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**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q/A**

**(Amendment No. 1)**

 

**(MarkOne)**

 

**x****     ****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934**

 

**FOR THE QUARTERLY PERIOD ENDED JUNE30, 2009**

 

**OR**

 

**o****        ****TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934**

 

**FOR THE TRANSITION PERIOD FROM                  TO                   **

 

**COMMISSION FILE NUMBER333-151108**

 

**WASTE2ENERGY HOLDINGS, INC.**

(Exact Name of Registrant as Specified in its Charter)

 

| **Delaware**                                                          |   | **26-2255797**                        |
|-----------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization)       |   | (I.R.S. Employer  Identification No.) |
|                                                                  |   |                                  |
| **1 Chick Springs Road,  Suite 218, Greenville, South Carolina** |   | **29609**                             |
| (Address of principal  executive offices)                             |   | (Zip code)                            |

 

Issuer’s telephone number: **(864)679-1625**

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T during the preceding 12 months (or such shorter period thatthe registrant was required to submit and post such files. Yes o No o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See the definitions of “large accelerated filer,” “acceleratedfiler” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

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

 

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

 

As of September 28, 2009, there were 47,977,850outstanding shares of the Registrant’s Common Stock, $.001 par value.

 

 

 

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**EXPLANATORY NOTE**

 

Waste2Energy Holdings, Inc. (the “Company”) isfiling this Amendment No. 1 (“Amendment”) to our Quarterly Report on Form 10-Qfor the three months ended June 30, 2009 filed with the Securities andExchange Commission (“SEC”) on October 1, 2009(“the Original Report”) torestate our unaudited condensed consolidated financial statements for the threemonth comparative period ended June 30, 2008 under Item 1 and toamend Item 2 of Part I of the Original Report. These adjustments relate toa period that was not previously filed on a stand-alone 10Q as the Company wasprivate and not subject to the filing requirements of the SEC for the periodwhich is being amended.  This Amendmentdoes not affect any other items or sections in the Original Filing, and noattempt has been made in this Form 10-Q/A to update other disclosurespresented in the Original Filing, except as required to reflect the effects ofthe restatement. In addition, Exhibits 31 and 32.1 of the Original Filinghave been re-filed to contain currently dated certifications from our ChiefExecutive Officer and Principal Financial Officer. We are republishing theentire Original Filing, as amended by this Amendment, so that all of ourinformation regarding the quarter ended June 30, 2008 is in one report.

 

Management determined that deferred tax assets relatedto the quarter ended June 30, 2008 were inadvertently omitted from thereported first quarter 2008 financial results. The accounting error resulted inan overstatement of net loss by $611,613.  The tables below present theeffect of the financial statement adjustments related to the restatement of ourpreviously reported unaudited condensed consolidated financial statements forthe three months ended June 30, 2008:

 
| **Three Months Ended June  30, 2008:**       | ** ** | **As  reported** | ** ** | **Adjustment** | ** ** | **As  Restated** | ** ** |
|----------------------------------------------|------------|------------------|------------|----------------|------------|------------------|------------|
|                                         |       |             |       |           |       |             |       |
| Benefit from income taxes                    |       | $                | 49,187     |           | $          | 611,613          |       | $ | 660,800 |   |
| Loss from continuing operations              |       | (2,427,951       | )          | 611,613        |       | (1,816,338       | )          |
| Net Loss                                     |       | (2,466,447       | )          | 611,613        |       | (1,854,834       | )          |
| Comprehensive Loss                           |       | (1,643,081       | )          | 611,613        |       | (1,031,468       | )          |
| Net Loss per Common Share-Basic and Diluted: |       |             |       |           |       |             |       |
| Continuing operations                        |       | (0.07            | )          | 0.01           |       | (0.06            | )          |
| Net loss per common share                    |       | (0.07            | )          | 0.01           |       | (0.06            | )          |
|                                              |            |                  |            |                |            |                  |            |  |  |  |

 

As previously disclosed in our Current Report on Form 8-Kfiled November 12, 2009, after discussions between management and theCompany’s independent registered public accounting firm, the Company concludedthat the previously issued unaudited condensed consolidated financialstatements included in the Original Filing should no longer be relied uponbecause of an error in recording and reporting the deferred tax asset andrelated income tax benefits for the quarter ended June 2008 in the OriginalFiling. The effects of the restatement on the Company’s unaudited condensedconsolidated financial statements as of and for the period presented herein aredescribed in Note 11 to the unaudited condensed consolidated financialstatements included in this Form 10-Q/A and are also reflected in Items 2of Part I of this Form 10-Q/A.

 

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**WASTE2ENERGYHOLDINGS, INC.**

 

**TABLE OF CONTENTS**

 
| ** **                                                                                               | **Page** |
|----------------------------------------------------------------------------------------------------------|----------|
| **PART I -  FINANCIAL INFORMATION**                                                                 |     |
|                                                                                                     |     |
| Item 1. Financial Statements                                                                             | 3        |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations | 28       |
| Item 3. Quantitative and Qualitative Disclosures About  Market Risk                                      | 31       |
| Item 4T. Controls and Procedures                                                                         | 31       |
| **PART II -  OTHER INFORMATION**                                                                    |     |
|                                                                                                     |     |
| Item 1. Legal Proceedings                                                                                | 32       |
| Item 1A. Risk Factors                                                                                    |     |
| Item 2. Unregistered Sales of Equity Securities and  Use of Proceeds                                     | 33       |
| Item 3. Defaults Upon Senior Securities                                                                  | 34       |
| Item 4. Submission of Matters to a Vote of Security  Holders                                             | 34       |
| Item 5. Other Information                                                                                | 34       |
| Item 6. Exhibits                                                                                         | 34       |
| **SIGNATURES**                                                                                           | 35       |

 

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**PART I Financial Information**

 

**ITEM 1 CONSOLIDATED FINANCIALSTATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS.**

 

**WASTE2ENERGY HOLDINGS, INC. ANDSUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**JUNE 30, 2009 AND MARCH 31, 2009**

 
| ** **                                                                                                                                                                        | ** ** | **June 30,2009********(Unaudited)** | ** ** | **March 31,  2009** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|--------------------------|------------|
| ASSETS                                                                                                                                                                            | ** ** | ** **                               | ** ** | ** **               | ** ** |
| CURRENT ASSETS :                                                                                                                                                                  | ** ** | ** **                               | ** ** | ** **               | ** ** |
| Cash                                                                                                                                                                              |       | $                                        | 54,543     |                     | $          | 27,360 |   |
| Contracts receivable                                                                                                                                                              |       | 12,000                                   |       | 53,250                   |       |
| Unbilled amounts due on uncompleted contracts                                                                                                                                     |       | 259,740                                  |       | 118,123                  |       |
| Deferred job costs                                                                                                                                                                |       | 137,018                                  |       | —                   |       |
| Other current assets                                                                                                                                                              |       | 172,683                                  |       | 167,435                  |       |
| Current assets from discontinued operations                                                                                                                                       |       | 1,090                                    |       | 1,413                    |       |
| Total current assets                                                                                                                                                              |       | 637,074                                  |       | 367,581                  |       |
| Equipment, net                                                                                                                                                                    |       | 19,962                                   |       | —                   |       |
| Investment in Enerwaste Europe, Ltd.                                                                                                                                              |       | —                                   |       | —                   |       |
| Security deposits                                                                                                                                                                 |       | 3,372                                    |       | 2,971                    |       |
| TOTAL ASSETS                                                                                                                                                                      |       | $                                        | 660,408    |                     | $          | 370,552 |   |
|                                                                                                                                                                              |       |                                     |       |                     |       |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                                                        |       |                                     |       |                     |       |
| CURRENT LIABILITIES :                                                                                                                                                             |       |                                     |       |                     |       |   |   |
| Notes payable                                                                                                                                                                     |       | $                                        | 1,515,468  |                     | $          | 2,279,828 |   |
| Accounts payable                                                                                                                                                                  |       | 973,509                                  |       | 659,155                  |       |
| Accrued expenses                                                                                                                                                                  |       | 668,055                                  |       | 2,948,931                |       |
| Deferred revenue                                                                                                                                                                  |       | 41,250                                   |       | 41,250                   |       |
| VAT payable                                                                                                                                                                       |       | 14,617                                   |       | 8,354                    |       |
| Due to related parties                                                                                                                                                            |       | 442,485                                  |       | 388,368                  |       |
| Other current liabilities                                                                                                                                                         |       | —                                   |       | 53,005                   |       |
| Current liabilities from discontinued operations                                                                                                                                  |       | 286,972                                  |       | 297,271                  |       |
|                                                                                                                                                                              |       |                                     |       |                     |       |
| Total current liabilities                                                                                                                                                         |       | 3,942,356                                |       | 6,676,163                |       |
|                                                                                                                                                                              |       |                                     |       |                     |       |
| TOTAL LIABILITIES                                                                                                                                                                 |       | 3,942,356                                |       | 6,676,163                |       |
|                                                                                                                                                                              |       |                                     |       |                     |       |
| COMMITMENTS AND CONTINGENCIES (Note 9)                                                                                                                                            |       |                                     |       |                     |       |
|                                                                                                                                                                              |       |                                     |       |                     |       |
| STOCKHOLDERS’ DEFICIT :                                                                                                                                                      |       |                                     |       |                     |       |
| Common stock, $.0001 par value, 80,000,000 shares  authorized, 49,451,520 and41,152,100 shares issued and outstanding at  June 30, 2009 and March 31,2009, respectively |       | 4,945                                    |       | 4,115                    |       |
| Additional paid in capital                                                                                                                                                        |       | 16,970,932                               |       | 12,514,724               |       |
| Foreign currency translation adjustment                                                                                                                                           |       | (118,370                                 | )          | (92,101                  | )          |
| Accumulated deficit                                                                                                                                                               |       | (20,139,455                              | )          | (18,732,349              | )          |
| TOTAL STOCKHOLDERS’ DEFICIT                                                                                                                                                  |       | (3,281,948                               | )          | (6,305,611               | )          |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                                                  |       | $                                        | 660,408    |                     | $          | 370,552 |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

 

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**WASTE2ENERGY HOLDINGS, INC. ANDSUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENT OFOPERATIONS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

**(Unaudited)**

 
| ** **                                                        | ** ** | **2009**   | ** ** | **2008********(Restated********Notes 1 &  11)** | ** ** |
|-------------------------------------------------------------------|------------|------------|------------|----------------------------------------------------------|------------|
| Contract revenues                                                 |       | $          | 770,388    |                                                     | $          | — |   |
| Contract costs                                                    |       | (770,550   | )          | —                                                   |       |
| GROSS LOSS                                                        |       | (162       | )          | —                                                   |       |
| Operating expenses                                                |       | 1,859,146  |       | 1,972,637                                                |       |
| OPERATING LOSS                                                    |       | (1,859,308 | )          | (1,972,637                                               | )          |
| OTHER INCOME (EXPENSE):                                           |       |       |       |                                                     |       |
| Interest expense                                                  |       | (426,395   | )          | —                                                   |       |
| Interest income                                                   |       | 132        |       | 2,256                                                    |       |
| Loss on deemed extinguishment of debt                             |       | (669,082   | )          | —                                                   |       |
| Foreign currency exchange gains                                   |       | 36,576     |       | —                                                   |       |
| Loss on equity method investment in EnerWaste  Europe, Ltd.       |       | —     |       | (506,757                                                 | )          |
| Gain on legal settlement                                          |       | 1,510,995  |       | —                                                   |       |
| TOTAL OTHER INCOME (EXPENSE), NET                                 |       | 452,226    |       | (504,501                                                 | )          |
| Loss from continuing operations before benefit from  income taxes |       | (1,407,082 | )          | (2,477,138                                               | )          |
| Benefit from income taxes                                         |       | —     |       | 660,800                                                  |       |
| LOSS FROM CONTINUING OPERATIONS                                   |       | (1,407,082 | )          | (1,816,338                                               | )          |
| LOSS FROM DISCONTINUED OPERATIONS                                 |       | (24        | )          | (38,496                                                  | )          |
| NET LOSS                                                          |       | (1,407,106 | )          | (1,854,834                                               | )          |
|                                                              |       |       |       |                                                     |       |
| Foreign currency translation adjustment                           |       | (118,370   | )          | 823,366                                                  |       |
|                                                              |       |       |       |                                                     |       |
| COMPREHENSIVE LOSS                                                |       | $          | (1,525,476 | )                                                        | $          | (1,031,468 | ) |
| NET LOSS PER COMMON SHARE - BASIC AND DILUTED                     |       |       |       |                                                     |       |
| Continuing operations                                             |       | $          | (0.03      | )                                                        | $          | (0.06 | ) |
| Discontinued operations                                           |       | —     |       | —                                                   |       |
| Net loss per common share                                         |       | $          | (0.03      | )                                                        | $          | (0.06 | ) |
| WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND  DILUTED          |       | 46,754,294 |       | 33,010,543                                               |       |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

