EWaste Systems, Inc. - FORM 10-Q/A

Attached files

file	filename
EX-32.2 - EXHIBIT322 - EWaste Systems, Inc.	exhibit322.htm
EX-32.1 - EXHIBIT321 - EWaste Systems, Inc.	exhibit321.htm
EX-31.1 - EXHIBIT311 - EWaste Systems, Inc.	exhibit311.htm
EX-31.2 - EXHIBIT312 - EWaste Systems, Inc.	exhibit312.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q/A
(Amendment No. 4)

x	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: March 31, 2013

o	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number: 333-165863

E-Waste Systems, Inc.

(Exact name of registrant as specified in its charter)

Nevada	26-4018362
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1350 E. Flamingo, #3101, Las Vegas, NV	89119
(Address of principal executive offices)	(Zip Code)

650-283-2907

(Registrant’s telephone number)

__________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of June 23, 2014, there were 394,893,241 shares of our common stock issued and outstanding.

Table of Contents

Explanatory Note: This revision of filing is being made in order to update financials to eliminate consolidation with Variable Interest Entity and to conform to final audited results provided in the 2013 10-K.

	TABLE OF CONTENTS	Page

PART I – FINANCIAL INFORMATION

Item 1:	Condensed Consolidated Financial Statements	3

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	11

Item 4:	Controls and Procedures	11

PART II – OTHER INFORMATION

Item 1:	Legal Proceedings	12

Item 1A:	Risk Factors	12

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	14

Item 3:	Defaults Upon Senior Securities	14

Item 4:	(Removed and Reserved)	14

Item 5:	Other Information	14

Item 6:	Exhibits	14

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our condensed consolidated financial statements included in this Form 10-Q are comprised of the following:

F-1	Condensed Consolidated Balance Sheets as of March 31, 2013 (unaudited) as restated and March 31, 2012

F-2	Condensed Consolidated Statements of Operations for the three months ended March 31, 2013 as restated and March 31, 2012 (unaudited);

F-3	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 as restated, and March 31, 2012 (unaudited);

F-4	Notes to Condensed Consolidated Financial Statements (unaudited).

These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2013 are not necessarily indicative of the results that can be expected for the full year.

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E-Waste Systems, Inc. and Subsidiary
CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31,			December 31,
	2013			2012
	(unaudited)
ASSETS	(As Restated)

CURRENT ASSETS:
Cash and cash equivalents	$	9,690		$	139
Total Current Assets		9,690			139

Investments		730,000			-
TOTAL ASSETS	$	739,690		$	139

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	264,759		$	339,684
Accrued expenses, related parties		1,180,306			1,247,355
Short-term notes payable		175,000			175,000
Short-term related party convertible notes payable, net		12,000			12,000
Short-term convertible notes payable, net		15,573			13,334
Derivative liability on short-term convertible notes payable		93,790			61,545
Total Current Liabilities		1,741,428			1,848,918

Long term portion of convertible notes payable, net		199,772			177,187
TOTAL LIABILITIES		1,941,200			2,026,105


STOCKHOLDERS' DEFICIT
Preferred stock, Series A, $0.001 par value, 10,000,000 shares authorized;
650 and 0 shares issued and outstanding, respectively		1			-
Common stock, $0.001 par value, 490,000,000 shares authorized;
137,823,587 and 106,504,926 shares issued and outstanding, respectively		137,823			106,505
Additional paid-in capital		2,339,162			904,032
Accumulated deficit		(3,678,496	)		(3,036,503	)
TOTAL STOCKHOLDERS' DEFICIT		(1,201,510	)		(2,025,966	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	739,690		$	139



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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E-Waste Systems, Inc. and Subsidiary
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three months ended March 31,
	2013			2012
	(As Restated)

OPERATING EXPENSES
Officer and director compensation		139,622			187,800
Professional fees		405,732			50,709
General and administrative expenses		14,780			18,622
TOTAL OPERATING EXPENSES		560,134			257,131

LOSS FROM OPERATIONS		(560,134	)		(257,131	)

OTHER (EXPENSE) INCOME:
Interest expense, net		(60,189	)		(5,090	)
Change in derivative liability		(32,245	)		7,371
Loss on settlement of contingent consideration		-			(66,672	)
TOTAL OTHER (EXPENSE) INCOME		(92,434	)		(64,391	)

Loss from Operations before Income Taxes		(652,568	)		(321,522	)
Provision for Income Taxes		-			-

NET LOSS FROM CONTINUING OPERATIONS		(652,568	)		(321,522	)

Income (Loss) from Discontinued Operations, net of Income Taxes		9,059			(23,902	)
NET LOSS	$	(643,509	)	$	(345,424	)

NET LOSS PER COMMON SHARE:
Basic and Diluted Loss per Share from Continuting Operations	$	(0.01	)	$	0.00
Basic and Diluted Loss per Share from Discontinued Operations	$	0.00		$	0.00
NET LOSS PER SHARE - BASIC AND DILUTED	$	(0.01	)	$	0.00

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic and diluted		121,008,369			100,834,956



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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E-Waste Systems, Inc. and Subsidiary
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three months ended March 31,
	2013			2012
	(As Restated)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations	$	(652,568	)	$	(321,522	)
Adjustment to reconcile net loss to net cash used in operating activities:
Bad debt provision		2,700			-
Origination interest charge		2,778			-
Convertible notes payable executed for services		115,440			-
Amortization of debt discount		43,660			-
Change in derivative liability		32,245			(7,371	)
Common stock issued for services		262,505			39,930
Contributed capital		43,244			-
Provision for allowance on accounts receivable		-			40,000
Loss on settlement of contingent considerations		-			66,671
Changes in operating assets and liabilities:
Accounts receivable, net		(2,700	)		-
Accounts payable and accrued expenses		70,237			(105,357	)
Accrued expenses, related parties		57,951			189,214

NET CASH USED IN CONTINUING OPERATING ACTIVITIES		(24,508	)		(98,435	)
NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATING ACTIVITIES		9,059			(15,706	)
NET CASH USED IN OPERATING ACTIVITIES		(15,449	)		(114,141	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable		25,000			-
Proceeds from notes payable		-			175,000
Proceeds from contributed capital		-			2,000

NET CASH PROVIDED BY CONTINUING FINANCING ACTIVITIES		25,000			177,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		25,000			177,000

Net increase (decrease) in cash and cash equivalents		9,551			62,859

Cash and cash equivalents, beginning of period		139			6,493

Cash and cash equivalents, end of period	$	9,690		$	69,352

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for interest	$	-		$	230
Cash paid for taxes	$	-		$	-

NON-CASH ACTIVITIES:
Issuance of common stock as payment towards accounts payable and accrued expenses, related parties	$	164,128		$	-
Issuance of preferred stock series A and common stock related to investment in GoEZ Deals, Inc.	$	730,000		$	-
Convertible notes payable executed for accounts payable and accrued expenses	$	106,034		$	-
Debt discounts on convertible notes payable	$	249,272		$	-
Conversions of convertible notes payable into shares of common stock	$	18,816		$	140,664
Common stock issued for conversion of preferred stock for settlement of deferred consideration	$	-		$	378,409



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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E-WASTE SYSTEMS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

March 31, 2013 and December 31, 2012

NOTE 1 – BACKGROUND INFORMATION

Organization and Business

We were incorporated on December 19, 2008 in the State of Nevada. Our wholly owned subsidiary, E-Waste Systems (UK) Ltd. was founded in January 2011 for the purpose of implementing our business strategy and has had limited operations. We acquired all of the issued and outstanding capital stock of EWSO on October 14, 2011. On September 20, 2012, certain of the assets and business of EWSO were physically transferred to Two Fat Greek, LLC.

On March 26, 2013, EWSI entered into a set of agreements with XuFu (Shanghai) Co, Ltd, (“XuFu”) a company incorporated in the People’s Republic of China (“PRC”) and formerly known as Yazhuo. The interests in XuFu were initially consolidated on the Company’s interim financial statements as a Variable Interest Entity (“VIE”) as of March 31, 2013. The Company has analyzed the controls and processes in place at XuFu and has concluded that consolidation is not proper. To eliminate any doubt about the accounting treatment as of March 31, 2013, the Company’s Board of Directors has suspended the VIE. Accordingly, the Company has not consolidated Xufu in the audited financial statements as of and for the three months ended March 31, 2013. The Company will follow guidance in accordance with ASC 250 “Accounting Changes and Error Corrections” and take the necessary action as soon as practicable with respect to its interim period financial statements.

