eLayaway 10Q 2013 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________

FORM 10-Q

______________________

x	QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2013

o	TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______.

Commission File Number: 000-54733

______________________________________________

ELAYAWAY, INC.

(Exact name of registrant as specified in its charter)

___________________________________________

Delaware		20-8235863
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1650 Summit Blvd. Suite 103 Tallahassee, FL		32317
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (850) 583-5019

_________________________________________

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $.001 Par Value

(Title of class)

____________________________________________

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “large accelerated filer”, “accelerated filer” 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 a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

As of as of August 9, 2013 the registrant had 4,441,041,037 shares of its Common Stock, $0.001 par value, outstanding.

TABLE OF CONTENTS

eLAYAWAY, INC.

Part I – Financial Information

Item 1	Financial Statements
	Consolidated Balance Sheets as of June 30, 2013 (unaudited) and December 31, 2012	3
	Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012 (unaudited)	4
	Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012 (unaudited)	5
	Notes to the Unaudited Consolidated Financial Statements (unaudited)	7

Item 2	Management’s Discussion and Analysis or Plan of Operation	26
Item 3	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4	Controls and Procedures	29

Part II – Other Information

Item 1	Legal Proceedings	31
Item 2	Unregistered Sales Of Equity Securities And Use Of Proceeds	31
Item 3	Defaults Upon Senior Securities	38
Item 4	Mine Safety Disclosures	38
Item 5	Other Information	38
Item 6	Exhibits	39

ITEM 1 Financial Statements

eLAYAWAY, INC. and SUBSIDIARIES
Consolidated Balance Sheets

	June 30,			December 31,
	2013			2012
	(unaudited)
ASSETS
Current assets
Cash	$	10,565		$	22,823
Segregated cash for customer deposits		84,398			86,054
Other receivable		-			50,000
Prepaid expenses		311,930			47,954
Assets attributable to discontinued operations		-			536

Total current assets		406,893			207,367

Property and equipment, net		1,656			2,195

Intangibles, net		3,736			3,844

Other assets		834			4,667

Total assets	$	413,119		$	218,073

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

Current liabilities
Notes and convertible notes, net of discounts and premiums	$	1,509,134		$	1,665,991
Notes, convertible notes, and lines of credit payable to related parties, net of discounts		519,738			427,590
Accounts payable		147,351			165,449
Accounts payable to related parties		18,209			18,920
Accrued liabilities		350,682			249,110
Liability to guarantee equity value		25,000			25,000
Deposits received from customers for layaway sales		74,693			85,604
Embedded conversion option liability		53,570			64,285

Total current liabilities		2,698,377			2,701,949

Total liabilities		2,698,377			2,701,949

Commitments and contingencies (Note 10)

Shareholders' deficiency
Preferred stock, par value $0.001, 50,000,000 shares authorized
Series A preferred stock, $0.001 par value, 1,854,013 shares designated, 0 and 0
issued and outstanding, respectively (liquidation value $0 and $0, respectively)		-			-
Series B preferred stock, $0.001 par value, 2,788,368 shares designated, 0 and 0
issued and outstanding, respectively (liquidation value $0 and $0, respectively)		-			-
Series C preferred stock, $0.001 par value, 3,142,452 shares designated, 0 and 0
issued and outstanding, respectively (liquidation value $0 and $0, respectively)		-			-
Series D preferred stock, $0.001 par value, 1,889,594 shares designated, 0 and 0
issued and outstanding, respectively (liquidation value $0 and $0, respectively)		-			-
Series E preferred stock, $0.001 par value, 10,000,000 shares designated, 685,725 and 0
issued and outstanding, respectively (liquidation value $170,602 and $0, respectively)		686			7,940
Series F preferred stock, $0.001 par value, 10,000,000 shares designated, 0 and 0
issued and outstanding, respectively (liquidation value $50,303 and $0, respectively)		-			9,848
Series G preferred stock, $0.001 par value, 1,000,000 shares designated, 1,000,000 and 0
issued and outstanding, respectively (liquidation value $1,000 and $0, respectively)		1,000			-
Common stock, par value $0.001, 5,000,000,000 shares authorized, 4,441,041,037 and
634,308,656 shares issued, issuable and outstanding, respectively, and (107,142,857
and 73,360,937 shares issuable, respectively)		4,441,041			634,309
Additional paid-in capital		15,441,855			15,450,884
Accumulated deficit		(22,169,840	)		(18,586,857	)

Total shareholders' deficiency		(2,285,258	)		(2,483,876	)

Total liabilities and shareholders' deficiency	$	413,119		$	218,073

See accompanying notes to unaudited consolidated financial statements

eLAYAWAY, INC. and SUBSIDIARIES

Consolidated Statements of Operations

(unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012


Sales	$	31,120		$	35,313		$	98,733		$	64,015
Cost of sales		8,547			3,869			19,842			3,383
		22,573			31,444			78,891			60,632

Selling, general and administrative expenses
(includes $33,760 and $61,752 for the three months ended
June 30, 2013 and 2012, respectively, and $159,978 and
$436,573 for the six months ended June 30, 2013 and 2012,
respectively, of stock-based compensation and settlements)		222,127			524,513			573,238			1,171,040
								-			-
Loss from continuing operations		(199,554	)		(493,069	)		(494,347	)		(1,110,408	)

Other income (expense)
Interest expense		(87,363	)		(245,442	)		(207,260	)		(563,798	)
Change in fair value of embedded conversion option liability		-			176,076			6,429			203,619
Gain on conversion of accounts payable		-			1,600			-			1,600
Loss on share repurchase		-			-			-			-
Gain (loss) on settlements of liabilities, net		(534,791	)		-			(534,791	)		-
Loss on issuance of common stock								(60,000	)		-
Loss on conversion of debt into common stock		(1,308,403	)		-			(2,293,014	)		-
Total other income (expense), net		(1,930,557	)		(67,766	)		(3,088,636	)		(358,579	)

Net loss from continuing operations		(2,130,111	)		(560,835	)		(3,582,983	)		(1,468,987	)

Net loss from discontinued operations		-			(57,051	)		-			(99,152	)

Net loss	$	(2,130,111	)	$	(617,886	)	$	(3,582,983	)	$	(1,568,139	)

Basic and diluted net loss per share - continuing operations	$	(0.001	)	$	(0.008	)	$	(0.001	)	$	(0.023	)
Basic and diluted net loss per share - discontinued operations	$	-		$	(0.001	)	$	-		$	(0.000	)
Basic and diluted net loss per share	$	(0.001	)	$	(0.008	)	$	(0.001	)	$	(0.025	)

Weighted average shares outstanding
- basic and diluted		2,890,796,541			73,366,427			2,389,645,431			62,546,892

See accompanying notes to unaudited consolidated financial statements

eLAYAWAY, INC. and SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Six Months Ended June 30,

(unaudited)

	2013			2012
Cash flows from operating activities:
Net loss	$	(3,582,983	)	$	(1,568,139	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation		539			6,640
Amortization of intangibles		108			34,915
Amortization of debt discounts to interest expense		105,142			497,569
Amortization of debt issue costs to interest expense		-			18,622
Issuance of note for legal services		-			25,000
Deriviative loss		(10,715	)		-
Grant of warrants for services		-			31,071
Grant of options for services		-			20,270
Common stock granted for services		159,978			113,400
Exchange of options and warrants for common stock		-			108,614
Loss on conversion of debt into common stock		2,397,987			-
Loss on issuance of stock		60,000			-
Amortization of stock-based prepaids		-			162,657
Accretion of put premium into interest expense		80,658			-
(Gain) loss on settlement of liabilities		534,791			(1,600	)
Change in fair value of embedded conversion option liability		(10,715	)		(203,619	)
Changes in operating assets and liabilities:
Segregated cash for customer deposit		1,656			121,990
Accounts receivable		50,000			8,519
Other receivable		-			-
Prepaid expenses		-			6,645
Other assets		4,369			-
Accounts payable		(18,098	)		95,929
Accounts payable to related parties		-			(3,257	)
Accrued expenses		101,572			125,714
Deposits received from customers for layaway sales		(10,911	)		3,671
Net cash used in operating activities		(136,622	)		(395,389	)

Cash flows from investing activities:
Acquisition of fixed assets		-			(901	)
Cash acquired in acquisition		-			2,447
Cash paid in acquisition		-			(6,000	)
Net cash used in investing activities		-			(4,454	)

Cash flows from financing activities:
Proceeds from related party loans		-			214,272
Proceeds from loans		125,075			177,500
Repayment of loans		-			(17,652	)
Repayment of related party loans		(711	)		(25,000	)
Payment of loan fee		-			(7,500	)
Sale of common stock		-			140,040
Net cash provided by financing activities		124,364			481,660

See accompanying notes to unaudited consolidated financial statements.

eLAYAWAY, INC. and SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Six Months Ended June 30,

(unaudited)

	2013			2012

Net increase (decrease) in cash		(12,258	)		81,817

Cash at beginning of period		22,823			29,458

Cash at end of period	$	10,565		$	111,275

Supplemental disclosure of cash flow information:

Cash paid for interest	$	-		$	3,405

Cash paid for taxes	$	-		$	-

Non-cash investing and financing activities:

Acquisition of Centralized Strategic Placements, Inc.	$	-		$	242,402

Reclassification of liability to equity for expiration of guarantee	$	-		$	135,000

Debt discounts for beneficial conversion features values	$	15,689		$	99,616

Common stock issued for legal services	$	-		$	37,800

Debt discounts for loan fees	$	2,500		$	6,000

Conversion of loan fees to common stock	$	-		$	2,500

Capitalization of accrued interest to convertible note payable	$	-		$	6,000

Conversion of related party payroll into Series E preferred stock	$	-		$	30,000

Common stock issued for services	$	930,001		$	60,000

Conversion of debt to common stock including premium	$	-		$	16,667

Conversion of accounts payable to common stock	$	-		$	15,500

Conversion of convertible preferred stock into common stock	$	-		$	15,500

Conversion of liabilities to a related party into notes payable	$	82,010		$	-

Embedded conversion option liability	$	-		$	24,815

Issuance of Series G preferred stock for services	$	1,000		$	-

Conversion of Series E preferred stock into common stock	$	(712	)	$	-

See accompanying notes to unaudited consolidated financial statements.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

eLayaway, Inc. (the “Company,” “we,” “us,” “our” or “eLayaway”) is a Delaware corporation. The business was started on September 8, 2005. Our subsidiary, eLayaway.com, Inc., was formed on September 8, 2005.

In April 2007, the Company formed eLayaway Australia Pty, Ltd., an Australian company. This entity is 97% owned by eLayaway and has been inactive since inception.

On July 28, 2010, Pay4Tix.com, Inc. (“Pay4Tix,” f/k/a eLayawaySPORTS, Inc.), a Florida corporation, was formed as a subsidiary of the Company. The name change to Pay4Tix was completed on March 9, 2012.

On November 15, 2011, DivvyTech, Inc. (“DivvyTech”), a Florida corporation, was formed as a subsidiary of the Company.

On January 20, 2012, PrePayGetaway.com, Inc. (“PrePayGetaway”) and PlanItPay.com, Inc. (“PlanItPay”), both Florida corporations, were formed as subsidiaries of the Company.

On January 25, 2012, NuVidaPaymentPlan.com, Inc. (“NuVida”), a Florida corporation, was formed as a subsidiary of the Company.

On February 7, 2012, with an effective date of February 1, 2012, the Company acquired all of the voting capital stock of Centralized Strategic Placements, Inc. (“CSP,” see Note 2).

Basis of Presentation

The accompanying unaudited consolidated financial statements of eLayaway, Inc. and Subsidiaries have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. The results of operations for the interim period ended June 30, 2013 shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending December 31, 2013. In the opinion of the Company’s management, the information contained herein reflects all adjustments (consisting of normal recurring adjustments and business combination adjustments – see Note 2) necessary for a fair presentation of the Company’s results of operations, financial position and cash flows. The unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements in the Company’s Form 10-K for the year ended December 31, 2012 filed on April 3, 2013 and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Nature of Operations

The Company has evolved its technology to remove itself from being identified as a layaway only company. The Company is changing its image and branding to DivvyTech, which specializes in various payment processing methods including, but not limited to, layaway. DivvyTech's core function is to empower retailers and payment processors with an automated recurring payments administration system. This includes a robust engine with the ability to process multiple and varied payments, a dynamic system to schedule individual plans and a user-friendly interface for reporting the complexities of both. DivvyTech’s technology empowers retailers and payment processors with an automated recurring payments administration system designed to manage layaway, leasing, micro-lending, layaway-credit hybrid programs and Automated Clearing House (“ACH”) programs. Supported consumer funding sources include: ACH, cash, credit and debit cards. By providing flexible an affordable payment options, retailers and processors increase consumer spending power and enhance their user experience.

When requiring consumers to pay over time, DivvyTech’s innovative payment breakthrough offers unprecedented flexibility and access. The Company’s suite of products is perfect for organizations and payment processors that are looking for an autonomous and agnostic payment solution to enhance their existing products and services. This service allows both the provider and consumer to have the ability to manage the automation and distribution of the overall payment transaction process which is unique to the industry.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

DivvyTech Powered Brands:

eLayaway.com is a payment processor that empowers merchants with the ability to easily and efficiently offer an automated layaway payment plan to both online and in-store customers. Consumers can use eLayaway to conveniently pay for any product or service over time and receive their order once it is paid in full. Payment processing and supporting services are handled by eLayaway while merchants provide order fulfillment.