 

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**CONDENSED CONSOLIDATED CASH FLOWS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

**(Unaudited)**

 
| ** **                                                                                          | ** ** | **2009**   | ** ** | **2008********(Restated********Notes 1 & 11)** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|------------|------------|---------------------------------------------------------|------------|
| Operating activities:                                                                               |       |       |       |                                                    |       |
| Loss from continuing operations                                                                     |       | $          | (1,407,082 | )                                                       | $          | (1,816,338 | ) |
| Adjustments to reconcile loss from continuing  operations to net cash used in operating activities: |       |       |       |                                                    |       |
| Foreign currency exchange gains                                                                     |       | (36,576    | )          | —                                                  |       |
| Equity in loss on investment in EnerWaste Europe,  Ltd                                              |       | —     |       | 506,757                                                 |       |
| Amortization of discount on notes payable                                                           |       | 120,951    |       | —                                                  |       |
| Amortization of deferred financing costs                                                            |       | 149,069    |       | —                                                  |       |
| Loss on deemed extinguishment of debt                                                               |       | 669,082    |       | —                                                  |       |
| Warrants issued for consulting services                                                             |       | 57,104     |       | 440,686                                                 |       |
| Warrants issued for compensation                                                                    |       | —     |       | 995,006                                                 |       |
| Common stock issued for consulting services                                                         |       | 585,000    |       | 150,000                                                 |       |
| Deferred taxes                                                                                      |       | —     |       | (660,800                                                | )          |
| Gain on legal settlement                                                                            |       | (1,510,995 | )          | —                                                  |       |
| Changes in assets and liabilities:                                                                  |       |       |       |                                                    |       |
| Due from escrow agent                                                                               |       | —     |       | 373,582                                                 |       |
| Contracts Receivable                                                                                |       | 64,472     |       | —                                                  |       |
| Cost and estimated earnings in excess of billings on  uncompleted contracts                         |       | (154,051   | )          | —                                                  |       |
| Deferred job costs                                                                                  |       | (137,018   | )          | —                                                  |       |
| Other assets                                                                                        |       | (133,796   | )          | 500                                                     |       |
| Accounts payable                                                                                    |       | 534,018    |       | —                                                  |       |
| Accrued expenses                                                                                    |       | (60,520    | )          | (9,929                                                  | )          |
| VAT payable                                                                                         |       | 194        |       | —                                                  |       |
| Due to related parties                                                                              |       | 22,470     |       | (126,754                                                | )          |
| Net cash used in operating activities                                                               |       | (1,237,678 | )          | (147,290                                                | )          |
| Investing activities:                                                                               |       |       |       |                                                    |       |
| Purchase of equipment                                                                               |       | (19,962    | )          | —                                                  |       |
| Cash acquired in acquisition                                                                        |       | —     |       | 718                                                     |       |
| Net cash (used in) provided by investing activities                                                 |       | (19,962    | )          | 718                                                     |       |
|                                                                                                     |            |            |            |                                                         |            |  |  |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

 

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**CONDENSED CONSOLIDATED CASH FLOWS(CONTINUED)**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

**(Unaudited)**

 
| ** **                                                             | ** ** | **2009**  | ** ** | **2008********(Restated  Notes 1 &  11)** | ** ** |
|------------------------------------------------------------------------|------------|-----------|------------|----------------------------------------------------|------------|
| Financing activities:                                                  |       |      |       |                                               |       |
| Proceeds from notes payable, net of financing costs                    |       | 1,104,000 |       | —                                             |       |
| Principal payments on note payable                                     |       | (500,000  | )          | (64,492                                            | )          |
| Consideration for cancellation and return of common  stock             |       | (20,000   | )          | —                                             |       |
| Issuance of common stock in private placement                          |       | —    |       | 56,364                                             |       |
| Fees in connection with acquisition of public shell                    |       | (210,000  | )          | —                                             |       |
| Issuance of common stock in private placement, net  of financing costs |       | 825,610   |       | —                                             |       |
| Net cash provided by (used in) financing activities                    |       | 1,199,610 |       | (8,128                                             | )          |
| Discontinued operations:                                               |       |      |       | —                                             |       |
| Operating cash flows                                                   |       | (10,000   | )          | 48,494                                             |       |
| Net cash (used in) provided by discontinued  operations                |       | (10,000   | )          | 48,494                                             |       |
| Effect of exchange rate changes on cash                                |       | 95,213    |       | (215,704                                           | )          |
| Net increase (decrease) in cash                                        |       | 27,183    |       | (321,910                                           | )          |
| Cash — beginning                                                  |       | 27,360    |       | 723,655                                            |       |
| CASH — ENDING                                                     |       | $         | 54,543     |                                               | $          | 401,745 |   |
|                                                                        |            |           |            |                                                    |            |  |  |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE 1.** | **THE COMPANY** |
|-------------|-----------------|

 

 The terms “we,” “ours,” “us,” and “Company”refer to Waste2Energy Holdings, Inc. and its subsidiaries.

 

**Organization**

 

We are a “cleantech” acquisition and technologycompany. We target waste to energy technologies that generate “green power”converting waste streams, traditionally destined for landfill, into clean,renewable energy.  The Company seeks small footprint, simple, costeffective technologies that are scalable, modular, environmentally friendly androbust enough to operate in harsh and remote environments.  TheCompany is forging strategic alliances for the regional fabrication andmanufacturing of its BOS TM systems and the development of sales and distributionchannels.

 

On May 6, 2009, the Company entered into anAgreement and Plan of Merger (the “Merger Agreement”) with Waste2EnergyAcquisition Co., a Delaware corporation and wholly owned subsidiary of theCompany (the “Subsidiary”) and Wate2Energy, Inc. (“W2E”).   OnMay 28 2009, the Company, Subsidiary and W2E entered into Amendment No. 1to the Merger Agreement (“Amendment No. 1.”).  Pursuant toAmendment No. 1, the definition of Acquisition Shares was revised tomean 45,981,770 shares of W2E and Section 5.19(e) of the MergerAgreement was revised to note that the issued and outstanding share capital ofW2E consists of 45,981,770  issued and outstandingshares.  (The Merger Agreement as amended by Amendment No. 1 ishereinafter referred to as the “Merger Agreement”). Pursuant to the MergerAgreement, on May 28, 2009 (the “Closing”), the Subsidiary merged with andinto W2E resulting in W2E’s becoming a wholly-owned subsidiary of the Company(the “Merger”). The Merger was accounted for as a reverse merger andrecapitalization. Pursuant to the Merger Agreement, the Company issued45,981,770 shares of common stock (the “Common Stock”) of the Company (the “AcquisitionShares”) to the shareholders of W2E, representing approximately 96% of theissued and outstanding Common Stock following the closing of the Merger and thesale of Units (as defined below) concurrently with the Closing, andwarrants to purchase 18,760,00 shares of Common Stock (the “AcquisitionWarrants”) to the warrant holders of W2E at exercise prices ranging from $.10to $.75. Pursuant to the Merger Agreement, the outstanding shares of commonstock and warrants to purchase shares of common stock of W2E werecancelled.  Subsequent to the closing of the Merger, the Company willcontinue W2E’s operations. In July 2009, the name was changed toWaste2Energy Holdings, Inc.   On the Closing, the Company soldin a private placement 254,500 units (the “Units”) to investors (the “Investors”),each Unit consisting of (i) three (3) shares of Common Stock and (ii) athree-year warrant (the “Warrants”) to purchase three (3) additionalshares of Common Stock at an exercise price of $1.25 per share, at a purchaseprice of $2.00 per Unit and, as a result, the Company received gross proceedsof approximately $509,000 and issued the Investors an aggregate of 763,500shares of Common Stock and Warrants to purchase 763,500 shares of Common Stock(the “Warrant Shares”). The Warrants may not be exercised to the extent suchexercise would cause the holder of the Warrant, together with its affiliates,to beneficially own a number of shares of Common Stock which would exceed 4.99%of the Company’s then outstanding shares of Common Stock following suchexercise.

 

The private placement was terminated in September 2009and, including the units sold in May 2009, the Company has raisedapproximately $1,200,465 from the offering. In July and August 2009,the Company issued $2,500,000 of Debentures due 90 days from the date ofissuance. This debt bears interest at 10% and was used to refinance existingdebt and to fund operating expenses.

 

Management believes the Company’s ability to continueoperations is dependent on its ability to raise capital.  If theCompany is unable to raise additional capital or encounters unforeseencircumstances, it may be required to take additional measures to conserveliquidity, which could include, but not necessarily be limited to, curtailingits operations, suspending the pursuit of its business plan, and controllingoverhead expenses.  The Company cannot provide any assurance that itwill raise additional capital as necessary nor can it provide any assurancethat new financing will be available to it on acceptable terms, if at all.

 

***Basis of Presentation***

 

The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with United Statesgenerally accepted accounting principles (“GAAP”) and with the instructions to Form 10Qand Article 10 of Regulation S-X.  Accordingly, they do notinclude all information and footnotes required by GAAP for a complete set offinancial statements.  In the opinion of management, all adjustments,(including normal recurring accruals) considered necessary for a fairpresentation have been included in the financialstatements.  Operating results for the interim period are notnecessarily indicative of the results that may be expected for the fiscal yearended March 31, 2010.  This form 10-Q should be read inconjunction with the Audited Consolidated Financial Statements and accompanyingNotes to the Consolidated Financial Statements in our Form 8K-A for theyear ended March 31, 2009 which was October 1, 2009.

 

All significant intercompany accounts and transactionshave been eliminated in consolidation.  Significant events whichoccurred subsequent to June 30, 2009, and prior to our filing date, havebeen disclosed in Note 11, Subsequent Events.

 

***Restatement of Financial Statements***

 

As referred to in Note 11 to the condensedconsolidated financial statements, the Company has restated these condensedconsolidated financial statements for the three months ended June 30, 2008for a correction of an error.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE 2.** | **LIQUIDITY, FINANCIAL CONDITION AND  MANAGEMENT’S PLANS** |
|-------------|-----------------------------------------------------------------|

 

The Company incurred a net loss from continuingoperations of $1,407,082 and used $1,237,678 of cash in continuing operationsfor the three months ended June 30, 2009.  At June 30,2009, the Company had a working capital deficit of $3,305,282 ** ** and a** ** $20,139,455 accumulated deficit. These conditions raisesubstantial doubt about the Company’s ability to continue as a going concern.These unaudited interim consolidated financial statements do not include anyadjustments relating to the recovery of assets or the classification ofliabilities should the Company be unable to continue as a going concern.