NOTE 2 – GOING CONCERN

The Company’s condensed consolidated financial statements have been 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 incurred net losses of $643,509 and $345,424 during the three months ended March 31, 2013 and 2012, respectively. Cash on hand will not be sufficient to cover debt repayments scheduled as of March 31, 2013 and operating expenses and capital expenditure requirements for at least twelve months from the condensed consolidated balance sheet date. As of the three months ended March 31, 2013 and the year ended December 31, 2012, the Company had working capital deficits of $1,731,738 and $1,848,779, respectively. In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to seek 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 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.

NOTE 3 - RESTATEMENT

On March 26, 2013, EWSI entered into a set of agreements with XuFu (Shanghai) Co, Ltd, (“XuFu”) a company incorporated in the People’s Republic of China (“PRC”) and formerly known as Yazhuo. The interests in XuFu were initially consolidated on the Company’s interim financial statements as a Variable Interest Entity (“VIE”) as of March 31, 2013, June 30, 2013 and September 30, 2013. Upon further analysis, prior to filing its 10-K for the year ended December 31, 2013, the Company concluded that consolidation was not proper. Upon further analysis, prior to filing its 10-K for the year ended December 31, 2013, the Company concluded that consolidation was not proper. Accordingly, the Company has not consolidated Xufu in the quarterly statements for the three months ended March 31, 2013.

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The following represents the changes to the restated condensed consolidated financial statements as of and for the three months ended March 31, 2013:

Condensed Consolidated Balance Sheets


	Restated				Amended
	March 31, 2013				March 31, 2013			Differences

ASSETS
Current Assets
Cash		$	9,690		$	25,107		$	(15,417	)
Accounts receivable			-			4,009			(4,009	)
License fee receivable			-			75,000			(75,000	)
Marketable securities, available-for-sale			730,000			880,000			(150,000	)
Total Current Assets			739,690			984,116			(244,426	)

Total Assets		$	739,690		$	984,116		$	(244,426	)

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Accounts payable and accrued expenses		$	264,759		$	307,876		$	(43,117	)
Accounts payable - related party			1,180,306			1,240,380			(60,074	)
Short-term notes payable			175,000			175,000			-
Short-term related party convertible notes payable, net			12,000			12,000			-
Short-term convertible notes payable, net			15,573			13,158			2,415
Derivative liability on short-term convertible notes payable			93,790			54,239			39,551
Total Current Liabilities			1,741,428			1,802,653			(61,225	)

Long-Term Liabilities
Long-term convertible notes payable, net			199,772			138,187			61,585
Derivative liability on long-term convertible notes			-			62,111			(62,111	)
Total Long-Term Liabilities			199,772			200,298			(526	)
Total Liabilities			1,941,200			2,002,951			(61,751	)

Stockholders' Deficiency
Preferred stock, $0.001 par value; 10,000,000 shares authorized, 650 and 0 shares issued and outstanding, respectively			1			1			-
Common stock, $0.001 par value; 490,000,000 shares authorized, 137,823,587 and 106,504,926 shares issued and outstanding, respectively			137,823			146,825			(9,002	)
Additional paid-in capital			2,339,162			2,357,119			(17,957	)
Accumulated other comprehensive income			-			62			(62	)
Accumulated deficit			(3,678,496	)		(3,522,842	)		(155,654	)
Total Stockholders' Deficiency			(1,201,510	)		(1,018,835	)		(182,675	)

Total Liabilities and Stockholders' Deficiency		$	739,690		$	984,116		$	(244,426	)

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Condensed Consolidated Statements of Operations
(Unaudited)


	Restated			Amended
	March 31, 2013			March 31, 2013			Differences

Product sales revenue	$	-		$	4,001		$	(4,001	)
Revenues from license fees		-			225,000			(225,000	)
Total Revenues		-			229,001			(229,001	)

Cost of goods sold		-			3,801			(3,801	)
Gross Margin		-			225,200			(252,200	)

Operating Expenses
Officer and director compensation		139,622			131,622			8,000
Professional fees		405,732			449,167			(43,435	)
General and administrative		14,780			21,261			(6,481	)
Total Operating Expenses		560,134			602,050			(41,916	)

Loss from Operations		(560,134	)		(376,850	)		(183,284	)

Other Income/(Expenses)
Interest expense		(60,189	)		(118,163	)		57,974
Gain on derivative liability		(32,245	)		3,525			(35,770	)
Currency exchange gain		-			5,149			(5,149	)
Total Other Income/(Expenses)		(92,434	)		(109,489	)		17,055

Loss from Operations before Income Taxes		(652,568	)		(486,339	)		(166,229	)
Provision for Income Taxes		-			-			-

Net Loss from Continuing Operations		(652,568	)		(486,339	)		(166,229	)
Loss from Discontinued Operations, net of Income Taxes		9,059			-			9,059
Net Loss	$	(643,509	)	$	(486,339	)	$	(157,170	)

Other Comprehensive Income
Foreign currency translation adjustments		-			-			-
Total Other Comprehensive Income	$	(643,509	)	$	(486,339	)	$	(157,170	)

Basic and Diluted Loss per Share from Continuing Operations	$	(0.01	)	$	(0.00	)	$	(0.01	)
Basic and Diluted loss per Share from Discontinued Operations	$	(0.00	)	$	(0.00	)	$	-
Net loss per share - Basic and Diluted	$	(0.01	)	$	(0.00	)	$	(0.01	)

Weighted average number of shares outstanding during the period - Basic and Diluted		121,008,369			123,153,590			(2,145,221	)

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Condensed Consolidated Statements of Cash Flows
(Unaudited)


	Restated			Amended
	March 31, 2013			March 31, 2013			Differences

Cash Flows From Operating Activities:
Net Loss	$	(652,568	)	$	(486,339	)	$	(166,229	)
Adjustments to reconcile net loss to net cash used in operations
Currency translation gain		-			(5,149	)		5,149
Amortization of debt discounts		43,660			25,918			17,742
Origination interest on derivative liability		2,778			76,195			(73,417	)
Change in derivative liability		32,245			(3,525	)		35,770
Debt issued for services		115,440			17,417			98,023
Common stock issued for services		262,505			293,634			(31,129	)
Bad debt provision		2,700			-			2,700
Contributed capital		43,244			-			43,244
Changes in operating assets and liabilities:
(Increase)/Decrease in accounts and other receivables		(2,700	)		(4,009	)		1,309
(Increase)/Decrease in license fees receivable		-			(225,000	)		225,000
Increase/(Decrease) in accounts payable and accrued expenses		70,237			166,826			(96,589	)
Increase/(Decrease) in accrued expenses - related party		57,951			123,176			(65,225	)
Net Cash Used In Continuing Operating Activities		(24,508	)		(20,856	)		(3,652	)
Net Cash Provided by Discontinued Operating Activities		9,059			-			9,059
Net Cash Used in Operating Activities		(15,449	)		(20,856	)		5,407

Cash Flows From Financing Activities:
Proceeds from notes payable		25,000			25,000			-
Net Cash Provided by Continuing Financing Activities		25,000			25,000			-
Net Cash Provided by Discontinued Financing Activities		-			-			-
Net Cash Provided by Financing Activities		25,000			25,000			-

Effects of exchange rates on cash		-			22,304			(22,304	)

Net Increase / (Decrease) in Cash		9,551			26,448			(16,897	)
Cash at Beginning of Period		139			139			-

Cash at End of Period	$	9,690		$	26,587		$	(16,897	)

Supplemental disclosure of cash flow information:

Cash paid for interest	$	-		$	-		$	-
Cash paid for taxes	$	-		$	-		$	-

Supplemental disclosure of non-cash investing and financing activities:
Debt discounts on convertible notes payable	$	249,272		$	247,545		$	1,727
Preferred stock issued for marketable securities	$	730,000		$	730,000		$	-
Preferred stock issued for acquisition of subsidiary	$	-		$	27,256		$	(27,256	)
Common stock issued for intangible assets	$	-		$	77,185		$	(77,185	)
Common stock issued for conversion of debt	$	18,816		$	252,123		$	(233,307	)
Issuance of common stock as payment towards accounts payable and accrued expenses, related parties	$	164,128		$	-		$	164,128
Convertible notes payable executed for accounts payable and accrued expenses	$	106,034		$	-		$	106,034

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NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the SEC. The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States

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 the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2013, and for all periods presented herein, have been made.

