[May 20, 2013] EWASTE SYSTEMS, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations Tweet (Edgar Glimpses Via Acquire Media NewsEdge) 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. Factors that could cause or contribute to our actual results differing materially from those discussed herein or for our stock price to be adversely affected include, but are not limited to: · general economic conditions; · risk that we will not be able to remediate identified material weaknesses in our disclosure controls and procedures; · risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to fully implement our business plan; · the uncertainty of profitability based upon our history of losses; · our pursuit of operations in an emerging market with uncertainty as to market acceptance of our products and services; · risk that we cannot attract, retain and motivate qualified personnel; · our dependence on key personnel; · competition from larger, more established companies with far greater economic and human resources; · possible issuance of common stock to raise adequate financing that may dilute the interest of stockholders; · future sale of a substantial number of shares of our common stock that could depress the trading price of our common stock, lower our value and make it more difficult for us to raise capital; · risk that the floating conversion price for our Series A Convertible Preferred Stock may lead to significant shareholder dilution and a corresponding drop in the market price of common stock; · our nonpayment of dividends and lack of plans to pay dividends in the future; · we are unable to keep current with all of our SEC filings and therefore undermine our status as smaller reporting company. The forgoing list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors, such as those discussed in our Current Report on Form 10-K/A filed on April 16, 2013, which are incorporated herein by reference, could affect our actual results and should be considered carefully. - 4 --------------------------------------------------------------------------------- Table of Contents 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 under the name Dragon Beverage, Inc. on December 19, 2008 for the purpose of developing, producing and selling energy drink beverages. We were not successful in implementing this business plan primarily because of our inability to secure sufficient financing in order to be able to execute on this business plan. In May 2011, our management determined that it was necessary to reassess our current direction and evaluate pursuing other opportunities which management believed would be more attractive to secure the financing required to commence operations. In connection with this assessment, we determined to suspend our plan of developing, producing and selling energy drink beverages in order to pursue becoming a provider of waste electric and electronic equipment processing services. In May 2011, we changed our name to "E-Waste Systems, Inc." to better reflect this new direction for our company and began, with the assistance of a new management team, to pursue acquisitions of providers of waste electric and electronic equipment processing services. Our Business A summary of our business plan has been published on our website at www.ewastesystems.com and is available for download there. We include it here by reference. Through subsidiaries, affiliations, licensees, and management contracts, EWSI offers customized end-to-end solutions in IT Asset Recovery, Waste Management, Reverse Logistics, Management Services, Technology and Engineering solutions and provides other solution providers with branding options that are proprietary to our Company. We target as customers organizations facing a mix of regulatory, environmental, and price pressures, as well as those which need to protect their brand names and safeguard their data in the management of their waste and end-of-life assets. EWSI's adherence to the principles of Fair Trade and the requirements of local and national legislation provides these customers with reassurance that end-of-life waste management is not only fully compliant and certified but is also done with social and environmental responsibility focus. Our strategy for growth comprises the following key elements: Build a global brand: We believe our brand is unique and we are promoting it through our website and via public relations to attain awareness of and alignment with the highest compliance standards in the world, led by Europe's WEEE Directive. Our commitment is to continuously enhance and achieve the best brand in the industry, to the benefit of our clients and our business partners. We recognize that waste, and particularly e-waste, is a global problem that requires a global solution. We are therefore committed to developing and managing a worldwide presence, and intend to do so by using brand licensing and affiliations as a principle method to do so. We have and will continue developing affiliations with quality companies that share our business and environmental principles, which expand the geographic and service coverage of our Company, and which can do so with a lower capital outlay for our shareholders. Expand our Technology: We are committed to developing and deploying a portfolio of proprietary engineering and technologies that can extract maximum value from end-of-life assets while minimizing environmental impact. These technologies include software solutions as well as high-end separation, refining, and processing technologies applied to component materials and output streams such as plastics, precious metals, glass, carbon, and bio-materials. - 5 --------------------------------------------------------------------------------- Table of Contents Accelerate our Revenues. We sell new branding licenses which generate revenue from up-front license fees and from subsequent royalties from sales executed under our brands; from the sale of technologies; from management services; from resale of still usable end-of-life electronics; from sale of extracted commodities produced by recycling; and