 

On May 28, 2009, simultaneous with the Merger,the Company also initiated a private placement offering (“May PrivatePlacement”) of up to 4,000,000 units (“Units’). Each Unit consists of (i) threeshares of common stock, par value $0.001 per share and (ii) a three-yearwarrant to purchase three additional shares of common stock at an exerciseprice of $1.25 per share. This offering was closed in September 2009 andthe Company raised approximately $1,200,465 of capital with this transaction.The Company cannot provide any assurance that it will successfully raise anyadditional capital.

 

Management believes that the funds the Company hasraised, and the funds it expects to generate from operations, and its abilityto raise additional capital, may enable it to sustain the business through June 30,2010.  If the Company is unable to raise additional capital orencounters unforeseen circumstances, it may be required to take additionalmeasures to conserve liquidity, which could include, but not necessarily belimited to, curtailing its operations, suspending the pursuit of its businessplan, and controlling overhead expenses.  The Company cannot provideany assurance that it will raise additional capital as necessary nor can itprovide any assurance that new financing will be available to it on acceptableterms, if at all.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE 3.** | **SUMMARY OF SIGNIFICANT ACCOUNTING  POLICIES** |
|-------------|-------------------------------------------------|

 

***Use of Estimates***

 

The preparation of consolidated financial statementsin conformity with accounting principles generally accepted in the UnitedStates of America requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and the disclosure ofcontingent assets and liabilities at the date of the consolidated financialstatements and the reported amounts of income and expenses during the reportedperiod.  The Company evaluates all of its estimates on an on-goingbasis. Significant estimates and assumptions include the valuation of acquiredassets including the establishment of a deferred tax liability, the usefullives of acquired intangible assets and the valuation of equityinstruments.  In addition, the Company’s business involves makingsignificant estimates and assumptions in the normal course of business relatingto its contracts and the long-term duration of a contract cycle. The mostsignificant estimates with regard to its contracts relate to the estimating oftotal forecasted construction contract revenues, costs and profits inaccordance with accounting for long-term contracts, as well as estimating theallowance for doubtful accounts with respect to contracts receivable.

 

Making estimates requires management to exercisesignificant judgment. It is at least reasonably possible that the estimate ofthe effect on the financial statements of a condition, situation or set ofcircumstances that existed at the date of the consolidated financialstatements, which management considered in formulating its estimate couldchange in the near term due to one or more future confirming events.Accordingly, actual results could differ in the near term from these estimates,and such differences could be material.

 

***Concentrations of Credit Risk***

 

Financial instruments that potentially expose theCompany to credit risk include cash. At times, our cash may be in uninsured orin deposit accounts that exceed the Federal Deposit Insurance Corporation (“FDIC”)insurance limit.

 

The Company placesits cash with various financial institutions and has not experienced any losseson these accounts.

 

For the three months ended June 30, 2009, substantiallyall the Company’s revenues were derived from one contract.  For thethree months ended June 30, 2008, the Company did not have anyrevenues.  Further, for the three months ended June 30, 2008,and included in the Company’s loss on investment in Enerwaste Europe, Ltd. (“EWE”),  substantiallyall of EWE’s revenue was derived from one contract.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE 3.** | **SUMMARY OF SIGNIFICANT ACCOUNTING  POLICIES (CONTINUED)** |
|-------------|-------------------------------------------------------------|

 

***Deferred Financing Costs***

 

Costs relating to obtaining the debt portion ofprivate placement offerings and notes are capitalized and amortized over theterm of the related debt using the straight-line method which approximates theinterest method.  When a loan is paid in full, any unamortizedfinancing costs are removed from the related accounts and charged tooperations.  During the three month ended June 30, 2009, theCompany incurred $45,000 in financing costs paid to third parties, inconnection with the extension of outstanding loans and $143,520 in placementfees incurred in connection with the issuance of Notes payable. Accumulatedamortization at June 30, 2009 was $24,601. Amortization of deferredfinancing costs charged to operations was $149,069 for the three months ended June 30,2009.

 

***Debt Extinguishment Accounting***

 

The Company accounted for amendments to certain debtinstruments to extended maturity dates, in accordance with the guidelinesenumerated in EITF Issue No. 96-19 “Debtor’s Accounting for a Modificationor Exchange of Debt Instruments.” EITF 96-19 provides that a substantialmodification of terms in an existing debt instrument should be accounted forlike, and reported in the same manner as, an extinguishment of debt. EITF 96-19further provides that the modification of a debt instrument by a debtor and acreditor in a non-troubled debt situation is deemed to have been accomplishedwith debt instruments that are substantially different if the present value ofthe cash flows under the terms of the new debt instrument is at least tenpercent different from the present value of the remaining cash flows under theterms of the original instrument at the date of the modification.

 

The Company evaluated its issuance of the noteextensions and the related issuance of equity instruments to determinewhether the modification for the change in the maturity date and the relatedissuance of equity instruments resulted in the issuance of a substantiallydifferent debt instrument. The Company determined after giving effect to thechanges in the extended due dates and the consideration paid to the debtholders, that the Company had issued substantially different debt instruments,which resulted in a constructive extinguishment of the original debtinstrument. Accordingly, the Company recorded a loss on the extinguishment ofdebt in the amount of $669,082 which represented the value of additional equityinstruments given to debt holders to extend the maturity.  The debtinstrument charge is included in the accompanying statement of operations forthe three months ended June 30, 2009 (See Note 8).

 

***Net Loss Per Share***

 

The Company computes net loss per share in accordancewith SFAS No. 128, “Earnings Per Share.” Under SFAS No. 128, basicnet loss per share is computed by dividing net loss per share available tocommon stockholders by the weighted average number of shares outstanding forthe period and excludes the effects of any potentially dilutive securities.Diluted earnings per share, if presented, would include the dilution that wouldoccur upon the exercise or conversion of all potentially dilutive securitiesinto common stock using the “treasury stock” and/or “if converted” methods asapplicable. The computation of basic loss per share for the three months ended June 30,2009 and 2008 excludes potentially dilutive securities because their inclusionwould be anti-dilutive.

 

Warrants to purchase 18,760,000 and 8,400,000 sharesof common stock, respectively, were excluded from the computation of basic anddiluted net loss per share.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE 3.** | **SUMMARY OF SIGNIFICANT ACCOUNTING  POLICIES (CONTINUED)** |
|-------------|-------------------------------------------------------------|

 

In June 2008, the FASB issued FSP EITF 03-6-1, “DeterminingWhether Instruments Granted in Share Based Payment Transactions AreParticipating Securities.” This FSP addresses whether instruments granted inshare based payment transactions are participating securities prior to vestingand, therefore, need to be included in the earnings allocation in computingearnings per share (EPS) under the two class method described in paragraphs 60and 61 of SFAS No. 128. FSP EITF 03-6-1 is effective for financialstatements issued for fiscal years beginning after December 15, 2008, andinterim periods within those years. The adoption of FSP EITF 03-6-1 did nothave a material impact on the Company’s consolidated financial position,results of operations or cash flows.

 

***Non-Controlling Interest***

 

In December 2007, the FASB issued SFAS No. 160,“Non-controlling Interests in Consolidated Financial Statements” (“SFAS 160”).SFAS 160 amends ARB 51 to establish accounting and reporting standards for thenon-controlling interest in a subsidiary and for the deconsolidation of asubsidiary. SFAS 160 is effective for fiscal years and interim periods withinthose fiscal years beginning on or after December 15, 2008. Earlieradoption is prohibited. SFAS 160 shall be applied prospectively as of thebeginning of the fiscal year in which this Statement is initially applied. Theadoption of SFAS 160 did not have a material effect on the Company’sconsolidated financial position, results of operations or cash flows.

 

***Financial Instruments***

 

In June 2008, the FASB issued EITF Issue No. 07-5,“Determining Whether an Instrument (or an Embedded Feature) Is Indexed to anEntity’s Own Stock” (“EITF 07-5”). EITF 07-5 provides that an entity should usea two step approach to evaluate whether an equity-linked financial instrument,or embedded feature, is indexed to its own stock, including evaluating theinstrument’s contingent exercise and settlement provisions. It also clarifieson the impact of foreign currency denominated strike prices and market-basedemployee stock option valuations. EITF 07-5 is effective for fiscal yearsbeginning after December 15, 2008 and interim periods within those fiscalyears.  The adoption of EITF 07-5 did not have a material effect onthe Company’s consolidated financial position, results of operations or cashflows.

 

***Recent Accounting Pronouncements***

 

In May 2009, the FASB issued SFAS No. 165, “SubsequentEvents” (“SFAS 165”), which establishes general standards of accounting for anddisclosure of events that occur after the balance sheet date but beforefinancial statements are issued or are available to be issued. The provisionsof SFAS 165 are effective for interim and annual reporting periods ending afterJune 15, 2009. We adopted SFAS 165 during the first quarter of fiscal 2009and as the pronouncement only requires additional disclosures, the adoption didnot have an impact on our consolidated financial position, results ofoperations or cash flows. We have evaluated subsequent events through October 1,2009, the date that these financial statements were issued.

 

Accounting standards that have been issued or proposedby the FASB or other standards-setting bodies that do not require adoptionuntil a future date are not expected to have a material impact on our unauditedinterim consolidated financial statements upon adoption.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE 4.** | **CONTRACTS IN PROGRESS** |
|-------------|---------------------------|

 

The following is a summary of the contracts inprogress at June 30, 2009:

 
| Cost incurred on uncompleted contract |   | $          | 4,237,457 |   |
|---------------------------------------|--------|------------|-----------|--------|
| Estimated loss on contract            |   | (399,263   | )         |
|                                  |   | 3,838,194  |      |
| Less: billings to date                |   | (3,578,454 | )         |
|                                  |   | $          | 259,740   |   |

 

Estimated future losses on contracts in progress whichare included in accrued expenses in the accompanying consolidated balance sheetamounted to $42,173 at June 30, 2009.  The one contract inprogress has incurred cost overruns and other costs that the customer assertsshould be part of the contract.  The Company and its customer intendto negotiate the settlement of these costs upon final completion of thecontract.  Management cannot at this time estimate the ultimateoutcome of the additional chargebacks by the customer or additional billings tobe charged to the customer at June 30, 2009. (See Note 9)

 

Included in the following balance sheet captions:

 
| Unbilled amounts due on uncompleted contracts |   | $ | 259,740 |
|-----------------------------------------------|--------|---|---------|

 
| **NOTE  5.** | **ACQUISITION  OF SUBSIDIARY AND DISCONTINUED OPERATIONS** |
|--------------|------------------------------------------------------------|

 

On July 10, 2007, the Company entered into astock purchase agreement pursuant to which the Company agreed to acquire 95% ofthe issued and outstanding shares of common stock of EWI.

