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
|
Nevada
|
26-4018362
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification No.)
|
101 First Street #493, Los Altos, CA 94022
|
|
(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)
|
Large accelerated filer o
|
Accelerated filer o
|
Non-accelerated filer o
|
Smaller reporting company x
|
E-Waste Systems, Inc.
|
|
Date:
|
May 28, 2013
|
By:
|
/s/ Martin Nielson
|
Martin Nielson
|
|
Title:
|
President, Chief Executive Officer and Director
|
Date:
|
May 28, 2013
|
By:
|
/s/ David Severson
|
David Severson
|
|
Title:
|
Chief Financial Officer
|
Exhibit
Number
|
Description
|
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
|
*
|
||
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
|
*
|
||
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
|
*
|
||
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
|
*
|
||
101.INS
|
XBRL Instance Document
|
†
|
||
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
†
|
||
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
†
|
||
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
†
|
||
101.LAB
|
XBRL Extension Labels Linkbase Document
|
†
|
||
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
†
|
*
|
Filed as an exhibit to the original Form 10-Q for the quarter ended March 31, 2013, filed May 20, 2013.
|
†
|
In accordance with SEC rules, this interactive data file is deemed “furnished” and not “filed” for purposes of Sections 11 or 12 of the Securities Act of 1933 and Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under those sections or acts.
|
VARIABLE INTEREST ENTITY - Schedule of Variable Interest Income and Expenses (Details) (USD $)
|
3 Months Ended | 0 Months Ended | |
---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Mar. 31, 2013
YaZhuo
|
|
Revenues | $ 229,004 | $ 4,004 | |
Cost of goods sold | 2,139 | 2,139 | |
Gross margin | 226,865 | 1,865 | |
Depreciation expense | 652 | 652 | |
General and administrative expenses | 27,877 | 18,622 | 2,351 |
Interest expense | 118,293 | 5,090 | 130 |
Total expenses | 604,667 | 257,131 | 3,133 |
Net loss | $ (487,421) | $ (345,424) | $ (1,268) |
NOTES PAYABLE (Details Narrative) (USD $)
|
3 Months Ended | 0 Months Ended | 3 Months Ended | 0 Months Ended | 3 Months Ended | 0 Months Ended | 3 Months Ended | 4 Months Ended | 0 Months Ended | 3 Months Ended | 0 Months Ended | 3 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Dec. 31, 2012
|
Dec. 31, 2011
|
Feb. 21, 2012
UnrelatedThirdPartyMember
|
Feb. 03, 2012
UnrelatedThirdPartyMember
|
Mar. 31, 2013
UnrelatedThirdPartyMember
|
Mar. 31, 2013
UnrelatedThirdPartyMember
Feb3Member
|
Mar. 31, 2013
UnrelatedThirdPartyMember
Feb21Member
|
Feb. 24, 2012
WorkingCapitalLoanMember
|
Mar. 31, 2013
WorkingCapitalLoanMember
|
Mar. 20, 2013
PromissoryNoteMember
|
Feb. 28, 2013
PromissoryNoteMember
|
Aug. 27, 2012
PromissoryNoteMember
|
Mar. 31, 2013
PromissoryNoteMember
|
Dec. 31, 2012
PromissoryNoteMember
|
Dec. 31, 2012
PromissoryNoteMember
Payment1Member
|
Dec. 31, 2012
PromissoryNoteMember
Payment2Member
|
Mar. 31, 2013
PromissoryNoteMember
DerivativeLiabilityMember
|
Dec. 31, 2012
PromissoryNoteMember
DerivativeLiabilityMember
|
Mar. 18, 2013
ConsultantMember
|
Dec. 31, 2012
ConsultantMember
|
Mar. 31, 2013
ConsultantMember
|
Jan. 18, 2013
ConvertibleDebtMember
Jan18Member
|
Feb. 08, 2013
ConvertibleDebtMember
Feb8Member
|
Mar. 05, 2013
ConvertibleDebtMember
Mar5Member
|
Mar. 31, 2013
ConvertibleDebtMember
ServicesMember
|
|
Proceeds from Notes Payable | $ 175,000 | $ 35,000 | $ 40,000 | $ 100,000 | $ 135,000 | ||||||||||||||||||||||
Debt Instrument Interest Rate | 14.00% | 14.00% | 6.00% | 6.00% | 6.00% | 6.00% | |||||||||||||||||||||
Interest Expense | 118,293 | 5,090 | 2,589 | 3,452 | 5,026 | 3,625 | |||||||||||||||||||||
Notes Payable | 6,476 | 5,424 | |||||||||||||||||||||||||
Interest Payable | 10,484 | ||||||||||||||||||||||||||
Executed Promissory Note | 150,000 | ||||||||||||||||||||||||||
Original Issue Discount | 13,500 | 4,445 | 2,778 | ||||||||||||||||||||||||
Original Issue Discount Rate | 10.00% | ||||||||||||||||||||||||||
Payments of Note Payable | 25,000 | 25,000 | 15,000 | ||||||||||||||||||||||||
Value Converted | 11,466 | 7,350 | 64,000 | ||||||||||||||||||||||||
Price Per Share | $ 0.0064 | $ 0.0049 | $ 0.0064 | $ 0.0064 | $ 0.0064 | $ 0.0064 | $ 0.0064 | ||||||||||||||||||||
Shares Converted | 1,800,000 | 1,500,000 | 10,000,000 | ||||||||||||||||||||||||
Minimum Price Per Share | $ 0.01 | ||||||||||||||||||||||||||
Percent of Trade Price | $ 70 | ||||||||||||||||||||||||||
Prior Trading Days | 25 | ||||||||||||||||||||||||||
Max Ownership Outstanding Stock | $ 4.99 | ||||||||||||||||||||||||||
Derivative Liabilities | 116,350 | 61,545 | 143,752 | 85,106 | 58,646 | ||||||||||||||||||||||
Debt Discounts | 27,778 | 44,445 | 31,111 | 37,814 | 11,447 | 20,313 | |||||||||||||||||||||
Amortization of Debt Discounts | 25,918 | 13,334 | 12,424 | 7,438 | 0 | 2,369 | 12,143 | ||||||||||||||||||||
Accounts Payable Forgiveness | 50,000 | 47,060 | |||||||||||||||||||||||||
Conversion of Debt | 162,500 | ||||||||||||||||||||||||||
Debt Issued for Service | 11,000 | 41,557 | 162,500 | 17,417 | |||||||||||||||||||||||
Beneficial Conversion Feature | 25,313 | 219,841 | |||||||||||||||||||||||||
Value of Services Provided | $ 115,400 |
VARIABLE INTEREST ENTITY (Tables)
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Variable Interest Assets & Liabilities |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Variable Interest Income and Expenses |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reclassifications