from selected acquisitions. Our business plan is fundamentally based on the deployment of a mix of human and automated recycling processes to extract the widest possible range of materials from environmental and electronic waste and other related materials, including copper, steel, aluminum, plastics, glass, lead, and precious metals. These materials are then made available for processing into new raw materials or new end-use products, while tending to preserve the environment by reducing the amount of toxic materials that are consigned to landfills. Yazhou JCP Through a series of steps described below, effective January 26, 2013, we became the indirect holding company of Shanghai YaZhuo Jiudian Guanli, Ltd. ("YaZhuo JCP"), a recycling company located in the People's Republic of China ("PRC"). YaZhuo JCP holds patents for the recycling of plastics, including electronic waste plastics, which it then processes into new materials for the construction industry. The company produces these construction grade plastics which are structurally advanced and are presently being used in the construction industry as reusable forms for building concrete structures. As a result of this transaction, we obtained control of the Company and we exercise this control through our office in Shanghai. We provide YaZhuo JCP with management services pursuant to a series of agreements, all of which were disclosed on Forms 8K and are incorporated herein by reference. Together these agreements give us the right and obligation to consolidate financial results under generally accepted accounting principles ("GAAP"). The agreements are tied to the Management Services Agreement whereby our Company is fully and exclusively responsible for the management of YaZhuo JCP. Beginning early in the first quarter, EWSI's Shanghai office began setting up new accounting systems and processes to manage the affairs of this company under this new contract. Using United States GAAP practices and English language based software. EWSI is working to identify improved methods of operation, and ultimately intends to source access to additional input streams of plastics from ewaste and other materials; and to seek new uses of the patented recycling technology. Our Strategy in the Next 12 Months Our stated goals for the next twelve months are to build our global brand, expand the presence of our technologies, and increase revenue. Our strategies to achieve these goals will encompass the negotiation and sale of additional licenses that will broaden the reach of our brands complete the development commence deployment of our technologies including eWasteCC (our carbon credit technology) and ePlant1000 (our engineering solution); and accelerate our revenue growth through previously announced business development initiatives and future acquisition and business development initiatives. Build a global brand: We believe our brand is unique and we are promoting it through our website and public relation initiatives to generate awareness of our adherence to the highest compliance standards in the world, led by Europe's WEEE Directive. Our commitment is to continuously enhance and achieve the best brand in the industry, to the benefit of our clients and business partners. We recognize that environmental waste, and particularly e-waste, is a global problem that requires a global solution. We are committed to developing and managing a worldwide presence, and intend to do so by using brand licensing and affiliations as the principle method to do so. We have and will continue developing affiliations with companies that share our business and environmental principles, which will expand the geographic and service coverage of our Company, and which can do so with a lower capital outlay for our shareholders. Expand our Technology: We are committed to developing and deploying a portfolio of proprietary engineering and technologies that can extract maximum value from end-of-life assets while minimizing environmental impact. These technologies include software solutions as well as high-end separation, refining, and processing technologies applied to component materials and output streams such as plastics, precious metals, glass, carbon, and bio-materials. - 6 --------------------------------------------------------------------------------- Table of Contents Accelerate our Revenues. We sell new branding licenses which generate revenue from license fees and from subsequent royalties from sales executed under our brands; from the sale of technologies; from management services; from resale of still usable end-of-life electronics; from sale of extracted commodities produced by recycling; and, from selected acquisitions. Factors impacting EWSI's Consolidated Results of Operations The principal factors that impacted our past results of operations and may affect future operations include: · Availability of feedstock volumes. We did not have any formal contracts with our suppliers of feedstock batches and there was no mechanism in place that effectively underpined our access to a regular, predictable volume of feedstock. Our revenue streams were dependent on batches of used electronic equipment being available to fuel the repair, refurbishment and spare parts recovery processes from which our revenue was derived. · Demand for second-hand electronic equipment. Our revenue, operating results and investment in working capital depended on the level of demand for second-hand electronic equipment that had been repaired and/or refurbished together with a requirement for recovered spare parts that could be used in repair and refurbishment operations. We would usually have concluded an agreement or have been in advanced negotiations to sell repaired and refurbished units before we committed to buying feedstock batches. In the future, such careful management of profits and cash cycles will be disrupted if demand for used electronics sharply declines 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 commodity prices notably that of precious metals used to manufacture key components found in electronic equipment. Movements