NuVida Payment Plan provides prepayment solutions for patients and healthcare facilities. This patented technology provides patients with the opportunity to prepay for procedures over time without having to use credit or go into debt. Nuvida is managed by HIPAA certified, payment processing professionals.

Pay4Tix provides a prepaid ticket solution for both teams and fans. DivvyTech's payment technology allows teams and ticketing platforms to integrate the prepayment option directly into all sales channels for new ticket sales and season ticket renewals. Pay4Tix is managed by payment processing experts with sports marketing experience.

PrePayGetaway provides a prepayment solution for travel companies and consumers. By leveraging DivvyTech's technology, travel professionals can create a customized recurring prepayments system. PrePayGetaway is managed by payment processing experts with travel industry experience.

PlanItPay consists of a robust community of registered member shoppers connecting online at eLayaway.com with affiliate merchants offering millions of consumer products and services. Thousands of secure transactions are processed weekly with membership increasing daily. PlanItPay’s proprietary technology is managed by payment processing experts with retail experience.

eApartado.com is the eLayaway.com platform recreated for Hispanic merchants and consumers. The site provides the same exclusive technologies offered through eLayaway.com and is managed by a team of bilingual experts.

Principles of Consolidation

The consolidated financial statements include the accounts of eLayaway and its wholly-owned subsidiaries (as of June 30, 2013), eLayaway.com, Pay4Tix, DivvyTech, NuVida, CSP, PrepayGetaway (inactive), PlanItPay (inactive) and majority-owned subsidiary eLayaway Australia Pty, Ltd. (inactive). All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited consolidated financial statements include the valuation and purchase price allocation of assets acquired and liabilities assumed in business combination, amortization period for intangible assets, valuation and impairment valuation of intangible assets, depreciable lives of the web site and property and equipment, valuation of warrants and beneficial conversion features, valuation of derivatives, valuation of share-based payments and the valuation allowance on deferred tax assets.

Discontinued Operations

As a result of an agreement dated October 1, 2012 with a third party, the operations of CSP will be reflected as a discontinued operation.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash, accounts payable, accrued expenses, deposits received from customers for layaway sales and short term loans the carrying amounts approximate fair value due to their short maturities.

We follow accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

We currently measure and report at fair value our intangible assets (due to our impairment analysis) and derivative liabilities. The fair value of intangible assets has been determined using the present value of estimated future cash flows method. The fair value of derivative liabilities is measured using the Black-Scholes option pricing method. The following table summarizes our non-financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2013:

	Balance at		Quoted Prices in Active Markets		Significant Other		Significant
	June 30,		for Identical		Observable		Unobservable
	2013		Assets		Inputs		Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Trademarks	$	3,736	$	-	$	-	$	3,736
Total Financial Assets	$	3,736	$	-	$	-	$	3,736

Following is a summary of activity through June 30, 2013 of the fair value of intangible assets valued using Level 3 inputs:

Balance at December 31, 2012	$	3,844
Amortization of intangibles		(108	)
Ending balance at June 30, 2013	$	3,736

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis at June 30, 2013:

	Balance at		Quoted Prices in Active Markets		Significant Other		Significant
	June 30,		for Identical		Observable		Unobservable
	2013		Assets		Inputs		Inputs
			(Level 1)		(Level 2)		(Level 3)
Liabilities:
Derivative Liabilities	$	53,570	$	-	$	-	$	53,570
Total Financial Assets	$	53,570	$	-	$	-	$	53,570

Following is a summary of activity through June 30, 2013 of the fair value of derivative liabilities valued using Level 3 inputs:

Balance at December 31, 2012	$	70,704
Change in fair value during the period ended June 30, 2013		(17,134)
Ending balance at June 30, 2013	$	53,570

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

Net Earnings (Loss) Per Share

In accordance with ASC 260-10, “Earnings Per Share”, basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Dilutive common stock equivalent shares which may dilute future earnings per share as of June 30, 2013 consist of warrants to purchase 6,523,720 at June 30, 2013 shares of common stock, employee options to purchase 781,372 shares of common stock and convertible notes convertible into 6,530,472,989 common shares. Equivalent shares are not utilized when the effect is anti-dilutive (see Note 8).

Segment Information

In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information,” the Company is required to report financial and descriptive information about its reportable operating segments. The Company does not have any operating segments as of June 30, 2013 and 2012.

Effect of Recent Accounting Pronouncements

The Company reviews new accounting standards as issued. No new standards had any material effect on these unaudited consolidated financial statements. The accounting pronouncements issued subsequent to the date of these unaudited consolidated financial statements that were considered significant by management were evaluated for the potential effect on these unaudited consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these unaudited consolidated financial statements as presented and does not anticipate the need for any future restatement of these unaudited consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to June 30, 2013 through the date these unaudited consolidated financial statements were issued.

NOTE 2 – BUSINESS ACQUISITIONS AND DISPOSITIONS

On February 7, 2012, with an effective date of February 1, 2012, the Company acquired all of the voting capital stock of Centralized Strategic Placements, Inc. (“CSP”) in exchange for a commitment for 4,280,000 shares of common stock of the Company, 1,070,000 issuable at the date of the execution of the agreement, 1,070,000 issuable on August 1, 2012, 1,070,000 issuable on February 1, 2013, and 1,070,000 issuable on August 1, 2013. The shares were issued to Richard St. Cyr (“St. Cyr”) and Douglas Pinard (“Pinard”), the co-owners of CSP. Additionally, $3,000 in cash was paid to each of the co-owners of CSP and Convertible Promissory Notes were issued in the amount of $57,000 each to both owners. The Company recorded the transaction at $248,400, which is based on the 4,280,000 shares valued at the previous day closing price of our common stock of $0.03, or $128,400, the cash balance paid of $6,000, and the two promissory notes for a combined amount of $114,000. The two promissory notes were in default as of August 1, 2012 (see Note 4). CSP is a strategic acquisition as it owns proprietary technology in regards to an online shopping mall and has contracts with various federal government agencies, including, but not limited to, the Army Air Force Exchange Service, which in total has approximately fourteen million members in the various government agencies including the United States military.

The purchase price was allocated first to record identifiable acquired assets and assumed liabilities at fair value as follows:

Current assets	$	13,002
Property and equipment		24,220
Other assets		346
Website technology intangibles		249,840
Total assets acquired		287,408
Liabilities assumed		(39,008	)
Total purchase price	$	248,400

On October 1, 2012, the Company, through an Asset Purchase Agreement with Channel Worth Holdings, LLC (“Channel Worth”), sold certain assets owned by CSP. Channel Worth acquired the technology of CSP and the respective operations of CSP. The Company and Channel Worth entered into an agreement whereas Channel Worth would provide on a long-term basis, the services of the operation independently of CSP and/or the Company. In exchange for the services, the principal of Channel Worth, St. Cyr, forgave $40,000 of the note payable of $57,000 and the related accrued interest due to him, as well as any accounts payable. See Notes 1, 2, 4, 6 and 8. Channel Worth entered into an agreement with the Company whereas it would independently provide the services that were previously in house.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

Disposition of Centralized Strategic Placements, Inc.

The operations of CSP were transferred to Channel Worth on October 1, 2012 in order to facilitate the growth quicker via a third party and to settle on the outstanding liabilities associated with the original acquisition. The consideration to be received for the transfer is 5% of net sales by Channel Worth for two years. Therefore, due to the transfer of the assets of CSP to the third party, the accounting for CSP in this period and historically would be classified as a discontinued operation. Accordingly, the Company has excluded results for CSP from its continuing operations in the Consolidated Statement of Operations for all periods presented.

NOTE 3 – GOING CONCERN

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company sustained net losses from continuing operations of $3,582,983 (includes $159,978 of stock-based compensation and settlements and $2,397,987 of loss on conversion of notes payable) and used cash in continuing operations operating activities of $136,622 for the six months ended June 30, 2013. The Company had a working capital deficiency, stockholders’ deficiency and accumulated deficit of continuing operations of $2,291,484, $2,285,258 and $22,169,840, respectively, at June 30, 2013. In addition, the Company was in default on thirty-three promissory notes totaling $1,829,329 at June 30, 2013. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from third parties to sustain its current level of operations. The Company is in the process of securing working capital from investors for common stock, convertible notes payable, and/or strategic partnerships. No assurance can be given that the Company will be successful in these efforts.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 4 – NOTES AND CONVERTIBLE NOTES PAYABLE, AND NOTES PAYABLE RELATED PARTIES, NET OF DISCOUNTS AND PREMIUMS

Notes and convertible notes payable, net of discounts and premiums, all classified as current at June 30, 2013 and December 31, 2012, consists of the following:

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

Notes and convertible notes,
net of discounts	June 30, 2013									December 31, 2012
								Principal,									Principal,
			Unamortized			Put		net of				Unamortized			Put		net of
	Principal		Discount			Premium		Discounts		Principal		Discount			Premium		Discounts
Gary Kline (1) (2)	$	56,000	$	-		$	-	$	56,000	$	56,000	$	-		$	-	$	56,000
Gary Kline (1)		55,000		-			-		55,000		55,000		-			-		55,000
Gary Kline (1)		75,000		-			-		75,000		75,000		-			-		75,000
Gary Kline (1)		23,500		-			-		23,500		23,500		-			-		23,500
James E. Pumphrey (1)		25,883		-			-		25,883		25,883		-			-		25,883
Evolution Capital, LLC (1) (2)		15,000		-			-		15,000		25,000		-			-		25,000
Evolution Capital, LLC (1) (2)		75,000		-			-		75,000		75,000		-			-		75,000
Evolution Capital, LLC (1)		22,750		-			-		22,750		-		-			-		-
Evolution Capital, LLC (1)		20,255		-			-		20,255		-		-			-		-
Evolution Capital, LLC (1)		36,580		-			-		36,580		-		-			-		-
Evolution Capital, LLC (1)		12,990		-			-		12,990		-		-			-		-
Marina Development, LLC (1) (2)		-		-			-		-		19,350		-			-		19,350
Keith Sazer (1) (2)		-		-			-		-		5,250		-			-		5,250
Hanson Capital, LLC (1) (2)		100,000		-			-		100,000		100,000		-			-		100,000
Asher Enterprises, Inc. (2)		31,700		1			27,155		58,856		37,500		(18,103	)		27,155		46,552
Asher Enterprises, Inc. (2)		53,000		1			38,379		91,380		53,000		(38,379	)		38,379		53,000
Asher Enterprises, Inc. (2)		32,500		(3,922	)		23,534		52,112		-		-			-		-
KAJ Capital, LLC (1) (2)		10,000		-			-		10,000		25,000		-			-		25,000
Robert Salie - Line of Credit (1) (2)		400,000		(2,805	)		-		397,195		400,000		(2,805	)		-		397,195
Salie Family Limited Partnership (1) (2)		50,000		-			-		50,000		50,000		-			-		50,000
Transfer Online, Inc. (1)		15,400		-			-		15,400		15,400		-			-		15,400
Transfer Online, Inc. (1)		25,000		-			-		25,000		25,000		-			-		25,000
Transfer Online, Inc. (1)		35,000		-			-		35,000		35,000		-			-		35,000
Transfer Online, Inc. (1)		45,000		-			-		45,000		45,000		-			-		45,000
Transfer Online, Inc. (1)		55,000		-			-		55,000		55,000		-			-		55,000
Douglas Pinard (1)		20,000		-			-		20,000		20,000		-			-		20,000
Richard St. Cyr (1)		17,000		-			-		17,000		17,000		-			-		17,000
Susan Jones (1)		58,333		-			-		58,333		58,333		-			-		58,333
SGI Group, LLC (1) (2)		-		-			-		-		6,419		-			-		6,419
Ventana Capital Partners, Inc. (1)		20,000		-			-		20,000		20,000		-			-		20,000
Star City Capital, LLC (1) (2)		-		-			-		-		20,000		-			-		20,000
Southridge Partners II, LP (1) (2)		-		-			-		-		155,525		-			-		155,525
Southridge Partners II, LP (1) (2)		-		-			-		-		45,000		-			-		45,000
Southridge Partners II, LP (1) (2)		40,900		-			-		40,900		55,300		-			-		55,300
WHC Capital, LLC (1) (2)		-		-			-		-		24,909		-			-		24,909
Southridge Partners II, LP (1) (2)		-		-			-		-		11,375		-			-		11,375
Southridge Partners II, LP (2)		-		-			-		-		25,000		-			-		25,000
Total	$	1,426,791	$	(6,725	)	$	89,068	$	1,509,134	$	1,659,744	$	(59,287	)	$	65,534	$	1,665,991

(1) In default.
(2) Convertible.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

Notes, convertible notes, and
lines of credit payable to
related parties, net of discounts	June 30, 2013								December 31, 2012
							Principal,								Principal,
			Unamortized		Put		net of				Unamortized		Put		net of
	Principal		Discount		Premium		Discounts		Principal		Discount		Premium		Discounts
Bruce Harmon (1)	$	157,260	$	-	$	-	$	157,260	$	157,260	$	-	$	-	$	157,260
Bruce Harmon (1)		10,000		-		-		10,000		10,000		-		-		10,000
Bruce Harmon (1)		52,010		-		-		52,010		-		-		-		-
Bruce Harmon (1)		15,000		-		-		15,000		-		-		-		-
Bruce Harmon (1)		15,000		-		-		15,000		-		-		-		-
Bruce Harmon (1)		10,138		-		-		10,138		-		-		-		-
Lakeport Business Services, Inc. (1)		47,235		-		-		47,235		47,235		-		-		47,235
Lakeport Business Services, Inc. - Line of Credit (1) (2)		213,095		-		-		213,095		213,095		-		-		213,095
Total	$	519,738	$	-	$	-	$	519,738	$	427,590	$	-	$	-	$	427,590

(1) In default.
(2) Convertible.