 

Effective on the date of acquisition, the Companydiscontinued the operational segment of EWI and ceased all operations of EWI.The Company has utilized outsourced manufacturing and services to complete anycontracts secured prior to the date of acquisition.  In addition, theCompany has discontinued all of EWI’s product lines and terminated all vendorrelationships. Accordingly, the results of activities for EWI are classified asdiscontinued operations in the accompanying consolidated financial statements.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE  5.** | **ACQUISITION  OF SUBSIDIARY AND DISCONTINUED OPERATIONS (CONTINUED)** |
|--------------|-----------------------------------------------------------------------------|

 

A summary of EWI’s assets and liabilities fromdiscontinued operations as of June 30, 2009 and March 31, 2009, andits results of discontinued operations for the three months ended June 30,2009 and 2008 are as follows:

 
| ** **                                       | ** ** | **June 30, 2009** | ** ** | **March 31,  2009** | ** ** |
|--------------------------------------------------|------------|------------------------|------------|--------------------------|------------|
| Assets from discontinued operations              |       |                   |       |                     |       |
| Cash                                             |       | $                      | 1,090      |                     | $          | 1,413 |   |
| Other receivables                                |       | —                 |       | —                   |       |
| Prepaid expenses and other current assets        |       | —                 |       | —                   |       |
| Current assets from discontinued operations      |       | 1,090                  |       | 1,413                    |       |
|                                             |       |                   |       |                     |       |
| Liabilities from discontinued operations         |       |                   |       |                     |       |
| Accounts payable and accrued expenses            |       | 160,420                |       | 170,719                  |       |
| Income taxes payable                             |       | 126,552                |       | 126,552                  |       |
| Customer deposits                                |       | —                 |       | —                   |       |
| Current liabilities from discontinued operations |       | 286,972                |       | 297,271                  |       |
|                                                  |            |                        |            |                          |            |  |  |

 
|                               |   | **June 30, 2009** | ** ** | **June 30, 2008** |   |
|------------------------------------|--------|------------------------|------------|------------------------|--------|
| Results of discontinued operations |   |                   |       |                   |   |
| Net revenue                        |   | $                      | —     |                   | $      | 43,766 |   |
| Cost of revenue                    |   | —                 |       | (44,265                | )      |
| Operating expenses                 |   | (25                    | )          | (59,156                | )      |
| Interest income, net               |   | 1                      |       | 343                    |   |
| Other income                       |   | —                 |       | 985                    |   |
| Benefit from income taxes          |   | —                 |       | 19,831                 |   |
| Loss from discontinued operations  |   | $                      | (24        | )                      | $      | (38,496 | ) |

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE 6.** | **NOTES PAYABLE** |
|-------------|-------------------|

 

A summary of the notes payable as of June 30,2009 and March 31, 2009 is as follows:

 
| ** **                                        | ** ** | **June 30, 2009** | ** ** | **March 31,  2009** | ** ** |
|---------------------------------------------------|------------|------------------------|------------|--------------------------|------------|
| Promissory Notes                                  |       | $                      | 390,000    |                     | $          | 1,508,898 |   |
| Promissory Note - Private Placement Offering      |       | 804,000                |       | 500,000                  |       |
| Convertible Notes                                 |       | 350,000                |       | 100,000                  |       |
| Convertible Notes - Related Parties          |       | 50,000                 |       | —                   |       |
| Bridge Loans                                      |       | 200,000                |       | 200,000                  |       |
| Bridge Loans - Related Parties                    |       | 25,000                 |       | 25,000                   |       |
| Subtotal                                          |       | 1,819,000              |       | 2,333,898                |       |
| Unamortized Discounts                             |       | (303,532               | )          | (54,070                  | )          |
| Total Notes Payable, net of unamortized discounts |       | $                      | 1,515,468  |                     | $          | 2,279,828 |   |

 

***Promissory Notes***

 

On November 7, 2007, the Company issued apromissory note in connection with the acquisition of EWI in the principalamount of $2,250,000. The promissory note bears interest at 8% per annum andwas due to mature on May 8, 2008. The promissory note is secured by theCompany’s 95% interest in EWI.  On April 21, 2009, the Companyentered into a Release and Settlement Agreement (the “Settlement Agreement”)with the note holder. The terms of the Settlement Agreement state that within (i) tendays of the Company raising the first $2,000,000 of capital or (ii) 90days from the date of the Settlement Agreement, whichever occurs first, theCompany will pay $125,000 in full settlement of any and all amounts due underthe July 10, 2007 Stock Purchase Agreement, as amended, the September 7,2007 consulting agreement and the November 7, 2007 promissory note, asamended. In addition, the Company and the note holder released each other fromany and all claims, as defined in the Settlement Agreement.

 

At June 30, 2009 and March 31, 2009, theprincipal balances of the promissory note amounted to $125,000 and $1,508,898,respectively. The Company has accrued unpaid interest of $0 and $127,097,respectively, which is included in accrued expenses in the accompanyingcondensed consolidated balance sheets as of June 30, 2009 and March 31,2009.  Interest expense amounted to $30,095 and $30,548 for threemonths ended June 30, 2009 and 2008, respectively.  As a resultof the Settlement Agreement the loan balance and accrued interest was reducedby $1,383,898 and $127,097, respectively.  The note was repaid on July 17,2009.

 

In April 2009, the Company entered into apromissory note for $265,000 with a vendor for previously provided servicesthat had been included in accounts payable and accrued expenses.  Thenote was due in ninety days bearing interest at 10% perannum.   In September 2009 the due date of the note wasextended through an amendment. The due date of the note is now been amended andrepayment is now expected to be repaid using proceeds from future capitalraises and/or operations.

 

***Promissory Note — Private Placement Offering***

 

On June 25, 2009, the Company issued notes in theaggregate amount of $804,000.  The notes bear interest at a rate of10% per annum. Principal, plus all accrued and unpaid interest thereon, is dueon September 25, 2009. The Company has obtained extension agreements onthe notes which now mature on October 2, 2009.  The notes areautomatically due and payable, including accrued interest thereon, upon theinitial closing of an equity financing of the Company in the minimum amount of$5,000,000. The Company issued 804,000 shares of its common stock to thepayees.  The Company allocated a portion of the proceeds from thenote to the common stock based on the relative fair value of the notes andcommon stock.  The relative fair value of the common stock, whichamounted to $249,517, was recorded as a discount to the notes. This amount isbeing accreted to interest expense over the contracted term of thenotes.  On September 30, 2009, the Company repaid in full$500,000 of the notes using proceeds from a private debt placement (Note 11).

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE 6.** | **NOTES PAYABLE (Continued)** |
|-------------|-------------------------------|

 

During the three months ended June 30, 2009,accretion of the discount amounted to $13,862, which was recorded as acomponent of interest expense in the accompanying condensed consolidatedinterim statements of operations.  As of June 30, 2009, thecarrying value of the notes was $568,345.  Contractual interestexpense under these notes amounted to $1,101 which was recorded as a componentof interest expense in the accompanying unaudited condensed consolidatedstatements of operations and accrued interest payable included in accruedexpenses in the accompanying unaudited condensed consolidated balance sheets asof June 30, 2009.

 

In connection with issuance, the Company paid aplacement agent $80,400 (10% of the amount of the notes issued) and a nonaccountable expense allowance equal to $24,120 (3% of the amount of the notesissued).  These costs have been recorded as deferred financing costswhich are being amortized over the term of the notes.

 

***Bridge Loans***

 

The Company issued $375,000 of notes payable to eightindividuals, including two related parties, from September 2008 through December 2008.  Ofthis amount, $150,000 has been repaid as of June 30, 2009.

 

During September 2008, the Company issued twonotes payable in the aggregate amount of $50,000 (including a note issued to ashareholder of the Company for $25,000). The notes mature one year from thedate of issuance. Additionally, the Company issued a $100,000 note payable in September 2008which matured ninety days from the date of issuance.  The notes bearinterest at 10% per annum and require the issuance of 300,000 shares of theCompany’s common stock. The aggregate fair value of the 300,000 shares of theCompany’s common stock was $150,000, or $0.50 per share.  The Companyallocated a portion of the proceeds from the notes to the common stock based onthe relative fair value of the notes and common stock.  The relativefair value of the common stock, which amounted to $75,000, was recorded as adiscount to the notes. This amount is being accreted to interest expense overthe contracted term of the notes.

 

Upon maturity, the note for $100,000 was satisfiedthrough the issuance of 200,000 shares of the Company’s common stock.

 

During the three months ended June 30, 2009,accretion of the discount amounted to $6,311, which was recorded as a componentof interest expense in the accompanying condensed consolidated statements ofoperations.  As of June 30, 2009, the carrying value of thenotes was $45,214. Contractual interest expense under these notes amounted to$1,247 which was recorded as a component of interest expense in theaccompanying condensed consolidated statements ofoperations.  Accrued interest payable in the amount of $3,993 isincluded in accrued expenses in the accompanying condensed consolidated balancesheet as of June 30, 2009.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE  6.** | **NOTES  PAYABLE (Continued)** |
|--------------|--------------------------------|

 

On October 22, 2008, the Company issued a notepayable in the amount of $25,000 to the CEO of the Company.  The notematures one year from the date of grant and bears interest at a rate of 10% perannum. Interest expense amounted to $555 which was recorded as a component ofinterest expense in the accompanying condensed consolidated statements ofoperations.  The note was paid in full on January 11, 2009.

 

During October, November and December 2008the Company issued notes payable in the aggregate amount of $200,000 andwarrants granting the holders the right to purchase up to 460,000 shares ofcommon stock at $0.50 per share exercisable for a period of three years. Theaggregate fair value of the warrants issued, amounted to $150,617, which wasdetermined using the Black Scholes option pricing model at a range of $0.32 and$0.33 per warrant utilizing the following assumptions: expected volatilityranging from 105.15% to 110.91%, risk free interest rate ranging from 1.80% to1.41%, expected term of three years and a market price of $0.50. The notes havea three month term and bear interest at a rate of 5% per annum. The warrantsexpire three years from the date of issuance and contain a provision allowingfor a cashless exercise.

 

The Company estimated the fair value of the warrantsusing the Black Scholes option pricing model.  Accordingly, theCompany allocated a portion of the proceeds from the notes to thewarrants.  The relative fair value of the warrants, which amounted to$84,420, was recorded as a discount to the notes.  This amount isbeing accreted to interest expense over the contracted term of the notes.

 

As of June 30, 2009, the carrying value of thenotes was $175,000.  Contractual interest expense under these notesamounted to $2,182 which was recorded as a component of interest expense in theaccompanying condensed consolidated statements of operations.  Accruedinterest payable in the amount of $5,603 is included in accrued expenses in theaccompanying condensed consolidated balance sheet as of June 30, 2009.

 

The maturity dates on notes in the aggregate amount of$175,000 scheduled to mature in January and February 2009 wereextended to April and May 2009.  In connection with theextension of the maturity dates, the Company issued 175,000 shares of commonstock valued at $78,750.  The remaining note in the principal amountof $25,000 was paid in full at maturity in February 2009. The notes werefurther extended to June 2009.  In connection with the secondextension of the maturity dates, the Company issued 425,000 shares of commonstock, valued at $191,250.  These notes were repaid in full on July 31,2009.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE 6.** | **NOTES PAYABLE (CONTINUED)** |
|-------------|-------------------------------|

 

***Convertible Note***

 

On March 17, 2009, the Company issued aconvertible note in the amount of $100,000. The note bears interest at a rateof 10% per annum. Principal, plus all accrued and unpaid interest thereon, andare due on June 17, 2009. The note is automatically due and payable,including accrued interest thereon, upon the initial closing of an equityfinancing of the Company in the minimum amount of $2,000,000. The note is convertibleat the option of the payee into shares of the Company’s common stock at aconversion price of $0.50 per share. In addition, the Company issued 150,000shares of its common stock to the payee on April 1, 2009. The Companyallocated a portion of the proceeds from the note to the common stock based onthe relative fair value of the notes and common stock.  The relativefair value of the common stock, which amounted to $40,299, was recorded as adiscount to the notes. This amount is being accreted to interest expense overthe contracted term of the notes.  The Company did not make the finalpayment on the promissory note on June 17,  2009, but hasobtained an extension of the note through November 4, 2009.  On September 30,2009, the note was repaid in full.

 

During the three months ended June 30, 2009,accretion of the discount amounted to $34,166, which was recorded as acomponent of interest expense in the accompanying condensed consolidatedstatements of operations.  As of June 30, 2009, the carryingvalue of the notes was $100,000.  Contractual interest expense underthese notes amounted to $2,493 which was recorded as a component of interestexpense in the accompanying condensed consolidated statements ofoperations.  Accrued interest payable in the amount of $2,877 isincluded in accrued expenses in the accompanying condensed consolidated balancesheets as of June 30, 2009.

