10-K: Deep Green Waste & Recycling Reports Widening Losses and Revenue Decline, Raising Going Concern Doubts

Deep Green Waste & Recycling, Inc. reported a significant increase in net loss and a sharp decline in revenue for the year ended December 31, 2024, leading to substantial doubt about its ability to continue as a going concern.

Summary

• Net loss widened to $1,390,114 for the twelve months ended December 31, 2024, compared to a net loss of $690,140 for the same period in 2023.
• Total revenues decreased significantly by approximately 60% to $1,081,615 in 2024 from $2,682,762 in 2023, primarily due to the absence of a large asbestos remediation project (Oxford House at Vanderbilt University Medical Center) that contributed substantially to 2023 revenues.
• Gross profit declined to $825,950 in 2024 from $2,045,694 in 2023.
• Operating loss increased to $963,396 in 2024 from $259,314 in 2023.
• Cash on hand decreased to $72,842 at December 31, 2024, from $318,441 at December 31, 2023.
• The company reported negative working capital of $4,646,222 at December 31, 2024, worsening from $4,227,606 at December 31, 2023.
• Total stockholders' deficit increased to $4,044,760 at December 31, 2024, from $3,300,050 at December 31, 2023.
• The sale of the Amwaste subsidiary on March 20, 2024, generated $175,000 in proceeds for Deep Green and resulted in a gain on sale of assets of $26,388.
• The company's independent registered public accounting firm and management have expressed substantial doubt about its ability to continue as a going concern through November 2025.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, evidenced by widening net losses, sharply declining revenue, negative working capital, and an explicit 'going concern' uncertainty. While a lawsuit was dismissed and some revenue channels grew, the overall financial health is deteriorating, indicating a high risk profile.

Positives

• A lawsuit filed by Owen May and MD Global, seeking $350,000 in compensatory damages and $3,500,000 in punitive damages, was dismissed with prejudice on May 30, 2024.
• The sale of the Amwaste subsidiary generated $175,000 in cash proceeds for Deep Green and a gain on sale of assets of $26,388.
• Revenue from Mold, Lead, and Radon remediation channels increased by 90%, 197%, and 40% respectively in 2024, indicating growth in these specific service areas.
• Operating expenses, while higher than 2023, were noted by management as being 'down from $2,305,008 year-over-year' primarily due to lower non-cash stock compensation in 2024.

Negatives

• Net loss significantly widened to $1,390,114 in 2024 from $690,140 in 2023.
• Total revenues decreased by approximately 60% to $1,081,615 in 2024 from $2,682,762 in 2023, primarily due to the absence of a large asbestos remediation project in 2024.
• Gross profit declined substantially to $825,950 in 2024 from $2,045,694 in 2023.
• Operating loss worsened to $963,396 in 2024 from $259,314 in 2023.
• Cash on hand significantly decreased to $72,842 at December 31, 2024, from $318,441 at December 31, 2023.
• Negative working capital worsened to $4,646,222 at December 31, 2024, from $4,227,606 at December 31, 2023.
• Total stockholders' deficit increased to $4,044,760 at December 31, 2024, from $3,300,050 at December 31, 2023.
• The company still has $487,615 in unpaid default judgments and $2,379,520 in mostly past due accounts payable and credit card obligations.
• The company's independent auditors and management have expressed substantial doubt about its ability to continue as a going concern.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to a history of net losses, negative working capital, and expected continued negative cash flows.
• The company's ability to meet its financial obligations is dependent on securing additional funding sources, which may include corporate partnerships, licensing agreements, convertible debentures, and public or private equity securities, including an at-the-market (ATM) facility.
• There is no assurance that sufficient funds will be generated from operations or available through external sources, which could force the company to substantially curtail or cease operations.
• Future financing, if obtained, may result in significant dilution for existing shareholders or new securities may have superior rights, preferences, or privileges.
• The company faces challenges in effectively executing its business plan, managing expansion, growth, and operating expenses.
• Risks are present in protecting the company's brands and reputation.
• The company's ability to repay its existing debts is a significant concern, given the large outstanding accounts payable and default judgments.
• The company operates in a highly competitive and evolving industry, requiring constant adaptation to changes in technology and customer behavior.
• Risks are associated with completed or potential acquisitions, dispositions, and other strategic growth opportunities, including timing and integration challenges.
• The company may fail to preserve its expertise in consumer product development.
• Existing and potential distribution partners may choose to work with competitors offering more favorable products or pricing terms.
• The company may be unable to maintain or grow its sources of revenue or achieve profitability.
• The company faces challenges in attracting and retaining key personnel.
• Unexpected increases in costs and expenses could further impact financial performance.

Future Outlook

The company plans to expand its service offerings to provide additional sustainable waste management solutions, acquire profitable waste and recycling services companies with similar or compatible and synergistic business models, 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 to help the company 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 anticipates needing an additional $500,000 over the next twelve months for expansion and to remain current in its SEC filings.

