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 195,492,871 shares of the registrant’s common stock outstanding.
DEEP GREEN WASTE & RECYCLING, INC.
TABLE OF CONTENTS
| 2 |
USE OF MARKET AND INDUSTRY DATA
This Quarterly Report on Form 10-Q includes market and industry data that we have obtained from third-party sources, including industry publications, as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which we operate (including our management’s estimates and assumptions relating to such industries based on that knowledge). Management has developed its knowledge of such industries through its experience and participation in these industries. While our management believes the third-party sources referred to in this Quarterly Report on Form 10-Q are reliable, neither we nor our management have independently verified any of the data from such sources referred to in this Quarterly Report on Form 10-Q or ascertained the underlying economic assumptions relied upon by such sources. Furthermore, internally prepared and third-party market prospective information, in particular, are estimates only and there will usually be differences between the prospective and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. Also, references in this Quarterly Report on Form 10-Q to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report, survey or article is not incorporated by reference in this Quarterly Report on Form 10-Q.
Solely for convenience, we refer to trademarks in this Quarterly Report on Form 10-Q without the ® or the ™ or symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our own trademarks. Other service marks, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, if any, are the property of their respective owners, although for presentational convenience we may not use the ® or the ™ symbols to identify such trademarks.
OTHER PERTINENT INFORMATION
Unless the context otherwise indicates, when used in this Quarterly Report on Form 10-Q, the terms “Deep Green” “we,” “us,” “our,” the “Company” and similar terms refer to Deep Green Waste & Recycling, Inc., a Wyoming corporation formerly known as Critic Clothing, Inc., and affiliates.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the period ended June 30, 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.
| 3 |
PART I
INDEX TO FINANCIAL STATEMENTS
| 4 |
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, $.0001 par value; 250,000,000 shares authorized; 169,394,790 and 129,836,060 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | $ | 16,940 | $ | 12,984 | ||||
| Preferred Stock, $.0001 par value, $1 per share stated value, 2,000,000 shares authorized; 31,000 and 31,000 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.
| 5 |
DEEP GREEN WASTE & RECYCLING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For
the three and six months ended June 30, 2021 and 2020
(Unaudited)
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
|
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 $22,121, $0, $46,911 and $33,600 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.
| 6 |
DEEP GREEN WASTE & RECYCLING, INC.
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICIENCY)
(Unaudited)
For the three and six months ended June 30, 2021:
| Shares | Amount | Shares | Amount | Additional | Accumulated | Total | ||||||||||||||||||||||
| 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 Preferred B stock in satisfaction of deferred compensation | - | - | ||||||||||||||||||||||||||
| Issuance of common stock to an officer for services | - | - | ||||||||||||||||||||||||||
| Issuance of common stock in satisfaction of notes payable | - | - | ||||||||||||||||||||||||||
| Issuance of Preferred B stock in satisfaction of loan payable to officer | - | - | ||||||||||||||||||||||||||
| 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 | ) | ||||||||||||||
| 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:
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| 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 | ) | ||||||||||||||
| 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.
| 7 |
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 6,000 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.
| 8 |
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 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.
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 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.
| 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:
SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT
| 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.
Loss per Share
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:
SCHEDULE OF PROPERTY AND EQUIPMENT
|
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:
SCHEDULE OF INTANGIBLE ASSETS
|
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 five years. 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:
SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS
| Mar. 31, 2021 | ||||
| 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:
SCHEDULE OF ACCOUNTS PAYABLE
|
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:
SCHEDULE OF DEBT
|
June
30, 2021
(Unaudited) |
December 31, 2020 | |||||||
| Long-term portion of debt | $ | - | $ | - | ||||
| 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:
SCHEDULE OF CONVERTIBLE NOTE PAYABLE
|
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 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 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 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 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 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. 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 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. 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 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. 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:
SCHEDULE OF DERIVATIVE LIABILITY
|
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 $0.0224 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 $0.0329 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 $0.0001 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 2,000,000 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 0 and 0 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 $0.0001 per share and authorization of 100,000 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 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.
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.
At June 30, 2021 and December 31, 2020, there were 31,000 and 31,000 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 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 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 year 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.
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, 2020 is 250,000,000 and 250,000,000, respectively. At June 30, 2021 and December 31, 2020, 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 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.
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.
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.
| 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:
SUMMARY OF WARRANTS AND OPTIONS ACTIVITY
| 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:
SCHEDULE OF PROVISION FOR (BENEFIT FROM) INCOME TAXES
| 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 $21,000 and $0, 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 500,000 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 6,120,000 shares of the Corporation’s Common Stock over a 3-year period. Stock Grant shares shall vest 170,000 shares each month after the Stock Grant date, December 4, 2019, over a three-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, 840,000 shares were issued to Mr. Spencer pursuant to the Employment Agreement. On September 9, 2020, 1,020,000 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 $21,000 and $0, 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: $5,000/(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: $5,000/(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 2,500,000 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 8,300,345 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 8,300,345 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 4,629,964 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 4,629,964 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 4,344,595 shares of common stock in satisfaction of $33,888 principal. The $68,210 excess of the $102,098 fair value of the 4,344,595 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 1,000,000 shares of common stock as Commitment Shares as per the terms of the SPA.
On July 9, 2021, the Company issued 7,823,177 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 2,758,620 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 250,000,000 to 500,000,000 and to increase the number of authorized shares of Preferred Stock of the Company from 2,000,000 to 5,000,000 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) 1,000,000 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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Exhibit 10.55
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this “Agreement”) is made as of this ___ day of June, 2021, among Deep Green Waste & Recycling, Inc., a Wyoming corporation (“Buyer”), Jeremy Lyell (the “Shareholder”), and Lyell Environmental Services, Inc., a Tennessee corporation (the “Company”).
RECITALS
The Shareholder owns all of the presently outstanding shares of capital stock of the Company (the “Shares”) and desires and intends to sell the Shares to Buyer at the price and on the terms and subject to the conditions set forth below.
The Buyer desires and intends to acquire the Shares from the Shareholder at the price and on the terms and subject to the conditions set forth below.
AGREEMENT
NOW THEREFORE, in consideration of the covenants and conditions set forth herein, the parties agree as follows:
SECTION 1. DEFINITIONS.
The following terms as used in this Agreement, shall have the meanings set forth in this Section:
“Accounts Receivable” means all rights of the Company to payment from the customers of the Company arising from Seller’s operation of the Company prior to the Closing Date.
“Assets” means all the tangible and intangible assets, real, personal, or mixed, owned or held by the Company and used or useful in the business, including the Personal Property, Real Property, the Assumed Contracts and Grants of Authority, the Accounts Receivable, the Intangibles, and all customer lists and relationships, and other information relating to the Company, but not including the Excluded Assets.
“Assumed Contracts and Grants of Authority” means (a) those Contracts and Grants of Authority hereto designated by Buyer to indicate that they will be assumed by Buyer at Closing, and (b) and Contracts and Grants of Authority entered into by Seller in the ordinary course of business between the date hereof and the Closing Date that Buyer expressly agrees to assume at Closing.
“Audit” means the SEC qualified audit of the Company’s 2019, 2020, and YTD 2021 Financial reports, to be purchased by Buyer and undertaken immediately upon execution of the Agreement, with the final Auditor’s letter acceptable to Buyer as a condition to Closing.
“Company” means Lyell Environmental Services, Inc., the environmental remediation services company owned by Shareholder, inclusive of the Assets, customer and vendor relationships, operating methods, brand, and any and all other elements of the enterprise used or useful in its operation.
“Closing” means the consummation of the transaction contemplated by this Agreement in accordance with the provisions of Section 14.
“Closing Date” means the date on which the Closing occurs, as determined pursuant to Section 14.
“Common Stock” means the shares of Common Stock of Buyer to be issued to Shareholder as a component of the consideration for the purchase of the Shares.
“Consents” means the consents, permits, or approvals of third parties, including governmental authorities, necessary to transfer any of the Assets to Buyer or otherwise to consummate the transaction contemplated hereby.
“Contracts” means all contracts, leases, non-governmental licenses, and other agreements (including leases for personal or real property and employment agreements), written or oral, including any amendments or other modifications thereto, that relate to the Company or the operation of any aspect of the Company together with any additions thereto between the date hereof and the Closing Date.
“Effective Time” means 12:01 a.m. local Nashville, Tennessee time, on the Closing Date.
“Excluded Assets” has the meaning set forth in Section 2.2 below.
“Grants of Authority” means any and all municipal, state, and federal grants of authority and applications therefore, which are used or useful in connection with the operation of the Company, together with any additions thereto between the date hereof and the Closing Date.
“Intangibles” means all copyrights, trademarks, service marks, trade names, licenses, patents, permits, privileges, proprietary information, technical information and data, trade secrets, machinery and equipment warranties, and all other intangible property rights and interests, whether or not applied for by, or issued to, the Company or under which the Company is licensed or franchised and used or which are, or may be, useful in, or in any way related to, the business and operations of the Company, together with any additions thereto between the date hereof and the Closing Date, and all goodwill relating to all of the foregoing.
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“Personal Property” means all machinery, equipment, tools, vehicles, furniture, leasehold improvements, office equipment, inventory, and other tangible personal property used or useful in the operation of the Company, and all data files, plans, diagrams, blueprints, schematics, and books and records relating to the operation of the Company, filings with governmental agencies, and executed copies of the Contracts and Grants of Authority, together with any additions thereto between the date hereof and the Closing Date.
“Purchase Price” has the meaning set forth in Section 2.1 below.
“Real Property” means all real estate and all interest in real property, including all leaseholds, easements, licenses used or useful in the operation of the Business, together with any additions thereto between the date hereof and the Closing Date.