Beneficial Conversion Feature

Costs incurred with parties who are providing financing, which include the intrinsic value of beneficial conversion features associated with the underlying debt, are reflected as a debt discount. These discounts are generally amortized over the life of the related debt. In certain circumstances, the intrinsic value of the beneficial conversion feature may be greater than the proceeds associated to the convertible instrument. In such situations, the amount of the discount assigned to the beneficial conversion feature is limited to the amount of the proceeds allocated to the convertible instrument.

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting for Derivative Instruments and Hedging Activities”.

Professional standards generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument”.

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

The Company evaluated the conversion option embedded in the Series A Preferred Stock and determined, in accordance with the provisions of these statements, that such conversion option does not meet the criteria requiring bifurcation of these instruments. The characteristics of the common stock that is issuable upon a holder’s exercise of the conversion option embedded in the convertible preferred stock are deemed to be clearly and closely related to the characteristics of the preferred shares. Additionally, the Company’s conversion options, if free standing, would not be considered derivatives subject to the accounting guidelines prescribed in accordance with professional standards.

ASC 815-40 provides that, among other things, generally, if an event is not within the entity’s control could require net cash settlement, then the contract shall be classified as an asset or a liability.

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Cash and Cash Equivalents

For the purpose of the financial statements cash equivalents include all highly liquid investments with maturity of three months or less. Cash and cash equivalents were $9,690 and $139 at March 31, 2013 and December 31, 2012, respectively.

Cash Flows Reporting

The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.

Commitments and Contingencies

The Company follows ASC 440, Commitments and ASC 450, Loss Contingencies, to report accounting for commitments and contingencies.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no commitments or contingencies at March 31, 2013 and December 31, 2012.

Earnings per Share

The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

For the three months ended March 31, 2013 and the year ended December 31, 2012, the effect of common stock equivalents has been excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive.

The Company does not have any potentially dilutive instruments as of March 31, 2013 and, thus, anti-dilution issues are not applicable.

At March 31, 2013, there were no stock options.

Fair Value of Financial Instruments

The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1		Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3		Pricing inputs that are generally unobservable inputs and not corroborated by market data.

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Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts payable, accrued expenses and loans payable approximate their fair values because of the short maturity of these instruments. Loans payable are recorded at their issue value.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

It is not, however, practical to determine the fair value of advances from stockholders, if any, due to their related party nature.

The following table presents assets and liabilities that are measured and recognized at fair value as of March 31, 2013 and December 31, 2012, on a recurring basis:

Assets and liabilities measured at fair value on a recurring basis at March 31, 2013	Level 1			Level 2			Level 3				Total Carrying Value

Derivative liabilities			-			-			(93,790	)			(93,790	)
		$	-		$	-		$	(93,790	)		$	(93,790	)

Assets and liabilities measured at fair value on a recurring basis at December 31, 2012	Level 1			Level 2			Level 3				Total Carrying Value

Derivative liabilities			-			-			(61,545	)			(61,545	)
		$	-		$	-		$	(61,545	)		$	(61,545	)

Related Parties

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Related party transactions for the three months ended March 31 2013 and the year ended December 31, 2012 are reflected in Note 6.

Stock Based Compensation

ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

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Under our stock compensation plan (the “Stock Plan”) which is registered under Form S8, or through newly issued restricted common stock, we pay qualified contractors and advisors common shares in lieu of compensation for services provided including business development, management, technology development, consulting, legal services and accounting services

Share-based expense for the three months ending March 31, 2013 and 2012 was $262,505 and $0, respectively.

Reclassifications

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

Principles of Consolidation

The accompanying condensed consolidated financial statements for the year ended March 31, 2013 include the accounts of the Company and its wholly-owned subsidiary, E-Waste Systems of Ohio, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Revenue Recognition

The Company applies the provisions of ASC 605, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. ASC 605 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue related to goods and services provided when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured.

Revenue from Sales of Brand Licenses

During the year, the Company sold brand licenses to customers which allow the promotion of business under the E-Waste Systems brand names in selected jurisdictions. The license agreements call for an initial payment plus a percentage of revenues generated under the brand during term of the license agreement. The initial fees are booked to revenues of the Company in the period first sold. License fees earned from subsequent revenues of the licensee company are only booked later after periodic reviews. The Company will recognize the licensing revenue when collected or when collectability is probable.

Segment Reporting

The Company generates revenues from the following sources: (1) licensing of technology and management services in electronic waste disposal, development of ePlants and similar processes for electronic waste disposal systems in return for license, consulting and management fees; (2) operation of strategic business development projects and market development projects through the eVolve divisions for which the company obtains sales revenues and incurs day to day operational expenses including the cost of leases incurred through the activities, and (3) repair refurbishing and recycling of electronics for which the company receives revenues from disposal contracts, and fees for disposal plus revenues from the sale of reclaimed components or reclaimed materials such a gold, platinum and other precious metals obtained through recycling processes and incurs costs associated recycling activities.

Marketable Securities

The Company reports its investments in marketable securities under the provisions of ASC 320, Investments in Debt and Equity Securities. All the Company’s marketable securities are classified as “available for sale” securities, as the market value of the securities are readily determinable and the Company’s intention upon obtaining the securities was neither to sell them in the short term nor to hold them to maturity. Pursuant to ASC 320, securities which are classified as “available for sale” are recorded on the Company’s condensed consolidated balance sheet at fair market value, with the resulting unrealized holding gains and losses excluded from earnings and reported as other comprehensive income until realized.

The Company evaluates securities for other-than-temporary impairment at least on a yearly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to the length of time and amount of the loss relative to cost, the nature and financial condition of the issuer and the ability and intent of the Company to hold the investment for a time sufficient to allow any anticipated recovery in fair value. Pursuant to ASC 320-5, other than temporary impairment losses are recorded as impairment expense in the statement of operations during the period in which the impairment is determined. The Company recorded an impairment expense of $0 as of March 31, 2013.

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Foreign Currency

Monetary assets and liabilities of the Company's foreign operations are translated into U.S. dollars at period-end exchange rates. Non-monetary assets and liabilities are translated at historical rates. Net exchange gains or losses resulting from such translation are excluded from net loss but are included in comprehensive income and accumulated in a separate component of stockholders' equity. Income and expenses are translated at weighted average exchange rates for the period. Foreign currency transactions denominated in a currency other than the US Dollar, which is the Company’s functional currency, are included in determining net income for the period.

Accumulated Other Comprehensive Income (Loss)

Comprehensive loss includes net loss as currently reported under U.S. GAAP and other comprehensive loss. Other comprehensive loss considers the effects of additional economic events, such as foreign currency translation adjustments, that are not required to be recorded in determining net loss, but rather are reported as a separate component of stockholders’ equity (deficit).

Stock-Based Compensation

Income Taxes

The Company did not have deferred income tax assets as of March 31, 2013.

Reconciliation between the statutory United States corporate income tax rate (35%) and the effective income tax rates based on continuing operations is as follows:

Three months ended March 31, 2013 and year ended December 31, 2012	2013			2012

Income tax benefit at Federal statutory rate of 35%	$	(230,255	)	$	(500,368	)
State Income tax benefit, net of Federal effect		-			(138,634	)
Permanent and other differences		-			-

Change in valuation allowance		230,255			639,002
Total	$	-		$	-

Components of deferred tax assets were approximately as follows:

As at March 31, 2013 and December 31, 2012	2013			2012

Net operating loss	$	3,700,000		$	3,037,000
Asset impairment
Valuation allowance		(3,700,000	)		(3,037,000	)
Total	$	-		$	-

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At March 31, 2013 the Company has available net operating losses of approximately $3,700,000 which may be carried forward to apply against future taxable income. These losses will expire in 2031. Deferred tax assets related to these losses have not been recorded due to uncertainty regarding their utilization.

