no external sources of liquidity such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital.
We are dependent on the sale of our securities to fund our operations and will remain so until we generate sufficient revenues to pay for our operating costs. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans and/or financial guarantees.
If we are unable to raise the funds, we will seek alternative financing through means such as borrowings from institutions or private individuals. There can be no assurance that we will be able to raise the capital we need for our operations from the sale of our securities. We have not located any sources for these funds and may not be able to do so in the future. We expect that we will seek additional financing in the future. However, we may not be able to obtain additional capital or generate sufficient revenues to fund our operations. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, we may be forced to cease operations. If we fail to raise funds, we expect that we will be required to seek protection from creditors under applicable bankruptcy laws.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern and believes that our ability is dependent on our ability to implement our business plan, raise capital and generate revenues. Please see NOTE L - GOING CONCERN UNCERTAINTY for further information.
Debt
Our Debt was $959,423 and $896,584 at June 30, 2021 and December 31, 2020, respectively. Included within the Debt was the following at June 30, 2021: (i) Note payable to Seller of CARE in the amount of $315,810 dated October 20, 2017, interest at 7% per annum, payable in 16 quarterly installments of principal and interest commencing on January 1, 2018 and ending October 1, 2021; and (ii) Note payable to Seller of CFSI in the amount of $179,190 dated October 20, 2017, interest at 7% per annum, payable in 16 quarterly installments of principal and interest commencing on January 1, 2018 and ending October 1, 2021. The Company disputes these liabilities based on Seller’s misrepresentations in connection with the sale of CARE and CFSI to Deep Green effective October 1, 2017. The Company has not made any of the payments required under these notes. In addition, (iii) $387,535 due under Factor agreement with AEC Yield Capital, LLC and Notice of Default; and (iv) $5,574 due under a short-term capital lease; and (v) $42,947 as loans payable to officers; and (vii) $28,637 other debt. Please see NOTE F – DEBT for further information.
Convertible Notes
On June 4, 2021, the Company issued Quick Capital, LLC (“Quick”) a Convertible Promissory Note (the “Note”) in the amount of One Hundred Fifty Thousand and NO/100 Dollars ($150,000). The Note is convertible, in whole or in part, at any time and from time to time before maturity (June 4, 2022) at the option of the holder at the Conversion Price that shall equal the lesser of: a) $0.01 or b) Sixty Percent (60%) of the lowest Trading Price (defined below) during the Valuation Period (defined below), and the Conversion Amount shall be the amount of principal or interest electively converted in the Conversion Notice. The total number of shares due under any conversion notice (“Notice Shares”) will be equal to the Conversion Amount divided by the Conversion Price. “Trading Price” means, for any security as of any date, any trading price on the OTC Markets, or other applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal securities exchange or trading market where such security is listed or traded. The “Valuation Period” shall mean twenty (20) Trading Days, commencing on the first Trading Day following delivery and clearing of the Notice Shares in Holder’s brokerage account, as reported by Holder (“Valuation Start Date”). The Note has a term of one (1) year and bears interest at 10% annually. The Company and Quick also entered into a Registration Rights Agreement (“RRA”) that provided for the Company to file a Registration Statement with the SEC covering the resale of up to 20,000,000 shares underlying the Note and to have filed such Registration Statement within 30 days of the RRA. In the event that the Company doesn’t maintain the registration requirements provided for in the RRA, the Company is obligated to pay Quick certain payments for such failures. The transaction closed on June 8, 2021. Please see NOTE G – CONVERTIBLE NOTES PAYABLE for further information.
On June 4, 2021, the Company issued GPL Ventures, LLC (“GPL”) a Convertible Promissory Note (the “Note”) in the amount of One Hundred Fifty Thousand and NO/100 Dollars ($150,000). The Note is convertible, in whole or in part, at any time and from time to time before maturity (June 4, 2022) at the option of the holder at the Conversion Price that shall equal the lesser of: a) $0.01 or b) Sixty Percent (60%) of the lowest Trading Price (defined below) during the Valuation Period (defined below), and the Conversion Amount shall be the amount of principal or interest electively converted in the Conversion Notice. The total number of shares due under any conversion notice (“Notice Shares”) will be equal to the Conversion Amount divided by the Conversion Price. “Trading Price” means, for any security as of any date, any trading price on the OTC Markets, or other applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal securities exchange or trading market where such security is listed or traded. The “Valuation Period” shall mean twenty (20) Trading Days, commencing on the first Trading Day following delivery and clearing of the Notice Shares in Holder’s brokerage account, as reported by Holder (“Valuation Start Date”). The Note has a term of one (1) year and bears interest at 10% annually. The Company and GPL also entered into a Registration Rights Agreement (“RRA”) that provided for the Company to file a Registration Statement with the SEC covering the resale of up to 20,000,000 shares underlying the Note and to have filed such Registration Statement within 30 days of the RRA. In the event that the Company doesn’t maintain the registration requirements provided for in the RRA, the Company is obligated to pay GPL certain payments for such failures. The transaction closed on June 8, 2021. Please see NOTE G – CONVERTIBLE NOTES PAYABLE for further information.