“Shares” means all of the issued and outstanding shares of Lyell Environmental Services, Inc.
“Shareholder” means Jeremy Lyell, who is the sole shareholder of Lyell Environmental Services, Inc.
SECTION 2. SALE AND PURCHASE OF SHARES.
Agreement to Sell and Buy. Subject to the terms and conditions of this Agreement, at the Closing, the Shareholder shall sell, convey, transfer, and assign, upon the terms and conditions hereinafter set forth, to Buyer, free and clear of all liens, pledges, claims, and encumbrances of every kind, nature and description, and Buyer shall purchase and accept from the Shareholder the Shares, which comprise all of the outstanding capital stock of the Company. Notwithstanding the foregoing or any other provision of this Agreement, the Shareholder shall retain and shall indemnify the Buyer against any and all losses, claims, settlements, judgments or other liabilities.
| 2.1. | Purchase Price. Subject to the terms and conditions set forth in this Agreement, including adjustments as provided below, Buyer shall purchase the Shares for aggregate consideration (the “Purchase Price”) as follows: |
(a) Upon Buyer’s execution of this Agreement, Buyer shall deliver to ________, Inc. (the “Escrow Agent”) the sum of fifty thousand dollars ($50,000) (the “Escrow Amount”). The Escrow Amount shall be held by the Escrow Agent and distributed pursuant to the terms and conditions of the Escrow Agreement attached hereto as Exhibit A, to be entered into by the Buyer, the Shareholder and the Escrow Agent at or prior to the Closing, and shall be subject to set off, in accordance with Section 13.5 hereof, in the event that the Company or the Shareholder breach the representations and warranties contained in Section 6 of this Agreement.
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(b) At the Closing, the Buyer shall pay to the Shareholder the sum of One Million Three Hundred Thousand Dollars ($1,300,000) by wire transfer of immediately available funds to such bank account of the Shareholder as the Shareholders shall designate in writing prior to the Closing.
(c) At the Closing, the Buyer shall issue to the Shareholder One Million (1,000,000) shares of Buyer’s common stock (the “Common Stock”) by Buyer’s Letter of Authorization to its transfer agent.
(d) The Purchase Price shall be adjusted as provided in this Section to give effect to the proration between Buyer and Shareholder of all revenues and expenses arising from the operation of the Company. The expenses to be prorated shall include business, franchise, and license fees (including any retroactive adjustments thereof), utility charges, real and personal property taxes and assessments levied against the Company, property and equipment rentals, amounts due under any of the Assumed Contracts and Grants of Authority and shall receive all revenues and be responsible for all expenses, costs, and liabilities allocable to the period prior to the effective time of Closing, and Buyer shall receive all revenues and be responsible for all expenses, costs, and obligations allocable to the period after the effective time of Closing, except that there shall be no adjustment and Shareholder shall remain solely liable with respect to any obligation or liability not being assumed by Buyer in accordance with this Section 2.
(e) The Purchase Price, taking into account all adjustments and prorations, will be determined finally, and additional payment to Buyer to Shareholder or refund by Shareholder to Buyer, as appropriate, will be made, in accordance with the following procedures:
| (1) | Within 60 days after the Closing Date, Buyer will deliver to Shareholder a statement setting forth Buyer’s determination of the amount of the Purchase Price and the calculation thereof, taking into account all prorations. If Shareholder disputes the amount of the Purchase Price determined by Buyer, Shareholder shall deliver to Buyer within 30 days after his receipt of Buyer’s statement a statement setting forth his determination of the amount thereof. If Shareholder notifies Buyer of his acceptance of Buyer’s statement, or if Shareholder otherwise fails to deliver his own statement with the 30-day period specified in the preceding sentence, then Buyer’s determination shall be final, and payment shall be made thereon. |
| (2) | Buyer and Shareholder shall use their good faith efforts to resolve any dispute involving the determination of the Purchase Price. If the parties are unable to resolve the dispute within 15 days following the delivery of Shareholder’s statement, each of Buyer and Shareholder shall select an independent arbitrator who shall be knowledgeable and experienced in the operation of such businesses, and the two arbitrators so chosen shall attempt to resolve the dispute. If they are not able to do so within 45 days following the delivery of Shareholder’s statement, the two arbitrators shall agree upon a third arbitrator and the dispute shall be resolved by the decision of the majority of the arbitrators, which shall be conclusive and binding on the parties. Any fees of the arbitrators shall be split equally between the parties. |
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| 2.2 | Excluded Assets |
The Shareholder shall retain all right title and interest in the following assets (the “Excluded Assets”):
| (a) | Shareholder’s cash on hand or in any of Company’s bank accounts as of the effective time of Closing except for an amount equal to one twelfth (1/12) of the Company’s reported 2020 revenue, which shall remain with the Company. |
| (b) | All books and records that Shareholder is required by law to retain or that relate solely to Shareholder’s personal matters. |
All of Shareholder’s claims, rights, and interest in and to any refund for federal, state, or local franchise, income, or other taxes or fees of any nature whatsoever for periods prior to the effective time of the Closing.
| 2.3 | Assumption of Liabilities and Obligations. |
| (a) | Assumption. Except as provided in paragraph (b) of this Section 2.3, as of the Effective Time, Buyer shall assume and undertake to pay, discharge, and perform all obligations and liabilities arising out of events occurring after the Effective Time related to Buyer’s ownership of the Shares or its operation of the Company after the Effective Time, including, insofar as they relate to the period after the Effective Time and arise out of events occurring after the Effective Time, all the obligations and liabilities of the Company under the Assumed Contracts and Grants of Authority. Buyer shall also assume the Company’s obligations and liabilities as of the Effective Time with respect to customer deposits and prepayments from customers. Other than as specified herein, Buyer shall assume no obligations or liabilities of the Company or the Shareholder. |
| (b) | Limitation. Notwithstanding any provision of this Agreement to the contrary, Buyer shall not assume: (1) any obligations or liabilities under any Contract or Grant of Authority not included in the Assumed Contracts and Grants of Authority; (2) any obligations or liabilities under the Assumed Contracts and Grants of Authority relating to the time period prior to the Effective Time; (3) any claims or pending litigation or proceedings relating to any action with respect to the operation of the Company prior to the Effective Time; (4) any obligation or liabilities arising under capitalized leases or other financing agreements; (5) any obligations or liabilities of the Company or Shareholder under collective bargaining agreements, multi-employer plans or any other employee benefit plan of the Company; and (6) any obligations or liabilities caused by, arising out of, or resulting from any action or omission of the Company or Shareholder prior to the Effective Time, and all such obligations and liabilities shall remain and be the obligations and liabilities solely of Shareholder. |
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SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SHAREHOLDER
The Company and the Shareholder, jointly and severally, represent and warrant to the Buyer as of the date hereof (which representations and warranties shall survive the Closing as provided in Section 16 of this Agreement) as follows:
| 3.1.1 | Good Title |
The Shareholder owns _______ (_____) shares of the Company’s common stock, no par value, (the “Common Stock”), which represents all of the issued and outstanding capital stock of the Company, certification of which is attached hereto as Schedule 3.1.1. Such Shares are owned free and clear of any lien, encumbrance, adverse claim, restriction on sale, transfer or voting (other than restrictions imposed by applicable securities laws), preemptive right, option or other right to purchase, and upon the consummation of the sale of such Shares as contemplated hereby, the Buyer will have good title to such Shares, free and clear of any lien, encumbrance, adverse claim, restriction on sale, transfer or voting (other than restrictions imposed by applicable securities laws), preemptive right, option or other right to purchase.
| 3.1.2 | Authority |
The Shareholder has all requisite power, right and authority to enter into this Agreement and the documents contemplated hereby (the “Transaction Documents”) to which he is a party, to consummate the transactions contemplated hereby and thereby, and to sell and transfer the Shares without the consent or approval of any other person, corporation, partnership, joint venture, organization, other entity or governmental or regulatory authority (“Person”). The Shareholder has taken, or will take prior to the Closing, all actions necessary for the authorization, execution, delivery and performance of this Agreement and the other Transaction Documents.
| 3.1.3 | Enforceability |
This Agreement has been, and the other Transaction Documents to which the Shareholder is a party on the Closing Date will be, duly executed and delivered by the Shareholder, and this Agreement is, and each of the other Transaction Documents to which he is a party on the Closing will be, the legal, valid and binding obligation of the Shareholder, enforceable against the Shareholder in accordance with their terms.
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| 3.1.4 | No Approvals or Notices Required; No Conflicts |
Except as provided on Schedule 3.1.4, the execution, delivery and performance of this Agreement and the other Transaction Documents by the Shareholder, and the consummation of the transactions contemplated hereby and thereby, will not (a) constitute a violation (with or without the giving of notice or lapse of time, or both) of any provision of any law, judgment, decree, order, regulation or rule of any court, agency or other governmental authority applicable to the Shareholder, (b) require any consent, approval or authorization of, or declaration, filing or registration with, any Person, (c) result in a default (with or without the giving of notice or lapse of time, or both) under, acceleration or termination of, or the creation in any party of the right to accelerate, terminate, modify or cancel, any agreement, lease, note or other restriction, encumbrance, obligation or liability to which the Company is a party or by which it is bound or to which any assets of the Company are subject, or (d) result in the creation of any lien or encumbrance upon the assets of the Shareholder, or upon the Shares or other securities of the Company.
| 3.1.5 | Securities Law Representations and Warranties |
The Shareholder has been advised that the Common Stock is not registered under the Securities Act of 1933 (the “Act”), or applicable state securities laws, but is being issued pursuant to exemptions from such laws, and that the Buyer’s reliance upon such exemptions is predicated in part on the Shareholder’s representations contained herein. The Shareholder acknowledges that the Buyer is relying in part upon the Shareholder’s representations and warranties contained herein for the purpose of qualifying the issuance of the Securities for applicable exemptions from registration or qualification pursuant to federal or state securities laws, rules and regulations.
| (a) | Acquired Entirely for Own Account |
The Common Stock will be issued for the Shareholder’s own account, not as a nominee or agent, and not with a view to distributing all or any part thereof. The Shareholder has no present intention of selling, granting any participation in or otherwise distributing any of the Common Stock in a manner contrary to the Act or any applicable state securities law. The Shareholder does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person with respect to any of the Common Stock.
| (b) | Due Diligence |
The Shareholder has been solely responsible for his own due diligence investigation of the Buyer and its business, and their analysis of the merits and risks of the investment made pursuant to this Agreement and are not relying on anyone else’s analysis or investigation of the Buyer, its business or the merits and risks of the Common Stock other than professional advisors employed specifically by the Shareholder to assist the Shareholder.
