E-Waste Systems revises down 2013 financials

E-Waste Systems revises down 2013 financials

By Bobby Elliott, E-Scrap News

Aug. 15, 2014

After determining that 2013 quarterly statements "should no longer be relied upon," E-Waste Systems, Inc. has released restated financials that show revenues were millions of dollars less than what the company initially reported.

Restated quarterly reports for the first, second and third quarter of 2013 show E-Waste Systems (EWSI), a publicly traded e-scrap company that operates facilities in Ohio and New York, misreported its revenues by nearly $8 million. Actual revenues for the first nine months of 2013 came in at $434,536, compared with the $7,862,216 the company first publicly reported – and heralded – to investors and the media toward the end of 2013.

In a recently issued press release, company CEO Roger Nielson explained that a new auditor, RBSM LLP, reviewed 2013 financials alongside EWSI and concluded the earnings information needed to be revised.

"After our audit review of the 10K to be filed with the SEC for the year ended December 31, 2013, which included the fully audited results for the entire calendar year of 2013, we found that it would be necessary to revise each of the previous quarters for 2013," Nielson said in the statement. "The quarterly statements have been revised to conform to the audited results and filed as amendments to each of the quarterly filings."

EWSI was the subject of a feature-length profile in the June 2014 print edition of E-Scrap News (a Resource Recycling sister publication). Read it here.

The crux of the recent accounting issue, SEC documents show, centers on a Chinese partner, XuFu, which was originally included as a "Variable Interest Entity" in filings. On Aug. 1 of this year, the company stated it should not have consolidated XuFu interests, adding "the quarterly statements for the periods ending March 31, 2013, June 30, 2013 and September 30, 2013 should no longer be relied upon and should be restated."

In his comments on the refilings, Nielson suggested "accounting treatment is only one factor in the business decision" and refers to the newly issued reports as "housekeeping."

Nielson indicated optimism for the company going forward.

"The promising preliminary results of the recently ended quarter and a commitment to an aggressive strategy to take advantage of the increasing electronics disposal issues are building blocks for our creation of a world-class organization," Nielson stated, "providing a real, sustainable, end-to-end solution."

After reaching a 2014 high of just over 5 cents a share in January, EWSI's stock price has been hovering around a quarter of a penny in recent weeks. EWSI decided in July to increase its share count by 500 million shares.

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