The provisions of ASC 740 require companies to recognize in their financial statements the impact of a tax position if that position is more likely than not to be sustained upon audit, based upon the technical merits of the position. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure.

Management does not believe that the Company has any material uncertain tax positions requiring recognition or measurement in accordance with the provisions of ASC 740. Accordingly, the adoption of these provisions of ASC 740 did not have a material effect on the Company’s condensed consolidated financial statements. The Company’s policy is to record interest and penalties on uncertain tax positions, if any, as income tax expense.

The Company has not filed its applicable Federal and State tax returns for the year ended December 31, 2012 and may be subject to penalties for noncompliance.

Recently Issued Accounting Pronouncements

Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification™ (“ASC”) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company.

We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

NOTE 5 – DISCONTINUED OPERATIONS

Disposition of E-Waste Systems of Ohio, Inc. (formerly Tech Disposal, Inc.)

On September 20, 2012 the Company’s wholly owned subsidiary, E-Waste Systems (Ohio), Inc. completed the physical transfer of its business and its assets to a company controlled by a minority shareholder in the Company (“the purchaser”). In connection with this transfer the purchaser has agreed to assume payments on the lease on the premises at 1033 Brentnell Avenue, Columbus, Ohio, formerly held by the Company. The value of any consideration receivable arising from the sale, including any gain on disposal, has been fully impaired as its collection is uncertain. Accordingly, all activity related to the disposal of our Ohio business has been classified as discontinued operations.

NOTE 6 - RELATED PARTY TRANSACTIONS

Transactions Involving Non-Officers and Directors

Effective October 28, 2011 the Company received $12,000 in cash from a related party in exchange for a convertible note payable. The note accrues interest at 12% and is due twelve months from the date of origination or October 28, 2012. The principal balance of the note along with accrued interest is convertible at any time, at the option of the note holder, into the Company's common stock on or before the maturity date at a price of $0.25 per share. The Company recognized $355 and $355 of interest expense for the three months ended March 31, 2013 and 2012 on the related party convertible note payable leaving a balance in accrued interest of $2,052 and $1,697 as of March 31, 2013 and December 31, 2012, respectively. At the time of the original filing, the note was in default, but has since been extended and has a maturity date of October 28, 2014.

Transactions Involving Officers and Directors

During the three months ended March 31, 2013, the Company issued 1,000,000 shares of common stock to the Company’s Chief Executive Officer and Director at $0.008 per share for officer compensation of $8,000. The Company also issued 10,000,000 shares of common stock to the Company’s Chief Executive Officer and Director at $0.0125 per share for accrued officer compensation of $125,000. The Company also recorded $86,176 of additional officer compensation leaving an ending balance of $1,180,306 in accrued officer and director compensation at March 31, 2013.

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NOTE 7 – NOTES PAYABLE

Effective February 3, 2012 and February 21, 2012 the Company borrowed $40,000 and $35,000, respectively, from an unrelated third party entity in the form of two promissory notes. The notes bear interest at 14%, are unsecured and are due on demand. During the three month ended March 31, 2013, the Company recognized $2,589 of interest expense on these notes payable leaving balances in accrued interest of $11,898 and $9,309, respectively as of March 31, 2013 and December 31, 2012.

Effective February 24, 2012, the Company borrowed $100,000 from an unrelated third party in the form of a Line of Credit. The funds were to support the working capital requirements of E-Waste Systems (Ohio) and specifically, the procurement of electronic waste for refurbishment or recycling. The promissory note accrues interest at 14% and is due on March 24, 2013. During the period ended March 31, 2013 the Company recognized $3,500 of interest expense and made no payments on this promissory note leaving a balance of $7,019 accrued interest of as of March 31, 2013.

Effective August 27, 2012, the Company executed a convertible promissory note in the principal sum of $150,000. The consideration to be provided by the note holder is no more than $135,000. A $13,500 (10%) original issue discount (“OID”) applies to the principal sum. The note holder made payments to the Company of $25,000 and $15,000 of the total consideration during the year ended December 31, 2012, and $25,000 through the three months ended March 31, 2013. The principal sum due to the note holder is to be prorated based on the consideration actually paid together with the 10% original issue discount that will also be prorated based on the amount of consideration actually paid as well as any other interest or fees. The maturity date is one year from the date of each payment of consideration and is the date upon which the principal sum, as well as any unpaid interest and other fees, shall be due and payable. The OID in respect of the consideration received on the date of execution equaled $4,445 for the year ended December 31, 2012, and $2,778 for the three months ended March 31, 2013.

Effective February 28, 2013, the note holder elected to convert $7,350 of the principal balance into 1,500,000 shares of the Company’s common stock. In connection with the conversion, the Company recognized a pro rata portion of the unamortized debt discount of $3,625 to interest expense.

Effective March 20, 2013, the note holder elected to convert an additional $11,466 of the principal into 1,800,000 shares of the Company’s common stock. In connection with the conversion, the Company recognized a pro rata portion of the unamortized debt discount of $5,026 to interest expense.

The note contains a conversion feature wherein the note may be converted to shares of the Company’s common stock at a conversion price of the lesser of $0.01 or 70% of the lowest trade price in the 25 trading days prior to the conversion date. Unless otherwise agreed in writing by both parties, at no time will the holder of the note convert any amount outstanding into common stock that would result in it owning more than 4.99% of the total common stock outstanding. The Company determined the note qualified for derivative liability treatment under ASC 815. The Company recorded initial derivative liabilities of $58,646 and debt discounts of $44,445 on the payment dates of the note for the year ended December 31, 2012, and $71,833 and $27,778 for the three months ended March 31, 2013. As of March 31, 2013 and December 31, 2012, the Company had recognized amortization on debt discounts on these notes of $21,075 and $37,814, leaving unamortized debt discounts of $37,814 and $31,111, respectively. See Note 9 for treatment of derivative liability associated with convertible notes payable.

Effective December 31, 2012, the Company negotiated the forgiveness of accounts payable of $50,000 owed to a Company consultant in exchange for the execution of a convertible note payable with a face value of $162,500. On the same date and under the same terms, the Company executed two other convertible notes payable with face values of $11,000 and $29,000 in exchange for services provided to the Company. The notes are unsecured, bear interest at 6% per annum and are due on December 31, 2015. The notes are also convertible, at the option of the holder, into shares of the Company’s common stock at a share price of the lower of $0.0064 or the average of the three lowest volume weighted-average prices per share during the 30 calendar day period immediately prior to the date of conversion.

The intrinsic value of the beneficial conversion features and the debt discounts associated with the equity issued in connection with these convertible debts were recorded based on the relative fair value of the equity in relation to the debt in accordance with ASC 470. The total initial beneficial conversion feature recorded was $25,313. The discount will be amortized and recorded to the statement of operations over the stated term of the notes and is included within interest expense. As of March 31, 2013 and December 31, 2012, the Company had recognized amortization on the debt discounts on these notes of $10,218 and $-0- of the total outstanding debt discounts leaving an unamortized debt discounts of $15,095 and $25,313, respectively.

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On January 18, 2013, the Company executed a convertible note payable with a face value of $41,557 in exchange for services provided to the Company. This note is unsecured, bears interest at 6% per annum and is due January 18, 2016. The note is convertible, at the option of the holder, into shares of the Company’s common stock at a share price of the lower of $0.0064 or the average of the three lowest volume weighted-average prices per share during the 30 calendar day period immediately prior to the date of conversion. The intrinsic value of the beneficial conversion features and the debt discounts associated with the equity issued in connection with the convertible debt was recorded based on the relative fair value of the equity in relation to the debt in accordance with ASC 470. The total initial beneficial conversion feature recorded was $41,557. The discount will be amortized and recorded to the statement of operations over the stated term of the note and is included within as interest expense. As of March 31, 2013, the Company had recognized amortization on the debt discounts on this note of $2,753 of the total outstanding debt discounts leaving an unamortized debt discount $38,824.

