10-K: Deep Green Waste & Recycling Reports Increased Revenue but Continues to Face Financial Challenges in 2023

Deep Green Waste & Recycling, Inc. saw a significant increase in revenue in 2023, but still reported a net loss and faces ongoing financial uncertainties.

Summary

• Deep Green Waste & Recycling, Inc. is a publicly traded company focused on acquiring operating entities in the waste and recycling sector.
• The company reported a substantial increase in revenue, from $1,053,612 in 2022 to $2,682,762 in 2023, representing a 155% increase.
• Despite the revenue growth, the company experienced a net loss of $690,140 in 2023, an improvement from the $1,194,221 loss in 2022.
• Operating expenses increased from $1,442,021 in 2022 to $2,305,009 in 2023, driven by increased officer compensation and other costs.
• The company's working capital deficit improved slightly from $4,768,610 in 2022 to $4,227,086 in 2023.
• The company has significant debt, including accounts payable of $3,028,385 and convertible debentures totaling $659,288.
• The company's auditors have expressed substantial doubt about its ability to continue as a going concern due to its history of losses and need for additional financing.

Sentiment

Score: 4

Explanation: While the company shows revenue growth, the continued net losses, substantial debt, and going concern warning from auditors indicate a negative outlook. The company's future is highly uncertain.

Positives

• The company experienced a significant increase in revenue, indicating growth in its operations.
• The company's gross profit margin improved substantially year-over-year.
• The net loss decreased, suggesting improved operational efficiency or cost management.
• The working capital deficit improved, indicating a slightly stronger financial position.

Negatives

• The company continues to operate at a net loss, indicating ongoing financial challenges.
• Operating expenses increased significantly, offsetting some of the revenue gains.
• The company has a substantial amount of debt, including accounts payable and convertible debentures.
• The company's auditors have expressed substantial doubt about its ability to continue as a going concern.

Risks

• The company has limited financial resources and may not be able to secure additional financing.
• The company has a limited operational history in an emerging industry, making it difficult to predict future performance.
• The company is highly dependent on key executives, and the loss of any of them could harm the business.
• The company may be subject to additional litigation, including potential class action and stockholder derivative actions.
• The company's bank accounts are not fully insured, which could result in losses if a bank fails.
• The company's business plan is speculative and subject to numerous risks and uncertainties.
• The company may be unable to manage growth, which may impact its potential profitability.
• The company's shares are subject to the U.S. Penny Stock Rules, which may limit the ability of broker-dealers to sell the securities.

Future Outlook

The company plans to expand its service offerings, acquire profitable waste and recycling companies, offer innovative recycling services, establish partnerships, and attract investment funds to become a leading waste and recycling services supplier in North America. Some potential merger/acquisition candidates have been identified and discussions initiated.

Industry Context

The waste and recycling industry is highly competitive, with large national companies, municipalities, and regional and local companies all vying for market share. The industry has seen some consolidation in recent years, but remains intensely competitive. Deep Green is an insignificant participant among the firms which engage in the acquisition of business opportunities.

Comparison to Industry Standards

• Deep Green competes with large national waste management companies such as Waste Management (WM), Republic Services, and Waste Connections.
• The company also competes with smaller regional and local companies, as well as specialized firms in areas like alternative disposal and waste brokering.
• Operating costs, disposal costs, and collection fees vary widely throughout the areas in which Deep Green operates, making direct comparisons challenging.
• Deep Green's financial results are not directly comparable to larger, more established companies due to its smaller scale and developmental stage.

Management Changes

Corporate Governance

Legal Proceedings

• The company is subject to several default judgments totaling $487,615.
• The company is also subject to a complaint filed in the Supreme Court of the State of New York by Owen May and MD Global seeking $350,000 in compensatory damages and $3,500,000 in punitive damages. The company won a partial motion to dismiss in June 2023.

Related Party Transactions

• Deep Green used an entity controlled by Deep Greens 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 December 31, 2023 and December 31, 2022, Deep Green had an account payable to this entity of $57,600 and $57,600, respectively.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial instability and potential for dilution.
• Employees may be affected by potential layoffs or restructuring if the company's financial situation does not improve.
• Customers may experience disruptions in service if the company faces financial difficulties.
• Creditors face the risk of non-payment due to the company's high debt levels.

Next Steps

• The company plans to expand its service offerings to provide additional sustainable waste management solutions.
• The company plans to acquire profitable waste and recycling services companies with similar or compatible and synergistic business models.
• The company plans to offer innovative recycling services that significantly reduce the disposal of plastics, electronic wastes, food wastes, and hazardous wastes.
• The company plans to establish partnerships with innovative universities, municipalities and companies.
• The company plans to attract investment funds who will actively work with the Company to achieve these goals.

Key Dates

Keywords

waste recycling, acquisitions, financial performance, revenue growth, net loss, debt, going concern, convertible notes, operating expenses, working capital