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| (c) | Access to Information |
The Shareholder believes he has been given access to full and complete information regarding the Buyer, including, in particular, the current financial condition of the Buyer and the risks associated therewith, and has utilized such access to their satisfaction for the purpose of obtaining information about the Buyer; particularly, the Shareholder has either attended or been given reasonable opportunity to meet with the senior executives of the Buyer, for the purpose of asking questions of, and receiving answers from, such persons concerning the terms and conditions of the issuance of the Common Stock and to obtain any additional information, to the extent reasonably available, necessary to verify the accuracy of information provided to the Shareholder about the Buyer. No such investigation, however, shall qualify in any respect the representations and warranties of the Buyer in this Agreement.
| (d) | Sophistication |
The Shareholder, either alone or with the assistance of his professional advisor, is a sophisticated investor, is able to fend for himself in the transactions contemplated by this Agreement and has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment in the Common Stock.
| (e) | Suitability |
The investment in the Common Stock is suitable for the Shareholder based upon his investment objectives and financial needs, and the Shareholder has adequate net worth and means for providing for his current financial needs and contingencies and has no need for liquidity of investment with respect to the Common Stock. The Shareholder’s overall commitment to investments that are illiquid or not readily marketable is not disproportionate to his net worth, and investment in the Common Stock will not cause such overall commitment to become excessive.
| (f) | Professional Advice |
The Shareholder has obtained, to the extent he deems necessary, his own professional advice with respect to the risks inherent in the investment in the Common Stock, the condition of the Buyer and the suitability of the investment in the Common Stock in light of the Shareholder’s financial condition and investment needs.
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| (g) | Ability to Bear Risk |
The Shareholder is in a financial position to purchase and hold the Common Stock and is able to bear the economic risk and withstand a complete loss of his investment in the Common Stock.
| (h) | Restricted Securities |
The Shareholder realizes that (a) the Common Stock has not been registered under the Act, is characterized under the Act as “restricted securities” and, therefore, cannot be sold or transferred unless subsequently registered under the Act or an exemption from such registration is available. The Shareholder’s financial condition is such that it is unlikely that the Shareholder would need to dispose of any of the Common Stock in the foreseeable future. In this connection, the Shareholder represents that he is familiar with Rule 144 of the Securities and Exchange Commission (the “SEC”), as presently in effect, and understands the resale limitations imposed thereby and by the Act.
| 3.2 | Company Organization, Good Standing; Corporate Authority; Enforceability |
| 3.2.1 | Organization, Good Standing, etc. |
The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Tennessee. The Articles of Incorporation, Bylaws, and Minutes of the Company, and Certificate of Good Standing dated no more than 10 days prior to execution of this Agreement from the State of Tennessee are attached hereto as Exhibit B. The Company is duly qualified to do business and is in good standing in the states where qualification is required due to (a) the Company’s ownership or lease of real or personal property for use in the operation of the Company’s business or (b) the nature of the business conducted by the Company. The Company has not at any time owned nor leased any real or personal property, or had any business, operations, obligations, or liabilities under any assumed or fictitious names. The Company has all requisite power, right and authority to own, operate and lease its properties and assets, and to carry on its business as now conducted.
| 3.2.2 | Corporate Authority |
The Company has full corporate power and authority to execute and deliver this Agreement and the documents contemplated hereby to which it is a party and to perform its obligations hereunder and thereunder. The execution and delivery by the Company of this Agreement and the Transaction Documents to which it is a party, the performance by the Company of its obligations hereunder and thereunder and the consummation by the Company of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, and the Transaction Documents to which the Company is a party, when executed and delivered by the Company, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms.
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| 3.3 | Capitalization |
(a) The authorized capital stock of the Company consists of _________ (_______) shares of common stock, without par value (the “Common Stock”).
(b) The issued and outstanding capital stock of the Company consists and as of the Closing will consist solely of _________ (_____) shares of Common Stock, all of which are, and as of the Closing Date will be, held of record by the Shareholder. All shares of Common Stock, that are issued and outstanding are, and as of the Closing Date will be, duly authorized, validly issued, fully paid and nonassessable, and issued in compliance with all applicable federal, state and foreign securities laws. Except for the Shareholder, no Person holds any interest in any Shares.
(c) The Company is not a party or subject to any agreement or understanding, and there is no agreement or understanding between any Persons, that affects or relates to the voting or giving of written consents with respect to any securities of the Company or the voting by any director of the Company.
| 3.4 | Subsidiaries and Affiliates |
The Company does not have, and has never had, any Subsidiaries. The Company does not own, directly or indirectly, any ownership, equity, profits or voting interest in, or otherwise control, any corporation, partnership, joint venture or other entity, and has no agreement or commitment to purchase any such interest.
| 3.5 | No Conflict |
Except as provided on Schedule 3.5, the execution, delivery and performance of this Agreement and/or the Transaction Documents by the Company and the consummation of the transactions contemplated hereby and thereby will not: (a) violate, conflict with, or result in any breach of, or constitute a default under, any provision of the Company’s articles of incorporation or by-laws; (b) violate, conflict with, result in any breach of, or constitute a default (or an event that, with notice or lapse of time or both, would constitute a default) under, any contract or judgment to which the Company is a party or by which it is bound or which relates to the Company’s business or assets; (c) result in the creation of any encumbrance, security interest, mortgage, lien, charge, option, license, adverse claim or restriction of any kind on any of the assets of the Company or upon any Shares or other securities of the Company; (d) violate any applicable law, statute, rule, ordinance or regulation of any governmental body; (e) give any party with rights under any contract, judgment or other restriction to which the Company is a party or by which it is bound, the right to terminate, modify or accelerate any rights, obligations or performance under such contract, judgment or restriction; (f) result in the creation of any lien or encumbrance upon the assets of the Company, or upon any Shares or other securities of the Company; or (g) invalidate or adversely affect any permit, license, authorization or status used in the conduct of the business of the Company.
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| 3.6 | Consents and Approvals |
Except as set forth in Schedule 3.6, (a) no consent, approval or authorization of, or declaration, filing or registration with, any governmental body is required for the execution, delivery and performance by the Company of this Agreement and the Transaction Documents to which it is a party or for the consummation by the Company of the transactions contemplated hereby and thereby and (b) no consent, approval or authorization of any third party is required for the execution, delivery and performance by the Company of this Agreement and the Transaction Documents to which it is a party and the consummation by the Company of the transactions contemplated hereby and thereby.
| 3.7 | Financial Statements |
The Company has provided to the Buyer an unaudited balance sheet, dated May 31, 2021 an unuadited operating statement for the one (1) and five (5)-month periods ended May 31, 2021 and an unaudited statement of cash flows for the five (5)-month period ended May 31, 2021 (collectively, the “Financial Statements”), attached hereto as Schedule 3.7. The Financial Statements were prepared from the books and records kept by the Company and fairly present the financial position, results of operations and changes in financial position of the Company, as of their respective dates and for the periods indicated, in accordance with generally accepted accounting principles consistently applied. The Company has no liabilities or obligations of any nature (absolute, accrued, or contingent) that are not fully reflected or reserved against in the balance sheet dated May 31, 2021 (the “Most Recent Balance Sheet”), as prescribed by generally accepted accounting principles, except liabilities or obligations incurred since the date of the May 31, 2021 Balance Sheet in the ordinary course of business and consistent with past practice. The Company is not a guarantor, indemnitor, surety, or other obligor of any indebtedness of any other Person.
| 3.8 | Absence of Undisclosed Liabilities |
The Company has no liabilities or obligations, secured or unsecured, whether accrued, absolute, contingent, unasserted or otherwise, except for liabilities (a) reflected or reserved against in the Most Recent Balance Sheet or (b) incurred in the ordinary course of business after the date of the Most Recent Balance Sheet and not material in amount, either individually or in the aggregate. The Company has not entered into or agreed to enter into any transaction, agreement or commitment, suffered the occurrence of any event or events or experienced any change in financial condition, business, results of operations or otherwise that, in the aggregate, has (i) interfered with the normal and usual operations of the business or business prospects of the Company or (ii) resulted, or could reasonably be expected to result, in a material adverse change in the business, assets, operations, prospects or condition (financial or otherwise) of the Company.