On September 22, 2010, the Company issued a Promissory Note with the Salie Family Limited Partnership, which is controlled by Dr. Salie, for $50,000. The principal is due in one year or upon the receipt by the Company of $450,000 in common stock sales, whichever comes first. Interest accrues at the rate of 12%. As a condition of the financing, the Company issued 100,000 warrants in 2010 and, 25,000, 25,000, 25,000, 75,000, and 100,000 warrants in 2011 for common stock at the exercise price of $0.33, $0.25, $0.11, $0.11, $0.07, and $0.07 per share, respectively. The warrants have a five year life. The Company recorded $18,394 in 2010 and $23,500 in 2011 for the relative fair value of the warrants as a Debt Discount which was to be amortized over the term of the one year note. The values in 2011 were based upon Black-Scholes computations with the following ranges of assumptions: Volatility 135% to 143%, interest rate 0.445% to 0.86%, expected term of 5 years and stock prices from $0.06 to $$0.13. On October 29, 2010, as a condition of the Revolving Credit Agreement with Dr. Salie and due to the lack of performance by the Company, this note was amended to add a conversion feature at a price based on the 10 day VWAP of the Company as of January 10, 2011 or $0.10, whichever is greater. On January 10, 2011, the conversion rate was, based on the formula, set at $0.10. The modification of the note qualified as a debt extinguishment for accounting purposes due to the addition of the conversion feature and accordingly all remaining warrant debt discount on the modification date was expensed. This note is in default. In January 2013, Dr. Salie filed a lawsuit regarding this note (see Note 6).

On October 29, 2010, the Company executed a Revolving Credit Agreement ("LOC") with Dr. Salie in the amount of $250,000. This LOC was increased to $500,000 on February 9, 2011. The agreement, as extended in November 2011, expires on October 28, 2012 and bears interest at the rate of 12% which accrues until maturity. As of December 31, 2012, the balance was $400,000. This LOC contains a conversion provision whereby the conversion price is $0.10 which was set on January 10, 2011. At that date the exercise price exceeded the quoted stock price and therefore there was no beneficial conversion value to record. On September 12, 2011, a portion of this LOC, $150,000, was purchased by a third party. Simultaneous with the acquisition of this portion of the LOC, that portion was converted to 1,500,000 shares of common stock (see Note 10 and 12). Dr. Salie loaned another $150,000 under the LOC in September 2011. The Company recorded $60,000 as a debt discount related to the beneficial conversion feature of the additional $150,000, which is amortized over the remaining term of the LOC. This note is in default. In January 2013, Dr. Salie filed a lawsuit regarding this note (see Note 6).

On October 26, 2011, the Company entered into a six month convertible note with Evolution Capital, LLC (“Evolution”), in the amount of $50,000. The interest, which accrues, is at a rate of 12% per annum. The conversion feature is the lesser of $0.09 or 70% of the closing price prior to conversion. There was a $5,000 fee to the lender for legal expenses and related expenses for the closing of the note which was recorded as debt discounts and is being amortized over the debt term. Evolution was issued 55,556 shares of restricted common stock in lieu of the fees. The shares were issued using the closing price of the previous day of $0.09. The convertible note contains an embedded derivative to be bifurcated from the note and reported as a liability at fair value (see Note 8). On August 27, 2012, Evolution converted $25,000 of this note into 3,246,753 shares of common stock at the discounted rate of $0.0077 whereas the closing price on the previous day was $0.011. The Company recognized a loss on conversion of $10,714. In 2012, the ownership of the note was assigned to Buko-Evolution, LLC. On May 17, 2013, Buko-Evolution, LLC converted $10,000 into 187,657,400 shares of common stock (see Note 8) at a conversion rate of $0.00005. A loss of $88,829 was recognized. As of June 30, 2013, this note is in default and has a balance of $15,000.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

On January 30, 2012, the Company entered into a six month convertible note with KAJ Capital, LLC (“KAJ”), in the amount of $25,000. The interest, which accrues, is at a rate of 12% per annum. The conversion feature is the lesser of $0.036 or 70% of the closing price prior to conversion. There was a $2,500 fee to a third party for legal expenses and related expenses for the closing of the note which was recorded as debt issue costs to be amortized over the debt term. The third party was issued 69,444 shares of restricted common stock in lieu of the fees. The shares were issued using the average of the closing price of the previous two days of $0.03 and $0.042. The convertible note contains an embedded derivative to be bifurcated from the note and reported as a liability at fair value. On March 28, 2013, KAJ converted $15,000 of the note into 107,142,857 shares of common stock (see Note 8) at a 30% discount, $0.00014, at a loss on conversion of $92,143. The shares were recorded as issuable as of June 30, 2013. This note is in default. As of June 30, 2013, the note has a principal balance of $10,000.

On March 30, 2012, the Company entered into a convertible promissory note with Southridge in the amount of $25,000, in exchange for legal services in regards to the Equity Purchase Agreement (see Note 7 and 12). The note is due on April 1, 2013 and can be converted at the option of the holder at any time after six months from the date of the note. The interest, which accrues, is at a rate of 8% per annum, and is convertible. The conversion feature is at the current market price, defined as the average of the two lowest closing bid prices, with a 30% discount. The note is considered a stock settlement debt since any future stock issued upon conversion will have a fair market value of $35,714. The Company therefore accreted a premium of $10,714 into interest expense over the six months to the first conversion date of the note. On February 26, 2013, Southridge sold the note principal of $25,000 to Momoma Capital, LLC (“Momoma Capital”).

On September 27, 2012, Star City Capital, LLC (“Star City”) converted $12,200 of its $30,000 note into 8,413,793 shares of common stock at the discounted conversion price of $0.00145. On October 12, 2012, due to the reset clause in the note, an additional 5,939,148 shares of common stock were issued. The Company recognized a loss of $5,939 for the additional issuance. On November 5, 2012, Star City converted $6,300 of principal and $85 of accrued interest of its note into 8,513,180 shares of common stock at the discounted conversion price of $0.00075. On November 16, 2012, Star City converted $6,500 of principal and $85 of accrued interest of its note into 18,889,371 shares of common stock at the discounted conversion price of $0.00035. On December 5, 2012, Star City converted $5,000 of principal and $120 of accrued interest of its note into 3,938,246 shares of common stock at the discounted conversion price of $0.0013 at a gain on conversion of $1,182. On December 20, 2012, due to the reset clause in the note, an additional 3,754,061 shares of common stock were to be issued. They were not issued until January 2013. The Company recognized a loss of $3,754 for the additional issuance. As of December 20, 2012, the note was fully converted.

On October 22, 2012, Star City purchased $20,000 of the Kline note. On February 11, 2013, Star City converted $20,000 of principal and $744 of accrued interest of the note into 82,974,160 shares of common stock (see Note 8) at a 50% discount, $0.00025, at a loss on conversion of $62,231. The balance as of June 30, 2013 is $0.

On October 24, 2012, the Company entered into a convertible note with Asher in the amount of $37,500. The note matures on July 26, 2013 and may be converted at any time after 180 days from the date of the note. The interest, which accrues, is at a rate of 8% per annum. The conversion feature is at the average of the lowest three days trading price for the Company’s common stock during the ten trading day period ending on the day prior to conversion, less a discount of 42%. There was a $2,500 fee to a third party for legal expenses and related expenses for the closing of the note which was recorded as debt issue costs to be amortized over the debt term. The note is considered a stock settled debt since any future stock issued upon conversion will have a fair market value of $64,655. The Company therefore is accreting a premium of $27,155 into interest expense over the 180 day period to the first conversion date of the note. On May 1, 2013, Asher converted $5,800 into 96,666,667 shares of common stock (see Note 8) at a conversion rate of $0.00006. A loss of $52,703 was recognized. As of June 30, 2013, the remaining balance was $31,700.

On November 8, 2012, Southridge purchased $50,000 of the Evolution note dated December 1, 2011. On December 5, 2012, Southridge converted $19,300 of the note into 32,166,667 shares of common stock at a 50% discount, $0.0006, at a loss on conversion of $12,867 on the conversion. On December 11, 2012, Southridge converted $19,325 of the note into 32,208,333 shares of common stock at a 50% discount, $0.0006, at a loss on conversion of $12,883 on the conversion. On January 3, 2013, Southridge converted $11,375 of the note into 18,958,333 shares of common stock (see Note 8) at a 50% discount, $0.0006. A loss on conversion of $15,167 was recognized. On January 9, 2013, under the reset clause of the note, Southridge was issued an additional 3,791,667 shares of common stock (see Note 8) at a loss of $3,792. The note was fully converted as of June 30, 2013.

On November 20, 2012, SGI Group purchased $15,419 of the TOL note dated June 28, 2011. On December 12, 2012, SGI Group converted $9,000 of principal and $68 of accrued interest of the note into 15,113,467 shares of common stock at a 50% discount, $0.0006, at a loss on conversion of $6,045 on the conversion. On February 7, 2013, SGI Group converted $6,419 of principal and $169 of accrued interest of the note into 26,351,200 shares of common stock (see Note 8) at a 50% discount, $0.00025, at a loss on conversion of $19,763. The balance as of June 30, 2013 is $0.

On February 11, 2013, under the reset clause of the note, Mauriello was issued an additional 14,278,266 shares of common stock (see Note 8) at a loss of $14,278. As of June 30, 2013, the note was fully converted.

On November 20, 2012, Sazer purchased $8,500 of the Kline note dated April 6, 2010. On November 23, 2012, Sazer converted $3,250 of principal and $4 of accrued interest of the note into 9,297,943 shares of common stock at a 50% discount, $0.00035, at a loss on conversion of $6,044 on the conversion. On February 11, 2013, Sazer converted $5,250 of principal and $145 of accrued interest of the note into 10,790,640 shares of common stock (see Note 8) at a 50% discount, $0.00025, at a loss on conversion of $5,395. As of June 30, 2013, the balance of the note was $0.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

On November 30, 2012, Southridge purchased and was assigned $60,126, $35,126, and $60,273 of principal and accrued interest from the Benchmark note dated October 26, 2011, the Evolution note dated October 26, 2011, and the Evolution note dated December 1, 2011, respectively, for a total of $155,525. On January 3, 2013, Southridge converted $22,750 of the principal into 37,916,667 shares of common stock (see Note 8) at a 50% discount, $0.006. A loss on conversion of $15,167 was recognized. On January 28, 2013, under the reset clause of the note, Southridge was issued an additional 5,183,333 shares of common stock (see Note 8) at a loss of $5,183. On February 20, 2013, Southridge converted $20,255 of the principal into 81,008,219 shares of common stock (see Note 8) at a 50% discount, $0.00025. A loss on conversion of $60,753 was recognized. On February 27, 2013, under the reset clause of the note, Southridge was issued an additional 20,255,000 shares of common stock (see Note 8) at a loss of $60,753. On February 27, 2013, Southridge converted $12,150 of the principal into 60,750,000 shares of common stock (see Note 8) at a 50% discount, $0.002. A loss on conversion of $48,600 was recognized. On March 12, 2013, Southridge converted $24,430 of the principal into 122,150,000 shares of common stock (see Note 8) at a 50% discount, $0.0002. A loss on conversion of $97,720 was recognized. On March 18, 2013, under the reset clause of the note, Southridge was issued an additional 40,716,667 shares of common stock (see Note 8) at a loss of $40,717. On March 18, 2013, Southridge converted $12,990 of the principal into 86,600,000 shares of common stock (see Note 8) at a 50% discount, $0.00015. A loss on conversion of $73,610 was recognized. On March 22, 2013, Southridge converted $19,100 of the principal into 127,333,333 shares of common stock (see Note 8) at a 50% discount, $0.00015. A loss on conversion of $108,233 was recognized. On April 1, 2013, Southridge converted $13,010 of the principal into 130,100,000 shares of common stock (see Note 10) at a 50% discount, $0.0001. A loss on conversion of $58,545 was recognized. On April 1, 2013, under the reset clause of the note, Southridge was issued an additional 63,666,667 shares of common stock (see Note 8) at a loss of $63,667. On April 10, 2013, Southridge converted $9,440 of the principal into 188,800,000 shares of common stock (see Note 8) at a 50% discount, $0.00005. A loss on conversion of $89,680 was recognized. On April 15, 2013, Southridge converted $11,125 of the principal into 222,500,000 shares of common stock (see Note 8) at a 50% discount, $0.00005. A loss on conversion of $105,688 was recognized. On April 22, 2013, Southridge converted $9,975 of the principal into 199,500,000 shares of common stock (see Note 8) at a 50% discount, $0.00005. A loss on conversion of $94,763 was recognized. As of June 30, 2013, the principal balance of the note was $0.

