101 First Street #493, Los Altos, CA	94022
(Address of principal executive offices)	(Zip Code)

 

 

 

E-WASTE SYSTEMS, INC.
(Formerly Dragon Beverage, Inc.)
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
										From Inception
										on December 19,
		For the Nine Months Ended								2008 Through
		September 30,								September 30,
		2011				2010				2011
OPERATING ACTIVITIES
Net loss		$	(532,010	)		$	(33,811	)		$	(579,507	)
Adjustments to reconcile net loss to
net cash used by operating activities:
Common stock issued for services			-				-				4,700
Expenses paid by shareholders on behalf
of the Company			70,500				1,500				75,617
Gain/(loss) on derivative liability			(20,624	)			-				(20,624	)
Changes to operating assets and liabilities:
Changes in accounts payable			6,865				27,413				32,011
Increase in accrued expenses-related parties			430,799				-				430,799
Increase in accrued interest payable			7,543				663				8,582
Net Cash Used in Operating Activities			(36,927	)			(4,235	)			(48,422	)
INVESTING ACTIVITIES
Purchase of property and equipment			-				-				-
Net Cash Used in Investing Activities			-				-				-
FINANCING ACTIVITIES
Proceeds from note payable, related party			56,600				1,500				65,360
Cash payments on note payable, related party			(17,237	)			-				(17,237	)
Common stock issued for cash			-				3,000				3,300
Net Cash Provided by Financing Activities			39,363				4,500				51,423
NET INCREASE IN CASH			2,436				265				3,001
CASH AT BEGINNING OF PERIOD			565				300				-
CASH AT END OF PERIOD		$	3,001			$	565			$	3,001
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
CASH PAID FOR:
Interest		$	-			$	-			$	-
Income Taxes		$	-			$	-			$	-
The accompanying notes are an integral part of these financial statements.

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2011, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2010 audited financial statements.  The results of operations for the periods ended September 30, 2011 and 2010 are not necessarily indicative of the operating results for the full years.

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Reclassifications

Certain balances in previously issued financial statements have been reclassified to be consistent with current period presentation.

Recent Accounting Pronouncements

 

The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.

 

 

 

 

 

 

The total fair value of the conversion option at issuance of $28,170 has been recognized as a derivative liability on the date of issuance with all future changes in the fair value of these conversion feature being recognized in earnings in the Company’s statement of operations under the caption “Other income (expense) – Gain (loss) on derivative liability” until such time as the note is converted.

 

ASC 815 requires the Company to assess the fair market value of all derivatives at each reporting period and recognize any change in the fair market value of the derivatives as gain (loss) on the income statements.   As of September 30, 2011, the fair value of the derivative has decreased to $7,546 and the Company has recognized a gain of $20,642 accordingly.

On March 8, 2010, the Company issued 37,500,000 shares of its par value $0.001 common stock for $3,000 cash.

The Company’s board of directors and majority shareholder approved a forward split of 12.5 to one in which each shareholder was issued 12.5 common shares in exchange for each one common share of their currently issued common stock. The accompanying financial statements have been restated to reflect the forward stock split on a retro-active basis.

 

The Company’s board of directors and majority shareholder approved an amendment to the articles of incorporation for the purpose of increasing the authorized common stock from 90,000,000 shares to 190,000,000 shares. The Company’s authorized shares of preferred stock were not affected in this corporate action.

 NOTE 8 – SUBSEQUENT EVENTS

On October 14, 2011 E-Waste Systems, Inc. completed the acquisition of 100 percent of the issued share capital of Tech Disposal, Inc., an electronic waste recycler and asset recovery specialist based in Ohio.  The purchase consideration for the shares will be 4.5 times the adjusted Earnings Before Interest Tax Depreciation and Amortization (EBITDA) for the twelve month period immediately following closing, plus the cash balance at the date of closing, less the initial consideration paid. The initial consideration, paid on the day of the closing comprised 200,000 shares of E-Waste Systems, Inc. common stock, priced at $0.50 each, together with 40,000 shares of E-Waste Systems, Inc. series A preferred stock, each with a face value of $1.00. The remainder of the purchase consideration is deferred for 12 months in accordance with the contractual terms of the earn-out arrangement and is to be paid by issuing new E-Waste Systems, Inc. common shares.

On October 19, 2011, the Company filed a Series A Certificate of Designation with the Nevada Secretary of State for the purpose of creating, from its authorized but unissued “blank check” preferred stock a class of 100,000 shares of preferred stock, designated as the Company’s Series A Convertible Shares, and of fixing the respective rights, preferences, privileges and restrictions of the Series A Convertible Shares (the “Preferred shares”).  The respective rights, preferences, and privileges of and the restrictions on the Preferred Shares are detailed in the Series A Certificate of Designation was filed in a Form 8-K on October 20, 2011.

In accordance with ASC 855-10, the Company’s management has reviewed all material events and there are no other material subsequent events to report.