in the prices at which these commodities are traded influences prices at various stages of the reverse supply chain for electronic goods, including the price to acquire feedstock volumes and the value extracted from the residual scrap remaining at the end of the repair, refurbishment and spare parts recovery processes. · Regulatory changes. Businesses that derive their revenue and profits from handling electronic waste in the United States are exposed to increasingly complex legislative and regulatory regimes at both Federal and State levels of government. Each time the legal or regulatory environment 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 experience an increase in operating costs, which may not be able to be passed downstream. · General and administrative costs. In order to execute on any strategy for growth, we would expect to have to further increase general and administrative overhead cost. Our results of operations will be adversely impacted if these additional overhead costs are incurred before growth in revenue is realized. - 7 --------------------------------------------------------------------------------- Table of Contents Condensed Consolidated Results of Operations for E-Waste Systems, Inc. Three Months Ended March 31, 2013 Compared to Three Months Ended March 31, 2012 Revenues We generated revenue of $229,004 during the three months ended March 31, 2013, compared with $0 during the three months ended March 31, 2012. Sales realized during the three months ended March 31, 2013 are from the sale of recycled plastics products in China, and to the sales of brand licenses. Sales increased substantially during the three months ended March 31, 2013 compared with the same period last year because we entered into a variable interest entity relationship through a management services agreement with Shanghai YaZhuo Jiudan Guanli ("YaZhuo") requiring consolidation of YaZhuo's operations in China. The Company also focused onimplementing the business plan announced at the start of the year by selling licensing fees. Cost of Sales Cost of sales for the three months ended March 31, 2013 amounted to $2,139, compared with $0 for the three months ended March 31, 2012. Costs of sales during the three months ended March 31, 2013 were comprised primarily of the cost of recycling plastics in our China operation. The increased cost of sales during the three months ended March 31, 2013 compared with the same period in 2012 is because of our focus on managing the subsidiary in China. Our direct cost of sales for brand licenses is nil. Gross Profit Gross profit for the three months ended March 31, 2013 was $226,865, or 99.1% of revenues, compared to gross profit of $0 for the three months ended March 31, 2012. The increase in gross margin for the three months ended March 31, 2013 compared with the same period during the prior year is attributable to the consolidation of the operations of YaZhuo, a variable interest entity ("VIE") effective March 25, 2013 and revenues from license fees for which there is no direct cost. Operating Expenses We incurred operating expenses of $604,667 for the three months ended March 31, 2013 compared with operating expenses of $257,131 for the same period in 2012, an increase of $347,536. This increase is attributable to an increase in professional fees of $393,807, an increase in general and administrative expenses of $9,255 and a $652 increase in depreciation, offset by a decrease in officer compensation of $56,178. The increase in professional fees resulted from activities associated with our consolidation of YaZhuo and our licensing efforts. The decrease in officer compensation is attributable to several officer resignations occurring at the end of 2012. 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 Items We incurred other expenses of $109,619 for the three months ended March 31, 2013 compared with $64,391 during the same period in 2012, an increase of $45,228. This increase in attributable to an $113,203 increase in interest expense on various convertible and non-convertible notes, a decrease in the gain on derivative liability of $3,846, offset by a $66,672 decrease in contingent consideration settlement losses and a foreign currency gain of $5,149. - 8 --------------------------------------------------------------------------------- Table of Contents Other income and expenses comprise interest expense on demand notes payable, gain on currency exchange and the interest on a derivative liability attaching to our convertible debt. Net Income (Loss) As a result of the above, we reported a net loss of $487,421 for the three months ended March 31, 2013. Liquidity and Capital Resources As of March 31, 2013, our condensed consolidated balance sheet presented total current assets of $542,068 and total current liabilities of $2,037,916, which resulted in a working capital deficit of $1,495,848. EWSI generated consolidated revenue from condensed consolidated operations during the three months ended March 31, 2013 that fell short of its condensed consolidated operating expenses from continuing operations over the same period by $377,802. 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 Convertible Notes. On 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 percent 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 $252 of interest expense on the related party convertible note payable leaving a balance in accrued interest of $1,697 and $2,052 as of March 31, 2013 and December 31, 2012, respectively. The note has been extended for an additional year and all default terms have been recognized in the presentation of the note payable. - 9 --------------------------------------------------------------------------------- Table of Contents On 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 percent, are unsecured and are due on demand. During the three months ended March 31, 2013, the Company recognized $2,589 of interest expense on these notes payable leaving balances in accrued interest of $11,900 and $9,311, as of March 31, 2013 and December 31, 2012 respectively. On May 6, 