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| 3.9 | Taxes |
(a) The Company has timely filed all tax returns and reports (including information returns and reports) as required by law. These returns and reports are correct and complete in all respects. The Company has paid all taxes and other assessments due. The Company has never had any tax deficiency proposed or assessed against it and has not executed any waiver of any statute of limitations on the assessment or collection of any tax or governmental charge. None of the Company’s federal income tax returns and none of its state income or franchise tax or sales or use tax returns has ever been audited by governmental authorities. Since the date of the Most Recent Balance Sheet, the Company has not incurred any taxes, assessments, or governmental charges other than in the ordinary course of business. The Company has established, in accordance with generally accepted accounting principles applied on a basis consistent with that of preceding periods, and the Most Recent Balance Sheet reflects, adequate reserves for payment of all taxes, assessments and government changes that have accrued and have not been paid and are incurred in or attributable to taxable periods (or portions thereof) ending on or prior to the Closing Date. The Company has timely made all deposits required by law to be made with respect to employees’ withholding and other employment taxes. For purposes of this Agreement, the term “taxes” means all taxes, duties, charges, fees, levies, or other assessments imposed by any governmental body including income, gross receipts, value-added, excise, unemployment compensation, withholding, social security, personal property, privilege, real estate, sale, use, ad valorem, license, lease, service, severance, stamp, intangibles, transfer, payroll, employment, customs, duties, alternative, add-on minimum, estimated, and franchise taxes (including any interest, penalties, or additions attributable to or imposed on or with respect to any such taxes, duties, charges, fees, levies or other assessments). For purposes of this Agreement, the term “tax return” means any return, declaration, report, claim for refund, or information return or statement relating to taxes, including any schedule or attachment thereto, and including any amendment thereof.
| 3.10 | Title to Property; Encumbrances |
(a) The Company has good and marketable title to all of its properties and assets free and clear of any payment obligation to any third party or any other lien or encumbrance.
(b) The Company does not own any real property.
(c) With respect to properties and assets it leases, the Company is in compliance with such leases and holds a valid leasehold interest free of all liens, claims or encumbrances. The Company is not in default under any lease nor does the Company have knowledge of any event which, after notice or the passage of time or both will constitute a default under any lease.
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| 3.11 | Environmental and Safety Matters |
The Company is not in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety.
| 3.12 | Contracts |
Schedule 3.12 contains a complete and accurate list of all contracts, agreements, arrangements, and understandings oral or written, to which the Company is a party or by which the Company is bound, including, without limitation, all security agreements, intellectual property licenses and other license agreements, credit agreements, instruments relating to the borrowing of money, leases, rental agreements, purchase orders, sales orders and sale and distribution agreements (“Contracts”). The Contracts are valid, binding, and enforceable in accordance with their terms against each party thereto and are in full force and effect; the Company has performed all obligations imposed on it thereunder. There are not, under any of the Contracts, any defaults, or events of default on the part of the Company or, to the Company’s knowledge, any other party thereto. True and complete copies of each Contract have been delivered to Buyer. Except for the Consents described in Section 13.1(c) hereof, no consent is required from any Person under any of the Contracts in connection with the consummation of the transactions contemplated by this Agreement, and the Company has not received notice, nor is the Company otherwise aware, that any party to any such contract intends to cancel, terminate, or refuse to renew such contract or to exercise or decline to exercise any option or right thereunder.
| 3.13 | Claims and Legal Proceedings |
Except as listed in Schedule 3.13, there are no claims pending or, to the Company’s knowledge, threatened against the Company, before or by any governmental body or nongovernmental department, commission, board, bureau, agency or instrumentality or any other person. There are no outstanding or unsatisfied judgments, orders, decrees, or stipulations to which the Company is a party.
| 3.14 | Labor Matters |
There are no disputes, material employee grievances or material disciplinary actions pending or, to the Company’s knowledge, threatened between the Company and any employees of the Company (collectively, the “Employees”). The Company has complied in all respects with all provisions of all laws relating to the employment of labor and has no liability for any arrears of wages or taxes or penalties for failure to comply with any such laws. The Company has no knowledge of any organizational efforts presently being made or threatened by or on behalf of any labor union with respect to any Employees.
| 3.15 | Patents, Trademarks, and Intellectual Property |
(a) The Company has sufficient title and ownership of all patents, trade names, trademarks, service marks, copyrights, net names, trade secrets, information, proprietary rights, and processes necessary for its business as now conducted and as presently proposed to be conducted without any conflict with or infringement of the rights of others (the “Intellectual Property”). Schedule 3.15 is an accurate and complete list of all such registered Intellectual Property and applications for any of the foregoing, reflecting dates of filing or dates of issuance, if applicable.
(b) None of the Intellectual Property or the Company’s rights thereto are being infringed or otherwise violated by any person or entity.
(c) The use of the Intellectual Property by the Company in the operation of its business as now conducted or as proposed to be conducted does not infringe or otherwise violate any rights of any person or entity, and there is no pending or threatened claim, demand, cause of action, suit or proceeding, hearing or investigation (each a “Claim”) alleging any such infringement or violation. In addition, there is no pending or threatened claim alleging any defect in or invalidity, misuse, or unenforceability of, or challenging the ownership or use of or the Company’s rights, with respect to any of the Intellectual Property and there is no basis for any such Claim. Furthermore, there is no other Claim made by any person or entity pertaining to the Intellectual Property. None of the Intellectual Property is subject to any judgement, order, award, writ, injunction or decree of any governmental body or arbitrator.
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| 3.16 | Licenses, Permits, Authorizations, etc. |
The Company and the Company’s employees, agents, and representatives have received all governmental approvals, authorizations, consents, accreditations, certifications, licenses, orders, registrations and permits of all agencies, whether federal, state, local or foreign (“Permits”) related to the operation of the Company’s business. Schedule 3.16 contains a list of all Permits with expiration dates, if any. The Company is in compliance with the terms of all Permits, and all Permits are valid and in full force and effect, and no proceeding is pending or threatened, the object of which is to revoke, limit or otherwise affect any Permit. The Company has not received any notifications of any asserted failure to obtain any Permit.
| 3.17 | Related Party Transactions |
Schedule 3.17 is a complete and accurate list of all contracts or agreements, oral or written, between the Company and the Company’s directors, officers, shareholders, employees, agents, consultants, advisors, salespeople, sales representatives and distributors or dealers. No employee, officer, director or shareholder of the Company or member of his or her immediate family (together, “Related Parties”) is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to the Related Parties in the aggregate in excess of $1,000. No employee, officer or director of the Company has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company.
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| 3.18 | Corporate Books and Records |
The Company has furnished to Buyer true and complete copies of (a) the articles of incorporation and bylaws of the Company as currently in effect, including all amendments thereto, (b) the minute books of the Company and (c) the stock transfer books of the Company, attached hereto as Schedule 3.18. Such minutes reflect all meetings of the Company’s shareholders, Board of Directors, and any committees thereof since the Company’s inception, and such minutes accurately reflect the events of, and actions taken at such meetings. Such stock transfer books accurately reflect all issuances and transfers of shares of capital stock of the Company since its inception.
| 3.19 | Compliance With Laws |
The Company is and has been in compliance with all laws, statutes, rules, ordinances and regulations promulgated by any governmental body and all judgments applicable to the operation of its business, to its employees or to its property. The Company has not received notice of any alleged violation (whether past or present and whether remedied or not), nor is the Company aware of any basis for any claim of any such violation, of any such law, statute, rule, ordinance, regulation, or judgment.
| 3.20 | Insurance |
Schedule 3.20 is a complete list of all insurance policies maintained by the Company. The Company has maintained insurance protection in such coverage amounts and deductibles and against all liabilities, claims and risks against which it is customary for corporations engaged in the Company’s industry or a similar business similarly situated to insure.
| 3.21 | Employee Plans |
(a) Schedule 3.21 contains a complete and accurate list of all employees, their positions, and rates of pay, and a list of all benefit plans, funds, policies, programs, contracts, arrangements or practices of any kind (including any “employee benefit plan,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and any employment, consulting or personal services contracts (i) sponsored, maintained or contributed to by the Company or to which the Company is a party, (ii) covering or benefiting any current or former officer, employee, agent, director or independent contractor of the Company (or any dependent or beneficiary of any such individual), or (iii) with respect to which the Company has (or could have) any obligation or liability (each, an “Employee Benefit Plan”). There has been no amendment, interpretation or other announcement (written or oral) by the Company, any corporation, partnership, limited liability company, sole proprietorship, trade, business or other entity or organization that, together with the Company, is or was treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (each, an “ERISA Affiliate”) or any other person relating to, or change in participation or coverage under, any Employee Benefit Plan that, either alone or together with other such items or events, could materially increase the expense of maintaining such Employee Benefit Plan (or the Employee Benefit Plans taken as a whole) above the level of expense incurred with respect thereto for the most recent fiscal year included in the Financial Statements. Neither the Company nor any ERISA Affiliate has any agreement, arrangement, commitment, or obligation to create, enter into or contribute to any additional Employee Benefit Plan, or to modify or amend any existing Employee Benefit Plan. The terms of each Employee Benefit Plan permit the Company to amend or terminate such Employee Benefit Plan at any time and for any reason without penalty and without material liability or expense. None of the rights of the Company under any Employee Benefit Plan will be impaired in any way by this Agreement or the consummation of the transactions contemplated by this Agreement.
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(b) Each Employee Benefit Plan is, and at all times since inception has been, established, maintained, administered, operated and funded in all respects in accordance with its terms and in compliance with all applicable laws, statutes, orders, rules and regulations, including, without limitation, ERISA and the Code. The Company, all ERISA Affiliates, and all other persons (including, without limitation, all fiduciaries) have, at all times properly performed all of their duties and obligations (whether arising by operation of law or by contract) under or with respect to such Employee Benefit Plan, including, without limitation, all reporting, disclosure and notification obligations. Neither the Company nor any ERISA Affiliate has incurred, and there exists no condition or set of circumstances in connection with which the Company, any ERISA Affiliate or the Buyer could incur, directly or indirectly, any material liability or expense (except for routine contributions and benefit payments) under ERISA, the Code or any other applicable law, statute, order, rule or regulation, or pursuant to any indemnification or similar agreement, with respect to any Employee Benefit Plan. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and its related trust is exempt from tax under Section 501(a) of the Code. Nothing has occurred or is reasonably expected by the Company or any ERISA Affiliate to occur that could adversely affect the qualified status of such Employee Benefit Plan or the tax-exempt status of its related trust. All contributions, premiums and other payments due or required to be paid to (or with respect to) each Employee Benefit Plan have been timely paid, or, if not yet due, have been accrued as a liability on the Most Recent Balance Sheet.