 

On April 6, 2009, the Company issued aconvertible note in the amount of $200,000.  The note bears interestat a rate of 10% per annum. Principal, plus all accrued and unpaid interestthereon, and are due on October 6, 2009. The note is automatically due andpayable, including accrued interest thereon, upon the initial closing of anequity financing of the Company in the minimum amount of $2,000,000. The noteis convertible at the option of the payee into shares of the Company’s commonstock at a conversion price of $0.50 per share. In addition, the Company issued300,000 shares of its common stock to the payees.  The Company allocateda portion of the proceeds from the note to the common stock based on therelative fair value of the notes and common stock.  The relative fairvalue of the common stock, which amounted to $80,597, was recorded as adiscount to the notes. This amount is being accreted to interest expense overthe contracted term of the notes.

 

During the three months ended June 30, 2009,accretion of the discount amounted to $37,436, which was recorded as acomponent of interest expense in the accompanying condensed consolidatedstatements of operations.  As of June 30, 2009, the carryingvalue of the note was $156,839.  Contractual interest expense underthe note amounted to $4,658 which was recorded as a component of interestexpense in the accompanying condensed consolidated statements of operations andaccrued interest payable included in accrued expenses in the accompanyingcondensed consolidated balance sheets as of June 30, 2009.

 

On April 17, 2009, the Company issued aconvertible note in the aggregate amount of $50,000 to its President and COO.The note bears interest at a rate of 10% per annum. Principal, plus all accruedand unpaid interest thereon, and are due on August 17, 2009. The note isautomatically due and payable, including accrued interest thereon, upon theinitial closing of an equity financing of the Company in the minimum amount of$2,000,000. The note is convertible at the option of the payee into shares ofthe Company’s common stock at a conversion price of $0.50 per share. Inaddition, the Company issued 75,000 shares of its common stock to the payee.The relative fair value of the common stock, which amounted to $20,149, wasrecorded as a discount to the notes. This amount is being accreted to interestexpense over the contracted term of the notes.  The note was paid infull in July 2009.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE 6.** | **NOTES PAYABLE (CONTINUED)** |
|-------------|-------------------------------|

 

During the three months ended June 30, 2009,accretion of the discount amounted to $12,222, which was recorded as acomponent of interest expense in the accompanying condensed consolidatedstatements of operations.  As of June 30, 2009, the carryingvalue of the note was $42,072.  Contractual interest expense underthe note amounted to $1,014 which was recorded as a component of interest expensein the accompanying condensed consolidated statements of operations and accruedinterest payable included in accrued expenses in the accompanying condensedconsolidated balance sheets as of June 30, 2009.

 

On April 17, 2009, the Company issued a convertiblenote in the aggregate amount of $50,000.  The note bears interest ata rate of 10% per annum. Principal, plus all accrued and unpaid interestthereon, is due on October 17, 2009. The notes are automatically due andpayable, including accrued interest thereon, upon the initial closing of anequity financing of the Company in the minimum amount of $2,000,000. Inaddition, the Company issued 75,000 shares of its common stock to thepayee.   The relative fair value of the common stock, whichamounted to $20,149, was recorded as a discount to the notes. This amount isbeing accreted to interest expense over the contracted term of the notes.

 

During the three months ended June 30, 2009,accretion of the discount amounted to $8,148, which was recorded as a componentof interest expense in the accompanying condensed consolidated statements ofoperations.  As of June 30, 2009, the carrying value of the notewas $37,999.  Contractual interest expense under the note amounted to$1,014 which was recorded as a component of interest expense in theaccompanying condensed consolidated statements of operations and accruedinterest payable included in accrued expenses in the accompanying condensedconsolidated balance sheets as of June 30, 2009.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30, 2009AND 2008**

 
| **NOTE 7.** | **ENERWASTE EUROPE, LTD** |
|-------------|---------------------------|

 

***Bankruptcy of Enerwaste Europe, Ltd on February 19,2009***

 

The Company’s subsidiary, EWE, had significantoperations in Iceland and historically paid a large proportion of its fixedcosts in Icelandic Krona (ISK), while its sales are generally denominated inEuros and its reporting currency is the U.S. dollar. Beginning in the thirdquarter of 2008 and particularly in the first weeks of the fourth quarter, theeffects of the global credit and financial crisis had a significant adverseeffect on the Icelandic economy. In mid October 2008, the Icelandicparliament passed emergency legislation to minimize the impact of the financialcrisis, resulting in the government takeover of the three largest Icelandicbanks, including Glitnir Bank (“Glitnir”), with whom EWE had bank accounts,lines of credit and a loan payable. The financial crisis has had seriousconsequences for the Icelandic economy; the national currency has fallensharply in value, foreign currency transactions were virtually suspended forweeks, and the market capitalization of the Icelandic stock exchange droppedsignificantly.

 

The turmoil in the Icelandic financial sector andeconomy as a whole had a significant impact on the Company and a material adverseimpact on the day to day operations of EWE.  In October 2008,the Company was made aware that Glitnir Bank (“Glitnir”) was placed intoreceivership due to serious financial difficulties and that transfers of fundsbetween the United Kingdom and Iceland were subject to significant delays anduncertainties. As a result of the significant delays caused by Glitnir, EWE’sDargavel contract with Ascot Environmental Ltd (“Ascot”) was seriouslyjeopardized, since EWE could not satisfy the terms of its sub contractualagreements with third parties. As a result of Glitnir’s inability to transferfunds into and out of Iceland, EWE was unable to continue work on the Dargavelcontract and EWE was unable to pay its manufacturing and site workers, subcontractors or material suppliers and was accumulating significant penaltiesfor non performance and delays on the contract.

 

Due to the above events, Ascot terminated EWE’sDargavel contract on November 10, 2008 and cancelled their letter ofcredit securing a line of credit for EWE.  In addition, because thecontract was canceled and EWE was unable to fulfill its duties under thecontract, EWE was unable to bill Ascot for costs they expended on the contractin excess of billings.  The resulting loss on the cancellation of thecontract for the year ended March 31, 2009, totaled $835,079.

 

On November 10, 2008, a new contract was enteredinto between Ascot and IOM to complete the project. As a result of the loss ofthis major contract, on February 19, 2009, a creditor commenced bankruptcyproceedings against EWE and it was placed in involuntary receivership(bankruptcy) and was appointed an Administrator under the supervision of thelocal courts. EWE subsequently delivered all of its books and records, money,bank accounts, bonds and any other valuable assets to the Administrator.Further, under Icelandic law, a ruling of bankruptcy has the effect that a newlegal entity emerges that is controlled by theAdministrator.  Management does not believe that the Company will bematerially impacted by the bankruptcy of EWE beyond the impact that hasoccurred to date.  Further, management does not intent to reorganizeEWE and continue its operations upon completion of the bankruptcy proceedings.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE 8.** | **STOCKHOLDER’S EQUITY** |
|-------------|-------------------------------|

 

***Common Stock***

 

On April 22, 2009, the Company issued 500,000shares of common stock in connection with consulting services rendered, valuedat $0.45 per share.  Accordingly, the Company recorded $225,000 ofconsulting expense during the three months ended June 30, 2009.

 

On April 22, 2009, the Company issued 500,000shares of common stock in connection with identifying it’s merger candidate,valued at $0.45 per share. Accordingly, the Company recorded $225,000.

 

On April 22, 2009, the Company issued 1,000,000shares of common stock in connection with the extension of the maturity datesof certain notes payable related to the December 2008 Private PlacementMemorandum, which were repaid during the three months ended June 30,2009.  The Company recorded the cost as a loss on extinguishment ofdebt under EITF 96-19, “Debtor’s Accounting for a Modification or Exchangeof Debt Instrument”.

 

In April 2009, the Company issued 425,000 sharesof common stock in connection with the extension of the maturity dates ofcertain notes payable (See Note 6).

 

On April 30, 2009, the Company issued 50,000shares of common stock in connection with consulting services rendered, valuedat $0.45 per share.  Accordingly, the Company recorded $22,500 ofconsulting expense during the three months ended June 30, 2009.

 

On May 4, 2009, the Company issued 750,000 sharesof common stock in connection with consulting services rendered, valued at$0.45 per share.  Accordingly, the Company recorded $337,500 ofconsulting expense during the three months ended June 30, 2009.

 

On April 22,. 2009, the Company issued 100,000shares of common stock, to consultants in connection with the extension of abridge loan, valued at $0.45 per share.  These costs have beenrecorded as deferred financing costs which are being amortized over the term ofthe notes.

 

During April of 2009, the Company issued1,254,000 shares of common stock as inducements to enter into promissory notes(See Note 6).

 

During April and May 2009, the Company issued200,000 shares of common stock in connection with promissory notes previouslyissued.

 

During the period from April 2009 through June 2009the Company issued 1,665,750 shares of common stock in connection with the May 2009Private Placement offering.

 

***Cancellation and Return of Common Stock***

 

On May 7, 2009, pursuant to return to treasuryagreements with certain former shareholders such shareholders agreed to return1,200,000 shares of common stock to the Company in consideration for $10,503which were then cancelled.

 

In May 2009, 1,250,000 shares of common stock,held by a shareholder, were canceled by the Company for non-payment of theirsubscription agreement amounting to $ 12,500.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE 8.** | **STOCKHOLDER’S EQUITY (Continued)** |
|-------------|-------------------------------------------|

 

***Common Stock Purchase Warrants***

 

Warrant activity for the period from April 1,2009 to June 30, 2009 is as follows:

 
| ** **                                                                            | ** ** | **Number of  Warrants** | ** ** | **Weighted********Average  Exercise Price** | ** ** |
|---------------------------------------------------------------------------------------|------------|-------------------------|------------|---------------------------------------------|------------|
| Outstanding at March 31, 2009                                                    |       | 11,410,000              |       | $                                           | 0.57       |   |
| Granted                                                                               |       | 7,350,000               |       | 0.53                                        |       |
| Exercised                                                                             |       | —                  |       | —                                      |       |
| Forfeited                                                                             |       | —                  |       | —                                      |       |
| Outstanding at June 30, 2009                                                     |       | 18,760,000              |       | $                                           | 0.56       |   |
|                                                                                  |       |                    |       |                                        |       |
| Weighted average fair value granted during the three  months ended June 30, 2009 |       |                    |       | $                                           | 0.30       |   |

 

***Warrants issued to Non-Employees***

 

On April 2, 2009, the Company issued warrants topurchase 2,000,000 shares of the Company’s common stock to a vendor, previouslygranted on March 31, 2009 at an exercise price of $0.50.  Thewarrants expire on April 2, 2014 and contain a provision allowing for acashless exercise. The fair value of the warrants issued, amounting to$701,541, was determined using the Black Scholes option pricing model at $0.35per warrant utilizing the following assumptions: expected volatility of110.04%, risk-free interest rate of 1.74%, contractual term of five years and amarket price of $0.45.  The value of the warrants were accrued as aconsulting expense payable at March 31, 2009.

 

The Company recorded $0 and $440,686 of consultingexpense during the three months ended June 30, 2009 and 2008, respectively,relating to warrants awarded.

 

***Warrants Issued to Employees***

 

On April 2, 2009, the Company issued warrants topurchase 2,000,000 shares of the Company’s common stock to the CEO previouslygranted on March 31, 2009 at an exercise price of $0.50.  Thewarrants expire on April 2, 2014 and contain a provision allowing for acashless exercise. The fair value of the warrants issued, amounting to$541,242, was determined using the Black Scholes option pricing model at $0.27per warrant utilizing the following assumptions: expected volatility of110.05%, risk-free interest rate of 1.25%, expected term of three years and amarket price of $0.45.  The value of the warrants were accrued as aconsulting expense payable at March 31, 2009.