On March 2, 2021, the Company issued GPL Ventures, LLC (“GPL”) a Convertible Promissory Note (the “Note”) in the amount of Fifty Thousand and NO/100 Dollars ($50,000). The Note is convertible, in whole or in part, at any time and from time to time before maturity (March 2, 2022) at the option of the holder at the Conversion Price that shall equal the lesser of: a) $0.01 or b) Sixty Percent (60%) of the lowest Trading Price (defined below) during the Valuation Period (defined below), and the Conversion Amount shall be the amount of principal or interest electively converted in the Conversion Notice. The total number of shares due under any conversion notice (“Notice Shares”) will be equal to the Conversion Amount divided by the Conversion Price. “Trading Price” means, for any security as of any date, any trading price on the OTC Markets, or other applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal securities exchange or trading market where such security is listed or traded. The “Valuation Period” shall mean twenty (20) Trading Days, commencing on the first Trading Day following delivery and clearing of the Notice Shares in Holder’s brokerage account, as reported by Holder (“Valuation Start Date”). The Note has a term of one (1) year and bears interest at 10% annually. The Company and GPL also entered into a Registration Rights Agreement (“RRA”) that provided for the Company to file a Registration Statement with the SEC covering the resale of up to 10,000,000 shares underlying the Note and to have filed such Registration Statement within 30 days of the RRA. In the event that the Company doesn’t maintain the registration requirements provided for in the RRA, the Company is obligated to pay GPL certain payments for such failures. The transaction closed on March 9, 2021. Please see NOTE G – CONVERTIBLE NOTES PAYABLE for further information.
On February 5, 2021, the Company issued GPL Ventures, LLC (“GPL”) a Convertible Promissory Note (the “Note”) in the amount of Seventy-Five Thousand and NO/100 Dollars ($75,000). The Note is convertible, in whole or in part, at any time and from time to time before maturity (February 5, 2022) at the option of the holder at the Conversion Price that shall equal the lesser of: a) $0.01 or b) Sixty Percent (60%) of the lowest Trading Price (defined below) during the Valuation Period (defined below), and the Conversion Amount shall be the amount of principal or interest electively converted in the Conversion Notice. The total number of shares due under any conversion notice (“Notice Shares”) will be equal to the Conversion Amount divided by the Conversion Price. “Trading Price” means, for any security as of any date, any trading price on the OTC Markets, or other applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal securities exchange or trading market where such security is listed or traded. The “Valuation Period” shall mean twenty (20) Trading Days, commencing on the first Trading Day following delivery and clearing of the Notice Shares in Holder’s brokerage account, as reported by Holder (“Valuation Start Date”). The Note has a term of one (1) year and bears interest at 10% annually. The Company and GPL also entered into a Registration Rights Agreement (“RRA”) that provided for the Company to file a Registration Statement with the SEC covering the resale of up to 10,000,000 shares underlying the Note and to have filed such Registration Statement within 30 days of the RRA. In the event that the Company doesn’t maintain the registration requirements provided for in the RRA, the Company is obligated to pay GPL certain payments for such failures. Please see NOTE G – CONVERTIBLE NOTES PAYABLE for further information.
On June 23, 2020, the Company issued GPL Ventures LLC (“GPL”) a Convertible Promissory Note (the “Note”) in the amount of One Hundred Thousand and NO/100 Dollars ($100,000). The Note is convertible, in whole or in part, at any time and from time to time before maturity (June 23, 2021) at the option of the holder at the Conversion Price that shall equal the lesser of a) $0.01 or b) Sixty Percent (60%) of the lowest Trading Price (defined below) during the Valuation Period (defined below), and the Conversion Amount shall be the amount of principal or interest electively converted in the Conversion Notice. The total number of shares due under any conversion notice (“Notice Shares”) will be equal to the Conversion Amount divided by the Conversion Price. “Trading Price” means, for any security as of any date, any trading price on the OTC Markets, or other applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal securities exchange or trading market where such security is listed or traded. The “Valuation Period” shall mean twenty (20) Trading Days, commencing on the first Trading Day following delivery and clearing of the Notice Shares in Holder’s brokerage account, as reported by Holder (“Valuation Start Date”). The Note has a term of one (1) year and bears interest at 10% annually. The Company and GPL also entered into a Registration Rights Agreement (“RRA”) that provided for the Company to file a Registration Statement with the SEC covering the resale of shares underlying the Note and the warrant and to have declared effective such Registration Statement (which occurred on July 13, 2020). In the event that the Company doesn’t maintain the registration requirements provided for in the RRA, the Company is obligated to pay GPL certain payments for such failures. In the twelve months ended December 31, 2020, a total of $84,000 (of the $100,000 Note) was converted into shares of the Company’s common stock. Please see NOTE G – CONVERTIBLE NOTES PAYABLE for further information.