2013, the Company entered into a settlement agreement with the holder of these notes whereby the Company will pay to the note holder interest due through May 31, 2013 in the form of unrestricted common stock of the Company at a price of 10% discount to the previous 10 day trading average stock price, which equals an amount of 2,184,879 shares. The balance of each of the notes will be paid in six equal monthly installments, including interest for the period of $5,833.33 for the $35,000 note and $6,666.67 for the $40,000 note. On February 24, 2012, the Company borrowed $100,000 from an unrelated third party in the form of a promissory note. The funds are to support the working capital requirements of the business and specifically, the procurement of electronic waste for refurbishment or recycling. As of December 31, 2012, approximately $17,000 of the funds lent had been applied to purchase feed stocks for the Company's discontinued operations. The promissory note accrues interest at 14 percent and is due on March 24, 2013. The note is currently in default and all default terms have been recognized in the presentation of the note payable. During the three months ended March 31, 2013, the Company recognized $3,452 of interest expense on this promissory note. The Company has subsequently entered into a settlement agreement with the note holder wherein the accrued interest through May 31, 2013 was converted into 1,029,479 shares of the Company's restricted stock at a price of $0.01 plus 10%. The principal amount of the note will be repaid in 12 equal monthly installments plus accrued interest beginning on June 1, 2013. On August 27, 2012, the Company executed a promissory note in the principal sum of $150,000. The consideration to be provide by the note holder is $135,000. A $15,000 (10%) original issue discount ("OID") applies to the principal sum. The note holder made payments of $25,000 and $15,000 of the total consideration during the year ended December 31, 2012 and has made an additional consideration to the Company of $25,000 during 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 $2,778 which is included in interest expense for the three months ended March 31, 2013. 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 $4,445 on the payment dates of the note. As of December 31, 2012, the Company had amortized $13,334 of the total outstanding debt discount leaving unamortized debt discounts of $31,111. On February 28, 2013, the note holder converted $7,350 of debt to 1,500,000 shares of the Company's unrestricted common stock at a price of $0.0049; on March 20, 2013, the note holder converted $11,466.00 of debt to 1,800,000 shares of the Company's unrestricted common stock at a price of $0.006370; on April 16, 2013, the note holder converted $11,739.56 of debt to 2,695,650 shares of the Company's unrestricted common stock at a price of $0.004355; and, on May 6, 2013, the note holder converted $8,450.00 of debt to 2,500,000 shares of the Company's unrestricted common stock at a price of $0.003385. On 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. - 10 --------------------------------------------------------------------------------- Table of Contents 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 $25,313. The discount will be amortized and recorded to the statement of operations over the stated term of the note is included within as interest expense. As of March 31, 2013, the Company has amortized $1,352 of the total outstanding debt discounts leaving an unamortized debt discount of $15,095. On January 18, 2013, the Company executed a convertible note payable with face a value of $41,557.07 with a related party in exchange for services provided to the Company. The note is unsecured and bears interest at 6% per annum and is due on January 18, 2016. The note is 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. On March 5, 2013, the Company executed a convertible note payable with a related party with a face value of $17,417.30 in exchange for services provided to the Company. The note is unsecured, bears interest at 6% per annum and is due on March 5, 2016.. The note is 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. On February 8, 2013 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. The note is unsecured, bear interest at 6% per annum and is due on February 8, 2016. The note is 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. Lease Commitments. We entered into a variable lease agreement in the Peoples 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 $20,856, 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 $487,421 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 $293,634 in common stock issued for services and amortization of debt discounts and origination interest on derivative liabilities of $102,113, both non-cash items, and an increase in accounts payable and accrued expenses of $288,306. These offsets were reduced by an increase in accounts receivable of $225,000. Consolidated Cash Used in Investing Activities We did not use any cash in investing for the three months ended March 31, 2013 or 2012. - 11 --------------------------------------------------------------------------------- Table of Contents 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.. Net cash flow provided by discontinued financing activities for the three months ended March 31, 2013 and 2012 was $0 and $0, respectively. 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 while seeking additional equity and/or debt financing. However, management cannot provide any assurances we will be successful in accomplishing any of our plans. 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 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 consolidated financial statements for the year ended December 31, 2012, that are included in our Annual Report on Form 10-K. We consider certain accounting policies to be critical to an understanding of our 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 consolidated financial statements for the year ended December 31, 2012. [ Back To TMCnet.com's Homepage ]