 

On April 2, 2009, the Company issued warrants topurchase 1,400,000 shares of the Company’s common stock to the President andCOO previously granted on March 31, 2009 and included on March 31,2009 at an exercise price of $0.50.  The warrants expire on April 2,2014 and contain a provision allowing for a cashless exercise.  Thefair value of the warrants issued, amounting to $378,870, was determined usingthe Black Scholes option pricing model at $0.27 per warrant utilizing thefollowing assumptions: expected volatility of 110.05%, risk-free interest rateof 1.25%, expected term of three years and a market price of$0.45.  The value of the warrants were accrued as compensationexpense payable at March 31, 2009.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE  8.** | **STOCKHOLDER’S  EQUITY (Continued)** |
|--------------|--------------------------------------------|

 

On April 2, 2009, the Company issued warrants topurchase 350,000 shares of the Company’s common stock to certainemployees previously granted on March 31, 2009 at an exercise priceof $0.50.  The warrants expire on April 2, 2014 and contain aprovision allowing for a cashless exercise.  The fair value of thewarrants issued, amounting to $94,717, was determined using the Black Scholesoption pricing model at $0.27 per warrant utilizing the following assumptions:expected volatility of 110.05%, risk-free interest rate of 1.25%, a expectedterm of three years and a market price of $0.45.   The value of thewarrants were accrued as compensation expense payable at March 31, 2009.

 

On May 4, 2009, the Company issued warrants topurchase 600,000 shares of the Company’s common stock toemployees previously granted on March 31, 2009 at an exercise priceof $0.50.  The warrants expire on May 14, 2014 and contain aprovision allowing for a cashless exercise. The fair value of the warrantsissued, amounting to $162,551, was determined using the Black Scholes optionpricing model at $0.27 per warrant utilizing the following assumptions:expected volatility of 110.04%, risk-free interest rate of 1.40%, a expectedterm of three years and a market price of $0.45.  The value of thewarrants were accrued as compensation expense payable at March 31, 2009.

 

On April 2, 2009, the Company issued warrants topurchase 1,000,000 shares of the Company’s common stock to the Chief TechnologyOfficer previously granted on March 31, 2009 at an exercise price of$0.75.  The warrants expire on April 2, 2014 and contain aprovision allowing for a cashless exercise.  The fair value of thewarrants issued, amounting to $233,948, was determined using the Black Scholesoption pricing model at $0.23 per warrant utilizing the following assumptions:expected volatility of 110.05%, risk-free interest rate of 1.15%, expected termof three years and a market price of $0.45.  The value of thewarrants were accrued as compensation expense payable at March 31, 2009.

 

The Company recorded $0 and $996,455 of compensationexpense during the three months ended June 30, 2009 and 2008,respectively, relating warrants awarded.

 

***Merger and Private Placement Offering – May 2009***

 

On May 6, 2009 under the Merger Agreement, (i) thestockholders of W2E surrendered all of the issued and outstanding shares of W2Ecapital stock and received, in exchange for 45,981,770 shares ofcommon stock of Pubco; (ii) all warrants to purchase shares of W2E commonstock outstanding immediately prior to the Merger was replaced withcorresponding new warrants to purchase shares of common; (iii) the formerstockholders Pubco retained 1,000,000 shares of common stock of Pubco. and Thishas been accounted for as a reverse merger with the acquiring company beingW2E.

 

Simultaneous with the reverse merger transaction in May 2009,the Company also initiated a private placement offering (“May PrivatePlacement”) of up to 4,000,000 units of (the Company “Units’). Each Unitconsists of (i) three shares of common stock, par value $0.001 per shareand (ii) a three-year warrant to purchase three additional shares ofcommon stock at an exercise price of $1.25 per share. The Company wasattempting to raise $8,000,000 capital with this transaction. The initialclosing of the May Private Placement was on May 28, 2009. As of August 242009, the Company completed an offering of 600,250 Units of the Company at$2.00 per Unit.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE  8.** | **STOCKHOLDER’S  EQUITY (Continued)** |
|--------------|--------------------------------------------|

 

The Units were being offered on behalf of the Companyby the Placement agent, and the Company has agreed to pay the following (i) asales commissions in an amount equal to ten percent (10%) of the gross proceedsof the Units sold; (ii) a non-accountable expense allowance of threepercent (3%) of the gross proceeds of the Units sold (iii) an investmentbanking fee of $400,000, payable from the proceeds received pursuant to theOffering. Upon exercise of the Warrants, the Placement agent will receive a tenpercent (10%) commission and a three percent (3%) non-accountable expenseallowance, and will also be issued a three-year warrant exercisable to purchasesuch number of shares of common stock equal to 4.5% of the number of the fullydiluted outstanding shares of common stock.

 

 Details ofoutstanding shares of common stock are as follows:

 
| ** **                                                                      | ** ** | **Shares** | ** ** |
|---------------------------------------------------------------------------------|------------|------------|------------|
| Shares of Pubco at March 31, 2009                                          |       | 3,000,000  |       |
| Cancellation of Pubco shares at merger date                                     |       | (2,000,000 | )          |
| Recapitalized shares of W2E’s stockholders at exchange  (one for one) |       | 41,152,100 |       |
| Issuance of shares in connection with notes payable                             |       | 2,879,000  |       |
| Issuance of shares in connection with  consulting agreement                |       | 5,204,670  |       |
| Issuance of shares in connection with May 2009  private placement          |       | 1,665,750  |       |
| Cancellation and return of shares                                               |       | (2,450,000 | )          |
| Common stock shares outstanding at June 30,  2009                          |       | 49,451,520 |       |

 
| **NOTE  9.** | **COMMITMENTS  AND CONTINGENCIES** |
|--------------|------------------------------------|

 

***Income Tax Liabilities***

 

At June 30, 2009 and March 31,  2008,the Company has included in income taxes payable an accrual of approximately$127,000,  inclusive of interest and penalties of approximately$25,000, that relate to EWI for the period prior to itsacquisition.  Such amounts are included in current liabilities fromdiscontinued operations in the accompanying condensed consolidated balancesheets.

 

***Employment Agreements***

 

At June 30, 2009, the Company has accrued unpaidfees of $250,000 for the CEO and $11,250 for the VP related to unpaidcompensation under their respective employment agreements.  These amountsare included in due to related parties in the consolidated balance sheet as of June 30,2009.

 

***Investment Banking Agreement***

 

On March 30, 2009, the Company entered into anagreement with a registered broker dealer (“Placement agent”) whereby the Placementagent will assist the Company with its investment banking requirements whichincludes assistance with mergers, acquisition and internal capital structuring,as well as the placement of new debt and/or equity issues. The Placement agentwill also assist the Company in placing up to $8,000,000 of the Company’ssecurities (the “Offering”).

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE  9.** | **COMMITMENTS  AND CONTINGENCIES (CONTINUED)** |
|--------------|------------------------------------------------|

 

The Company is required to pay the Placement agent aretainer of $400,000. In connection with the Offering, the Company agreed topay the Placement agent (i) placement fees equal to 10% of the grossproceeds of the Offering and 3% of the gross proceeds of the Offering as anon-accountable expense allowance; and (ii) issue 3,304,670 shares of theCompany’s common stock valued at $0.45 per share.

 

***Transition Agreement***

 

On May 28, 2009, the Company, Christopher d’Arnaud-Taylor(“Mr. d’Arnaud-Taylor”) and Peter Bohan entered into a TransitionAgreement (the “Transition Agreement”). Pursuant to the Transition Agreement, Mr. d’Arnaud-Tayloragreed that, effective on the final closing May Private Placement, he willresign as Chief Executive Officer of the Company and at such time hisemployment agreement with the Company will be terminated.  He willcontinue to serve as a director of the Company. Mr. d’Arnaud-Taylorentered into a consulting agreement, dated as of May 28, 2009 (the “ConsultingAgreement”).  Pursuant to the Consulting Agreement, which shallbecome effective upon the final closing of the May Private Placement, Mr. d’Arnaud-Taylorwill serve as a consultant to W2E Group Holdings and shall be paid an annualfee of $300,000. The Company has guaranteed the payments due to Mr. d’Arnaud-Taylorpursuant to the Consulting Agreement.  Upon his resignation, Mr. Bohanwill become the Company’s Chief Executive Officer. In September 2009, theCompany amended the Transition Agreement such that Mr. Taylor would resignupon termination of the May Private Placement.  This waseffective September 4, 2009 and Mr. Bohan assumed the role of CEO asof that date.

 

***Dargavel Contract Cost Dispute***

 

During the course of the construction of the Dargavelplant, the Company and its customer have encountered a number of significantissues that have resulted in delays and cost increases to theproject.  These issues include the Icelandic economy collapse,project scoping changes, and changes required by engineers hired by thecustomer and the Scottish Environment Protection Agency (“SEPA”).  Theseissues have resulted in substantial increases to the costs to complete thisproject.  The customer claims that they have incurred liquidateddamages due to the project not being completed on schedule based on theoriginal contract with our Icelandic subsidiary, Enerwaste Europe ofapproximately €470,000.  The Company is contesting this claim basedon our belief that a Force Majeure occurred with respect to the Icelandcollapse and the impact on our business operations based inIceland.  Additionally, there are significant other costs that thecustomer claims are our responsibility, the majority of which are costsassociated with the engineering firm that they engaged to participate in theproject.  We do not believe the vast majority of these costs are ourresponsibility and intend to contest this claimvigorously.  Additionally, the Company is in the process of pullingtogether its counter claims with respect to cost increases incurred that wereoutside of our control and are not solely our responsibility.   Thecompilation of those costs is not yet complete and therefore we are unable toquantify the amount of those costs.  Management is currently unableto estimate the ultimate outcome of the negotiations and whether or not therewill be any additional amounts owed to the customer by the Company,particularly since we are not yet able to fully quantify ourcounterclaim.  Based on the amounts the customer has provided to usas their claim, we estimate the range of potential future costs to settle thiscould range from €0 to €900,000.  We have not recorded an accrual forthese costs as the likelihood is reasonably possible but the amounts cannot beestimated at this time. (See Note 4).

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE  10.** | **INCOME  TAXES** |
|---------------|-------------------|

 

The Company recognized a deferred tax asset ofapproximately $4,815,000 as of June 30, 2009, primarily relating to netoperating loss carryforwards of approximately $6,882,000_available to offsetfuture taxable income through 2030.   Due to changes inownership, these federal net operating loss carryforwards are subject to annuallimitations in their use in accordance with Internal Revenue Code Section 382.  Accordingly,the extent to which the loss carryforwards can be used to offset future taxableincome may be limited.  The ultimate realization of deferred taxassets is dependent upon the generation of future taxable income during theperiods in which those temporary differences become deductible. The Companyconsiders projected future taxable income and tax planning strategies in makingthis assessment. At present, the Company does not have a sufficient history ofincome to conclude that it is more likely than not that the Company will beable to realize all of its tax benefits in the near future and therefore avaluation allowance was established in the full value of the deferred taxasset.