Management Comments

• "We anticipate that our cost of revenues will increase in 2024 and for the foreseeable future as we continue to build out our remediation services and identify acquisition opportunities in the waste and recycling sector."
• "We expect to incur losses from operations for the near future."
• "We believe we will have to raise an additional $500,000 to expand our operations over the next twelve months, including roughly $50,000 to remain current in our filings with the SEC."
• "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."

Industry Context

Deep Green Waste & Recycling operates in the waste and recycling services industry, focusing on commercial and institutional properties. The company aims to expand its offerings in sustainable waste management and innovative recycling, aligning with broader industry trends towards environmental solutions. Its strategy includes acquiring profitable companies, indicating a fragmented market with consolidation opportunities. The significant decline in asbestos-related revenue in 2024, offset by growth in mold, lead, and radon channels, suggests a dynamic market where specific remediation needs can fluctuate, requiring diversified service offerings.

Comparison to Industry Standards

• The document does not provide specific comparable companies, projects, or results to assess the company's performance against global industry benchmarks.
• However, the substantial net losses, sharply declining revenues, significant negative working capital, and the explicit 'going concern' uncertainty suggest performance well below typical industry standards for a healthy, growing enterprise in the waste and recycling sector.

Management Changes

Corporate Governance

Legal Proceedings

• A complaint filed in the Supreme Court of the State of New York by Owen May and MD Global, alleging breach of contract, conversion, fraud, and securities fraud, seeking $350,000 in compensatory damages and $3,500,000 in punitive damages, was dismissed with prejudice on May 30, 2024.
• The company has three unpaid default judgments aggregating $487,615, including $32,832 to an Ohio vendor, $423,152 to a Tennessee customer, and $31,631 to a Florida vendor.
• 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.
• The company has not paid any amounts to satisfy the $387,535 claimed by AEC Yield Capital, LLC pursuant to a Notice of Default dated July 31, 2018.

Related Party Transactions

• Bill Edmonds, the company's Chairman and CEO, owned Tylers Couch, LLC, which received $10,000 from the sale of Amwaste assets on March 20, 2024.
• Bill Edmonds received 25,000 shares of Series B Preferred Stock in satisfaction of $25,000 deferred compensation liability on January 22, 2020.
• Bill Edmonds received 6,000 shares of Series B Preferred Stock in satisfaction of $6,000 loans payable on June 3, 2020.
• Bill Edmonds received 21,000 shares of Series B Preferred Stock in satisfaction of $21,000 of a note payable on November 30, 2022.
• Effective September 7, 2024, the company issued a total of 3,783,711 shares of common stock to its three officers and directors (including Bill Edmonds and David Bradford) in satisfaction of accrued board compensation totaling $60,000 and accrued officer compensation totaling $118,591.
• Loans payable to officers amounted to $1,940 at December 31, 2024.
• Accrued compensation due to David A. Bradford was $28,000 and deferred compensation was $125,045 at December 31, 2024.
• Accrued board salary due to Bill Edmonds was $10,334, accrued officer salary was $29,500, and deferred compensation was $3,546 at December 31, 2024.
• Accrued cash compensation due to Lloyd Spencer was $17,500 and accrued board salary was $28,000 at December 31, 2024.

Stakeholder Impact

• Shareholders face significant dilution risk from potential future equity raises and note conversions. The substantial increase in net loss and negative working capital, along with the explicit going concern warning, indicates a high risk to investment value.
• Employees, particularly Lyell Environmental Services, Inc. supervisors and project managers, may benefit from the $92,300 accrued for the LES Gross Profit Incentive Plan. However, the overall financial instability poses a risk to job security.
• Customers who made advance payments for waste management services may see their services resumed or receive refunds through a repayment plan, indicating a commitment to resolving past issues.
• Suppliers and creditors face significant risk of non-payment or delayed payment due to the company's substantial outstanding liabilities, including $487,615 in default judgments and $2,379,520 in mostly past due accounts payable and credit card obligations.

Next Steps

• Expand 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.
• Acquire profitable waste and recycling services companies with similar or compatible and synergistic business models.
• 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.
• Attract investment funds to help the company grow into a leading waste and recycling services supplier in North America.
• Negotiate settlements and establish payment plans with creditors for outstanding default judgments and accounts payable.
• Either resume waste management services with customers who made advance payments or refund those payments through a repayment plan.
• Seek additional financing in the future through means such as borrowings from institutions or private individuals, or through the sale of securities.

Key Dates

Recommendation

Keywords

Waste Management, Recycling Services, Environmental Remediation, Asbestos Removal, SEC Filing, 10-K, Financial Performance, Going Concern, Liquidity, Capital Raise, Deep Green Waste & Recycling, Lyell Environmental Services, Amwaste