(c) Neither the Company nor any ERISA Affiliate sponsors, maintains or contributes to, or has ever sponsored, maintained or contributed to (or been obligated to sponsor, maintain or contribute to), (i) a multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of ERISA, (ii) a multiple employer plan within the meaning of Section 4063 or 4064 of ERISA, or (iii) an “employee benefit plan,” as defined in Section 3(3) of ERISA, that is subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA.
| 3.22 | Full Disclosure |
No information furnished by or on behalf of the Company to Buyer or its representatives in connection with this Agreement or the transactions contemplated by this Agreement is false or misleading. In connection with such information and with this Agreement and the transactions contemplated hereby, the Company has not made any untrue statement of financial or material fact or omitted to state a fact necessary in order to make the statements made or information delivered, in the light of the circumstances under which they were made or delivered, not misleading.
| 3.23 | Customers and Suppliers |
There is no indication that any customer or supplier of the Company intends to terminate or modify its relationship with the Company, or that the consummation of the transactions contemplated by this Agreement and the Transaction Documents will adversely affect the post-Closing relationship of the Buyer with any of the Company’s customers or suppliers.
| 3.24 | Broker |
No broker, finder or other financial consultant has acted on behalf of the Company in connection with this Agreement. Shareholder has engaged Alliant Capital Advisors LLC in connection with this transaction. To the extent that such broker, finder, or other financial consultant has acted on behalf of the Shareholder, the Shareholder shall indemnify and hold Buyer harmless from any brokers, finders or other consultant fees or commissions incurred or accrued in connection with this Agreement or the transactions contemplated by this Agreement.
| 3.25 |
Conduct of Business in Ordinary Course; Adverse Change.
|
Since December 31, 2020, the Company has conducted its business only in the ordinary course and has not:
| (a) | Adverse Change. Suffered any material adverse change in the business, assets, properties, prospects, or condition (financial or otherwise) of the Company, or any damage, destruction, or loss affecting any of the assets used or useful in the conduct of its business, |
| (b) | Liens. Created, assumed, or suffered any mortgage, pledge, lien, or encumbrance on any of the assets, |
| (c) | Employee Compensation. Suffered any material increase in compensation payable or to become payable to any of the employees of the Company, or any bonus payment made or promised to any employee of the Company, or any material change in personnel policies, insurance benefits, or other compensation arrangements affecting the employees of the Company, |
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| (d) | Dispositions. Suffered any sale, assignment, lease, material depletion of inventory, or other transfer of any of the Company’s properties without suitable replacements being obtained therefore, |
| (e) | Cancellation of Debts. Cancelled any debts owed to or claims held by the Company, |
| (f) | Write-Down. Suffered any significant write-down of the value of any assets or any significant write-off as uncollectible of any Accounts Receivable; and |
| (g) | Rights. Transferred or granted any right under or entered into any settlement regarding the breach or infringement of, any license, patent, copyright, trademark, trade name, grant of authority, or other intellectual property or proprietary right, or modified any existing right relating to the Company. |
3.26. Information Regarding the Business
Accounts. All the account balances of customers to the Company are actual and bona fide receivables representing obligations for the total dollar amount thereof, as shown on the books of Company, resulted from the regular course of the Company’s business, and are fully collectible in accordance with their terms, subject to no offset or reduction whatsoever. The Company has no monetary obligations or liabilities to any of its customers except with respect to any deposits and prepayments disclosed in Schedule 3.26.
3.27 Full Disclosure.
No representation or warranty made by Shareholder or the Company in this Agreement or in any certificate, document, or other instrument furnished or to be furnished by the Company or Shareholder pursuant hereto contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact required to make any statement contained herein or therein not misleading. Shareholder or the Company is not aware of any impending or contemplated event or occurrence that would cause any of the foregoing representations not to be true and complete on the date of such event or occurrence as if made on that date.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
| 4.1 | Organization, Standing, and Authority. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Wyoming. On the Closing Date, Buyer will be duly qualified to conduct its business in the States of Tennessee and Kentucky. Buyer has the requisite power and authority to execute, deliver, and perform this Agreement and the documents contemplated hereby according to their respective terms. |
| 4.2 | Authorization and Binding Obligation. The execution, delivery, and performance of this Agreement by Buyer have been duly authorized by all necessary action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer and constitutes a legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms except as the enforceability hereof may be affected by bankruptcy, insolvency, or similar laws affecting creditors’ rights generally and by judicial discretion in the enforcement of equitable remedies. |
| 4.3 | Absence of Conflicting Agreements and Required Consents. Subject to obtaining the Consents, the execution, delivery, and performance of this Agreement and the documents contemplated hereby (with or without the giving of notice, the lapse of time, or both): (a) do not require the consent of any third party; (b) will not conflict with the by-laws of the Buyer; (c) will not conflict with, result in a breach of, or constitute a default under, any applicable law, judgment, order, ordinance, injunction, decree, rule, regulation, or ruling of any court or governmental instrumentality; and (d) will not conflict with, constitute grounds for termination of, result in a breach of, constitute a default under, or accelerate or permit the acceleration of any performance required by the terms of any agreement, instrument, license or permit to which Buyer is a party or by which Buyer may be bound, such that Buyer could not acquire or operate the Assets. |
| 4.4 | Broker. Neither Buyer nor any person or entity acting on its behalf has agreed to pay a commission, finder’s fee, or similar payment in connection with this Agreement or any matter related hereto to any person or entity, nor has it or any person or entity acting on its behalf taken any action on which a claim for any such payment could be based. |
| 4.5 | Full Disclosure. No representation or warranty made by Buyer in this Agreement or in any certificate, document, or other instrument furnished or to be furnished by Buyer pursuant hereto contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact required to make any statement contained herein or therein not misleading. Buyer is not aware of any impending or contemplated event or occurrence that would cause any of the foregoing representations not to be true and complete on the date of such event or occurrence as if made on that date. |
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SECTION 5. CONDITIONS PRECEDENT TO BUYER’S OBLIGATIONS
The Buyer’s obligations under this Agreement are subject to the satisfaction of each of the following conditions, each of which is material, for the sole benefit of the Buyer and may be waived only in writing by the Buyer:
| 5.1 | Representations and Warranties |
The representations of the Company and the Shareholder contained in Section 3 of this Agreement shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date.
| 5.2 | Performance of Agreements |
The Company and the Shareholders shall have duly performed and complied with all covenants and obligations contained in this Agreement or any other Transaction Document that are required to be performed or complied with by them on or before the Closing Date.
| 5.3 | Officer’s Certificate |
The Buyer shall have received a certificate of an officer of the Company, in a form reasonably acceptable to Buyer, dated the Closing Date, certifying that the conditions set forth in Sections 5.1, 5.2, 5.4, 5.6, 5.7, 5.9, 5.11, 5.12, and 5.13, have been fulfilled.
| 5.4 | Shareholder’s Certificate |
The Buyer shall have received a certificate of the Shareholder, in a form reasonably acceptable to the Buyer, dated the Closing Date, certifying that the conditions set forth in Sections 5.1, 5.2, 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.11, 5.12, and 5.13 have been fulfilled.
| 5.5 | Approvals |
All transfers of Permits and all approvals, applications, or notices to public agencies, federal, state, local or foreign, the granting or delivery of which is necessary for the consummation of the transactions contemplated hereby or for the continued operation of the Company shall have been obtained, and all waiting periods specified by law with respect thereto shall have passed. All such transfers and approvals shall be reasonably satisfactory in all respects to the Buyer.
| 5.6 | Resignation |
The Buyer shall have received the Shareholder’s resignation, as the sole officer and director of the Company, effective as of the Closing.
| 5.7 | Delivery of Certificates |
The Shareholder shall have delivered to the Buyer certificates representing the Shares, duly endorsed for transfer on the Company’s books.
| 5.8 | Escrow Agreement |
The Escrow Agent and the Shareholders shall have executed and delivered the Escrow Agreement.
| 5.9 | Payment of Liabilities |
Prior to the Closing Date, the Shareholder shall cause all liabilities of the Company to be satisfied, including but not limited to those liabilities arising under any employment agreements with employees of the Company, which were executed prior to the Closing Date, and shall indemnify, hold harmless and release the Company from such liabilities, except those liabilities listed on Schedule 5.9 attached hereto (the “Permitted Liabilities”) and those liabilities which shall be released after the Closing Date pursuant to Section 14.3 hereof.
| 5.10 | Bank Accounts |
Authority to act on behalf of the Company shall be transferred to Lloyd Spencer, Chief Executive Officer; Bill Edmonds, Interim Financial Officer; and David Bradford, Chief Operating Officer of the Buyer, in connection with all banks, trust companies, savings and loan associations and other financial institutions at which the Company maintains safe deposit boxes or accounts.
| 5.11 | Termination of Options and Warrants |
All options, warrants and other contractual rights to purchase capital stock of the Company shall have expired or been terminated.
| 5.12 | Due Diligence |
The results of the Buyer’s due diligence investigation of the Company and the Shareholder as it relates to the Shares shall be satisfactory in all respects to the Buyer.
| 5.13 | No Adverse Changes |
From the date of this Agreement to the Closing Date, there shall not have been any material adverse change in (a) the business, operations, assets, liabilities, earnings, condition (financial or otherwise) or prospects of the Company or (b) with respect to the Shareholder and the Shares, and no material adverse change shall have occurred (or be threatened) in any domestic or foreign laws affecting the Company or in any third party contractual or other business relationships of the Company.