 

A valuation allowance will be maintained untilsufficient positive evidence exists to support the reversal of any portion orall of the valuation allowance net of appropriate reserves. Should the Companythen continue to be profitable in future periods with supportable trends, thevaluation allowance will be reversed accordingly.

 
| **NOTE  11.** | **RESTATEMENT  OF PRIOR PERIOD FINANCIAL STATEMENTS** |
|---------------|-------------------------------------------------------|

 

Management determined that deferred tax assets relatedto the quarter ended June 30, 2008 were inadvertently omitted from thereported first quarter 2008 financial results. The accounting error resulted inan overstatement of net loss by $611,613.  The tables below present theeffect of the financial statement adjustments related to the restatement of ourpreviously reported unaudited condensed consolidated financial statements forthe three months ended June 30, 2008:

 
| **Three Months Ended June  30, 2008:**       | ** ** | **As  reported** | ** ** | **Adjustment** | ** ** | **As  Restated** | ** ** |
|----------------------------------------------|------------|------------------|------------|----------------|------------|------------------|------------|
|                                         |       |             |       |           |       |             |       |
| Benefit from income taxes                    |       | $                | 49,187     |           | $          | 611,613          |       | $ | 660,800 |   |
| Loss from continuing operations              |       | (2,427,951       | )          | 611,613        |       | (1,816,338       | )          |
| Net Loss                                     |       | (2,466,447       | )          | 611,613        |       | (1,854,834       | )          |
| Comprehensive Loss                           |       | (1,643,081       | )          | 611,613        |       | (1,031,468       | )          |
| Net Loss per Common Share-Basic and Diluted: |       |             |       |           |       |             |       |
| Continuing operations                        |       | (0.07            | )          | 0.01           |       | (0.06            | )          |
| Net loss per common share                    |       | (0.07            | )          | 0.01           |       | (0.06            | )          |
|                                              |            |                  |            |                |            |                  |            |  |  |  |

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE  12.** | **SUBSEQUENT  EVENTS** |
|---------------|------------------------|

 

***Promissory Notes***

 

On July 17, 2009, the Company issued notes in theaggregate amount of $125,000.  The notes bear interest at a rate of10% per annum. Principal, plus all accrued and unpaid interest thereon, is dueon October 15, 2009. The notes are automatically due and payable,including accrued interest thereon, upon the initial closing of an equityfinancing of the Company in the minimum amount of $5,000,000. The Companyissued 125,000 shares of its common stock to the payees.  Inconnection with issuance, the Company paid a placement agent $12,500 (10% ofthe amount of the notes issued) and a non-accountable expense allowance equalto $3,750 (3% of the amount of the notes issued).

 

On August 4, 2009, the Company issued notes inthe aggregate amount of $1,571,000.  The notes bear interest at arate of 10% per annum. Principal, plus all accrued and unpaid interest thereon,is due on November 2, 2009. The notes are automatically due and payable,including accrued interest thereon, upon the initial closing of an equityfinancing of the Company in the minimum amount of $5,000,000. The Companyissued 1,571,000 shares of its common stock to the payees.  Inconnection with issuance, the Company paid a placement agent $157,100 (10% ofthe amount of the notes issued) and a non-accountable expense allowance equalto $47,130 (3% of the amount of the notes issued).  The Companyrepaid $302,100 of these notes on September 30, 2009.

 

***Senior Convertible Debentures***

 

On September 30, 2009, the Company issued SeniorConvertible Debentures in the aggregate amount of $2,572,800 in a privateplacement.  The notes bear interest at a rate of 12% per annum andare due one year from date of issue. The notes are convertible into one shareof common stock with a conversion price of $1.00.  Also, for eachdollar invested, a warrant was issued which entitles the note holder topurchase one share of common stock for an exercise price of $2.00 pershare.  In connection with the issuance, the Company paid a placementagent $257,280 (10% of the amount of the notes issued) and a non-accountableexpense allowance equal to $77,184 (3% of the amount of the notesissued).  An amount of $308,736 was placed into an escrow account atclosing which represents the 12% interest to be paid on the notes.

 

***Investment Banking Agreement***

 

In September 2009, the May Private Placementwas terminated.  The Placement agent was previously issued 3,304,670shares of the Company’s common stock for services rendered in connection withthe Offering.  Subsequent to the issuance, the common shares were canceledand replaced with warrants to purchase 2,000,000 shares of the Company’s commonstock at an exercise price of $0.01.  The warrants expire on August 17,2012 and contain a provision allowing for a cashless exercise. The fair valueof the warrants issued, amounting to $882,308, was determined using the BlackScholes option pricing model at $0.44 per warrant utilizing the followingassumptions: expected volatility of 110.04%, risk free interest rate of 1.54%,contractual term of three years and a market price of $0.45.

 

***Employment Agreements***

 

On July 15, 2009, the Company entered into aformal employment agreement with its Chief Financial Officer (“CFO”).  Theagreement is for a one year term; thereafter the agreement automatically renewsfor successive one year terms, unless terminated sooner, upon 30 daysnotice.   Under the terms of the agreement, the CFO will receivean annual base salary of $175,000.  The CFO’s base salary will bereviewed, from time to time, and may be adjusted at the discretion of theBoard. The first such review shall be at the first anniversary date of thisagreement. In addition, on July 15, 2009, the CFO was granted 400,000warrants to purchase the Company’s common stock at an exercise price of $0.67per share vested two years from the effective date of the registrationstatement, or immediately if the Company fails to raise a minimum of $4,000,000in the equity offering, provided the CFO is still employed by the Company onsuch date.  The warrants expire on July 15, 2014 and contain aprovision allowing for a cashless exercise.  The fair value of thewarrants issued, amounting to $98,089, was determined using the Black Scholesoption pricing model at $0.25 per warrant utilizing the following assumptions:expected volatility of 110.04%, risk free interest rate of 1.60%, expected termof 3 and a market price of $0.45.

 

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**WASTE2ENERGY HOLDINGS INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**FOR THE THREE MONTHS ENDED JUNE 30,2009 AND 2008**

 
| **NOTE  13.** | **SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION** |
|---------------|--------------------------------------------------------|

 
| ** **                                                                                          | ** ** | **Three Months********Ended June  30, 2009** | ** ** | **Three Months********Ended June 30,  2008** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|---------------------------------------------------|------------|
| Cash paid for:                                                                                      |       |                                         |       |                                              |       |
| Interest                                                                                            |       | $                                            | 260,667    |                                              | $          | — |   |
|                                                                                                |       |                                         |       |                                              |       |
| Acquisition of EnerWaste Europe, Ltd.:                                                              |       |                                         |       |                                              |       |
| Current assets                                                                                      |       | $                                            | —     |                                              | $          | 2,148,448 |   |
| Other liabilities assumed                                                                           |       | —                                       |       | (3,947,343                                        | )          |
| Building and equipment                                                                              |       | —                                       |       | 208,662                                           |       |
| Goodwill                                                                                            |       | —                                       |       | 333,500                                           |       |
| Technology                                                                                          |       | —                                       |       | 7,509,515                                         |       |
| Deferred tax liability                                                                              |       | —                                       |       | (2,928,714                                        | )          |
| Issuance of note payable                                                                            |       | —                                       |       | (324,068                                          | )          |
| Issuance of common stock                                                                            |       | —                                       |       | (3,000,000                                        | )          |
| Cash paid for acquisition                                                                           |       | $                                            | —     |                                              | $          | — |   |
|                                                                                                |       |                                         |       |                                              |       |
| Deferred tax liability related to acquire  intangibles in Investment in EnerWaste Europe, Ltd.      |       | $                                            | —     |                                              | $          | 2,928,715 |   |
|                                                                                                |       |                                         |       |                                              |       |
| Non-cash investing and financing activities:                                                        |       |                                         |       |                                              |       |
| Common stock issued in connection with notes payable                                                |       | 423,212                                      |       | —                                            |       |
| Common stock issued in connection with modifications  of notes payable                              |       | 686,250                                      |       | —                                            |       |
| Common stock issued for acquisition of EnerWaste  Europe, Ltd.                                      |       | —                                       |       | 3,000,000                                         |       |
| Promissory note issued for acquisition of EnerWaste  Europe, Ltd.                                   |       | —                                       |       | 324,068                                           |       |
| Common stock outstanding from share exchange  transaction.                                          |       | 100                                          |       | —                                            |       |
| Cancellation and return of common stock                                                             |       | 3,003                                        |       | —                                            |       |
| Warrants issued previously granted on March 31,  2009 and included in accrued expenses payable |       | 2,112,870                                    |       | —                                            |       |
| Conversion of accrued expense to Notes Payable                                                      |       | 265,000                                      |       | —                                            |       |

 

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**ITEM 2. MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS**

 

***Forward-Looking Statements and Associated Risks.***

 

*The following discussion should beread in conjunction with the condensed consolidated financial statements andthe notes to those statements included elsewhere in this Quarterly Report on Form 10-Q.This Quarterly Report on Form 10-Q contains certain statements that areforward-looking within the meaning of the Private Securities Litigation ReformAct of 1995. Certain statements contained in the MD&A are forward-lookingstatements that involve risks and uncertainties. The forward-looking statementsare not historical facts, but rather are based on current expectations,estimates, assumptions and projections about our industry, business and futurefinancial results. Our actual results could differ materially from the resultscontemplated by these forward-looking statements due to a number of factors,including those discussed in other sections of this Quarterly Report on Form 10-Q.*

 

**Plan of Operation**

 

We intend to compete in the growing worldwide marketfor waste-to-energy systems that simultaneously destroy waste and generategreen energy. Our business plan calls for us to design, manufacture and installsmall footprint, simple, cost-effective gasification technologies that arescalable, modular, environment friendly and robust enough to operate in harshand remote environments. We intend to provide customized engineering solutionsthat we believe will enable our current and future customers to convert solidwaste streams traditionally destined for landfill or incineration into clean,renewable energy.

 

We intend to target the local waste-to-energy sectorin the small to mid-range market – from one ton batch systems all the way up tothe continuous 500 metric ton per day (TPD) range – not large centralizedplants such as those operated by waste-to-energy companies like Covanta orWheelabrator who typically develop major facilities in the 1,000+ TPDrange.  We intend to focus on providing any customers we obtain withthe technologies to recover the energy trapped in municipal solid waste,construction and demolition debris, industrial and commercial waste, andbiomass.

 

To date we have financed our activities andacquisitions through private placements of our securities, including thePrivate Placement.  To date we have generated limited revenues, havesubstantial operating losses and an accumulated deficit since our inception in April 2007.

 

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**Results of Operations**

 

*For the three months ended June 30,2009 compared to June 30, 2008*

 

For the three months ended June 30, 2009,contract revenue was $770,388 compared to $0 in the prior yearquarter.   The increase in contract revenue is primarily due tothe acquisition of the remaining 50% interest of EWE, which was accounted forunder the equity method in the prior year, and included revenues from theDARGAVEL contract. The prior year contract costs were included as acomponent of “Loss on equity method investment in EnerWaste Europe, Ltd.” inthe accompanying condensed consolidated statement of operations.

 

For the three months ended June 30, 2009,contract costs totaled $770,550 compared to $0 in the prior yearperiod.  Project costs include all costs incurred to date as well asestimated future costs on the contract.  The prior year contractcosts were accounted for under the equity method and included as a component of“Loss on equity method investment in EnerWaste Europe, Ltd.” in theaccompanying condensed consolidated statement of operations.

 

General and administrative expenses for the threemonths ended June 30, 2009, were $1,859,146 compared to $1,972,637 for thequarter ended June 30, 2008.  The decrease in general andadministrative costs is primarily due to an increase in accounting fees ofapproximately $296,000, an increase in legal fees of approximately$98,000, increase in consulting fees of approximately $195,000 a decreaseof approximately $785,000 in compensation expense, and an increase in generaland administrative expense of approximately $83,000. Consulting fees andcompensation expense include approximately $630,000 and $57,000, respectively,of stock based compensation for the three months ended June 30, 2009,compared to approximately $590,000 and $995,000, respectively, for the prioryear quarter.

 

Other income/expenses for the three months ended June 30,2009 were net other income of $452,226 compared to net other expense of$504,501 for the three months ended June 30, 2008.  The currentyear period included a gain related to extinguishment of a debt obligationpayable to the former owner and CEO of Enerwaste International as a result of asettlement agreement executed in April 2009.  This gain wasoffset by interest expense on our debt obligations.  The prior yeartotal was primarily the net loss on the Company’s equity investment inEnerwaste Europe for the three months ended June 30, 2009.

 

The Company did not record an income tax benefit forthe pre-tax loss from continuing operations for the three months ended June 30,2009 because the deferred tax asset that is associated with this benefit istotally reserved for as the Company does not have a sufficient history ofincome to conclude that it is more likely than not that the Company will beable to realize all of its tax benefits in the near future, and therefore avaluation allowance was established in the full value of the deferred taxasset.  For the three months ended June 30,2008, the Company recorded a deferred tax asset for the income tax benefit ofpre-tax loss from continuing operations which offset the deferred tax liabilityas of that date.