On December 4, 2012, Southridge purchased $55,300 of the Reserve note. The balance as of December 31, 2012 is $55,300. On February 11, 2013, Southridge converted $14,400 of the note into 81,008,219 shares of common stock (see Note 8) at a 50% discount, $0.00025. A loss on conversion of $66,608 was recognized. As of June 30, 2013, the principal balance of the note was $40,900.

On December 4, 2012, Marina $25,000 of the TOL note dated June 28, 2011. On December 11, 2012, Marina converted $5,650 principal and $13 of accrued interest of the note into 9,438,367 shares of common stock at a 50% discount, $0.0006, at a loss on conversion of $3,775 on the conversion. On January 23, 2013, Marina converted $15,000 principal and $247 of accrued interest of the note into 30,493,151 shares of common stock (see Note 8) at a 50% discount, $0.0005, at a loss on conversion of $15,247. On February 12, 2013, Marina converted $4,350 principal and $100 of accrued interest of the note into 17,800,438 shares of common stock (see Note 8) at a 50% discount, $0.00025, at a loss on conversion of $13,350. As of June 30, 2013, the note had a balance of $0.

On December 13, 2012, WHC purchased $35,000 of the TOL note. On December 27, 2012, WHC converted $10,091 of the note into 17,828,609 shares of common stock (see Note 12) at a 50% discount, $0.00057, at a loss on conversion of $7,738. On January 10, 2013, WHC converted $10,536 of the principal and $315 of accrued interest of the note into 20,359,000 shares of common stock (see Note 8) at a 50% discount, $0.00053, at a loss on conversion of $9,508. On January 18, 2013, WHC converted $10,700 of the note into 21,400,000 shares of common stock (see Note 8) at a 50% discount, $0.00025, at a loss on conversion of $10,700. On February 5, 2013, WHC converted $3,673 of the note into 11,019,480 shares of common stock (see Note 8) at a 50% discount, $0.000333, at a loss on conversion of $7,346. As of June 30, 2013, the note had a balance of $0.

On December 21, 2012, the Company entered into a convertible note with Asher in the amount of $53,000. The note matures on September 26, 2013 and may be converted at any time after 180 days from the date of the note. The interest, which accrues, is at a rate of 8% per annum. The conversion feature is at the average of the lowest three days trading price for the Company’s common stock during the ten trading day period ending on the day prior to conversion, less a discount of 42%. There was a $3,000 fee to a third party for legal expenses and related expenses for the closing of the note which was recorded as debt issue costs to be amortized over the debt term. The note is considered a stock settled debt since any future stock issued upon conversion will have a fair market value of $91,379. The Company therefore is accreting a premium of $38,379 into interest expense over the 180 day period to the first conversion date of the note. The funding of the note was on January 2, 2013 therefore the $50,000 was recorded as a receivable as of December 31, 2012.

On December 28, 2012, Southridge purchased $45,000 of the TOL note dated June 28, 2011. On January 28, 2013, Southridge converted $28,100 of the note into 62,444,444 shares of common stock (see Note 8) at a 50% discount, $0.00045. A loss on conversion of $34,344 was recognized. On February 5, 2013, Southridge converted $7,650 of the note into 25,500,000 shares of common stock (see Note 8) at a 50% discount, $0.0003. A loss on conversion of $17,850 was recognized. On February 6, 2013, Southridge converted $5,750 of the note into 23,000,000 shares of common stock (see Note 8) at a 50% discount, $0.00025. A loss on conversion of $17,250 was recognized. On March 5, 2013, Southridge converted $20,375 of the note into 101,875,000 shares of common stock (see Note 8) at a 50% discount, $0.0002. A loss on conversion of $81,500 was recognized. On May 4, 2013, Southridge converted $8,525 of the note into 170,500,000 shares of common stock (see Note 8) at a 50% discount, $0.00005. A loss on conversion of $80,988 was recognized. The principal balance of the note as of June 30, 2013 was $0.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

On December 31, 2012, the Company entered into a note with TOL for $45,000. The note has an interest rate of 12% and matured on January 7, 2013. The note was in default after the date of this Report.

On January 21, 2013, the Company entered into a note with Harmon for $52,010. The note has an interest rate of 12% and matured on January 24, 2013. The note was in default as of date of this Report.

On January 30, 2013, the Company entered into a note with Evolution for $22,750. The note has an interest rate of 12% and matured on February 7, 2013. The note was in default as of the date of this Report.

On January 31, 2013, the Company entered into a convertible note with Asher in the amount of $32,500. The note matures on November 4, 2013 and may be converted at any time after 180 days from the date of the note. The interest, which accrues, is at a rate of 8% per annum. The conversion feature is at the average of the lowest three days trading price for the Company’s common stock during the ten trading day period ending on the day prior to conversion, less a discount of 42%. There was a $2,500 fee to a third party for legal expenses and related expenses for the closing of the note which was recorded as debt issue costs to be amortized over the debt term. The note is considered a stock settled debt since any future stock issued upon conversion will have a fair market value of $56,034. The Company therefore is accreting a premium of $23,534 into interest expense over the 180 day period to the first conversion date of the note.

On February 15, 2013, the Company entered into a note with Harmon for $15,000 in regards to accrued compensation from January 1, 2013 through February 15, 2013. The note has an interest rate of 12% and matured on February 25, 2013. The note was in default as of the date of this Report.

On February 26, 2013, Momoma Capital purchased from Southridge a note dated March 30, 2012 for $25,000. On February 26, 2013, Momoma Capital converted $13,100 of the principal and $1,825 of accrued interest of the note into 42,641,879 shares of common stock (see Note 8) at a 50% discount, $0.00035, at a loss on conversion of $27,717. On April 3, 2013, Momoma Capital converted $11,900 of the principal and $1,658 of accrued interest of the note into 96,841,603 shares of common stock (see Note 8) at a 50% discount, $0.00014, at a loss of $41,642. As of June 30, 2013, the balance of the note was $0.

On February 27, 2013, the Company entered into a note with Evolution for $20,255. The note has an interest rate of 12% and matured on March 1, 2013. The note was in default after the date of this Report.

On March 11, 2013, the Company entered into a note with Evolution for $36,580. The note has an interest rate of 12% and matured on March 15, 2013. The note was in default after the date of this Report.

On March 22, 2013, the Company entered into a note with Evolution for $19,100. The note has an interest rate of 12% and matured on March 25, 2013. The note was in default after the date of this Report.

On March 28, 2013, the Company entered into a note with Evolution for $62,650. The note has an interest rate of 12% and matured on April 1, 2013. The note was in default after the date of this Report.

On March 31, 2013, the Company entered into a note with Harmon for $15,000 in regards to accrued compensation from February 16, 2013 – March 31, 2013. The note has an interest rate of 12% and matured on April 10, 2013. The note was in default after the date of this Report.

On April 1, 2013, the Company entered into a note with Harmon for $10,138 in regards to accounts payable due to Harmon as of April 1, 2013. The note has an interest rate of 12% and matured on April 10, 2013. The note was in default after the date of this Report.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

NOTE 5 – DERIVATIVES

Embedded Conversion Option Derivatives

Due to the conversion terms of certain promissory notes, the embedded conversion options met the criteria to be bifurcated and presented as derivative liabilities. The Company calculated the estimated fair values of the liabilities for embedded conversion option derivative instruments at the original note inception date and as of June 30, 2013 using the Black-Scholes option pricing model using the share prices of the Company’s stock on the dates of valuation and using the following ranges for volatility, expected term and the risk free interest rate at each respective valuation date, no dividend has been assumed for any of the periods:

	Note Inception Date	June 30, 2013	December 31, 2012
Volatility	251% - 257%	307%	251%
Expected Term	0.17 - 0.5 years	0.17 - 0.67 years	0.08 – 0.46 years
Risk Free Interest Rate	0.33%	0.27%	0.315%

The following reflects the initial fair value on the note inception date and changes in fair value through June 30, 2013:

Note inception date fair value allocated to debt discount	$	483,317
Note inception date fair value allocated to other expense		23,132
Change in fair value in 2011- (gain) loss		(73,402	)
Embedded conversion option derivative liability fair value on December 31, 2011		433,047
Change in fair value in 2012-(gain) loss		(368,762	)
Embedded conversion option derivative liability fair value on December 31, 2012		64,285
Change in fair value for the six months ended June 30, 2013 – (gain) loss		(10,715	)
Embedded conversion option derivative liability fair value on June 30, 2013	$	53,570

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Legal Matters

In December 2011, the Board of Directors and the majority of the shareholders of the Company terminated for cause, Douglas Salie, the CEO, Chairman and member of the Board of Directors. Mr. Salie has indicated that he believes his termination was wrongful. On or about May 6, 2012, a Company employee received a telephone call from Mr. Salie stating that the Company would have to answer for his termination. The Company firmly believes that its actions were justified, and no legal proceeding has been filed.

In October 2012, Douglas Pinard, a former owner of CSP (see Note 2, 4, 6 and 8), resigned from the Company. Certain monies were due to Mr. Pinard related to accrued payroll and notes payable. Mr. Pinard threatened litigation whereas both parties agreed upon a settlement requiring the Company to pay Mr. Pinard a settlement of $40,000 for those liabilities. The Company paid Mr. Pinard $20,000 according to the conditions of the settlement agreement. The Company then notified Mr. Pinard that in its opinion, Mr. Pinard had allegedly breached the settlement agreement by not returning all of the Company’s assets which Mr. Pinard had in his possession at the time of termination. Therefore, the final $20,000 was not paid to Mr. Pinard. Due to the nonpayment, Mr. Pinard alleges that the Company breached the settlement agreement. Mr. Pinard indicated that he would seek legal recourse. As of the date of this report, no further actions have been taken by Mr. Pinard.

In January of 2013, Dr. Robert Salie, father of former chief executive officer and chairman, Douglas Salie, who was terminated for cause, filed a suit, Robert Salie and Salie Family Limited Partnership v eLayaway, Inc. , in the Circuit Court for the Second Judicial Circuit in and for Leon County, Florida, Civil Division. The lawsuit is in regards to two notes payable with claims of approximately $565,000 in principal and accrued interest. A hearing is scheduled for May 21, 2013. In October 2012, the Company offered Dr. Salie a principal and interest repayment plan utilizing a third party, but Dr. Salie rejected the Company’s offer. On June 19, 2013, a Plantiffs’ Motion For Default Judgment was filed.

In March 2013, ASC Recap, LLC (“ASC”) filed a Joint Motion for Approval of Settlement Agreement and Stipulation, and Request for Fairness Hearing in the Circuit Court of the Second Judicial Circuit in and for Leon County, Florida, Case No. 2012-CA-4074. ASC has contracted with various note holders of the Company to acquire their debt and subsequently converting the debt to common stock of the Company. The Company has agreed to these terms as the acquisition of these debts and subsequent conversion would alleviate a majority of the Company’s liabilities thereby putting the Company in a better position to facilitate growth. The amount of the proposed purchases is approximately $1.2 million. A hearing was held on May 14, 2013 and the joint motion was approved.

Other

On March 30, 2012, the Company and Southridge entered into an Equity Purchase Agreement. Pursuant to this Equity Purchase Agreement, the Investor shall commit to purchase up to Ten Million Dollars ($10,000,000) of our common stock over the course of twenty four (24) months commencing on the agreement date but the company may not put a purchase to Southridge until the effective date of the initial Registration Statement (as defined below) covering the Registrable Securities (as defined below) pursuant to the Equity Purchase

Agreement. The put option price is ninety-two percent (92%) of the average of two lowest closing prices of any two applicable trading days during the five (5) trading day period commencing the date a put notice is delivered to the Investor in a manner provided by the Equity Purchase Agreement.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

The “Registrable Securities” include the Put Shares, any Blackout Shares (each as defined in the Equity Purchase Agreement) and any securities issued or issuable with respect to any of the foregoing by way of exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise.

We are obligated to file a registration statement (the “Registration Statement”) with the U.S. Securities and Exchange Commission (the “SEC’) to cover the Registrable Securities after the execution of the Equity Purchase Agreement. The amount of the Registrable Securities required to be included in the initial Registration Statement shall be no less than 100% of the maximum amount of common stock permitted by the SEC to be included in a Registration Statement pursuant to Rule 415 (the “Rule 415 Amount”) promulgated under the Securities Act of 1933, as amended (the “Act”), and shall file additional Registration Statement(s) to register additional Rule 415 Amounts until all the Registrable Securities are registered (see Note 10).

In connection with the Equity Purchase Agreement, the Company paid the Investor a fee of $25,000 as a convertible promissory note which has interest of 8% per annum and matures on April 1, 2013 (see Note 4).

NOTE 7 – RELATED PARTIES

Bruce Harmon, CFO and Chairman of the Company, is a note holder of the Company (see Note 4). Line of credit and notes payable of $509,600 and $427,590 was due to our CFO’s company and himself personally at June 30, 2013 and December 31, 2012, respectively, for advances to the Company. At June 30, 2013 and December 31, 2012, the Company had accounts payable to Mr. Harmon of $18,209 and $14,681, respectively, and accrued interest of $55,536 and $33,563, respectively.