·	general economic conditions;

·	risk that we will not be able to remediate identified material weaknesses in our disclosure controls and procedures;

·	risk that we are unable to successfully integrate our recently completed, first acquisition, Tech Disposal, Inc. (‘TDI”)

·	risk that we might be subject to claims relating to the validity of the sale to us of TDI’s stock;

·	uncertainty as to whether TDI will be able to maintain and expand its current supplier and customer base;

·	risk that we will not be able to obtain the financing required to complete the proposed acquisition of Laptop Service Center, LLC d/b/a Computer Systems Solutions, a Pennsylvania limited liability company, and Surf Investments, Ltd. d/b/a CPU, a California corporation;

·	risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to fully implement our business plan;

·	the uncertainty of profitability based upon our history of losses;

·	our pursuit of operations in an emerging market with uncertainty as to market acceptance of our products and services;

·	risk that we cannot attract, retain and motivate qualified personnel;

·	our dependence on key personnel;

·	competition from larger, more established companies with far greater economic and human resources;

·	possible issuance of common stock to raise adequate financing that may dilute the interest of stockholders;

·	future sale of a substantial number of shares of our common stock that could depress the trading price of our common stock, lower our value and make it more difficult for us to raise capital;

·	risk that the floating conversion price for our Series A Convertible Preferred Stock may lead to significant shareholder dilution and a corresponding drop in the market price of common stock;

·	our nonpayment of dividends and lack of plans to pay dividends in the future;

·	we are unable to keep current with all of our SEC filings and therefore undermine our status as smaller reporting company.

 

 

 

 

 

 

 

 

 

Following the closing of the Transaction, there was no change in our executive officers and directors.  In connection with the Transaction, Mr. Pardos resigned as the sole executive officer and director of TDI and the following persons were appointed to serve as executive officers and directors of TDI:

 

 

 

 

 

 

·	Martin Nielson was appointed to fill the position of TDI’s Chief Executive Officer and President and serve as a member of TDI’s board of directors;

·	Steven Hollinshead  was appointed to fill the position of TDI’s Chief Financial Officer and serve as a member of TDI’s board of directors; and

·	Susan Johnson was appointed to fill the position of TDI’s Secretary and Treasurer and serve as a member of TDI’s board of directors.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

 

 

 

 

 

 

·

Availability of feedstock volumes. We do not have any formal contracts with our suppliers of feedstock batches. There is no mechanism in place that effectively underpins our access to a regular, predictable volume of feedstock each week/month. Our revenue streams are all dependent on batches of used electronic equipment being available to fuel the repair, refurbishment and spare parts recovery processes from which the revenue base is derived.

·

Demand for second-hand electronic equipment. Our revenue, operating results and investment in working capital depend on the level of demand for second-hand electronic equipment that has been repaired and/or refurbished together with a requirement for recovered spare parts that can be used in repair and refurbishment operations.  We will usually have concluded an agreement or be in advanced negotiations to sell our repaired and refurbished units before we commit to buying feedstock batches. This careful management of the profits and cash cycles will be disrupted if demand for used electronics were to sharply decline for any reason including businesses and consumers curtailing their investment in new equipment in response to changes in economic conditions.

·

Market prices for certain commodities. Our business is affected by changes in the market prices of certain traded commodities, notably those precious  metals that are used to manufacture key components found in electronic equipment today. Movements in the prices at which these commodities are traded influences the prices at various stages of the reverse supply chain for electronic goods, including the prices that we negotiate to acquire our feedstock volumes and the value we are able to extract from the residual scrap remaining at the end of our repair, refurbishment and spare parts recovery processes.

·

Regulatory changes. The businesses that derive their revenue and profits from handling electronic waste in the United States are exposed to increasingly pervasive legislative and regulatory regimes at both Federal and State levels of government. Each time the legal or regulatory backcloth changes it is likely that incremental cost is added to the reverse supply chain, which in turn implies that all participants in that supply chain will observe an increase in their operating cost base, which depending on their leverage may, or may not, be capable of being passed on downstream. We operate in the State of Ohio, where there is proposed legislation being prepared with the purpose of controlling more stringently the behavior of the reverse supply chain for electronic goods.

·

General and administrative costs. Our business is still very young and at the beginning of its pursuit of organic and external growth. In order to execute on any strategy for growth, we expect to have to further increase its general and administrative overheads cost base. Our results from operations will be adversely impacted if these additional overhead costs are incurred before the growth in revenue is received.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	E-Waste Systems, Inc.
Date:	November 21, 2011
By:	/s/  Martin Nielson
	Martin Nielson
Title:	President, Chief Executive Officer and Director
Date:	November 21, 2011
By:	/s/  Steven Hollinshead
	Steven Hollinshead
Title:	Chief Financial Officer and Director

 

 

 

 

 

 

 

 

 

 

 

Exhibit Number		Description		Incorporated by Reference to:		Filed Herewith
4.1		Form of Demand Promissory Note		Exhibit 4.1 to the Form 8-K filed on November 21, 2011
4.2		Form of Convertible Note		Exhibit 4.2 to the Form 8-K filed on November 21, 2011
10.1		The Stock Purchase Agreement, dated September 21, 2011 by and among E-Waste Systems, Inc., on the one hand, and Ikaria Holdings, LLC, and George Pardos, on the other hand.		Exhibit 10.1 to the Form 8-K filed on September 27, 2011
10.2		Consulting Agreement, dated November 2, 2011 by and among E-Waste Systems, Inc. and Fine Resource, Inc.				X
31.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
31.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X
99.1		Pro forma financial information				X
101.INS *		XBRL Instance Document				X
101.SCH *		XBRL Taxonomy Extension Schema Document				X
101.CAL *		XBRL Taxonomy Extension Calculation Linkbase Document				X
1.01 LAB *		XBRL Extension Labels Linkbase Document				X
101.PRE *		XBRL Taxonomy Extension Presentation Linkbase Document				X
101.DEF *		XBRL Taxonomy Extension Definition Linkbase Document				X

*	In accordance with SEC rules, this interactive data file is deemed “furnished” and not “filed” for purposes of Sections 11 or 12 of the Securities Act of 1933 and Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under those sections or acts.