 

**Liquidity and Capital Resources**

 

We have incurred operating losses since inception. Asof June 30, 2009, we had $54,543 in cash compared to $27,360 at March 31,2009.  As of June 30, 2009, we had a working capital deficiencyof $3,305,282, compared to a working capital deficiency of $6,308,582 as of March 31,2009.

 

Net cash used in operating activities for the threemonths ended June 30, 2009 was $1,237,678, compared with net cash used of$147,290 for the prior year period.  The majority of the increase innet cash used was due to a increase in operating losses due to higher operatingexpenses, increases in project costs and other assets. Net cash used ininvesting activities increased by $19,962 due to the purchase of computerequipment.  Net cash provided by financing activities for the threemonths ended June 30, 2009 was $1,199,610, compared to net cash used infinancing activities in the prior year period of $8,128.  The currentyear period included the proceeds of debt and equity financings offset by therepayment of certain debt obligations.

 

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The Company must raise additional funds on animmediate basis in order to fund our continued operations.  We maynot be successful in our efforts to raise additional funds. Even if we are ableto raise additional funds through the sale of our securities or through theissuance of debt securities, our cash needs could be greater than anticipatedin which case we could be forced to raise additional capital. At the presenttime, we have no commitments for any additional financing, and there can be noassurance that, if needed, additional capital will be available to us oncommercially acceptable terms or at all. These conditions raise substantialdoubts as to our ability to continue as a going concern, which may make it moredifficult for us to raise additional capital when needed

 

Our significant financing and investing activities forthe three months ended June 30, 2009 consisted of the following:

 

In connection with the private placement, theCompany sold to accredited investors 600,250 Units to investors at $2.00per Unit, each Unit consisting of three shares of Common Stock and a three-yearwarrant to purchase three additional shares of Common Stock at an exerciseprice of $1.25 per share.  The Company received gross proceeds ofapproximately $1.2 million from the sale of the Units. A broker-dealer acted asthe exclusive placement agent for the Private Placement. We received netproceeds of approximately $825,000 after deducting commissions and expenses ofthe Private Placement.

 

In June 2009, the Company issued $804,000 ofnotes payable to accredited investors bearing interest at 10% and due 90 daysfrom date of issue.  As of September 25, 2009, these notes hadbeen extended for repayment until October 2, 2009.

 

In August 2009, the Company issued $1,571,000 of notespayable to accredited investors bearing interest at 10% and due 90 days fromdate of issue.  These notes mature in November 2009.

 

In the third and fourth quarters of fiscal 2009,management anticipates new order intake once the Dargavel plant is commissioned,which will start to provide funding for operational expenses on an on-goingbasis.

 

However, depending on our future needs and changes andtrends in the capital markets affecting our shares and us, we may determine toseek additional equity or debt financing in the private or public markets.Additional financing, whether through public or private equity or debtfinancing, arrangements with stockholders or other sources to fund operations,may not be available, or if available, may be on terms unacceptable to us.

 

Our material capital expenditure requirements for theremaining period of the year ending March 31, 2010 will be approximately$200,000 to procure office equipment, furniture and IT equipment.

 

We anticipate that our long-term operational expenseswill be approximately $400,000 to $600,000 per month, consisting primarily ofSG&A expenses.

 

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**RecentAccounting Pronouncements**

 

See Note 3 to theCondensed Consolidated Financial Statements.

 

**OffBalance Sheet Arrangements**

 

None.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK.**

 

Not Applicable

 

**ITEM 4T. CONTROLS AND PROCEDURES.**

 

**Evaluationof Disclosure Controls and Procedures**

 

Our management is responsible for establishing andmaintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) underthe Exchange Act) that is designed to ensure that information required to bedisclosed by the Company in the reports that it files or submits under theExchange Act is recorded, processed, summarized and reported, within the timespecified in the Commission’s rules and forms. Disclosure controls andprocedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by an issuer in the reportsthat it files or submits under the Securities Exchange Act of 1934 (the “ExchangeAct”), as amended, is accumulated and communicated to the issuer’s management,including its principal executive officer or officers and principal financialofficer or officers, or persons performing similar functions, as appropriate toallow timely decisions regarding required disclosure.

 

Pursuant to Rule 13a-15(b) under theExchange Act, the Company carried out an evaluation with the participation ofthe Company’s management, including Chris d’Arnaud-Taylor, the Company’s ChiefExecutive Officer as of June 30, 2009, Peter Bohan, the Company’s currentChief Executive Officer as of September 4, 2009, and Craig Brown, theCompany’s Chief Financial Officer, of the effectiveness of the Company’sdisclosure controls and procedures (as defined under Rule 13a-15(e) underthe Exchange Act) as of June 30, 2009.  Based upon thatevaluation, the Company’s Chief Executive Officer and Chief Financial Officerconcluded that the Company’s disclosure controls and procedures were noteffective. Furthermore, certain matters involving our internal controlover financial reporting constitute a material weakness under standardsestablished by the Public Company Accounting Oversight Board (“PCAOB”).  TheCompany’s disclosure controls and procedures were not effective due to a lackof internal resources to account for the completeness of transactions to ensurethat information required to be disclosed by the Company in the reports thatthe Company files or submits under the Exchange Act, is recorded, processed,summarized and reported, within the time periods specified in the SEC’s rules andforms, and that such information is accumulated and communicated to the Company’smanagement, including the Company’s CEO, as appropriate, to allow timelydecisions regarding required disclosure. The Company is evaluating itsstructure and processes and procedures so that it can begin to implementcorrective action where necessary to ensure that the appropriate resources arein place throughout the company to ensure the Company’s disclosure controls andprocedures are effective.  Additionally, the Company hired a ChiefFinancial Officer in July 2009 and will be evaluating the systems andrequired changes needed to strengthen our internal controls.

 

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Our management, including our Chief Executive Officerand Chief Financial Officer, believes that any disclosure controls andprocedures or internal controls and procedures, no matter how well conceived andoperated, can provide only reasonable, not absolute, assurance that theobjectives of the control system are met. Further, the design of a controlsystem must consider the benefits of controls relative to their costs. Inherentlimitations within a control system include the realities that judgments indecision-making can be faulty, and that breakdowns can occur because of simpleerror or mistake. Additionally, controls can be circumvented by the individualacts of some persons, by collusion of two or more people, or by unauthorizedoverride of the control. While the design of any system of controls is toprovide reasonable assurance of the effectiveness of disclosure controls, suchdesign is also based in part upon certain assumptions about the likelihood offuture events, and such assumptions, while reasonable, may not take intoaccount all potential future conditions. Accordingly, because of the inherentlimitations in a cost effective control system, misstatements due to error orfraud may occur and may not be prevented or detected.

 

**Changesin internal controls**

 

Our management, with the participation of ourChief Executive Officer and Chief Financial Officer performed an evaluation asto whether any change in our internal controls over financial reportingoccurred during the quarter ended June 30, 2009.  In May 2009,the Company completed the reverse merger with Maven Media Holdings, Inc.  Thereverse merger resulted in a change in internal controls for the Company duringthe quarter ended June 30, 2009.

 

**PART II**

**OTHER INFORMATION**

 

**ITEM 1 - LEGAL PROCEEDINGS**

 

We are not a party to any pending legal proceeding,nor is our property the subject of a pending legal proceeding, that is not inthe ordinary course of business or otherwise material to the financialcondition of our business. None of our directors, officers or affiliates isinvolved in a proceeding adverse to our business or has a material interestadverse to our business.

 

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**ITEM 2 - UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS**

 

On June 5, 2009  and in connection withand pursuant to the terms of the Confidential Private Offering Memorandum datedMay 7, 2009, as amended by Amendment No. 1 dated May 26, 2009(the “Private Placement Memorandum”) of the Company, the Company sold in aprivate placement (the “Private Placement”) 122,500 units (the “Units”) at$2.00 per Unit to investors (the “Investors”), each Unit consisting of (i) three(3) shares of Common Stock and (ii) a three-year warrant (the “Warrants”)to purchase three (3) additional shares of Common Stock at an exerciseprice of $1.25 per share and, as a result, the Company received gross proceedsof approximately $245,000 and issued the Investors an aggregate of367,500 shares of Common Stock and Warrants to purchase 367,500 shares ofCommon Stock (the “Warrant Shares”).

 

On July 7, 2009, and in connection with andpursuant to the terms of the Private Placement Memorandum, the Company sold inthe Private Placement 32,500 Units at $2.00 per share, each Unit consisting of (i) threeshares of Common Stock and (ii) Warrants to purchase three additionalshares of common Stock at an exercise price of $1.25 per share, and as a resultthe Company received gross proceeds of approximately $65,000 and issued theInvestors and aggregate of 97,500 shares of Common Stock and 97,500 WarrantShares.

 

On July 17, 2009, and in connection with andpursuant to the terms of the Private Placement Memorandum, the Company sold inthe Private Placement 12,500 Units at $2.00 per share, each Unit consisting of (i) threeshares of Common Stock and (ii) Warrants to purchase three additionalshares of common Stock at an exercise price of $1.25 per share, and as a resultthe Company received gross proceeds of approximately $25,000 and issued theInvestors and aggregate of 37,500 shares of Common Stock and 37,500 WarrantShares.

 

The Warrants may not be exercised to the extent suchexercise would cause the holder of the Warrant, together with its affiliates,to beneficially own a number of shares of Common Stock which would exceed 4.99%of the Company’s then outstanding shares of Common Stock following suchexercise.

 

A registered broker-dealer and a member of theFinancial Industry Regulatory Authority (“FINRA”) was retained as the exclusiveplacement agent for the Private Placement and in connection with the sales ofthe Units set forth in this Item received a commission of $33,500 (ten (10%)percent of the gross proceeds) and a non-accountable expense allowance of$10,000 (three (3%) percent of the gross proceeds).  The Companyissued the registered broker dealer a warrant to purchase 2,000,000 shares ofits common stock at $.01 per share.

 

In connection with the Private Placement, the Companyrelied upon the exemption from securities registration afforded by Rule 506of Regulation D as promulgated by the SEC under the Securities Act of 1933, asamended (the “Securities Act”) and/or Section 4(2) of the SecuritiesAct. No advertising or general solicitation was employed in offering thesecurities. The offerings and sales were made to a limited number of persons,all of whom were “accredited investors,” and transfer was restricted by theCompany in accordance with the requirements of the Securities Act.

 

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**ITEM 3 - DEFAULTS UPON SENIOR SECURITIES**

 

None.

 

**ITEM 4 - SUBMISSION OF MATTERS TOVOTE OF SECURITY HOLDERS**

 

None.

 

**ITEM 5 - OTHER INFORMATION**

 

None.

 

**Item 6. Exhibits**

 
| **Exhibit  Number** | ** ** | **Description**                                                                       |
|---------------------|------------|---------------------------------------------------------------------------------------|
|                |       |                                                                                  |
| 31.1                |       | Certification by Chief Executive Officer pursuant to  Sarbanes Oxley Section 302 |
| 31.2                |       | Certification by Chief Financial Officer pursuant to  Sarbanes Oxley Section 302 |
| 32.1                |       | Certification by Chief Executive Officer pursuant to  18 U.S.C. Section 1350     |
| 32. 2               |       | Certification by Chief Financial Officer pursuant to  18 U.S.C. Section 1350     |

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
| ** **                   | **WASTE2ENERGY HOLDINGS, INC.** |
|------------------------------|---------------------------------|
|                         |                            |
| Date: November 12, 2009 | By:                             | /s/ Peter Bohan |
|                         |                            | Peter Bohan |
|                         |                            | Chief Executive Officer |
|                         |                            | (Principal Executive Officer) |
|                         |                            |   |
|                         |                            |   |
|                         | By:                             | /s/ Craig L. Brown |
|                         |                            | Chief Financial Officer |
|                         |                            | (Principal Financial Officer) |

 

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