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Cash Flows
We had net cash used in operating activities for the six months ended June 30, 2021 and 2020 of $236,418 and $34,639, respectively.
We had net cash used in investing activities for the six months ended June 30, 2021 and 2020 of $207,185 and $0, respectively.
We had net cash provided by financing activities for the six months ended June 30, 2021 and 2020 of $482,839 and $133,965, respectively.
Required Capital Over the Next Twelve Months
We expect to incur losses from operations for the near future. We believe we will have to raise an additional $2,500,000 to expand our operations over the next twelve months, including roughly $75,000 to remain current in our filings with the SEC. The additional funds will be utilized for hiring ancillary staff and key personnel, corporate website and SEO development, acquisition(s) in the waste and recycling management sector and day to day operations.
Future financing may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, existing holders of our securities may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our securities.
If additional financing is not available or is not available on acceptable terms, we may be required to delay or alter our business plan based on available financing.
Critical Accounting Policies and Estimates
The SEC issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” suggesting that companies provide additional disclosure and commentary on their most critical accounting policies. In Financial Reporting Release No. 60, the SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the following significant policies as critical to the understanding of our financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make a variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and (ii) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements. Our management expects to make judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increase, these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable, actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material impact on our results.
Off-Balance Sheet Arrangements
We did not have, during the periods presented, and we do not currently have, any relationships with any organizations or financial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act Rule 13a-15, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Company’s President concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s President, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2021, there was no change in internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
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PART II
ITEM 1. LEGAL PROCEEDINGS
We know of no pending proceedings to which any director, member of senior management, or affiliate is either a party adverse to us or has a material interest adverse to us.
| ● | None of our executive officers or directors have (i) been involved in any bankruptcy proceedings within the last five years, (ii) been convicted in or has pending any criminal proceedings (other than traffic violations and other minor offenses), (iii) been subject to any order, judgment or decree enjoining, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activity or (iv) been found to have violated any Federal, state or provincial securities or commodities law and such finding has not been reversed, suspended or vacated. |
ITEM 1A. RISK FACTORS
Not applicable to smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities
In connection with the foregoing, the Company relied upon the exemptions from registration provided by Rule 701 and Section 4(a)(2) under the Securities Exchange Act of 1933, as amended:
For the six months ended June 30, 2021 and fiscal year ended December 31, 2020, the Company issued and/or sold the following unregistered securities:
Common Stock
For the six months ended June 30, 2021
On June 24, 2021, the Company issued 14,700,000 shares of common stock in satisfaction of $114,660 principal. The $120,540 excess of the $235,200 fair value of the 14,700,000 shares over the $114,660 liability reduction was charged to loss on conversion of debt in the three months ended June 30, 2021.
On June 24, 2021, the Company issued 7,225,972 shares of common stock in satisfaction of $51,369 principal and $658 interest. The $63,589 excess of the $115,616 fair value of the 7,225,972 shares over the $52,027 liability reduction was charged to loss on conversion of debt in the three months ended June 30, 2021.
On May 12, 2021, the Company issued 6,000,000 shares of common stock in satisfaction of $60,000 principal. The $123,600 excess of the $183,600 fair value of the 6,000,000 shares over the $60,000 liability reduction was charged to loss on conversion of debt in the three months ended June 30, 2021.
On May 12, 2021, the Company issued 4,000,000 shares of common stock in satisfaction of $40,000 principal. The $83,600 excess of the $123,600 fair value of the 4,000,000 shares over the $40,000 liability reduction was charged to loss on conversion of debt in the three months ended June 30, 2021.
On May 12, 2021, the Company issued 2,500,000 shares of common stock in satisfaction of $25,000 principal. The $51,500 excess of the $76,500 fair value of the 2,500,000 shares over the $25,000 liability reduction was charged to loss on conversion of debt in the three months ended June 30, 2021.
On March 19, 2021, the Company issued 750,000 restricted shares of its common stock to a consultant for services rendered.
On February 17, 2021, the Company issued Lloyd Spencer (Company CEO) 1,616,379 restricted shares of its common stock (850,000 shares vested from August 2020 to December 2020 pursuant to the Employment Agreement dated December 4, 2019 and 766,379 shares vested in 2020 pursuant to the Board of Directors Services Agreement dated January 9, 2020).