Effective February 8, 2013, the Company executed a convertible note payable with a face value of $162,500 in exchange for services provided to the Company in the amount of $115,440 and forgiveness of accounts payable of $47,060. The intrinsic value of the beneficial conversion features and the debt discounts associated with the equity issued in connection with the convertible debts were recorded based on the relative fair value of the equity in relation to the debt in accordance with ASC 470. The total initial beneficial conversion feature recorded was $162,500. The discount will be amortized and recorded to the statement of operations over the stated term of the note and is included within as interest expense. As of March 31, 2013, the Company had recognized amortization on the debt discounts on this note of $7,568 of the total outstanding debt discounts leaving an unamortized debt discounts $154,932.

This note is unsecured, bears interest at 6% per annum and is due February 8, 2016. The note is convertible, at the option of the holder, into shares of the Company’s common stock at a share price of the lower of $0.0064 or the average of the three lowest volume weighted-average prices per share during the 30 calendar day period immediately prior to the date of conversion.

Effective March 5, 2013, the Company executed a convertible note payable with a face value of $17,417 in exchange for services provided to the Company. This note is unsecured, bears interest at 6% per annum and is due March 5, 2016. The note is convertible, at the option of the holder, into shares of the Company’s common stock at a share price of the lower of $0.0064 or the average of the three lowest volume weighted-average prices per share during the 30 calendar day period immediately prior to the date of conversion.

The intrinsic value of the beneficial conversion features and the debt discounts associated with equity issued in connection with the convertible debts has been recorded based on the relative fair value of the equity in relation to the debt in accordance with ASC 470. The total initial beneficial conversion feature recorded was $15,371. The discount will be amortized and recorded to the statement of operations over the stated term of the note and is included within as interest expense. As of March 31, 2013, the Company has amortized $2,046 of the total outstanding debt discounts leaving an unamortized debt discount of $15,371.

The components of notes payable are summarized in the table below:

	March 31, 2013			December 31, 2012

Convertible note payable to a related party, bearing interest at 12%, unsecured, due on October 28, 2012 (note is in default)	$	12,000		$	12,000
Notes payable to an unrelated party, bearing interest at 14%, unsecured, due on demand		75,000			75,000
Note payable to an unrelated party, bearing interest at 14%, unsecured, due on March 24, 2013 (note is in default)		100,000			100,000
Convertible note payable to an unrelated party, bearing interest at 10%, unsecured, due on February 27, 2014		27,778			-
Convertible note payable to an unrelated party, bearing interest at 10%, unsecured, due on August 27, 2013 and due on October 10, 2013.		25,629			44,445
Discounts on short-term convertible notes payable		(37,834	)		(31,111	)
Total short-term debt	$	202,573		$	200,334

Derivative liability on short-term convertible notes	$	93,790		$	61,545

Convertible note payable to an unrelated party, bearing interest at 6%, unsecured, due on December 31, 2015	$	11,000		$	11,000
Convertible note payable to an unrelated party, bearing interest at 6%, unsecured, due on December 31, 2015		29,000			29,000
Convertible note payable to an unrelated party, bearing interest at 6%, unsecured, due on December 31, 2015		162,500			162,500
Convertible note payable to an unrelated party, bearing interest at 6%, unsecured, due on January 18, 2016		41,557			-
Convertible note payable to an unrelated party, bearing interest at 6%, unsecured, due on February 8, 2016		162,500			-
Convertible note payable to an unrelated party, bearing interest at 6%, unsecured, due on March 5, 2016		17,417			-
Discounts on long term portion of convertible notes payable		(224,222	)		(25,313	)
Total long-term debt	$	199,772		$	177,187

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NOTE 8 – DERIVATIVE LIABILITY

Effective July 31, 2009, the Company adopted ASC 815 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. The conversion terms of the convertible notes executed on June 3, 2013, June 11, 2013, July 15, 2013, August 14, 2013, August 27, 2013 and September 26, 2013 (total unpaid face value of $170,278) are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. As a result, the Company has determined that the conversion features imbedded in the notes are not considered to be solely indexed to the Company’s own stock and are therefore not afforded equity treatment. In accordance with ASC 815, the Company has bi-furcated the conversion feature of the note and recorded a derivative liability.

ASC 815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value as another income or expense item. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with convertible notes payable.

At origination, the Company valued the conversion features using the following assumptions: dividend yield of zero, years to maturity of 0.75 to 1.00 year, average risk free rates over between 0.11 and 0.18 percent, and annualized volatility of between 5 and 230 percent to record derivative liabilities of $752,749. At December 31, 2012, the Company revalued the conversion features using the following assumptions: dividend yield of zero, years to maturity of between 0.65 and 0.78 years, risk free rate of 0.16 percent, and annualized volatility of between 234 and 251 percent and determined that, during the year ended December 31, 2012, the Company’s derivative liability decreased by $2,899 to $61,545. The Company recognized a corresponding loss on derivative liability in conjunction with this revaluation in the statement of operations.

At March 31, 2013, the Company revalued the conversion features using the following assumptions: dividend yield of zero, years to maturity of between 0.41 and 0.91 years, a risk free rate of 0.14%, and annualized volatility of 232.29% and determined that, during the three months ended March 31, 2013, the Company’s derivative liability increased by $32,245 to $93,789. The Company recognized a corresponding loss on derivative liability in conjunction with this revaluation.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

As of the date of this filing, the Company is not aware of any current or pending legal actions expected to have a material impact.

Occupancy Leases

The Company leased office and warehouse space in Columbus, Ohio under an operating lease. The lease provided for a lease payment of $4,200 per month from December 1, 2012 through November 30, 2013, and a lease payment of $4,400 per month from December 1, 2013 through November 30, 2014, and lease payments thereafter on a month-to-month basis at a rate of $4,568 per month. On September 20, 2012, this lease was assigned to the purchaser as part of the transfer of the Company’s assets and business on September 20, 2012. As such, the Company has no ongoing minimum lease payments associated with the lease.

Effective February 12, 2013 the Company entered into a Lease Agreement with Evotech Capital Ltd in a commercial building in Shanghai, China. The term of the lease runs from February 12, 2013 through February 12, 2015. The terms of the lease calls for the Company to issue Evotech Capital 250,000 shares of common stock within 180 days of the beginning of the lease term. This represents the only payment required during the term of the lease. The Company has not issued those shares.

Operating Leases

The Company has entered into three operating agreements to operate businesses on behalf of property and business owners. The agreements require facility and equipment payments and personnel payments along with other possible payments in the course of operating these businesses. These agreements are on a quarter-to-quarter basis and can be terminated upon agreement of both parties.

Contingent Consideration

In connection with the acquisition of E-Waste Systems of Ohio, Inc. (formerly Tech Disposal, Inc.), this was disclosed in our annual filing with the SEC on Form 10-K, filed April 16, 2013 and incorporated by reference herein.

NOTE 10 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 10,000,000 shares of Preferred Stock, of which there are 200,000 shares set aside as Series A Convertible Preferred Stock with a par value of $0.001. As of March 31, 2013, and December 31, 2012, there were 650 and 0 shares of Series A Convertible Preferred Stock issued and outstanding, respectively.

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The Series A Preferred Shares have the following provisions:

Dividends

Series A convertible preferred stockholders’ are entitled to receive dividends when declared. As of March 31, 2013 and December 31, 2012 no dividends have been declared or paid.

Liquidation Preferences

In the event of liquidation, following the sale or disposition of all or substantially all of the Company’s assets, the holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of the common stock by reason of their ownership thereof, an amount equal to $1,000 per share.

Voting Rights

Each holder of shares of the Series A Preferred Stock is entitled to the number of votes equal to the number of shares of common stock into which the preferred shares are convertible.

Conversion

Each share of Series A Preferred Stock is convertible, at the option of the holder, into the number of shares of common stock which is equal to $1,100 divided by the greater of (i) $0.001 or (ii) 90 percent of the volume weighted average closing price for the Company’s common stock during the ten trading days immediately prior to conversion.

Redemption

The Series A Preferred Stock shares are redeemable for cash, at the option of the Company any time after the date of issuance, plus all accrued but unpaid dividends, on the following basis:

(i)	110 percent of the purchase price of each share of Series A Preferred Stock if redeemed any time before the first twelve months of the date of issuance; and

(ii)	105 percent of the purchase price of each share of Series A Preferred Stock on or after the first twelve months of the date of issuance.

