10-Q: Deep Green Waste & Recycling Reports Q3 2024 Results, Shows Improvement Despite Revenue Dip

Deep Green Waste & Recycling, Inc. reports a net loss of $422,459 for the nine months ended September 30, 2024, an improvement compared to the $1,499,679 loss in the same period of 2023, despite a decrease in revenue.

Summary

• Deep Green Waste & Recycling, Inc. reported a net loss of $422,459 for the nine months ended September 30, 2024, which is an improvement compared to a net loss of $1,499,679 for the same period in 2023.
• The company's revenue decreased to $837,037 for the nine months ended September 30, 2024, from $1,214,677 in the same period of 2023, primarily due to a significant drop in asbestos-related revenue from a large project in 2023.
• Cost of sales decreased slightly to $201,416 from $229,730 year-over-year.
• Operating expenses decreased to $1,172,716 from $1,747,196 year-over-year, mainly due to a reduction in non-cash stock compensation.
• The company's operating loss improved to $537,095 from $762,249 year-over-year.
• Other income improved to a loss of $135,238 due to a non-cash derivative calculation adjustment and a gain on settled accounts payable.
• The company had a negative working capital of $4,166,463 as of September 30, 2024, with total liabilities of $4,535,668 and a stockholders deficit of $3,499,270.
• The company's cash on hand decreased to $58,488 as of September 30, 2024, from $318,441 at the end of 2023.
• The company has outstanding secured notes and convertible notes payable of $484,288 and other debt of $438,714 as of September 30, 2024.

Sentiment

Score: 5

Explanation: The document shows a mixed picture. While there's a significant improvement in net loss and a reduction in operating expenses, the company faces substantial challenges with declining revenue, negative working capital, and a going concern uncertainty. The need for a capital raise and the presence of significant debt and liabilities add to the negative sentiment.

Positives

• The company's net loss improved by over $1 million year-over-year.
• Operating expenses decreased significantly due to lower non-cash stock compensation.
• Other income improved due to a non-cash derivative calculation adjustment and a gain on settled accounts payable.
• The company's other revenue channels such as Mold, Lead and Radon all increased year-over-year by 40%, 135% and 45% respectively.

Negatives

• The company experienced a significant decrease in revenue, primarily due to the absence of a large asbestos project from the previous year.
• The company has a negative working capital of $4,166,463.
• The company's cash on hand decreased significantly to $58,488.
• The company has a stockholders deficit of $3,499,270.
• The company has a substantial amount of accounts payable totaling $2,867,135.

Risks

• The company has a history of net losses and expects to continue to incur negative cash flows.
• There is substantial doubt about the company's ability to continue as a going concern.
• The company is dependent on the sale of its securities to fund operations.
• The company has a significant amount of debt and outstanding liabilities.
• The company may not be able to raise sufficient funds to execute its business plan.
• The company has a liability of $487,615 as a result of three default judgements.
• The company has accounts payable to other vendors of materials and services and credit card companies aggregating $2,379,520, which are mostly past due and remain unpaid.

Future Outlook

The company plans to expand its service offerings, acquire profitable waste and recycling services companies, offer innovative recycling services, establish partnerships, and attract investment funds to grow into a leading waste and recycling services supplier in North America. The company expects to incur losses from operations for the near future and will need to raise additional capital to expand operations.

Management Comments

• Management believes that the company will have to raise an additional $500,000 to expand operations over the next twelve months.
• Management intends to negotiate settlements and establish payment plans with creditors holding default judgments.
• Management intends to either resume waste management services with customers holding deposits or refund the advance payments through a repayment plan.

Industry Context

The company operates in the waste and recycling industry, which is subject to various environmental regulations and market trends. The company's focus on sustainable waste management solutions and innovative recycling services aligns with the growing demand for environmentally responsible practices. The company's strategy of acquiring profitable waste and recycling services companies is a common approach in the industry to achieve growth and market share.

Comparison to Industry Standards

• The company's financial performance is below industry standards for profitability and liquidity.
• Many competitors in the waste and recycling industry have established revenue streams and positive cash flows, while Deep Green is still in a turnaround phase.
• Companies like Waste Management and Republic Services have significantly higher revenue and market capitalization, indicating a substantial difference in scale and financial stability.
• Deep Green's reliance on debt financing and convertible notes is a common practice for smaller companies in the industry, but it also carries higher financial risk.
• The company's focus on asbestos removal and remediation services is a niche market within the broader waste and recycling industry, which may provide opportunities for growth but also exposes the company to specific risks and regulations.

Management Changes

Legal Proceedings

• The company was involved in a legal proceeding with Owen May and MD Global Partners, which was dismissed on May 30, 2024.
• The company has three default judgments against it totaling $487,615.

Related Party Transactions

• The company issued shares of common stock to its three officers and directors in satisfaction of accrued board and officer compensation.
• Bill Edmonds, the company's CEO, is also a key party in the sale of Amwaste through his single member LLC, Tylers Couch LLC.

Stakeholder Impact

• Shareholders face the risk of further dilution if the company issues additional equity securities.
• Employees may be impacted by the company's financial instability and potential restructuring.
• Customers may be affected by the company's ability to provide services and fulfill contracts.
• Suppliers and creditors face the risk of non-payment due to the company's financial difficulties.

Next Steps

• The company plans to secure additional funding sources, including corporate partnerships, licensing revenue agreements, convertible debentures, and public or private equity securities.
• The company intends to negotiate settlements and establish payment plans with creditors holding default judgments.
• The company intends to either resume waste management services with customers holding deposits or refund the advance payments through a repayment plan.
• The company will continue to seek acquisition opportunities in the waste and recycling sector.

Key Dates

Keywords

Waste Recycling, Environmental Services, Asbestos Removal, Remediation, Financial Results, Debt, Convertible Notes, Going Concern, Acquisition, Operating Loss