On April 8, 2013, Harmon converted 5,812,517 shares of Series E preferred stock and 9,848,432 shares of Series F preferred stock, collectively on a 1:1 basis, into 15,660,949 shares of common stock (see Note 8).

On April 8, 2013, Pinon converted 251,006 shares of Series E preferred stock on a 1:1 basis into 251,006 shares of common stock (see Note 8).

NOTE 8 – STOCKHOLDERS’ DEFICIENCY

Preferred Stock

The Company authorized 50,000,000 shares of preferred stock and has designated seven Series as Series A, B, C, D, E, F and G. Series A, B, C and D of preferred stock are non-voting and have liquidation preference over common stock with liquidation preference value equal to the price paid for each preferred share. The Series A, B, C and D preferred stock are mandatorily and automatically convertible on a one for one basis to common stock upon the earlier of (i) the effectiveness of the sale of the Company’s common stock in a firm commitment, underwritten public offering registered under the Securities Act of 1933, as amended, other than a registration relating solely to a transaction under rule 145 under the Securities Act or to an employee benefit plan of the corporation, with aggregate proceeds to the Company and/or selling stockholders (prior to deduction of underwriter commissions and offering expenses) of at least $20,000,000, (ii) a sale of substantially all assets of the Company, (iii) the event whereby the average closing price per share of common stock of the Company, as reported by such over-the-counter market, interdealer quotation service or exchange on which shares of common stock of the Company are primarily traded (if any), equals or is greater than $10.00 per share, for thirty (30) consecutive trading days or (iv) twelve months after the April 12, 2010 merger. Upon the automatic conversion of Series A, B, C, and D preferred stock to common stock, the shares are entitled to piggyback registration rights.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

On August 12, 2010, the Company’s Board of Directors approved the filing of a Certificate of Designation of the Preferences and Rights of Series E Preferred Stock of eLayaway, Inc. (“Certificate of Designation”) with the Department of State of the State of Delaware authorizing the creation of a new series of preferred stock designated as “Series E Preferred Stock” pursuant to the authority granted to the Board of Directors under the Company’s Amended and Restated Certificate of Incorporation and Section 151 of the Delaware General Corporation Law. The Certificate of Designation was filed with the Delaware Department of State on August 13, 2010. The Certificate of Designation created 2,500,000 shares of Series E Preferred Stock. Each holder of Series E Preferred Stock will be entitled to participate in dividends or distributions payable to holders of the Company’s common stock at a rate of the dividend payable to each share of Common Stock multiplied by the number of shares of Common Stock that each share of such holder’s Series E Preferred Stock is convertible into. Each share of Series E Preferred Stock is convertible, at the option of the holder of the Series E Preferred Stock, into three (3) shares of the Company’s common stock. Shares of the Series E Preferred Stock will be issued to certain officers of the Company as the Board determines if (i) the average closing price per share of the Company’s Common Stock equals or is greater than $50 per share for the preceding 20 trading days, (ii) the Company earns $0.50 per share EBITDA in any twelve consecutive months, (iii) the Company stock is trading on a U.S. Exchange such as AMEX, NASDAQ, or NYSE, or (iv) controlling interest of the Company is acquired by a third party. Each shares of Series E Preferred Stock will be entitled to three (3) votes on all matters submitted to a vote of the stockholders of the Company (“Enhanced Voting Rights”). Upon the liquidation, dissolution or winding up of the Company, the holders of the Series E Preferred Stock will participate in the distribution of the Company’s assets with the holders of the Company’s Common Stock pro rata based on the number of shares of Common Stock held by each (assuming conversion of all shares of Series E Preferred Stock). Due to the Enhanced Voting Rights, following the issuance of shares of Series E Preferred Stock, the holders of the Series E Preferred Stock may be able to exercise voting control over the Company. In such case, the holders of the Series E Preferred Stock may gain the ability to control the outcome of corporate actions requiring stockholder approval, including mergers and other changes of corporate control, going private transactions, and other extraordinary transactions. The concentration of voting control in the Series E Preferred Stock could discourage investments in the Company, or prevent a potential takeover of the Company which may have a negative impact on the value of the Company’s securities. In addition, the liquidation rights granted to the holders of the Series E Preferred Stock will have a dilutive effect on the distributions available to the holders of the Company’s common stock.

On April 12, 2011, the series A, B, C, and D of preferred stock were automatically converted to common stock based upon the twelve month automatic conversion provision.

On September 8, 2011, the Company’s Board of Directors approved the filing of an Amended Certificate of Designation of the Preferences and Rights of Series E Preferred Stock of eLayaway, Inc. (“Amended Certificate of Designation”) with the Department of State of the State of Delaware authorizing the amended terms of the Series E Preferred Stock pursuant to the authority granted to the Board of Directors under the Company’s Amended and Restated Certificate of Incorporation and Section 151 of the Delaware General Corporation Law. The Certificate of Designation was filed with the Delaware Department of State on September 26, 2011. The Certificate of Designation removed the various conditions associated with the issuance, changed the conversion rate to one common share for one preferred share and the voting rights to provide 15 votes for each Series E preferred share. The liquidation preference is the amount paid for the shares.

On March 26, 2012, as approved by the Board of Directors, the Company issued 1,190,476 shares of the Series E Preferred Stock to Susan Jones in exchange for the conversion of accrued payroll in the amount of $30,000. The Series E Preferred Stock is immediately convertible into common stock, therefore the preferred shares are valued at the $0.0252 per share closing price of the common stock on the date prior to this transaction. Accordingly, there is no beneficial conversion value recorded. These shares were converted into common stock on April 4, 2013.

On June 30, 2013, Harmon personally guaranteed approximately $20,000 in debt for the Company. In exchange for the personal guarantee, the board of directors agreed to the following: 1) issue an equivalent amount of Series F Preferred Stock based on the closing trading price on the previous day of $0.0033 or 6,060,606 shares. Harmon’s previous proxy to Mr. Pinon covers these shares also; 2) as a condition of previous conversions into Series E Preferred Stock of accrued payroll to Harmon, he is returning to the Company 2,060,276 shares and the Company will reestablish the liability of $157,260 on its books accordingly as a note payable (see Note 4). It is noted that Harmon has never received any cash compensation for his services for more than three years.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

On January 22, 2013, the Company’s Board of Directors approved the filing of a Certificate of Designation of the Preferences and Rights of Series G Preferred Stock of eLayaway, Inc. (“Certificate of Designation”) with the Department of State of the State of Delaware authorizing the creation of a new series of preferred stock designated as “Series G Preferred Stock” pursuant to the authority granted to the Board of Directors under the Company’s Amended and Restated Certificate of Incorporation and Section 151 of the Delaware General Corporation Law. The Certificate of Designation was filed with the Delaware Department of State on January 22, 2013. The Certificate of Designation created 1,000,000 shares of Series G Preferred Stock. Each holder of Series G Preferred Stock will be entitled to participate in dividends or distributions payable to holders of the Company’s common stock at a rate of the dividend payable to each share of Common Stock multiplied by the number of shares of Common Stock that each share of such holder’s Series G Preferred Stock is convertible into. Each share of Series G Preferred Stock is convertible, at the option of the holder of the Series G Preferred Stock, into one share of the Company’s common stock. Shares of the Series G Preferred Stock will be issued to certain officers of the Company as the Board determines for consideration of financial investment and/or forgiveness of liabilities of the Company to the officer. Each shares of Series G Preferred Stock will be entitled to ten thousand (10,000) votes on all matters submitted to a vote of the stockholders of the Company (“Enhanced Voting Rights”). Upon the liquidation, dissolution or winding up of the Company, the holders of the Series G Preferred Stock will participate in the distribution of the Company’s assets with the holders of the Company’s Common Stock pro rata based on the number of shares of Common Stock held by each (assuming conversion of all shares of Series G Preferred Stock). Due to the Enhanced Voting Rights, following the issuance of shares of Series G Preferred Stock, the holders of the Series G Preferred Stock may be able to exercise voting control over the Company. In such case, the holders of the Series G Preferred Stock may gain the ability to control the outcome of corporate actions requiring stockholder approval, including mergers and other changes of corporate control, going private transactions, and other extraordinary transactions. The concentration of voting control in the Series G Preferred Stock could discourage investments in the Company, or prevent a potential takeover of the Company which may have a negative impact on the value of the Company’s securities. In addition, the liquidation rights granted to the holders of the Series G Preferred Stock will have a dilutive effect on the distributions available to the holders of the Company’s common stock.

On February 25, 2013, the Company issued 1,000,000 shares of Series G Preferred Stock to Sergio Pinon as incentive compensation. The Series G Preferred Stock is immediately convertible into common stock therefore the preferred shares are valued at the $0.0006 per share closing price of the common stock on the date of this transaction or $600.

On April 8, 2013, Harmon converted 5,812,517 shares of Series E preferred stock and 9,848,432 shares of Series F preferred stock, collectively on a 1:1 basis, into 15,660,949 shares of common stock.

On April 8, 2013, Sergio Pinon (“Pinon”) converted 251,006 shares of Series E preferred stock on a 1:1 basis into 251,006 shares of common stock.

Common Stock

The Company is authorized to issue 5,000,000,000 shares of common stock, as amended on April 30, 2012, May 30, 2012, September 27, 2012, and February 22, 2013. The common stock is voting.

On January 3, 2013, 17,828,609 shares were issued to WHC which were recorded as issuable as of December 31, 2013 (see Note 4).

On January 3, 2013, due to a reset clause in the note acquired on November 8, 2012 (see Note 4), Southridge was issued an additional 18,958,333 shares of common stock.

On January 3, 2013, Southridge converted $11,375 of the note dated November 8, 2012, into 18,958,333 shares of common stock (see Note 4) at a 50% discount, $0.0006. A loss on conversion will be recognized.

On January 3, 2013, Southridge converted $22,750 of the note dated November 30, 2012, into 37,916,667 shares of common stock (see Note 4) at a 50% discount, $0.0006. A loss on conversion will be recognized. Due to the deficiency of available shares to be issued at the time, the Company issued 12,000,000 shares on January 10, 2013 and the remaining 25,916,667 on January 24, 2013.

On January 8, 2013, due to a reset clause in the note acquired on September 26, 2012 (see Note 4), Star City was issued an additional 3,754,061 shares of common stock.

On January 9, 2013, due to a reset clause in the note acquired on November 8, 2012 (see Note 4), Southridge was issued an additional 3,791,667 shares of common stock.

On January 11, 2013, 20,358,000 shares of common stock were issued to WHC for a conversion of a note payable in December 2012 (see Note 4) which was recorded as issuable as of December 31, 2012.

On January 18, 2013, WHC converted $10,700 of the note dated December 13, 2012, into 21,400,000 shares of common stock (see Note 4) at a 50% discount, $0.00025.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

On January 23, 2013, Marina converted $15,000 of principal and $246.58 of accrued interest of the note dated December 5, 2012, into 30,493,151 shares of common stock (see Note 4) at a 50% discount, $0.0005.

On January 24, 2013, 14,278,267 shares of common stock were issued to Mauriello in regards to a conversion of a note payable on December 13, 2012 (see Note 4) which were recorded as issuable as of December 31, 2012.

On January 28, 2013, Southridge converted $28,100 of the note dated December 28, 2012, into 62,444,444 shares of common stock (see Note 4) at a 50% discount, $0.00045.

On January 28, 2013, due to a reset clause in the note acquired on September 26, 2012 (see Note 4), Star City was issued an additional 3,754,061 shares of common stock.

On January 28, 2013, due to a reset clause in the note acquired on November 30, 2012 (see Note 7), Southridge was issued an additional 5,183,333 shares of common stock.

On February 4, 2013, due to a reset clause in the note acquired on January 2, 2013 (see Note 4), Southridge was issued an additional 17,841,270 shares of common stock.

On February 5, 2013, Southridge converted $7,650 of the note dated December 28, 2012, into 25,500,000 shares of common stock (see Note 4) at a 50% discount, $0.0003.

On February 5, 2013, WHC converted $3,673 of the note dated December 13, 2012, into 11,019,480 shares of common stock (see Note 4) at a 50% discount, $0.000167.

On February 6, 2013, Southridge converted $5,750 of the note dated December 28, 2012, into 23,000,000 shares of common stock (see Note 4) at a 50% discount, $0.00025.

On February 7, 2013, SGI Group converted $6,419 of principal and $168.80 of accrued interest of the note dated November 20, 2012, into 26,351,200 shares of common stock (see Note 4) at a 50% discount, $0.00025.

On February 11, 2013, due to a reset clause in the note acquired on November 20, 2012 (see Note 4), Mauriello was issued an additional 14,278,266 shares of common stock.

On February 11, 2013, Sazer converted $5,250 of principal and $145.32 of accrued interest of the note dated November 20, 2012, into 10,790,640 shares of common stock (see Note 4) at a 50% discount, $0.00025.

On February 11, 2013, Southridge converted $14,400 of the note dated December 4, 2012, into 81,008,219 shares of common stock (see Note 4) at a 50% discount, $0.00025.

On February 11, 2013, Star City converted $20,000 of principal and $743.54 of accrued interest of the note dated October 22, 2012, into 82,974,160 shares of common stock (see Note 4) at a 50% discount, $0.00025.