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SECTION 6. CONDITIONS TO THE COMPANY’S AND SHAREHOLDER’S OBLIGATIONS
The Company’s and Shareholder’s obligations under this Agreement are subject to the satisfaction of the following conditions:
| 6.1 | Representations and Warranties |
The representations of the Buyer contained in Section 6 of this Agreement shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date.
| 6.2 | Performance of Agreements |
Buyer shall have duly performed and complied with all covenants and obligations contained in this Agreement or any other Transaction Document that are required to be performed or complied with by it on or before the Closing Date.
| 6.3 | Escrow Agreement |
The Escrow Agent and the Buyer shall have executed and delivered the Escrow Agreement.
SECTION 7. COVENANTS OF SHAREHOLDER AND THE COMPANY
7.1 Pre-Closing Covenants. Shareholder and the Company covenant and agree that from and after the close of the financial period ending May 31, 2021 as reflected by the financial statements provided pursuant to Section 3.7 above and between the date hereof and the Closing Date, Shareholder and the Company has conducted, and will have conducted, its business diligently, in the ordinary course, and in such a manner so that the representations and warranties contained in Section 3 shall continue to be true on and as of the Closing Date as if made on and as of the Closing Date, and, except with the prior written consent of Buyer, Shareholder and the Company has acted, and will, from the date of this Agreement, act, in accordance with the following:
| (a) | Contracts. The Company will not enter into any contract or commitment relating to the Company or the Assets or amend or terminate any Contract of Grant of Authority (or waive any substantial right thereunder) or incur any obligation (including obligations relating to the borrowing of money or guarantee of indebtedness). |
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| (b) | Encumbrances. The Company will not create, assume, or permit to exist any mortgage, pledge, lien, or other charge or encumbrance of rights affecting any of the Assets, except for those in existence on the date of this Agreement except for mechanics’ liens and other similar liens which will be discharged prior to the Closing Date. |
| (c) | Dispositions. The Company will not sell, assign, lease, or otherwise transfer or dispose of any of the Assets except in the ordinary course of business where no longer used or useful or in connection with the acquisition of replacement property of equivalent kind and value. |
| (d) | Grants of Authority. The Company will not cause or permit, by any act or failure to act, any of the Grants of Authority to expire or to be surrendered or modified, or take any action that would cause any governmental authority to institute proceedings for the suspension, revocation, or adverse modification of any of the Grants of Authority, or fail to prosecute with due diligence any pending applications to any governmental authority in connection with the operation of the Company, or take any other action within its control that would result in the Company being in noncompliance with the requirements of any law, the rules and regulations of any governmental authority, or the terms of any Grant of Authority. |
| (e) | Consents. The Company will obtain the Consents, without any change in the terms or conditions of any Contract that could be less advantageous to the Company than those pertaining under the Contract as in effect on the date hereof. Shareholder or the Company will promptly advise Buyer of any difficulties experienced in obtaining any of the Consents and of any conditions proposed, considered, or requested for any of the Consents. |
| (f) | Books. The Company will maintain the books and records of the company in accordance with prior practice. |
| (g) | Access to Information. The Company will give to Buyer and its counsel, accountants, engineers, and other authorized representatives, reasonable access to the Assets, to the officers, employees, and agents of the Company, and to all books and records relating thereto, and will furnish or cause to be furnished to Buyer and its authorized representatives all information relating to the Assets and Seller that they reasonably request (including any financial reports and operations reports produced with respect to the company). |
| (h) | Notification. The Company will give Buyer prompt written notice of any material change in any of the information contained in its representations and warranties in this Agreement or in the Schedules referred to herein and of any occurrence involving the Business or any Assets and not arising in the ordinary course of the company. |
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| (i) | Maintenance of Assets. The Company will maintain all of the company’s property and Assets or replacements thereof in their present condition as represented in this Agreement, ordinary wear and tear excepted. Seller will maintain supplies of inventory and spare parts consistent with past practice. If any loss, damage, impairment, confiscation, or condemnation to any of the Assets occurs, The Company shall repair, replace, or restore the Assets to their prior condition as represented herein as soon thereafter as possible, and the Company will use the proceeds of any claim under any insurance policy solely to repair, replace, or restore any of the Assets that are lost, damaged, impaired, or destroyed. |
| (j) | Compliance with Laws. The Company will comply with all laws, rules, and regulations. Upon receipt of notice of violation of any law, rule, or regulation, The Company will contest in good faith or cure the violation prior to the Closing Date. |
| (k) | Insurance. The Company will maintain in force the existing hazard and liability insurance policies, or comparable coverage, for the company and the Assets, and it will use the proceeds of any claims for loss payable under those insurance policies to repair, replace, or restore any of the Assets destroyed by fire or other casualty to their former condition as soon as possible after the loss. |
| (l) | Financial Information. Within fifteen days after the close of each calendar month, the Company will furnish to Buyer an unaudited statement of income and expense of the Company for the month and an unaudited balance sheet of the Company as at the close of the month. The financial statements to be delivered hereunder shall be complete and correct, shall be prepared in accordance with generally accepted accounting principles applied and maintained on a basis consistent with prior periods, shall accurately reflect the books, records, and accounts of the company, and shall present fairly the financial condition, assets, liabilities, and results of operations of the company as of the dates and for the periods indicated. The Company shall furnish to Buyer as it becomes available any other information prepared by Seller concerning the financial condition of the company. |
| (m) | Preservation of Business. The Company will preserve the business and organization of the company intact and use its best efforts to keep available to the Company its present employees and to preserve for the company its present relationships with suppliers and customers and others having business relations with them, to the end that the business, operations, and prospects of the Company shall be unimpaired at the Closing Date. The ordinary and customary operating, marketing, promotional, sales, and advertising practices of the company shall be maintained. |
| (n) | Collection of Accounts Receivable. The Company shall collect its Accounts Receivable only in the ordinary course consistent with its past practices and without extraordinary efforts of any kind. |
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| (o) | Rates. The Company will not directly or indirectly modify or amend any rate, charge, deposit, or other material condition under which it does business with its customers and potential customers. |
| (p) | No Inconsistent Action. The Company will not take any action that is inconsistent with its obligations under this Agreement or that could hinder or delay the consummation of the transactions contemplated by this Agreement. |
| (q) | Financing Leases. The Company will satisfy prior to Closing all outstanding obligations under capital and financing leases with respect to any of the Assets and obtain good title to the Assets leased by Company pursuant to those leases so that those Assets shall be transferred to Buyer at Closing free of any interest of the lessors. |
7.2 Closing Covenant. On the Closing Date, if the conditions set forth in Section 8.2 have been satisfied, the Company and Shareholder shall transfer, convey, assign, and deliver to Buyer the Shares as provided in Section 2 of this Agreement and make the deliveries provided in Section 14.3 of this Agreement.
SECTION 8. CLOSING COVENANT OF BUYER
On the Closing Date, if the conditions set forth in Section 7 have been satisfied, Buyer shall purchase the Shares from Shareholder as provided in Section 2 of this Agreement and shall make the deliveries provided in Section 14.3 of this Agreement.
SECTION 9. SPECIAL COVENANTS AND AGREEMENTS
9.1 Further Action Upon the terms and subject to the conditions hereof, each of the parties shall (a) make promptly its respective filings, and thereafter make any other required submissions, under applicable laws with respect to the transactions contemplated hereby and shall cooperate with the Buyer with respect to such filings and submissions and (b) use its best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated hereby, including, without limitation, using its best efforts to obtain all waivers, licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts as are necessary for the consummation of the transactions contemplated hereby and to fulfill the conditions to the closing of the sale of the Shares to the Buyer. In case at any time after the Closing Date any further action is necessary or desirable to carry out the purposes of this Agreement, each party to this Agreement shall use its best efforts to take all such action. None of the Buyer, the Company or the Shareholder will undertake any course of action inconsistent with this Agreement or that would make any representations, warranties or agreements made by such party in this Agreement untrue or any conditions precedent to this Agreement unable to be satisfied at or prior to the Closing.
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9.2 Risk of Loss. The risk of any loss, damage, impairment, confiscation, or condemnation of any of the Assets from any cause whatsoever shall be borne by Seller at all times prior to the Closing.
9.3 Confidentiality. Each party hereto will keep confidential any information obtained from the other party in connection with the transactions contemplated by this Agreement, except as and to the extent required by applicable law and, in the case of Buyer, as disclosure may be reasonably required in connection with Buyer’s review and financing of this transaction and with respect to required securities filings or notices. If this Agreement is terminated, each party will return to the other party all information obtained from the other party in connection with the transactions contemplated hereby.
9.4 Cooperation. Buyer and Shareholder shall cooperate fully with each other and their respective counsel and accountants in connection with any actions required to be taken as part of their obligations under this Agreement, and Buyer and Shareholder will use their best efforts to consummate the transactions contemplated hereby and to fulfill their obligations hereunder.
9.5 Access. To the extent possible, for a period of five years after the Closing Date, Shareholder shall provide Buyer reasonable access and the right to copy any books and records relating to the Company that are not included in the Assets, and Buyer will provide Shareholder access to any books and records relating to the Company that are included in the Assets.
