EWaste Systems, Inc.

CIK:0001488309|SEC Filings

Note 5 - DISCONTINUED OPERATIONS	9 Months Ended
Sep. 30, 2014
Notes to Financial Statements
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 the assets of our Ohio business has been classified as discontinued operations.

Note 5 - DISCONTINUED OPERATIONS

9 Months Ended

Sep. 30, 2014

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 the assets of our Ohio business has been classified as discontinued operations.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations	$ (9,453,770)	$ (4,707,518)
Adjustment to reconcile net loss to net cash used in operating activities:
Bad debt provision	2,036
Amortization of deferred financing costs	34,544
Depreciation expense	48,278	0
Amortization of intangible assets	64,781
Origination interest charge	88,500
Convertible notes payable executed for services	191,140
Amortization of debt discount	149,005
Origination interest on derivative liability
Change in derivative liability	1,616,832
Common stock issued for services	871,345
Stock based compensation	1,658,442
Loss on conversion of debt	3,659
Preferred stock issued for services	2,817,100
Gain on settlement of debt	51,685
Write off of former officer and director accrued compensation	566,825
Impairment on available for sale securities		1,445,000
Contributed capital
Changes in operating assets and liabilities:
Accounts receivable, net	(111,098)
License fees receivable
Related parties receivable	1,052
Inventory	2,437
Other current assets	1,004
Accounts payable and accrued expenses	533,609
Accrued expenses, related parties	(570,059)
Payroll and related liabilities	21,745
Deferred revenue	111,562
Deferred rent	6,681
NET CASH (USED IN) PROVIDED BY CONTINUING OPERATING ACTIVITIES	(1,292,665)
NET CASH (USED IN) PROVIDED BY DISCONTINUED OPERATING ACTIVITIES	(81,823)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	(1,374,488)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired with purchase of subsidiary
Purchase of equipment	(120,661)
Payments towards security deposits	(104,467)
Payments towards intangible assets
NET CASH USED IN CONTINUING INVESTING ACTIVITIES	(225,128)
NET CASH USED IN INVESTING ACTIVITIES	(225,128)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable	1,358,475
Principal payments towards convertible notes payable	(27,500)
Principal payments towards notes payable	(54,293)
Principal payments towards convertible notes payable, related parties	(6,000)
Advances from related parties	31,610
Advances from others	12,965
Issuance of common stock for cash	153,000
NET CASH PROVIDED BY CONTINUING FINANCING ACTIVITIES	1,468,257
NET CASH PROVIDED BY FINANCING ACTIVITIES	1,468,257
Effects of exchange rates on cash
Net (decrease) increase in cash and cash equivalents	(131,359)
Cash and cash equivalents, beginning of period	145,778
Cash and cash equivalents, end of period	14,419
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	70,999
Cash paid for taxes
NON-CASH ACTIVITIES:
Deferred financing costs associated with convertible notes payable issuances	60,500
Conversions of convertible notes payable and accrued interest into shares of common stock	661,237
Preferred stock issued for cost method investment
Common stock issued for cost method investment
Issuance of common stock as payment towards accrued expenses	27,838
Conversion of preferred Series A stock into common stock	34,335
Issuance of preferred Series A stock for payment of accrued expenses, related parties	300,169
Issuance of preferred Series A stock for payment of accounts payable and accrued expenses	50,428
Issuance of preferred Series B stock for payment of accrued expenses, related parties
Accrued interest added to principal in connection with assignments of convertible notes payable between third parties	3,913
Monies due from convertible notes payable	110,000
Issuance of common stock as payment towards accrued expenses, related parties	23,550
Retirement of common stock	2,494
Debt discounts on convertible notes payable
Intangible assets from investment in Surf
Convertible notes payable executed for accounts payable and accrued expenses
As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations		(4,707,518)
Adjustment to reconcile net loss to net cash used in operating activities:
Bad debt provision		2,700
Amortization of deferred financing costs		158,843
Depreciation expense
Amortization of intangible assets		21,594
Origination interest charge
Convertible notes payable executed for services		117,940
Amortization of debt discount
Origination interest on derivative liability		10,556
Change in derivative liability		245,245
Common stock issued for services		2,104,255
Loss on conversion of debt		43,970
Preferred stock issued for services
Gain on settlement of debt
Write off of former officer and director accrued compensation
Impairment on available for sale securities		1,445,000
Contributed capital		95,420
Changes in operating assets and liabilities:
Accounts receivable, net		(49,831)
License fees receivable
Related parties receivable		(750)
Inventory		(6,520)
Other current assets
Accounts payable and accrued expenses		309,735
Accrued expenses, related parties		322,271
Payroll and related liabilities
Deferred revenue		2,046
Deferred rent
NET CASH (USED IN) PROVIDED BY CONTINUING OPERATING ACTIVITIES		114,956
NET CASH (USED IN) PROVIDED BY DISCONTINUED OPERATING ACTIVITIES		143
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		115,099
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired with purchase of subsidiary
Purchase of equipment
Payments towards security deposits		(1,589)
Payments towards intangible assets		(247,153)
NET CASH USED IN CONTINUING INVESTING ACTIVITIES		(248,742)
NET CASH USED IN INVESTING ACTIVITIES		(248,742)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable		178,750
Principal payments towards convertible notes payable
Principal payments towards notes payable
Principal payments towards convertible notes payable, related parties
Advances from related parties
Advances from others
Issuance of common stock for cash
NET CASH PROVIDED BY CONTINUING FINANCING ACTIVITIES		178,750
NET CASH PROVIDED BY FINANCING ACTIVITIES		178,750
Effects of exchange rates on cash
Net (decrease) increase in cash and cash equivalents		45,107
Cash and cash equivalents, beginning of period		139
Cash and cash equivalents, end of period		45,246
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest
Cash paid for taxes
NON-CASH ACTIVITIES:
Deferred financing costs associated with convertible notes payable issuances
Conversions of convertible notes payable and accrued interest into shares of common stock		120,723
Preferred stock issued for cost method investment		27,273
Common stock issued for cost method investment		258,300
Issuance of common stock as payment towards accrued expenses
Conversion of preferred Series A stock into common stock
Issuance of preferred Series A stock for payment of accrued expenses, related parties
Issuance of preferred Series A stock for payment of accounts payable and accrued expenses
Issuance of preferred Series B stock for payment of accrued expenses, related parties		195,000
Accrued interest added to principal in connection with assignments of convertible notes payable between third parties
Monies due from convertible notes payable
Issuance of common stock as payment towards accrued expenses, related parties		106,473
Retirement of common stock
Debt discounts on convertible notes payable		419,550
Intangible assets from investment in Surf		120,046
Convertible notes payable executed for accounts payable and accrued expenses		$ 112,284