On February 20, 2013, Southridge converted $20,255 of the note dated November 30, 2012, into 81,020,000 shares of common stock (see Note 4) at a 50% discount, $0.00025.

On February 26, 2013, Momoma Capital converted the $14,925 into 42,641,879 shares of common stock at a discount of 30%, $0.00035 (see Note 4).

On February 27, 2013, due to a reset clause in the note acquired on November 30, 2012 (see Note 4), Southridge was issued an additional 20,255,000 shares of common stock.

On February 27, 2013, Southridge converted $12,150 of the note dated November 30, 2012, into 60,750,000 shares of common stock (see Note 4) at a 50% discount, $0.0002.

On March 5, 2013, Southridge converted $20,375 of the note dated December 28, 2012, into 101,875,000 shares of common stock (see Note 4) at a 50% discount, $0.0002.

On March 6, 2013, the Board of Directors approved the grant of common stock to the officers and directors of the Company in consideration of the dilution of the Company’s outstanding common stock. Mr. Pinon and Mr. Harmon, the CEO and CFO, respectively, were each granted 50,000,000 shares of restricted common stock.

On March 6, 2013, the Board of Directors approved the compensation for 2013 for Vincent & Rees, legal counsel for the Company, thereby granting Vincent & Rees 50,000,000 shares of restricted common stock. Mr. Rees is a director of the Company.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

On March 12, 2013, Southridge converted $24,430 of the note dated November 30, 2012, into 122,150,000 shares of common stock (see Note 4) at a 50% discount, $0.0002.

On March 18, 2013, due to a reset clause in the note acquired on November 30, 2012 (see Note 4), Southridge was issued an additional 40,716,667 shares of common stock.

On March 18, 2013, Southridge converted $12,990 of the note dated November 30, 2012, into 86,600,000 shares of common stock (see Note 4) at a 50% discount, $0.00015.

On March 22, 2013, Southridge converted $19,100 of the note dated November 30, 2012, into 127,333,333 shares of common stock (see Note 4) at a 50% discount, $0.00015.

On March 28, 2013, KAJ converted $15,000 of the note dated January 30, 2012, into 107,142,857 shares of common stock (see Note 4) at a 30% discount, $0.00014. The shares were recorded as issuable at June 30, 2013.

On April 1, 2013, Southridge converted $13,010 of the note dated November 30, 2012, into 130,100,000 shares of common stock (see Note 4) at a 50% discount, $0.0001.

On April 1, 2013, due to a reset clause in the note acquired on November 30, 2012 (see Note 4), Southridge was issued an additional 63,666,667 shares of common stock.

On April 3, 2013, Momona Capital, LLC converted $11,900 of principal and $1,658 of accrued interest of the note dated February 26, 2013, into 96,841,603 shares of common stock (see Note 4) at a 50% discount, $0.00014.

On April 4, 2013, Susan Jones was issued 2,000,000 shares of common stock in exchange for 1,190,476 of Series E preferred stock. The Series E preferred stock had super voting rights and, to compensate Susan Jones for those super voting rights, the Company issued the additional 809,254 shares of common stock.

April 8, 2013, Harmon converted accounts payable of $9,301 into 31,004,867 shares of common stock at a conversion rate of $0.0003.

On April 8, 2013, Harmon converted 5,812,517 shares of Series E preferred stock and 9,848,432 shares of Series F preferred stock, collectively on a 1:1 basis, into 15,660,949 shares of common stock.

On April 8, 2013, Pinon converted 251,006 shares of Series E preferred stock on a 1:1 basis into 251,006 shares of common stock.

On April 10, 2013, Southridge converted $9,440 of the note dated November 30, 2012, into 188,800,000 shares of common stock (see Note 4) at a 50% discount, $0.00005.

On April 15, 2013, Southridge converted $11,125 of the note dated November 30, 2012, into 222,500,000 shares of common stock (see Note 4) at a 50% discount, $0.00005.

On April 18, 2013, the board of directors of the Company approved a reverse split proposed to be between an exchange rate of 1:100 up to 1:250. A majority of the shareholders subsequently approved the transaction. The Company appropriately filed with FINRA to effect the reverse split at a rate of 1:200. As of the date of this filing, FINRA has not yet approved the reverse split.

On April 19, 2013, the Company approved the 2013 Stock Option Plan which authorized 950,000,000 shares of common stock to be used as S-8 shares.

On April 22, 2013, Southridge converted $9,975 of the note dated November 30, 2012, into 199,500,000 shares of common stock (see Note 4) at a 50% discount, $0.00005.

On April 25, 2013, 326,141,667 shares of S-8 common stock were issued to Pinon, Harmon, Thomas Carluccio, Jr. (“Carluccio”), and Melissa Valido (“Valido”) (115,000,000, 115,000,000, 43,475,000, and 32,666,667 shares, respectively), in lieu of payroll for April and May 2013.

On May 4, 2013, Southridge converted $8,525 of the note dated December 28, 2012, into 170,500,000 shares of common stock (see Note 4) at a 50% discount, $0.00005.

On May 1, 2013, Asher converted $5,800 of the note dated October 24, 2012, into 96,666,667 shares of common stock (see Note 4) at a 42% discount, $0.00006.

On May 17, 2013, Buko-Evolution, LLC converted $10,000 of the note dated October 26, 2011, into 187,657,400 shares of common stock (see Note 4) at a 50% discount, $0.00005.

On May 22, 2013, 623,858,333 shares of S-8 common stock were issued to Pinon, Harmon, Carluccio, and Valido (219,977,131, 219,977,131, 102,289,366, and 81,614,704 shares, respectively), in lieu of payroll for June and July 2013. Harmon had his 219,977,131 shares cancelled to facilitate a note conversion by a third party as the remaining available shares from the authorized amount of shares were not sufficient. Harmon’s shares remain issuable as of June 30, 2013.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

Stock Warrants

The Company has granted warrants to non-employee individuals and entities. Warrant activity for non-employees for the six months ended June 30, 2013 is as follows:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number		Exercise		Contractual		Intrinsic
	of Warrants		Price		Terms		Value

Outstanding at December 31, 2012		6,305,298	$	0.12
Granted		0
Reclassification		0

Outstanding and exercisable at June 30, 2013		6,305,298	$	0.12		3.26	$	-

Weighted Average Grant Date Fair Value			$	0.02

On January 15, 2012, the Company granted 142,857 fully-vested warrants with an exercise price of $0.035 per share for common stock to Catalyst Business Development, Inc. for services rendered. The warrants were valued at $0.039 per warrant or $5,571 using a Black-Scholes option-pricing model with the following assumptions:

Stock Price	$	0.039
Expected Term	5 Years
Expected Volatility		239	%
Dividend Yield		0
Risk Free Interest Rate		0.29	%

The expected term equals the contractual term for this non-employee grant. The volatility is based on comparable volatility of other companies since the Company was thinly trading and had no historical volatility. The Company recognized an expense of $5,571 as of June 30, 2013, which is included in operations.

On June 25, 2012, the Company granted warrants for its common stock in the amount of 1,500,000 to Digital Farmstand, LLC. The 1,500,000 warrants, with an exercise price of $0.075, were issued as compensation for their services. The warrants were valued at $0.017 per warrant or $25,500 using a Black-Scholes option-pricing model with the following assumptions:

Stock Price	$	0.017
Expected Term	2.5 Years
Expected Volatility		267	%
Dividend Yield		0
Risk Free Interest Rate		0.35	%

The expected term was computed using the simplified method for this director grant. The volatility is based on comparable volatility of other companies since the Company was thinly trading and had no reliable historical volatility. The Company recognized an expense of $25,500 on the issuance date since the warrant is earned.

The Company has granted warrants to employees. Warrant activity for employees the year ended June 30, 2013 is as follows:

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number		Exercise		Contractual		Intrinsic
	of Warrants		Price		Terms		Value

Outstanding at December 31, 2012		218,422	$	0.25

Forfeited		0	$
Reclassification		0	$

Outstanding at June 30, 2013		218.422	$	0.25		1.88	$	-

Exercisable at June 30, 2013		218,422	$	0.25

Weighted Average Grant Date Fair Value			$	0.08

On March 26, 2012, three officers and/or directors, as a directive from the board of directors, forfeited 1,225,000 warrants for common stock in exchange for 1,225,000 shares of common stock. The Company recorded additional expense of $520 on the transaction.

Stock Options

eLayaway.com, Inc. approved the 2009 Stock Option Plan which had 5,831,040 options issued to management. As a condition of the reverse merger, these options were forfeited and the 2009 Stock Option Plan was discontinued at the time of the reverse merger in April 2010. The Company approved the 2010 Stock Option Plan in July 2010 under which 15,000,000 shares were reserved for issuance.

The Company has granted options to employees. Options activity for the year ended June 30, 2013 is as follows:

			Weighted		Weighted Average
			Average		Remaining		Aggregate
	Number		Exercise		Contractual		Intrinsic
	of Options		Price		Terms		Value

Outstanding at December 31, 2012		1,363,039	$	0.119
Granted		0
Forfeited		0

Outstanding at June 30, 2013		1,363,039	$	0.119		7.47	$	-

Exercisable at June 30, 2013		781,372	$	0.08

Weighted Average Grant Date Fair Value			$	0.03

On March 26, 2012, the Company granted various employees 1,900,000 options for common stock. The options are conditional based on various milestones. The options vest, after the milestones are met, over a three year period, have a ten year life, and have an exercise price of $0.03. The options were valued at $0.0252 per option or $47,880 using a Black-Scholes option-pricing model with the following assumptions:

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

Stock Price	$	0.0252
Expected Term	6.5 Years
Expected Volatility		257	%
Dividend Yield		0
Risk Free Interest Rate		0.33	%

The expected term was computed using the simplified method for these employee grants. The volatility is based on comparable volatility of other companies since the Company was thinly trading and had no reliable historical volatility. The milestones associated with the issuance of these options were not met therefore they were forfeited on June 30, 2013.

On March 26, 2012, three officers of the Company forfeited 3,040,314 options for common stock in exchange for 3,040,314 shares of common stock. The Company recorded an additional expense of $608 on this transaction.

NOTE 9 – CONCENTRATIONS

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments.

The Company places its temporary cash investments with financial institutions insured by the FDIC. No amounts exceeded federally insured limits as of June 30, 2013. There have been no losses in these accounts through June 30, 2013.

Concentration of Intellectual Property

The Company owns the trademark “eLayaway” and the related logo, and owns, through the assignment from its former subsidiary, MDIP, LLC, the U.S. utility patent pending rights, title and interest, filed on October 17, 2006, relating to the eLayaway business process. The Company’s business is reliant on these intellectual property rights. MDIP Assigned the Utility Patent Application to the Company in March 2010.

NOTE 10 – SUBSEQUENT EVENTS

None.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” ”will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Form 10-K dated December 31, 2012 for the fiscal year ended December 31, 2012 and in our subsequent filings with the Securities and Exchange Commission.

THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. THESE FORWARD LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR ANTICIPATED RESULTS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" IN THIS “MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN THIS REPORT. THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH "SELECTED FINANCIAL DATA" AND THE COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.

Company Overview

The Company was a startup company that was incorporated in Delaware under the name Tedom Capital, Inc. (“Tedom”) on December 26, 2006. The stockholders of Tedom on March 26, 2010, approved a forward split of one share of common stock for three shares of common stock. On March 19, 2010, Tedom signed a Letter of Intent with eLayaway, Inc., a Florida corporation, to execute a reverse triangular merger (the “Merger”). On April 7, 2010, Tedom filed with the State of Delaware to authorize four classes of preferred stock (Series A, B, C and D). On April 12, 2010, Tedom and eLayaway, Inc. executed the Merger as noted in Form 8-K dated April 16, 2010. The change of officers and directors of the Company associated with the Merger were incorporated in the April 16, 2010 Form 8-K. On April 16, 2010, Tedom filed with the State of Delaware for a name change to eLayaway, Inc. (“eLayaway”). On April 19, 2010, eLayaway, Inc. filed with the State of Florida for a name change to eLayawayCOMMERCE, Inc. On April 20, 2010, eLayaway filed with FINRA for its name change and a symbol change. On May 24, 2010, FINRA notified eLayaway of its symbol change from TDOM.OB to ELAY.OB to be traded on the NASDAQ OTC Bulletin Board. The Florida-based Company is an online payment processor specializing in a layaway service and other payment processing platforms for merchants and consumers.

DivvyTech Powered Brands:

eLayaway.com (eLayaway.com, Inc., f/k/a eLayawayCOMMERCE, Inc.) is a payment processor that empowers merchants with the ability to easily and efficiently offer an automated layaway payment plan to both online and in-store customers. Consumers can use eLayaway to conveniently pay for any product or service over time and receive their order once it is paid in full. Payment processing and supporting services are handled by eLayaway while merchants provide order fulfillment.

Nuvida Payment Plan (f/k/a eLayawayHEALTH) provides prepayment solutions for patients and healthcare facilities. This patented technology provides patients with the opportunity to prepay for procedures over time without having to use credit or go into debt. Nuvida is managed by HIPAA certified, payment processing professionals.

Pay4Tix (Pay4Tix.com, Inc., f/k/a eLayawaySPORTS, Inc.) provides a prepaid ticket solution for both teams and fans. DivvyTech's payment technology allows teams and ticketing platforms to integrate the prepayment option directly into all sales channels for new ticket sales and season ticket renewals. Pay4Tix is managed by payment processing experts with sports marketing experience.