9.6 Covenant Not to Compete.
| (a) | Shareholder. In consideration of the sums to be paid pursuant to the terms of this Agreement, and in order to protect the Company (and the value of the Shares), Shareholder agrees that if the Closing occurs he shall not, either, directly or indirectly through other persons or their respective affiliates, engage in, carry on, or be connected to any waste management business; provided, however, nothing herein shall prohibit Shareholder from being a passive owner of not more than two percent (2%) of the outstanding stock of any class of any corporation that engages in such business, so long as (i) such Shareholder have no active participation in the business of such corporation, and (ii) such stock is traded on a nationally-recognized stock market or on NASDAQ. The provisions of this Section 9.6 shall be binding upon Shareholders for a period of three (3) years from the date of the Closing. It is the intent and understanding of each party hereto that if, in any action before any court or agency legally empowered to enforce this Section 9.6, any term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable to the greatest extent possible by such court or agency. |
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| (b) | Other Provisions. For purposes of this Section, an affiliate means (a) any partnership, corporation, or other entity directly or indirectly controlling, controlled by, or under common control with Shareholder signing below, or (b) any officer, director, manager, trustee, or principal of Shareholder or of any partnership, corporation, or other entity that is an affiliate under this definition. The parties acknowledge and agree that the covenants set forth in this Section 9.6 are ancillary to the sale of the Shares and are reasonable and necessary to protect Buyer’s purchase of the Shares. |
SECTION 10. TAXES
(a) The Shareholder shall be responsible for the payment of all transfer, sales and use and documentary taxes, filing and recording fees and similar charges that may be payable in connection with the transactions contemplated by this Agreement.
(b) Buyer shall prepare, or cause to be prepared, and file, or cause to be filed, all tax returns of the Company for all periods ending on or prior to the Closing Date (which are filed after the Closing Date) and for all periods that began before the Closing Date and end after the Closing Date.
(c) The Shareholder agrees that he will join with the Buyer and the Company to timely make the election provided for under Section 338(h)(10) of the Code in connection with the consummation of the transactions contemplated hereby (the “Section 338(h)(10) Election”). The Shareholder will include any income, gain, loss, or deduction resulting from the Section 338(h)(10) Election on his tax returns to the extent required by applicable law. The Purchase Price, liabilities of the Company and other relevant items shall be allocated in accordance with the allocation set forth on a schedule which shall be prepared by the Buyer and provided to the Shareholder within 90 days following the Closing Date.
SECTION 11. TRANSACTION COSTS
Each party shall be responsible for its own costs and expenses incurred in connection with the preparation, negotiation and delivery of this Agreement and the Transaction Documents, including but not limited to attorneys’ and accountants’ fees and expenses; except that in no event shall any of such costs or expenses be borne by or charged to the Company.
SECTION 12. ATTORNEYS’ FEES AND COSTS
In the event that a party commences a legal proceeding to enforce its rights under this Agreement, the substantially prevailing party shall be entitled to recover its attorneys’ fees and costs from the non-prevailing party or parties, including those incurred in any arbitration, bankruptcy or appeal procedure.
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SECTION 13. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER
13.1 Conditions to Obligations of Buyer. All obligations of Buyer at the Closing hereunder are subject at Buyer’s option to the fulfillment prior to or at the Closing Date of each of the following conditions:
| (a) | Representations and Warranties. All representations and warranties of the Company and Shareholder contained in this Agreement shall be true and complete in all material respects at and as of the Closing Date as though made at and as of that time. |
| (b) | Covenants and Conditions. Shareholder and the Company shall have performed and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing Date. |
| (c) | Consents. All Consents shall have been obtained and delivered to Buyer, without any change in the terms or conditions of any Contract that could be less advantageous to the Company than those pertaining under the Contract as in effect on the date hereof. |
| (d) | Governmental Authorizations. The Company shall be the holder of all Grants of Authority, and there shall not have been any modification of any of the Grants of Authority that could have an adverse effect on the Company or the conduct of its operations. No proceeding shall be pending, the effect of which would be to revoke, cancel, fail to renew, suspend, or modify adversely any Grants of Authority. |
| (e) | Deliveries. Shareholder and the Company shall have made or stand willing to make all the deliveries to Buyer set forth in Section 14.2. |
| (f) | Audit Complete. Buyer shall have received a final letter from the SEC qualified audit of the Company’s financial statements. |
| 13.2 | Conditions to Obligations of Shareholder. All obligations of Shareholder and the Company at the Closing hereunder are subject at Shareholder and the Company’s option to the fulfillment prior to or at the Closing Date of each of the following conditions: |
| (a) | Representations and Warranties. All representations and warranties of Buyer contained in this Agreement shall be true and complete in all material respects at and as of the Closing Date as though made at and as of that time. |
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| (b) | Covenants and Conditions. Buyer shall have performed and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing Date. |
SECTION 14. CLOSING AND CLOSING DELIVERIES
14.1 Closing.
| (a) | Closing Date. The Closing shall take place at 10:00 a.m. on the date which is 15 days after Buyer’s receipt of the final Audit Letter or an earlier or later date to be set by Buyer which is within fifteen days following the satisfaction or waiver of all conditions to closing set forth in this Agreement. |
| (b) | Closing Place. The Closing shall be held at the offices of the Company in Nashville, Tennessee, or any other place that is agreed upon by Buyer and Shareholder. |
14.2 Deliveries by Shareholder. Prior to or on the Closing Date, Shareholder shall deliver to Buyer the following, in form and substance reasonably satisfactory to Buyer and its counsel:
| (a) | Transfer Documents. Duly executed warranty deeds, bills of sale, assignments, and other transfer documents which shall be sufficient to vest good title to the Assets in the name of Buyer, free and clear of all mortgages, liens, restrictions, encumbrances, claims, and obligations except as permitted in this Agreement, |
| (b) | Consents. A manually executed copy of each Consent, |
| (c) | Resolutions. Copies of resolutions adopted by the Board of Directors and, if required, shareholder of Company, authorizing and approving the execution of this Agreement and the consummation of the transactions contemplated hereby on the Closing Date, |
| (d) | Certificate of Compliance. A certificate, dated as of the Closing Date, executed by the President of the Company, certifying: (1) that Shareholder and the Company have obtained proper corporate authorization necessary to the consummation of this Agreement; (2) that the representations and warranties of Shareholder and the Company contained in this Agreement are true and complete in all material respects as of the Closing Date as though made on and as of that date; and (3) that Shareholder and the Company have, in all material respects, performed and complied with all of its obligations, covenants, and agreements set forth in this Agreement to be performed and complied with on or prior to the Closing Date;’ |
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| (e) | Licenses, Contracts, Business Records, Etc. Copies of any Grants of Authority, contracts, blueprints, schematics, working drawings, plans, projections, statistics, and all files and records used by Seller in the operations of the Company, |
| (f) | Accounts Receivable. A complete and accurate list of the Accounts Receivable, including, with respect to each account Receivable, the account number, date of issuance, name and address of account debtor, aggregate amount, and balance due, together with any resolution or other documents that Buyer reasonably requests to permit Buyer to deposit any collections on any Accounts Receivable into its bank accounts. |
14.3 Deliveries by Buyer. Prior to or on the Closing Date, Buyer shall deliver to Shareholder the following, in form and substance reasonably satisfactory to Shareholder and its counsel:
| (a) | Consideration. The consideration for the Shares as provided in Section 2.1, subject to Sections 2.2 and 2.3 above, |
| (b) | Certificate of Compliance. A certificate, dated as of the Closing Date, executed on behalf of Buyer by its President, certifying (1) that the representations and warranties of Buyer contained in this Agreement are true and complete in all material respects as of the Closing Date as though made on and as of that date, and (2) that Buyer has, in all material respects, performed and complied with all of its obligations, covenants, and agreements set forth in this Agreement to be performed and complied with on or prior to the Closing Date. |
SECTION 15. TERMINATION
This Agreement may be terminated by either Buyer or Shareholder, if the terminating party is not then in material default, upon written notice to the other party, upon the occurrence of any of the following:
| (a) | Conditions. If on the Closing Date any of the conditions precedent to the obligations of the terminating party set forth in this Agreement have not been satisfied or waived in writing by the terminating party. |
| (b) | Judgments. If there shall be in effect on the Closing Date any judgment, decree, or order that would prevent or make unlawful the Closing of this Agreement. |
| (c) | Upset Date. If the Closing shall not have occurred prior to September 15, 2021, provided, however that Buyer may elect to extend this date by 30 days upon giving written notice to Shareholder pursuant to section 18.2 herein. |
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SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION.
16.1 Representation and Warranties. All representations, warranties, and covenants not to compete contained in this Agreement shall be deemed continuing representations, warranties and covenants and shall survive the Closing. Any investigations by or on behalf of any party hereto shall not constitute a waiver as to enforcement of any representation, warranty, or covenant contained herein. No notice or information delivered by Shareholder pursuant to Section 7.1(g) or Section 7.1(h) shall modify or limit any of Shareholder’s representations and warranties, affect Buyer’s right to rely on any representation or warranty made by Shareholder, or relieve Shareholder of any obligations hereunder as the result of a breach of any of its representations and warranties.