Preferred Stock Activity for the three months ended March 31, 2013

Effective February 6, 2013, as part of a master license agreement signed with an unrelated third party, the Company issued 650 shares of Series A and in exchange received marketable securities valued at $730,000. The fair value of the preferred stock transferred was based on the trading price on the date of transfer of the marketable securities into which the shares received may be converted based on the conversion terms of the preferred stock.

Common Stock

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 190,000,000 shares to 490,000,000 shares. The Company’s authorized shares of preferred stock were not affected in this corporate action. As of March 31, 2013 and December 31, 2012, there were 137,823,587 and 106,504,926 shares of common stock issued and outstanding, respectively.

Common Stock Activity for the three months ended March 31, 2013

During the three months ended March 31, 2013, the Company issued 15,277,312 shares of common stock at prices ranging from $0.008 to $0.019 per share for services valued at $262,505. The value of the shares issued for services was based on the trading price of the Company’s common stock on the date of issuance.

During the three months ended March 31, 2013, the Company issued 16,041,349 shares of common stock at $0.0049 to $0.0164 per share for settlement of all accounts payable, accrued expense, accrued interest and debt transactions valued at $182,944. The value of shares issued for settlement of debt was based on the trading price of the Company’s common stock on the date of issuance or the face value of the debt extinguished.

During the three months ended March 31, 2013, the Company recorded $249,272 to additional paid-in capital for debt discounts recorded on convertible notes payable, and $41,728 as permanent equity in connection with convertible notes.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Caution Regarding Forward-Looking Statements

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue,” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate.

With respect to this discussion, the terms “EWSI,” the “Company,” “we,” “us,” and “our” refer to E-Waste Systems, Inc. and the term “EWSO” refers to E-Waste Systems (Ohio), Inc. (formerly known as Tech Disposal, Inc.) This discussion and analysis should be read in conjunction with the financial statements and notes, and other financial information included in this quarterly report.

Company Overview

We were incorporated in the State of Nevada on December 19, 2008. In May 2011, we changed our name to “E-Waste Systems, Inc.” to reflect the strategy we are now operating.

2013 Operations

Acquisitions

The strategy behind every acquisition is strongly related to three criteria:

●	Strategic: Synergies, Differentiation and Compliance;
●	Financial: Financial Strength, P/E, Growth;

●	Management: Vision, Culture, Quality.

History and background

Mission Statement

Create a market-leading, integrated business group in the emerging electronic waste (“ewaste”) and reverse logistics industry, in the advisory for compliant management and in the development of new commercial and technological ventures by offering customers global, seamless, and expanded custom services.

Company History

After 5 years of research, planning and operating various companies in the industry, Martin Nielson founded E-Waste Systems as a wholly owned subsidiary of a US public company shell, specifically to grow by completing a series of acquisitions as its basis for operations. EWSI has three operating units in US, UK and China, corresponding to the first geographies in which EWSI is completing acquisitions.

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Financial Strategy

Execution of the Company’s Business Plan requires a foundation capable of sustaining rapid growth. This foundation consists of a global brand, proprietary technologies and substantial revenues. In addition, the Company’s financial plan needs to support the potential for very rapid quarter to quarter growth over the next few years, which could be 50% or more.

Key Elements

The total value of our Company’s economic resources is capital invested in our equity plus debt we assume. The Company must make efficient use of a combination of debt and equity in our operations to fuel growth. Equity is the portion of our Company’s economic resources that our shareholders own and debt will be used to leverage equity by using borrowed money to obtain additional economic resources. Leverage, while increasing investment returns, must be used wisely. Accordingly, the basic elements of our financing strategy are the following:

Balance Sheet Strengthening. We will strengthen our balance sheet and the balance sheets of our subsidiaries and key affiliates by acquiring tangible and intellectual assets. We will also convert certain liabilities into equity, eliminate debt of high burden, and avoid both short term liabilities that cannot be managed and unsustainable long term liabilities.

Financing for ePlant™ and other Technology. We will seek friendly third party financing for new capital equipment, such as ePlant™ and other eWaste™ systems in order to improve the operating performance of our business units. We will invest in developing our proprietary technologies using equity wherever possible.

Financing for our Subsidiaries and Affiliates. The growth of our subsidiaries and affiliates directly contributes to our company growth. We will provide financial support to our subsidiaries and affiliates in a manner in which the investment can lead to superior returns and within manageable and acceptable risks.

Manage a Sustainable Capitalization Structure. The Company has presently authorized 500 Million shares of equity, of which 490 Million are Common Shares and 10 Million are Preferred. During 2013 the share price ranged from $0.01 to $0.1 bringing the Market Capital to an average of $8M with average volumes of 1.99M. As of January 31, 2014, the closing share price is $0.041, the issued and outstanding was 262,699,762 and its market value was $10,770,690. As the Company’s value increases with its performance, the market capitalization value should increase. It is in the best interest of the Company to have a high market capitalization, higher share prices, and strong liquidity to obtain sufficient capital for our growth and for acquisitions. Maintaining a balance of sensible debt alongside a robust market capitalization is targeted.

Use of Performance-Based Incentives. The Company believes in creating an atmosphere that encourages and motivates our people to out-perform the competition. Disciplined and hard-working management, professionals, and other individuals can help us meet or exceed our company’s objectives and are fundamental to the growth we seek. Incentive compensation plans tied to equity will be a key element of our compensation packages and our officers must set the example by accepting equity as a primary component of their compensation.

Equity as Growth Capital. Preferred shares will be increasingly used to increase asset values, to minimize current dilution of common stock and to enhance overall shareholder equity while providing for attractive means to maintain sensible voting and conversion features. Alongside preferred equity instruments, registered shares will be used to compensate qualified individuals to grow the company. Wherever possible, we will also use equity as a currency for acquisitions.

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Debt Financing. Debt can leverage our equity and capital. We will selectively obtain debt financing, even paying premium interest rates if necessary so that we can avoid toxic convertible debt. And, we will establish plans to buy out potentially toxic liabilities by using loyal and long term investors.

Investor Relations, Communication and Awareness. We intend to have a strong and comprehensive investor communications plan using regular press releases, information 8K filings with the SEC, social media programs, frequent website updates; and an increasing use of CEO and management interviews and media relations programs. These are all designed to make the investing public and our other constituents fully aware our plans, accomplishments, and developments as they occur.

Secondary Public Offering and Upgrade Listing. The company will seek to raise capital from a public offering to fuel its growth and, at the proper time, consider migration to a national exchange like NASDAQ or NYSE to have access to higher quality and quantity of capital to fuel its desire for expansive growth.

Company Structure

To provide a foundation for expansion internationally and streamline response to international business opportunities, the Company provides centralized organization and corporate services (legal, accounting, travel) as well as strategic direction and management to each of the units.

eWaste

The business unit’s mission is to integrate the industry worldwide under a quality brand: namely, EWSI’s eWaste™ brand. Through its broad network of subsidiaries and affiliates, EWSI offers customized end-to-end solutions in IT Asset Recovery, E-Waste Management, and Electronics Reverse Logistics. EWSI leverages its affiliates’ complementary geographies, technical capabilities, and strong supplier relationships to expand the services offered to customers, cross-fertilize best management practices, streamline logistics, aggregate volumes, offer state-of-the-art engineering, and provide a truly global e-waste solution. The expertise, experience, and relationships of the EWSI senior management team, particularly in the application of scale cost reductions, business development, and technology implementation is a key differentiator.

eWaste’s primary customer targets are organizations facing a mix of regulatory, environmental, and price pressures, as well as an increasing need to protect their brand names and safeguard their data in the management of their e-waste. eWaste Systems’ adherence to the principles of Fair Trade and the requirements of the WEEE Directive provides these customers with reassurance that end-of-life e-waste management is not only fully compliant and certified but is also done with social and environmental responsibility at the forefront.

eVolve

This unit provides best practices management and business lease agreements to companies that want to become compliant to US GAAP. The agreements entitle eVolve to become responsible to execution of activities related to sales, accounting, advisory, training and business development.

The strategy behind the lease and management agreements provide growth acceleration with lower capital costs than acquisition and strategic industry penetration with synergies between the companies. In support of the eWaste branch, the agreements will include full commitment to the environmental compliance providing eco-friendly initiatives and services. eVolve primary customers targets are companies that wish to grow their business and to enhance the management, accounting and operations of their business to such high standards that they may potentially become a public company or become attractive for investing/acquiring purposes. All companies under this type of agreement report directly for balance sheet purposes.