PrePayGetaway (f/k/a eLayawayTRAVEL) provides a prepayment solution for travel companies and consumers. By leveraging DivvyTech's technology, travel professionals can create a customized recurring prepayments system. PrePayGetaway is managed by payment processing experts with travel industry experience.

PlanItPay (f/k/a eLayawayMALL) consists of a robust community of registered member shoppers connecting online at eLayaway.com with affiliate merchants offering millions of consumer products and services. Thousands of secure transactions are processed weekly with membership increasing daily. PlanItPay’s proprietary technology is managed by payment processing experts with retail experience.

eApatado.com is the eLayaway.com platform recreated for Hispanic merchants and consumers. The site provides the same exclusive technologies offered through eLayaway.com and is managed by a team of bilingual experts.

Results of Continuing Operations

Three months ended June 30, 2013 compared to the three months ended June 30, 2012

Revenue. For the three months ended June 30, 2013, our revenue was $31,120, compared to $35,313 for the same period in 2012, representing a decrease of 11.9%.

Revenue less Cost of Sales. For the three months ended June 30, 2013, our revenue less cost of sales was $22,573, compared to $31,444 for the same period in 2012. This change is due to lower revenue in 2013.

Selling, General and Administrative Expenses. For the three months ended June 30, 2013, selling, general and administrative expenses were $222,127 compared to $524,513 for the same period in 2012, a decrease of 57.7%. This decrease was primarily caused by a reduction in expenses to maximize the use of working capital.

Net Loss. We generated net losses from operations of $2,130,111 for the three months ended June 30, 2013 compared to $560,835 for the same period in 2012 for continuing operations, an increase of 279.8%. The Company had losses on the conversion of debt into common stock in 2013 of $1,308,403, or 83.4% of the increase. The net losses without the effect of the recording of losses on the conversion of debt into common stock was $821,708 for the three months ended June 30, 2013.

Six months ended June 30, 2013 compared to the six months ended June 30, 2012

Revenue. For the six months ended June 30, 2013, our revenue was $98,733, compared to $64,015 for the same period in 2012, representing an increase of 54.26%.

Revenue less Cost of Sales. For the six months ended June 30, 2013, our revenue less cost of sales was $78,891, compared to $60,632 for the same period in 2012. This change is due to higher revenue in 2013.

Selling, General and Administrative Expenses. For the six months ended June 30, 2013, selling, general and administrative expenses were $573,238 compared to $1,171,040 for the same period in 2012, a decrease of 51.0%. This decrease was primarily caused by a reduction in expenses to maximize the use of working capital and stock-based compensation decreasing from $436,573 for 2012 compared to $159,978 for 2013.

Net Loss. We generated net losses from operations of $3,582,983 for the six months ended June 30, 2013 compared to $1,468,987 for the same period in 2012 for continuing operations, an increase of 143.9%. The net losses without the effect of the recording of stock-based compensation and losses on conversion of debt into common stock was $1,129,991 and $1,032,414 for the six months ended June 30, 2013 and 2012, respectively, primarily due to the loss on conversions of notes payable, $2,293,014.

Liquidity and Capital Resources

General. At June 30, 2013, we had cash and cash equivalents of $10,565. We have historically met our cash needs through a combination of cash flows from operating activities, proceeds from private placements of our securities and loans. Our cash requirements are generally for selling, general and administrative activities. We believe that our cash balance is not sufficient to finance our cash requirements for expected operational activities, capital improvements, and partial repayment of debt through the next 12 months.

Our continued operations operating activities used of cash in operations of $136,622 for the six months ended June 30, 2013, and we used cash in operations of $395,389 during the same period in 2012. The principal elements of cash flow from operations for the six months ended June 30, 2013 included a net loss of $3,582,983, offset primarily by loss on conversion of debt into common stock, $2,293,014, and stock-based compensation and settlements of $159,978.

Cash used in investing activities was $0 for the six months ended June 30, 2013, compared to $4,454 during the comparable period in 2012.

Cash provided by our financing activities was $124,364 for the six months ended June 30, 2013, compared to cash generated of $481,060 during the comparable period in 2012. This increase was primarily attributed to a concentrated effort of capital procurement in 2013 compared to 2012.

As of June 30, 2013, current liabilities exceeded current assets by 6.6 times. Current assets increased from $207,367 at December 31, 2012 to $406,893 at June 30, 2013 whereas current liabilities decreased from $2,701,949 at December 31, 2012 to $2,698,377 at June 30, 2013.

GOING CONCERN

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had sales of $98,733 and net losses of $3,582,983 ($159,978 represents stock-based compensation and settlements and $2,397,987 represents losses on conversion of debt into common stock) for the six months ended June 30, 2013 compared to sales from continuing operations of $64,015 and net losses from continuing operations of $1,468,987 ($436,573 represents stock-based compensation and settlements) for the six months ended June 30, 2012. The Company had a working capital deficiency, stockholders’ deficiency, and accumulated deficit for continuing operations of $2,291,484, $2,285,258 and $22,169,840, respectively, at June 30, 2013, and used cash in operations of $136,622 in the six months ended June 30, 2013. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company is highly dependent on its ability to continue to obtain investment capital from future funding opportunities to fund the current and planned operating levels. The unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to bring in income generating activities and its ability to continue receiving investment capital from future funding opportunities. No assurance can be given that the Company will be successful in these efforts.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As the Company is a “smaller reporting company,” this item is inapplicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and interim chief financial officer to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date.

To remediate our internal control weaknesses, management intends to implement the following measures:

▪	The Company will add sufficient number of independent directors to the board and appoint additional member(s) to the Audit Committee.

▪	The Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.

▪	The Company will hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting.

▪	Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures.

The additional hiring is contingent upon The Company’s efforts to obtain additional funding through equity or debt and the results of its operations. Management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.

Changes in Internal Control over Financial Reporting

Except as set forth above, there were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

The Company’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of May 1, 2013, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations except as follows:

On October 17, 2012, the Company entered into a settlement agreement with Douglas Pinard, a former owner and employee of the Company’s subsidiary, CSP. The Company and Mr. Pinard currently have a dispute regarding whether Mr. Pinard has since complied with the settlement agreement.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On January 30, 2012, the Company issued 69,444 shares of common stock to Evolution in exchange for legal fees.

On February 15, 2012, as part of the acquisition of CSP, the Company was obligated to issue 4,280,000 shares of common stock to the owners of CSP. As contractually obligated, 1,070,000 shares of common stock were issued with 3,210,000 issuable at various times.

On February 20, 2012, the Company entered into an investor relations contract with American Capital Ventures, Inc. for a term of one year. As part of the contract, the Company was obligated to pay $3,500 per month and to issue 1,750,000 shares of common stock, of which 1,250,000 were to be issued at the time of execution, and the remaining 500,000 shares of common stock to be issued on August 18, 2012. On May 21, 2012, the Company replaced the first contract with a new one for a term of nine months. The Company will issue the 500,000 shares of common stock on August 18, 2012.

On March 26, 2012, the Board of Directors of the Company issued common stock and converted options and warrants for common stock into common stock as part of the compensation plan for 2012 for its officers and directors. The actions were submitted to the Board of Directors from the Company’s Compensation Committee. As a result of the action, Messrs. Pinon and Harmon, the Company’s CEO and CFO, were each issued 2,000,000 shares of common stock. The Company’s two independent directors, Messrs. Rees and Wittler, were each issued 250,000 shares of common stock for their services for 2012. During prior periods, the officers and directors were all issued options for common stock and/or warrants for common stock, as previously disclosed, for services and/or conversion of liabilities to the officer and/or director. The Board of Directors converted each of their outstanding options and/or warrants to the same amount of common stock. As a result of this action, 3,040,314 options were converted to 3,040,314 shares of common stock and 1,225,000 warrants were converted to 1,225,000 shares of common stock.

On March 26, 2012, the Company approved the issuance of 1,500,000 shares of common stock in exchange for legal services by Vincent and Rees for the period of June 6, 2012 through June 5, 2013.

On March 26, 2012, the Company sold 4,666,667 shares of common stock in exchange for $70,000 which were issued in April 2012.

On April 2, 2012, Southridge converted $10,000 of their $56,000 note into 694,444 shares of common stock. On April 17, 2012, in conjunction with this conversion, as the closing trading price on the clearing date of the 694,444 shares of common stock was less than the closing trading price on the date of conversion, the Company was required to issue an addition 280,214 shares of common stock to Southridge.

In April 2012, the Company sold 4,669,333 shares of common stock in exchange for $70,040.

On May 6, 2012, the Company issued 5,883,920 additional shares of common stock to Vincent & Rees in regards to its contractually obligated guaranteed issue value of $135,000 for the legal services provided from May 7, 2011 through May 6, 2012. On May 6, 2012, upon the expiration of the guarantee, 5,883,920 additional common shares were issued.

On May 29, 2012, the Company converted $10,500 of accounts payable into 420,000 shares of common stock at a conversion price of $0.025 per share.

On June 25, 2012, the Company converted $5,000 of accounts payable into 200,000 shares of common stock at a conversion price of $0.025 per share.

On August 3, 2012, the Company issued Douglas Pinard (“Pinard”) and Richard St. Cyr (“St. Cyr”) each 535,000 shares of common stock as contractually obligated in regards to the Company’s purchase of CSP.

On August 18, 2012, the Company issued to American Capital Ventures 500,000 shares of common stock as contractually obligated in regards to a consulting agreement. These shares were previously recorded as issuable common stock.

On August 27, 2012, Evolution converted $25,000 of its convertible promissory note into 3,246,753 shares of common stock at a conversion price of $0.0077 per share.

On September 6, 2012, Asher converted $10,000 of its convertible promissory note dated February 1, 2012 into 1,724,138 shares of common stock at a conversion price of $0.0058 per share.

On September 18, 2012, the Company sold 37,500,000 shares of common stock in exchange for $150,000.

On September 20, 2012, Southridge was issued 7,619,048 shares of common stock in regards to a provision in their conversion of their note and its respective reset clause. An additional 7,619,048 shares of common stock remain issuable under this reset.

On September 27, 2012, SGI Group, LLC converted $6,100 of its Convertible Promissory Note into 4,206,896 shares of common stock at a conversion price was $0.00145 per share.

On September 27, 2012, Star City Capital, LLC converted $12,200 of its $25,000 note into 8,413,793 shares of common stock at a conversion price of $0.00145 per share.

On October 1, 2012, as a condition of an agreement with St. Cyr, the Company issued the remaining 1,070,000 contractually obligated shares of common stock.

On October 18, 2012, Southridge converted $5,480 of its note into 8,430,769 shares of common stock at a conversion price of $0.00065 per share.

On October 12, 2012, as a condition of the note and its reset clause, Star City Capital, LLC was issued an additional 5,939,148 shares of common stock.

On October 12, 2012, as a condition of the note and its reset clause, SGI Group, LLC was issued an additional 2,969,574 shares of common stock.

On October 17, 2012, as a condition of a settlement agreement with Pinard, the Company issued the remaining 1,070,000 contractually obligated shares of common stock.

On October 22, 2012, SGI converted $2,600 of principal and accrued interest of $18 of the note acquired on September 26, 2012 (see Note 4) into 4,028,400 shares of common stock at a conversion price of $0.00065 per share.

On November 5, 2012, SGI converted $6,300 of principal and accrued interest of $85 of the note acquired on September 26, 2012 (see Note 4) into 8,513,160 shares of common stock at a conversion price of $0.00075 per share.

On November 5, 2012, Star City converted $6,300 of principal and accrued interest of $85 of the note acquired on September 26, 2012 (see Note 4) into 8,513,160 shares of common stock at a conversion price of $0.00075 per share.

On November 9, 2012, Southridge Partners II, LP converted $12,190 of its $56,000 note into 16,253,333 shares of common stock at a conversion price of $0.00075 per share.

On November 15, 2012, Southridge converted $5,685 of principal of its note acquired on September 24, 2012 into 16,242,857 shares of common stock at a conversion price of $0.00035 per share.

On November 16, 2012, SGI converted $6,500 of principal and accrued interest of $111 of the note acquired on September 26, 2012 into 18,889,371 shares of common stock at a conversion price of $0.00035 per share.

On November 16, 2012, Star City converted $6,500 of principal and accrued interest of $85 of the note acquired on September 26, 2012 into 18,889,371 shares of common stock at a conversion price of $0.00035 per share.

On November 21, 2012, Southridge converted $8,375 of principal of its note acquired on September 24, 2012 into 23,928,571 shares of common stock at a conversion price of $0.00035 per share.

On November 23, 2012, SGI Group converted $3,000 of principal and $33 of accrued interest of its note acquired on October 22, 2012 into 8,664,771 shares of common stock at a conversion price of $0.00035 per share.

On November 23, 2012, SGI converted $3,500 of principal and accrued interest of $68 of the note acquired on September 26, 2012 into 10,193,857 shares of common stock at a conversion price of $0.00035 per share.

On November 23, 2012, Sazer converted $3,250 of principal and accrued interest of $4 of the note acquired on November 26, 2012 into 9,297,943 shares of common stock at a conversion price of $0.00035 per share.