16.2 Indemnification by Shareholder. Notwithstanding the Closing, and regardless of any investigation made at any time by or on behalf of Buyer or any information Buyer may have, Shareholder agrees to indemnify and hold Buyer harmless against and with respect to, and shall reimburse Buyer for:
| (a) | Breach. Any and all losses, liabilities, or damages resulting from any untrue representation, breach of warranty, or nonfulfillment of any covenant by Seller contained herein or in any certificate, document, or instrument delivered to Buyer hereunder, |
| (b) | Obligations. Any and all obligations of Seller not assumed by Buyer pursuant to the terms of this Agreement, including any and all liabilities arising at any time under any Contract or Grant of Authority not included in the Assumed Contracts and Grants of Authority, |
| (c) | Ownership. Any and all losses, liabilities, or damages resulting from the operation or ownership of the Business prior to the Effective Time, including any and all liabilities arising under the Grants of Authority or the Contracts which relate to events occurring prior to the Effective Time; and |
| (d) | Legal Matters. Any and all actions, suits, proceedings, claims, demands, assessments, judgments, costs, and expenses, including reasonable legal fees and expenses, incident to any of the foregoing or incurred in investigating or attempting to avoid the same or to oppose the imposition thereof, or in enforcing this indemnity. |
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16.3 Indemnification by Buyer. Notwithstanding the Closing, and regardless of any investigation made at any time by or on behalf of Shareholder or the Company or any information Shareholder or the Company may have, Buyer hereby agrees to indemnify and hold Shareholder and the Company harmless against and with respect to, and shall reimburse Shareholder or the Company for:
| (a) | Breach. Any and all losses, liabilities, or damages resulting from any untrue representation, breach of warranty, or nonfulfillment of any covenant by Buyer contained herein or in any certificate, document, or instrument delivered to Shareholder or the Company hereunder, |
| (b) | Ownership. Any and all losses, liabilities, or damages resulting from the operation or ownership of the Company after the Effective Time, including any and all liabilities arising under the Assumed Contracts and Grants of Authority which relate to events occurring after the Effective Time, but in all instances excluding any liabilities arising under any Excluded Assets; and |
| (c) | Legal Matters. Any and all actions, suits, proceedings, claims, demands, assessments, judgments, costs and expenses, including reasonable legal fees and expenses, incident to any of the foregoing or incurred in investigating or attempting to avoid the same or to oppose the imposition thereof, or in enforcing this indemnity; and |
| (d) | Obligations. Any and all obligations of Buyer not assumed by Shareholder pursuant to the terms of this Agreement, including any and all liabilities arising at any time under any Contract or Grant of Authority not included in the Assumed Contracts and Grants of Authority. |
16.4 Procedure for Indemnification. The procedure for indemnification shall be as follows:
| (a) | Notice. The party claiming indemnification pursuant to this Agreement (the “Claimant”) shall promptly give notice to the party from whom indemnification is claimed (the “Indemnitor”) of any claim, whether solely between the parties or brought by a third party, specifying the factual basis for the claim, and the amount of the claim. |
| (b) | Investigation. With respect to claims between the parties, following receipt of notice from the Claimant of a claim, the Indemnitor shall have thirty days to make any investigation of the claim that the Indemnitor deems necessary or desirable. For the purposes of this investigation, the Claimant agrees to make available to the Indemnitor and/or its authorized representatives the information relied upon by the Claimant to substantiate the claim. If the Claimant and the Indemnitor cannot agree as to the validity and amount of the claim within the 30-day period (or any mutually agreed upon extension thereof), the Claimant may seek appropriate legal remedy. |
| (c) | Control. With respect to any claim by a third party as to which the Claimant is entitled to indemnification hereunder, the Indemnitor shall have the right at its own expense to participate in or assume control of the defense of the claim, and the Claimant shall cooperate fully with the Indemnitor, subject to reimbursement for actual out-of-pocket expenses incurred by the Claimant as the result of a request by the Indemnitor. If the Indemnitor elects to assume control of the defense of any third-party claim, the Claimant shall have the right to participate in the defense of the claim at its own expense. If the Indemnitor does not elect to assume control or otherwise participate in the defense of any third party claim, it shall be bound by the results obtained by the Claimant with respect to the claim. |
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SECTION 17. CERTAIN REMEDIES
17.1 Attorneys’ Fees. In the event of a default by Shareholder or Buyer which results in the filing of a lawsuit for damages, specific performance, or other remedy, the prevailing party shall be entitled to reimbursement by the other party of reasonable legal fees and expenses incurred.
SECTION 18. MISCELLANEOUS
18.1 Fees and Expenses. Shareholder shall pay any filing fees, transfer taxes, sales taxes, document stamps, or other charges levied by any governmental entity on account of the transfer of the Shares from Shareholder to Buyer. Except as otherwise provided in this Agreement, each party shall pay its own expenses incurred in connection with the authorization, preparation, execution, and performance of this Agreement, including all fees and expenses of counsel, accountants, agents, and representatives.
18.2 Notices. All notices, demands, and requests required or permitted to be given under the provisions of this Agreement shall be in writing and shall be deemed to have been duly delivered and received (a) on the date of personal delivery, or (b) on the earlier of the date of receipt (as shown on the return receipt) or refusal of delivery if mailed by registered or certified mail, postage prepaid and return receipt requested, or by email in each case addressed as follows:
If to Shareholder:
Mr. Jeremy Lyell
211 Shady Grove Road
Nashville, Tennessee 37214
Email: ________________
If to Company:
Mr. Jeremy Lyell, President
Lyell Environmental Services, Inc.
211 Shady Grove Road
Nashville, Tennessee 37214
Email: ___________________
If to Buyer:
Mr. Lloyd Spencer
Deep Green Waste & Recycling, Inc.
13110 NE 177th Place #293
Woodinville, Washington 98072
Email: Lloyd.spencer@deepgreenwaste.com
Or to any other or additional persons and addresses as the parties may from time to time designate in a writing delivered in accordance with this Section 13.2.
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18.3 Benefit and Binding Effect. Neither party hereto may assign this Agreement without the prior written consent of the other party hereto, except that, without the prior written consent of Shareholder, Buyer may assign its rights under this Agreement to any entity controlling, controlled by or under common control with Buyer or any successor of Buyer by way of merger, acquisition, reorganization or other similar corporate transaction, and, upon the assumption by such assignee of all liabilities and obligations of Buyer hereunder, Buyer shall be released from all liabilities and obligations to Shareholder and the Company pursuant to this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
18.4 Further Assurances. The parties shall take any actions and execute any other documents that may be necessary or desirable to the implementation and consummation of this Agreement, including, in the case of Shareholder, any additional bills of sale, deeds, or other transfer documents that, in the reasonable opinion of Buyer, may be necessary to ensure, complete, and evidence the full and effective transfer of the Shares to Buyer pursuant to this Agreement.
18.5 Governing Law. This Agreement shall be governed, construed, and enforced in accordance with the laws of the State of Washington (without regard to the choice of law provisions thereof); and the parties consent to the jurisdiction of courts in the State of Washington which shall be the venue for any and all actions or proceedings brought by a party hereto, arising out of or relating to this Agreement or the Transaction Documents.
18.6 Headings. The headings herein are included for ease of reference only and shall not control or affect the meaning or construction of the provisions of this Agreement.
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18.7 Gender and Number. Words used herein regardless of the gender and number specifically used, shall be deemed and construed to include any other gender, masculine, feminine, or neuter, and any other number, singular or plural, as the context requires.
18.8 Entire Agreement. This Agreement, all schedules and exhibits hereto, and all documents, certificates, and other documents to be delivered by the parties pursuant hereto, collectively represent the entire understanding and agreement between Buyer and Shareholder with respect to the subject matter hereof. This Agreement supersedes all prior negotiations between the parties and cannot be amended, supplemented, or changed except by an agreement in writing that makes specific reference to this Agreement, and which is signed by the party against which enforcement of any such amendment, supplement, or modification is sought.
18.9 Counterparts. This Agreement may be signed in counterparts with the same effect as if the signature on each counterpart were upon the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed by Buyer, Shareholder, and the Company as of the date first written above.
| BUYER: | ||
| By: | ||
| Lloyd Spencer, President | ||
| COMPANY: | ||
| By: | ||
| Jeremy Lyell, President | ||
| SHAREHOLDER: | ||
| By: | ||
| Jeremy Lyell | ||
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Schedules
| 3.1.1 | Share Certificate of Shareholder | |
| 3.1.4 | Notices | |
| 3.5 | Conflicts | |
| 3.6 | Consents and Approvals | |
| 3.7 | Financial Reports | |
| 3.12 | Contracts | |
| 3.13 | Claims and Legal Proceedings | |
| 3.15 | Intellectual Property | |
| 3.16 | Permits, Licenses, Accreditations, Certifications | |
| 3.17 | Related Party Transactions | |
| 3.18 | Articles, Bylaws, Minutes | |
| 3.20 | Insurance Policies | |
| 3.21 | Employees and Employee Plans | |
| 3.26 | Deposits and Prepayments | |
| 5.9 | Permitted Liabilities |
Exhibits
Exhibit A Escrow Agreement
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EXHIBIT 31.1
DEEP GREEN WASTE & RECYCLING, INC.
CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Lloyd Spencer, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Deep Green Waste & Recycling, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 16, 2021 | /s/ Lloyd Spencer |
| Lloyd Spencer | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
EXHIBIT 31.2
DEEP GREEN WASTE & RECYCLING, INC.
CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Bill Edmonds, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Deep Green Waste & Recycling, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 16, 2021 | /s/ Bill Edmonds |
| Bill Edmonds | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
EXHIBIT 32.1
DEEP GREEN WASTE & RECYCLING, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED
PURSUANT TO
SECTION
906 OF THE
SARBANES-OXLEY
ACT OF 2002
In connection with the quarterly report on Form 10-Q for the quarter ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), of Deep Green Waste & Recycling, Inc. (the “Company”), each of the undersigned officers of the Company hereby certify, in their capacity as an executive officer of the Company, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of their knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: August 16, 2021 | /s/ Lloyd Spencer |
| Lloyd Spencer | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
| Date: August 16, 2021 | /s/ Bill Edmonds |
| Bill Edmonds | |
| Chief Financial Officer | |
| (Principal Financial Officer) |