·	eIncubator

eIncubator takes in consideration different forms of investments and ventures directly and indirectly related to the e-waste market by which business can experience future growth by developing new products or processes to improve and expand operations and market opportunities. The companies involved in Joint Ventures with eIncubator benefit of added credibility and visibility through the wide network of affiliates of the group nevertheless of the expertise and know-how to develop and improve the business.

The ideal candidates for Joint Venture investments with eIncubator are companies that have developed innovative technologies or other compelling businesses. eIncubator promotes and supports also social and environmental no-profit ventures.

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Factors Impacting EWSI’s Consolidated Results of Operations

The principal factors that impact our past and future results of operations include:

●

Availability of feedstock volumes. We do not have any formal contracts with 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.

●

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.

Consolidated Results of Operations for E-Waste Systems, Inc. – Continuing Operations

Three Months Ended March 31, 2013 Compared to the Three Months Ended March 31, 2012

Operating Expenses – Continuing Operations

We incurred operating expenses of $560,134 for the three months ended March 31, 2013 compared with operating expenses of $257,131 for the same period in 2012, an increase of $303,003. This increase is attributable to an increase in professional fees of $355,023, offset by a decrease in officer compensation of $48,178 and a decrease in general and administrative expenses of $3,842.

Our operating expenses for the three months ended March 31, 2013 consisted of directors’ and officers’ accrued compensation, professional fees and general and administrative expenses.

We anticipate that our operating expenses will continue to increase as we seek to increase the scale and range of services our business can offer to our customers.

Other (Expenses) Income – Continuing Operations

We incurred other expenses of $92,434 for the three months ended March 31, 2013 compared with $64,391 during the same period in 2012, an increase of $28,043. This increase in attributable to an $55,099 increase in interest expense on various convertible and non-convertible notes, an increase in the loss on derivative liability of $39,616, offset by a $66,672 decrease in contingent consideration settlement losses.

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Net Loss – Continuing Operations

As a result of the above, we reported a net loss from continuing operations of $652,568 for the three months ended March 31, 2013.

Net Income (Loss) – Discontinued Operations

We reported a net income from continuing operations of $9,059 for the three months ended March 31, 2013, compared to a net loss from continuing operations of $(23,902) for the three months ended March 31, 2012, which was a result of write offs of accrued expenses which were not to realized.

Liquidity and Capital Resources

As of March 31, 2013, our condensed consolidated balance sheet presented total current assets of $9,690 and total current liabilities of $1,741,428, which resulted in a working capital deficit of $1,731,738.

To date, we have relied upon issuances of unsecured notes to finance our operations and help us meet our short-term obligations. There is no assurance that we will be able to continue to issue notes to finance our short-term obligations. Our present capital resources are insufficient to implement our business plan, which includes meeting our contractual obligations described below. Over the next twelve months we anticipate incurring expenditures of approximately $600,000 to implement our business plan, exclusive of approximately $30,000 in ongoing operating expenses per month for the next twelve months, for total anticipated expenditures of approximately $960,000 over the coming twelve months. The operating expenses for the year will consist primarily of compensation for senior management, professional fees for the audit and legal work relating to our regulatory filings throughout the year, as well as transfer agent fees, travel and general office expenses. Our current cash on hand is insufficient to make our planned expenditures and to pay for our general operating expenses over the next twelve months. Accordingly, we must obtain additional financing in order to continue to implement our business plan during and beyond the next twelve months.

We believe that debt financing may not be an alternative for funding as we have minimal tangible assets available to secure debt financing. We anticipate that additional future funding will be in the form of equity financing from the sale of our common and preferred stock. We are currently seeking additional funding in the form of equity financing from the sale of equity shares, but cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common and preferred stock to implement our business plan. Additional equity financings could result in significant dilution to our stockholders.

Contractual Obligations

Notes Payable

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Lease Commitments.

We entered into a variable lease agreement in the People’s Republic of China, at 302 Golden Finance Tower, 58 Yan'an East Road, Shanghai, China 200040 with Evotech Capital, Ltd. on February 12, 2013 for a term of two years. The terms of the lease call for EWSI to issue Evotech Capital, Ltd. 250,000 shares of common stock during the second quarter of 2013.

Consolidated Cash Used in Operating Activities

Continuing operating activities in the three months ended March 31, 2013 used cash of $24,508, which is a reflection of the corresponding period’s operating results. Our consolidated net loss from continuing operations reported for three months ended March 31, 2013 of $652,568 was the primary reason for our negative operating cash flow. The impact of our consolidated net loss from continuing operations on our condensed consolidated cash flow for the three months ended March 31, 2013 was primarily offset by convertible notes payable executed for services of $115,440, and common stock issued for services of $262,505, both non-cash items, and offset by a decrease in accounts payable and accrued expenses of $70,237, and accrued expenses, related parties of $57,951.

Net cash flow used in discontinued operating activities for the three months ended March 31, 2013 and 2012 was $9,059 and $(15,706), respectively.

Consolidated Cash Used in Investing Activities

We did not use any cash in investing for the three months ended March 31, 2013 or 2012.

Consolidated Cash from Financing Activities

We have financed our operations primarily from loans made to the company. Consolidated net cash flow provided by continuing financing activities for the three months ended March 31, 2013 was $25,000, which consisted of proceeds received from notes payable.

Off Balance Sheet Arrangements

As of March 31, 2013, we had no off balance sheet arrangements.

Going Concern

Our 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. We have not yet established an on-going source of revenues sufficient to cover our operating costs and allow us to continue as a going concern. Our ability to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to cease operations.

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

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

Critical Accounting Policies

Our financial statements have been prepared in conformity with GAAP. For a full description of our accounting policies as required by GAAP, refer to our condensed consolidated financial statements for the year ended December 31, 2013, that are included in this Annual Report on Form 10-K. We consider certain accounting policies to be critical to an understanding of our condensed consolidated financial statements because their application requires significant judgment and reliance on estimations of matters that are inherently uncertain. The specific risks related to these critical accounting policies are described in our condensed consolidated financial statements for the year ended December 31, 2013.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

(Not Applicable)

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2013. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Mr. Martin Nielson. Based upon that evaluation, our Chief Executive Officer concluded that, as of March 31, 2013, our disclosure controls and procedures are not effective, we are, however, still in the process of evaluating and implementing changes in our disclosure controls and procedures.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and our Secretary/Treasurer, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Changes in Internal Control over Financial Reporting

During the three months ended March 31, 2013, there have been no changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of March 31, 2013 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of March 31, 2013, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with limited staff to carry out administrative duties: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

Remediation of Material Weakness

We are unable to remedy our controls related to the inadequate segregation of duties and ineffective risk management until we receive financing to hire additional employees and upgrade both the applications and information technology environment that we make use of for financial reporting and control purposes.

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Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

As of the filing of this document, the Company is not aware of any material pending litigation.

Item 1A – Risk Factors

Forward-Looking Statements

We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information currently available to us. Forward-looking statements include information about our possible or assumed future results of operations, throughout this report, which include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” or similar expressions. Any number of risks and uncertainties could cause actual results to differ materially from those we express in our forward-looking statements, including the risks and uncertainties we describe below and other factors we describe from time to time in our periodic filings with the SEC. We therefore caution you not to rely unduly on any forward-looking statement. The forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.

Risks and Uncertainties

We are subject to various risks that could have a negative effect on us or on our financial condition. You should understand that these risks could cause results to differ materially from those expressed in forward-looking statements contained in this report or in other Company communications. Because there is no way to determine in advance whether, or to what extent, any present uncertainty will ultimately impact our business, you should give equal weight to each of the following:

Our industry is highly competitive, which may impact our ability to compete successfully for customers. We generally operate in markets that contain numerous competitors. Each of our operations compete with national international and independent companies in regional markets. Some of this competition is very large. Our ability to remain competitive and to attract and retain business depends on our success in distinguishing the quality, value, and efficiency of our products and services, from those offered by others. If we cannot compete successfully in these areas, our operating margins could contract, our market share could decrease, and our earnings could decline.