On November 26, 2012, WHC converted $6,982 of principal of its note acquired on November 6, 2012 into 12,695,000 shares of common stock at a conversion price of $0.00055 per share.

On November 29, 2012, Mauriello converted $6,500 of principal of its note acquired on November 20, 2012 into 18,583,657 shares of common stock at a conversion price of $0.00035 per share.

On November 30, 2012, Southridge converted $11,260 of principal of its note acquired on September 24, 2012 into 32,171,429 shares of common stock at a conversion price of $0.00035 per share.

On December 5, 2012, Southridge converted $5,685 of principal of its note acquired on September 24, 2012 into 4,373,077 shares of common stock at a conversion price of $0.0013 per share.

On December 5, 2012, Star City converted $5,000 of principal and accrued interest of $120 of the note acquired on September 26, 2012 into 3,938,246 shares of common stock at a conversion price of $0.0013 per share.

On December 5, 2012, Southridge converted $36,150 of principal of its note acquired on October 22, 2012 into 27,807,692 shares of common stock at a conversion price of $0.0013 per share.

On December 5, 2012, Southridge converted $19,300 of principal of its note acquired on November 8, 2012 into 32,166,667 shares of common stock at a conversion price of $0.0006 per share.

On December 11, 2012, Southridge converted $19,325 of principal of its note acquired on November 8, 2012 into 32,208,333 shares of common stock at a conversion price of $0.0006 per share.

On December 11, 2012, Marina converted $5,650 of principal of its note acquired on December 11, 2012 into 9,438,367 shares of common stock at a conversion price of $0.0006 per share.

On December 11, 2012, due to a reset clause in the note acquired on September 24, 2012, Southridge was issued an additional 1,311,923 shares of common stock.

On December 11, 2012, WHC converted $12,553 of principal and $182 of accrued interest of its note acquired on November 6, 2012 into 12,526,279 shares of common stock at a conversion price of $0.0010167 per share.

On December 11, 2012, Southridge converted $13,850 of principal of its note acquired on October 22, 2012 into 13,850,000 shares of common stock at a conversion price of $0.001 per share.

On December 11, 2012, due to a reset clause in the note acquired on October 22, 2012, Southridge was issued an additional 8,342,308 shares of common stock.

On December 11, 2012, SGI Group converted $2,000 of principal and $34 of accrued interest of its note acquired on October 22, 2012 into 3,389,433 shares of common stock at a conversion price of $0.0006 per share.

On December 12, 2012, SGI converted $9,000 of principal and accrued interest of $68 of the note acquired on November 20, 2012 into 15,113,467 shares of common stock at a conversion price of $0.0006 per share.

On December 13, 2012, Mauriello converted $8,500 of principal and $67 of accrued interest of its note acquired on November 20, 2012 into 14,278,267 shares of common stock at a conversion price of $0.0006 per share.

On December 17, 2012, Asher converted $9,000 of principal of its note dated June 7, 2012 into 9,473,684 shares of common stock at a conversion price of $0.00095 per share.

On December 19, 2012, Asher converted $8,600 of principal of its note dated June 7, 2012 into 9,247,312 shares of common stock at a conversion price of $0.00093 per share.

On December 20, 2012, Asher converted $8,600 of principal of its note dated June 7, 2012 into 9,450,549 shares of common stock at a conversion price of $0.00091 per share.

On December 20, 2012, due to a reset clause in the note acquired on September 26, 2012, Star City was issued an additional 3,754,061 shares of common stock.

On December 24, 2012, Asher converted $6,000 of principal of its note dated June 7, 2012 into 8,219,178 shares of common stock at a conversion price of $0.00073 per share.

On December 27, 2012, Asher converted $300 of principal and $1,300 of accrued interest of its note dated June 7, 2012 into 2,191,781 shares of common stock at a conversion price of $0.00073 per share.

On December 27, 2012, WHC converted $10,091 of principal of its note acquired on December 13, 2012 into 17,828,609 shares of common stock at a conversion price of $0.00057 per share.

On January 3, 2013, 17,828,609 shares were issued to WHC which were recorded as issuable as of December 31, 2013.

On January 3, 2013, due to a reset clause in the note acquired on November 8, 2012, Southridge was issued an additional 18,958,333 shares of common stock.

On January 3, 2013, Southridge converted $11,375 of the note dated November 8, 2012, into 18,958,333 shares of common stock at a 50% discount, $0.0006.

On January 3, 2013, Southridge converted $22,750 of the note dated November 30, 2012, into 37,916,667 shares of common stock at a 50% discount, $0.0006. Due to the deficiency of available shares to be issued at the time, the Company issued 12,000,000 shares on January 10, 2013 and the remaining 25,916,667 on January 24, 2013.

On January 8, 2013, due to a reset clause in the note acquired on September 26, 2012, Star City was issued an additional 3,754,061 shares of common stock.

On January 9, 2013, due to a reset clause in the note acquired on November 8, 2012, Southridge was issued an additional 3,791,667 shares of common stock.

On January 11, 2013, 20,358,000 shares of common stock were issued to WHC for a conversion of a note payable in December 2012 which were recorded as issuable as of December 31, 2012.

On January 18, 2013, WHC converted $10,700 of the note dated December 13, 2012, into 21,400,000 shares of common stock at a 50% discount, $0.00025.

On January 23, 2013, Marina converted $15,000 of principal and $246.58 of accrued interest of the note dated December 5, 2012, into 30,493,151 shares of common stock at a 50% discount, $0.0005.

On January 24, 2013, 14,278,267 shares of common stock were issued to Mauriello in regards to a conversion of a note payable on December 13, 2012 which were recorded as issuable as of December 31, 2012.

On January 28, 2013, Southridge converted $28,100 of the note dated December 28, 2012, into 62,444,444 shares of common stock at a 50% discount, $0.00045.

On January 28, 2013, due to a reset clause in the note acquired on September 26, 2012, Star City was issued an additional 3,754,061 shares of common stock.

On January 28, 2013, due to a reset clause in the note acquired on November 30, 2012, Southridge was issued an additional 5,183,333 shares of common stock.

On February 4, 2013, due to a reset clause in the note acquired on January 2, 2013, Southridge was issued an additional 17,841,270 shares of common stock.

On February 5, 2013, Southridge converted $7,650 of the note dated December 28, 2012, into 25,500,000 shares of common stock at a 50% discount, $0.0003.

On February 5, 2013, WHC converted $3,673 of the note dated December 13, 2012, into 11,019,480 shares of common stock at a 50% discount, $0.000167.

On February 6, 2013, Southridge converted $5,750 of the note dated December 28, 2012, into 23,000,000 shares of common stock at a 50% discount, $0.00025.

On February 7, 2013, SGI Group converted $6,419 of principal and $168.80 of accrued interest of the note dated November 20, 2012, into 26,351,200 shares of common stock at a 50% discount, $0.00025.

On February 11, 2013, due to a reset clause in the note acquired on November 20, 2012, Mauriello was issued an additional 14,278,266 shares of common stock.

On February 11, 2013, Sazer converted $5,250 of principal and $145.32 of accrued interest of the note dated November 20, 2012, into 10,790,640 shares of common stock at a 50% discount, $0.00025.

On February 11, 2013, Southridge converted $14,400 of the note dated December 4, 2012, into 81,008,219 shares of common stock at a 50% discount, $0.00025.

On February 11, 2013, Star City converted $20,000 of principal and $743.54 of accrued interest of the note dated October 22, 2012, into 82,974,160 shares of common stock at a 50% discount, $0.00025.

On February 20, 2013, Southridge converted $20,255 of the note dated November 30, 2012, into 81,020,000 shares of common stock at a 50% discount, $0.00025.

On February 26, 2013, Momoma Capital converted the $14,925 into 42,641,879 shares of common stock at a discount of 30%, $0.00035.

On February 27, 2013, due to a reset clause in the note acquired on November 30, 2012, Southridge was issued an additional 20,255,000 shares of common stock.

On February 27, 2013, Southridge converted $12,150 of the note dated November 30, 2012, into 60,750,000 shares of common stock at a 50% discount, $0.0002.

On March 5, 2013, Southridge converted $20,375 of the note dated December 28, 2012, into 101,875,000 shares of common stock at a 50% discount, $0.0002.

On March 12, 2013, Southridge converted $24,430 of the note dated November 30, 2012, into 122,150,000 shares of common stock at a 50% discount, $0.0002.

On March 18, 2013, due to a reset clause in the note acquired on November 30, 2012, Southridge was issued an additional 40,716,667 shares of common stock.

On March 18, 2013, Southridge converted $12,990 of the note dated November 30, 2012, into 86,600,000 shares of common stock at a 50% discount, $0.00015.

On March 22, 2013, Southridge converted $19,100 of the note dated November 30, 2012, into 127,333,333 shares of common stock at a 50% discount, $0.00015.

On March 28, 2013, KAJ converted $15,000 of the note dated January 30, 2012, into 107,142,857 shares of common stock at a 30% discount, $0.00014.

On April 1, 2013, Southridge converted $13,010 of its note dated November 30, 2012 into 130,100,000 shares of common stock at a discounted rate of 50%, $0.0001.

On April 10, 2013, Southridge converted $9,440 of its note dated November 30, 2012 into 188,800,000 shares of common stock at a discounted rate of 50%, $0.00005.

On April 15, 2013, Southridge converted $11,125 of its note dated November 30, 2012 into 222,500,000 shares of common stock at a discounted rate of 50%, $0.00005.

On April 22, 2013, Southridge converted $9,975 of its note dated November 30, 2012 into 199,500,000 shares of common stock at a discounted rate of 50%, $0.00005.

On April 25, 2013, the Board of Directors issued S-8 shares to various employees of the Company in lieu of cash compensation. The shares issued were to Pinon, 115,000,000, Harmon, 115,000,000, Thomas Carluccio, Jr., 43,475,000, and Melissa Valido, 32,666,667, for compensation for April and May 2013.

On May 4, 2013, Southridge converted $8,525 of its note dated December 28, 2012 into 170,500,000 shares of common stock at a discounted rate of 50%, $0.00005.

The Securities were issued pursuant to exemptions from registration requirements relying on Section 4(2) of the Securities Act of 1933 and upon Rule 506 of Regulation D of the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company is in default with several of its noteholders as reflected below and disclosed within this report in Note 4 of the Notes to the Consolidated Financial Statements dated June 30, 2013.

	Principal
Notes and convertible notes, net of discounts
Gary Kline	$	56,000
Gary Kline		55,000
Gary Kline		75,000
Gary Kline		23,500
James E. Pumphrey		25,883
Evolution Capital, LLC		15,000
Evolution Capital, LLC		75,000
Evolution Capital, LLC		22,750
Evolution Capital, LLC		36,580
Evolution Capital, LLC		12,990
Evolution Capital, LLC		20,255
Hanson Capital, LLC		100,000
KAJ Capital, LLC		10,000
Robert Salie - Line of Credit		400,000
Salie Family Limited Partnership		50,000
Transfer Online, Inc.		15,400
Transfer Online, Inc.		25,000
Transfer Online, Inc.		35,000
Transfer Online, Inc.		45,000
Transfer Online, Inc.		55,000
Douglas Pinard		20,000
Richard St. Cyr		17,000
Susan Jones		58,333
SGI Group, LLC		-
Ventana Capital Partners, Inc.		20,000
Star City Capital, LLC		-
Southridge Partners II, LP		40,900
Southridge Partners II, LP		-
Southridge Partners II, LP		-
WHC Capital, LLC		-
Southridge Partners II, LP		-

Notes, convertible notes, and lines of credit payable to related parties, net of discounts
Bruce Harmon		157,260
Bruce Harmon		10,000
Bruce Harmon		52,010
Bruce Harmon		15,000
Bruce Harmon		15,000
Bruce Harmon		10,138
Lakeport Business Services, Inc.		47,235
Lakeport Business Services, Inc. - Line of Credit		213,095
Total	$	1,829,329

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Number		Description

3.1 (1)		Articles of Incorporation, as Amended

3.2 (1)		Bylaws

3.3 (2)		Certificate of Designation of the Preferences and Rights of Series E Preferred Stock

3.4 (3)		Certificate of Designation of the Preferences and Rights of Series F Preferred Stock

31.1 (3)		Certification of Chief Executive Officer of eLayaway, Inc. Required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 (3)		Certification of Chief Financial Officer of eLayaway, Inc. Required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 (3)		Certification of Chief Executive Officer of eLayaway, Inc. Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63

32.2 (3)		Certification of Chief Financial Officer of eLayaway, Inc. Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63

101.INS**	XBRL Instance Document

101.SCH**	XBRL Taxonomy Extension Schema Document

101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB**	XBRL Taxonomy Extension Label Linkbase Document

101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Previously filed with the Form 8-K filed on April 16, 2010 and is incorporated herein by reference.

(2) Previously filed with the Form 10-Q for the period ended June 30, 2010 and is incorporated herein by reference.

(3) Filed herewith

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

	ELAYAWAY, INC.

Date: August 12, 2013	By:	/s/ Sergio A. Pinon
		Sergio A. Pinon
		Chief Executive Officer


Date: August 12, 2013	By:	/s/ Bruce Harmon
		Bruce Harmon
		Chief Financial Officer

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eLayaway Inactive 10-Q2013 Q2 Quarterly report

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