Certain balances in previously issued financial statements have been reclassified to be consistent with current period presentation.
Recent Accounting Pronouncements
The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.
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 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.
Principles of Consolidation
The accompanying consolidated financial statements for the period 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.
The consolidated financial statements also include the accounts of Shanghai YaZhuo Jiudian Guanli ("YaZhuo"), a consolidated variable interest entity. On March 26, 2013, EWSI entered into a set of agreements with YaZhuo, a company incorporated in the People’s Republic of China (“PRC”), wherein EWSI will provide management services in relation to the current and proposed operations of YaZhuo’s business in the PRC. The management services include general business operation, human resources, business development, and such other advice and assistance as may be agreed upon by the parties. In consideration, YaZhuo will pay a management services fee, payable each quarter, equivalent to all of YaZhuo’s net income for such quarter. All intercompany balances and transactions have been eliminated.
Inventory
The company produces and sells plastic formwork used by construction companies in the PRC. Inventory consists of various raw materials, work-in-process and finished goods. The Company values its inventory on a first in first out (FIFO) basis at the lower of cost or market. Cost includes purchase price, freight, insurance, duties and other incidental expenses incurred in bringing inventories to their present location and condition. The Company records a reserve if the fair value of inventory is determined to be less than the cost.
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 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 recognized other-than-temporary impairment to marketable securities in the amount of $34,250 and $-0- during the years ended August 31, 2011 and 2010, respectively.
Long-Lived Assets
Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable from the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. The Company recorded impairment expense on long-lived intangible assets of $615,000 and $-0- during the years ended December 31, 2012 and 2011, respectively.
Property and equipment are recorded at historical cost less accumulated depreciation, unless impaired. Depreciation is charged to operations over the estimated useful lives of the assets using the straight-line. Upon retirement or sale, the historical cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized. Expenditures for repairs and maintenance are charged to expense as incurred.
Basic and Diluted Loss Per Common Share
Basic loss per common share is computed by dividing the loss available to common stockholders by the weighted average number of common shares outstanding during the period of computation. Diluted loss per share gives effect to all potential dilutive common shares outstanding during the period of compensation. The computation of diluted loss per share does not assume conversion, exercise or contingent exercise of securities that would have an antidilutive effect on earnings. As of March 31, 2013, the Company had 64,879,313 potentially dilutive securities that would affect the loss per share if they were to be dilutive.
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.
Product sales revenue is recognized when the sales amount is determined, shipment of goods to the customer has occurred and collection is reasonably assured. Product is shipped FOB origination. License fee revenue and related royalty revenue is recognized when an agreement is in place, collectability is reasonable assured and the licensee has reported the product sales to the Company. Product royalties revenue is calculated based upon the contractual percentage of reported sales.
Foreign Currency
Assets and liabilities of the Company's foreign operations are translated into U.S. dollars at period-end exchange 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
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
The Company measures and recognizes stock-based compensation expense using a fair value-based method for all share-based awards made to employees and nonemployee directors, including grants of stock options and other stock-based awards. The application of this standard requires significant judgment and the use of estimates, particularly with regard to Black-Scholes assumptions such as stock price volatility and expected option lives to value equity-based compensation. We recognize stock compensation expense using a straight line method over the vesting period of the individual grants.
Income Taxes
The Company utilizes the balance sheet method of accounting for income taxes. Accordingly, The Company is required to estimate its income taxes in each of the jurisdictions in which it operates as part of the process of preparing its consolidated financial statements. This process involves estimating the Company’s actual current tax exposure, including assessing the risks associated with tax audits, together with assessing temporary differences resulting from the different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. Due to the evolving nature and complexity of tax rules, it is possible that the Company’s estimates of its tax liability could change in the future, which may result in additional tax liabilities and adversely affect the results of operations, financial condition and cash flows. |