On February 17, 2021, the Company issued Bill Edmonds (Company CFO) 766,379 restricted shares of its common stock which vested in 2020 pursuant to the Board of Directors Services Agreement dated January 9, 2020.
On February 16, 2021, the Company issued the 2,000,000 shares of its common stock to the Seller of the AmWaste assets as per the terms of the Asset Purchase Agreement.
For the twelve months ended December 31, 2020
On January 24, 2020, the Company issued Lloyd Spencer 840,000 shares of its common stock with an estimated fair value of $33,600 as per the terms of the Employment Agreement entered into between the Company and Mr. Spencer dated December 4, 2019.
On July 27, 2020, the Company issued a noteholder 2,000,000 shares of common stock in satisfaction of $20,000 principal. The $52,800 excess of the $72,800 fair value of the 2,000,000 shares over the $20,000 liability reduction was charged to loss on conversion of debt in the year ended December 31, 2020.
On August 6, 2020, the Company issued a noteholder 892,592 shares of common stock in satisfaction of $7,000 principal, $726 interest and $1,200 in fees. The $17,852 excess of the $26,778 fair value of the 892,592 shares over the $8,926 liability reduction was charged to loss on conversion of debt in the year ended December 31, 2020.
On August 17, 2020, the Company issued a noteholder 4,000,000 shares of common stock in satisfaction of $40,000 principal. The $20,000 excess of the $60,000 fair value of the 4,000,000 shares over the $40,000 liability reduction was charged to loss on conversion of debt in the year ended December 31, 2020.
On August 18, 2020, the Company issued a noteholder 262,481 shares of common stock as a partial cashless exercise of a warrant.
On September 9, 2020, the Company issued Lloyd Spencer 1,020,000 shares of its common stock with an estimated fair value of $18,768 as per the terms of the Employment Agreement entered into between the Company and Mr. Spencer dated December 4, 2019.
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On September 23, 2020, the Company issued a noteholder 4,000,000 shares of common stock in satisfaction of $24,000 principal. The $24,000 excess of the $48,000 fair value of the 4,000,000 shares over the $24,000 liability reduction was charged to loss on conversion of debt in the year ended December 31, 2020.
On December 29, 2020, the Company issued a noteholder 1,769,447 shares of common stock in satisfaction of $16,000 principal, $494 interest and $1,200 in fees. The $23,357 excess of the $41,051 fair value of the 1,769,447 shares over the $17,694 liability reduction was charged to loss on conversion of debt in the year ended December 31, 2020.
On December 30, 2020, the Company issued May Davis Partners Acquisition Company, LLC 10,000,000 shares of its common stock as per the terms of the Services Settlement Agreement entered into between the Company and MD Global Partners, LLC dated November 27, 2020. The $163,000 fair value of the 10,000,000 shares at November 27, 2020 was charged to professional and consulting fees in the year ended December 31, 2020.
The number of common shares authorized with a par value of $0.0001 per share at June 30, 2021 and December 31, 2019 is 250,000,000 and 250,000,000, respectively. At June 30, 2021 and December 31, 2019, there are 169,394,790 and 129,836,060 shares of common stock issued and outstanding, respectively.
Preferred Stock
For the six months ended June 30, 2021
None.
For the year ended December 31, 2020
On June 3, 2020, the Company issued 6,000 shares of its Series B Convertible Preferred Stock to Bill Edmonds in satisfaction of $6,000 loans payable to Mr. Edmonds.
On January 22, 2020, the Company issued 25,000 shares of Series B Preferred Stock to Bill Edmonds in satisfaction of $25,000 of the Company’s deferred compensation liability to Mr. Edmonds.
The number of preferred shares authorized with a par value of $0.0001 per share at June 30, 2021 and December 31, 2020 is 2,000,000 and 2,000,000, respectively. At June 30, 2021 and December 31, 2020, there are 31,000 and 31,000 shares of preferred stock issued and outstanding, respectively.
Except as noted, none of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering, and the Registrant believes each transaction was exempt from the registration requirements of the Securities Act as stated above. All recipients of the foregoing transactions either received adequate information about the Registrant or had access, through their relationships with the Registrant, to such information. Furthermore, the Registrant affixed appropriate legends to the share certificates and instruments issued in each foregoing transaction setting forth that the securities had not been registered and the applicable restrictions on transfer.
Use of Proceeds
None.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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+ Filed hereby with this Registration Statement.
++ To be filed by subsequent amendment.
XBRL Exhibits will be filed by subsequent amendment.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 16, 2021
| DEEP GREEN WASTE & RECYCLING, INC. | ||
| By: | /s/ Lloyd Spencer | |
| Lloyd Spencer | ||
| President | ||
| (Principal Executive Officer) | ||
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