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Sep. 30, 2014	Dec. 31, 2013
CURRENT ASSETS:
Cash and cash equivalents	$ 14,419	$ 145,778
Restricted cash held in escrow	140,000	140,000
Accounts receivable, net	172,279	63,217
Related parties receivable		1,052
Inventory	3,315	5,752
Deferred financing costs	25,956
Other current assets	112,829	3,833
Total Current Assets	468,798	359,632
Property and equipment, net	254,103	181,720
Security deposits	107,737	3,270
Intangible assets	259,230	324,011
Investments	285,573	285,573
TOTAL ASSETS	1,375,441	1,154,206
CURRENT LIABILITIES:
Accounts payable and accrued expenses	919,247	479,884
Accrued expenses, related party	993,672	1,320,918
Due to related parties	31,610
Due to others	12,965
Payroll and related liabilities	21,745
Deferred rent	6,681
Deferred revenue	111,562
Short-term notes payable	208,563	194,460
Short-term related party convertible notes payable, net	6,000	12,000
Short-term convertible notes payable, net	2,091,152	1,139,897
Derivative liability on short-term convertible notes payable	1,792,524	465,880
Total Current Liabilities	6,195,721	3,613,039
Long term portion of notes payable	17,512	85,908
Long term portion of convertible notes payable, net	636,697	251,406
Long-term portion of derivative liabilities	290,188
TOTAL LIABILITIES	7,140,118	3,950,353
STOCKHOLDERS' DEFICIT
Preferred stock, Series A, $0.001 par value, 200,000 shares authorized; 5,516 and 1,903 shares issued and outstanding, respectively	6	2
Preferred stock, Series B, $0.001 par value, 500,000 shares authorized; 487,500 and 195,000 shares issued and outstanding, respectively	487	195
Common stock, $0.001 par value, 6,000,000,000 shares authorized; 1,107,817,477 and 262,734,973 shares issued and outstanding, respectively	1,107,818	262,735
Additional paid-in capital	12,875,909	7,154,225
Accumulated deficit	(19,748,897)	(10,213,304)
TOTAL STOCKHOLDERS' DEFICIT	(5,764,677)	(2,796,147)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 1,375,441	$ 1,154,206