Economic uncertainty could continue to impact our financial results and growth. Weak economic conditions in parts of the world, the strength or continuation of recovery in countries that have experienced improved economic conditions, potential disruptions in the U.S. economy as a result of governmental action or inaction on the federal deficit, budget, and related issues, political instability in some areas, and the uncertainty over how long any of these conditions will continue, could continue to have a negative impact on our industry.

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Operational Risks

Premature termination of our leasehold operating agreements could hurt our financial performance. Our leasehold operating agreements may be subject to sudden termination. A significant loss due to sudden terminations could hurt our financial performance or our ability to grow our business.

Our operations are subject to global, regional, and national conditions. Because we conduct our business on a global platform, our activities are affected by changes in global and regional economies. Our future performance could be similarly affected by the economic environment in each of the regions in which we operate.

The major significance of our operations outside of the United States also makes us increasingly susceptible to the risks of doing business internationally, which could lower our revenues, increase our costs, reduce our profits, or disrupt our business. We currently operate in multiple countries, and our operations in China represent the majority of our revenues to date. We expect that the international share of our total revenues will continue to increase in future periods. As a result, we are increasingly exposed to the challenges and risks of doing business outside the United States, which could reduce our revenues or profits, increase our costs, result in significant liabilities or sanctions, or otherwise disrupt our business. These challenges include: (1) compliance with complex and changing laws, regulations and policies of governments that may impact our operations, such as foreign ownership restrictions, import and export controls, and trade restrictions; (2) compliance with U.S. and foreign laws that affect the activities of companies abroad, such as anti-corruption laws, competition laws, currency regulations, and laws affecting dealings with certain nations; (3) limitations on our ability to repatriate non-U.S. earnings in a tax effective manner; (4) the difficulties involved in managing an organization doing business in many different countries; (5) uncertainties as to the enforceability of contract and intellectual property rights under local laws; (6) rapid changes in government policy, political or civil unrest, acts of terrorism, or the threat of international boycotts or U.S. anti-boycott legislation; and (7) currency exchange rate fluctuations.

Our new programs and new branded products may not be successful. We cannot assure you that our recently launched brands, our recent operational management agreements, our intended acquisitions, or any new programs or products we may launch in the future will be accepted by the public or other customers. We also cannot be certain that we will recover the costs we incurred in developing or acquiring the brands or any new programs or products, or that the brands or any new programs or products will be successful. In addition, some of our new brands involve or may involve cooperation and/or consultation with one or more third parties, including some shared control over product design and development, sales and marketing, and brand standards. Disagreements with these third parties could slow the development of these new brands and/or impair our ability to take actions we believe to be advisable for the success and profitability of such brands.

Disagreements with the owners of the businesses that we manage, operate, or sell brand licenses to may result in litigation or may delay implementation of product or service initiatives. Consistent with our focus on leasehold operating contracts and branding, we own very few of our functional properties. The nature of our responsibilities under our management agreements to operate and enforce the standards required for our brands under management operating agreements may be subject to interpretation and will from time to time give rise to disagreements, which may include disagreements over the need for or payment for new product or service initiatives. We seek to resolve any disagreements in order to develop and maintain positive relations with current and potential business owners but may not always able to do so. Failure to resolve such disagreements could result in litigation. If any such litigation results in a significant adverse judgment, settlement, or court order, we could suffer significant losses, our profits could be reduced, or our future ability to operate our business could be constrained.

Our business depends on the quality and reputation of our brands, and any deterioration in the quality or reputation of these brands could have an adverse impact on our market share, reputation, business, financial condition, or results of operations. Events that may be beyond our control could affect the reputation of one or more of our brands. If the reputation or perceived quality of our brands declines, our market share, reputation, business, financial condition, or results of operations could be affected.

Actions by our brand licensees or operating divisions could adversely affect our image and reputation. We license many of our brand names and trademarks to third parties. Under the terms of their agreements with us, our licensees may interact directly with customers and other third parties under our brand and trade names. If these licensees fail to maintain or act in accordance with applicable brand standards, experience operational problems, or project a brand image inconsistent with ours, our image and reputation could suffer.

Development and Financing Risks

We depend on capital to buy, develop, and improve business and may be unable to access capital when necessary. In order to fund new opportunities both the Company and strategic business owners in our network must periodically spend money. The availability of funds for new investments and improvement of operations our current businesses depends in large measure on capital markets and liquidity factors, over which we can exert little control.

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Our growth strategy depends upon third-parties future arrangements with these third parties may be less favorable. Our growth strategy for development of additional facilities entails entering into and maintaining various arrangements with business owners. The terms of our lease agreements, management operating agreements, license agreements, and acquisitions are influenced by contract terms offered by our competitors, among other things. We cannot assure you that any of our current arrangements will continue or that we will be able to enter into future collaborations, renew agreements, or enter into new agreements in the future on terms that are as favorable to us as those that exist today.

Development activities that involve investment with third parties may result in disputes that could increase costs, impair operations, or increase project completion risks. Partnerships, joint ventures, and other business combinations involving investment with third parties generally include some form of shared control over the operations of the business and create added risks, including the possibility that other investors in such ventures could have or develop business interests, policies, or objectives that are inconsistent with ours. Although we actively seek to minimize such risks before investing in partnerships, joint ventures, acquisitions or similar structures, actions by another investor or party may present additional risks of delay, increased costs, or operational difficulties following completion.

Other Risks

Changes in tax and other laws and regulations could reduce our profits or increase our costs. Our businesses are subject to regulation under a wide variety of laws, regulations, and policies in jurisdictions around the world. In response to the economic environment, we anticipate that many of the jurisdictions in which we do business will continue to review laws, regulations, and policies, and any resulting changes could impose new restrictions, costs, or prohibitions on our current practices and reduce our profits.

If we cannot attract and retain talented associates, our business could suffer. We compete with other companies both within and outside of our industry for talented personnel. If we cannot recruit, train, develop, and retain sufficient numbers of talented individuals it could limit our ability to grow and expand our businesses.

We previously determined that our disclosure controls and procedures were not effective. We have addressed previous issues but if our actions prove insufficient, we could suffer consequences. We cannot assure you that we will not discover additional weaknesses in our disclosure controls and procedures. Any such additional weakness could adversely affect our financial condition or ability to comply with applicable financial reporting requirements.

In addition to the above, we refer you to further statements of risks filed in our annual report with the SEC on Form 10K filed on April 16, 2014 and incorporated herein by reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Effective April 5, 2013 E-Waste Systems, Inc. (the “Company”) entered into a Series A Convertible Callable Preferred Stock Purchase Agreement (“the Agreement”) pursuant to the Master License Agreement entered into with Tanke, Inc. (“TNKE”) on February 6, 2013 whereby the Company granted TNKE a master license for the People’s Republic of China and TNKE agreed to make an investment into the Company. This agreement was previously filed with the SEC on Form 8K on April 8, 2013 and incorporated herein by reference.

The Agreement is for the purchase of Six Hundred Fifty (650) shares of the Company’s Series A Convertible Callable Preferred Stock at a price of One Thousand Dollars ($1,000) per share.

For the offer and sale of the preferred stock described above, we have relied upon the exemption from registration set forth in Section 4(2) of the Securities Act of 1933 and/or Rule 506 of Regulation D and/or Regulation S.

Item 3. Defaults upon Senior Securities

Note 11 to our condensed consolidated financial statements record our current defaults on the terms of loan notes that we have issued since October 2011.

Item 4. Removed and Reserved

Item 5. Other Information

None.

Item 6. Exhibits

See the Exhibit Index following the signatures page of this report, which is incorporated herein by reference.

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SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	E-Waste Systems, Inc.



Date:	July 2, 2014




By:	/s/ Martin Nielson
	Martin Nielson
Title:	President, Chief Executive Officer, Chief Financial Officer and Director

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E-Waste Systems, Inc.

(the “Registrant”)

(Commission File No. 333-165863)

Exhibit Index

To Quarterly Report on Form 10-Q/A

for the Quarter Ended March 31, 2013

Exhibit Number	Description	Incorporated by Reference to:	Filed Herewith

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

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EWaste Systems, Inc. - FORM 10-Q/A - July 2, 2014

Attached files

EWaste Systems, Inc. Reports