eLayaway 10Q 2014 Q1 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 MARCH 31, 2014

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.)

3111 Mahan Drive, Suite 20 #121 Tallahassee, FL		32308
(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, $0.001 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 April 28, 2014 the registrant had 4,362,417,437 shares of its Common Stock, $0.001 par value, outstanding.

TABLE OF CONTENTS

eLAYAWAY, INC.

Part I – Financial Information

Item 1	Financial Statements	3
	Consolidated Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013		3
	Consolidated Statements of Operations for the three and three months ended March 31, 2014 and 2013 (unaudited)		4
	Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (unaudited)		5
	Notes to the Unaudited Consolidated Financial Statements (unaudited)		6
Item 2	Management’s Discussion and Analysis or Plan of Operation		31
Item 3	Quantitative and Qualitative Disclosures about Market Risk		33
Item 4	Controls and Procedures		33

Part II – Other Information

Item 1	Legal Proceedings		35
Item 2	Unregistered Sales Of Equity Securities And Use Of Proceeds		36
Item 3	Defaults Upon Senior Securities		37
Item 4	Mine Safety Disclosures		37
Item 5	Other Information		37
Item 6	Exhibits		38

ITEM 1 Financial Statements

eLAYAWAY, INC. and SUBSIDIARIES

Consolidated Balance Sheets

	March 31,			December 31,
	2014			2013
	(unaudited)

ASSETS

Current assets
Cash	$	4,405		$	3,115
Segregated cash for customer deposits		47,368			22,621

Total current assets		51,773			25,736

Property and equipment, net		1,010			1,225

Intangibles, net		3,305			3,413

Total assets	$	56,088		$	30,374

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

Current liabilities
Notes and convertible notes, net of discounts and premiums	$	692,195		$	851,613
Notes, convertible notes, and lines of credit payable to related parties, net of discounts		245,252			65,000
Purchased liabilities, net		704,393			1,087,949
Accounts payable		121,152			137,165
Accounts payable to related parties		-			18,920
Accrued liabilities		447,217			388,879
Deposits received from customers for layaway sales		40,223			22,160
Derivative liability for insufficient shares		460,497			-
Embedded conversion option liability		-			53,570

Total current liabilities		2,710,929			2,625,256

Total liabilities		2,710,929			2,625,256

Commitments and contingencies (Note 5)

Shareholders' deficiency
Preferred stock, par value $0.001, 50,000,000 shares authorized
Series A preferred stock, $0.001 par value, 13,942 shares designated, 0 and 0
issued and outstanding, respectively (liquidation value $0 and $0, respectively)		-			-
Series B preferred stock, $0.001 par value, 13,942 shares designated, 0 and 0
issued and outstanding, respectively (liquidation value $0 and $0, respectively)		-			-
Series C preferred stock, $0.001 par value, 15,712 shares designated, 0 and 0
issued and outstanding, respectively (liquidation value $0 and $0, respectively)		-			-
Series D preferred stock, $0.001 par value, 9,448 shares designated, 0 and 0
issued and outstanding, respectively (liquidation value $0 and $0, respectively)		-			-
Series E preferred stock, $0.001 par value, 50,000 shares designated, 3,429 and 39,699
issued and outstanding, respectively (liquidation value $170,602 and $0, respectively)		3			3
Series F preferred stock, $0.001 par value, 50,000 shares designated, 0 and 49,243
issued and outstanding, respectively (liquidation value $50,303 and $0, respectively)		-			-
Series G preferred stock, $0.001 par value, 5,000 shares designated, 5,000 and 0
issued and outstanding, respectively (liquidation value $1,000 and $0, respectively)		5			5
Common stock, par value $0.001, 5,000,000,000 shares authorized, 3,208,914,758 and
616,486,756 shares issued, issuable and outstanding, respectively, and (56,250,000
and 366,805 shares issuable, respectively)		3,265,164			616,486
Additional paid-in capital		18,261,103			19,943,743
Accumulated deficit		(24,181,116	)		(23,155,119	)

Total shareholders' deficiency		(2,654,841	)		(2,594,882	)

Total liabilities and shareholders' deficiency	$	56,088		$	30,374

See accompanying notes to unaudited consolidated financial statements.

eLAYAWAY, INC. and SUBSIDIARIES

Consolidated Statements of Operations

(unaudited)

	For the Three Months Ended
	March 31,
	2014			2013


Sales	$	19,441		$	67,613
Direct costs		4,989			11,295
Selling, general and administrative expenses
(includes $16,316 and $126,218 for the three months ended March 31,
2014 and 2013, respectively, of stock-based compensation
and settlements)		78,685			351,111
		-			-
Loss from continuing operations		(64,233	)		(294,793	)

Other income (expense)
Other income		-			-
Interest expense		(60,355	)		(119,897	)
Change in fair value of embedded conversion option liability		-			6,429
Gain on settlement of debt		1,000			-
Gain on extinguishment of debt		8,500			-
Derivative amortization		(133,251	)		-
Loss on settlement of liability		(1,744	)		-
Loss on issuance of common stock		-			(60,000	)
Loss on conversion of debt into common stock		(775,914	)		(984,611	)
Total other income (expense), net		(961,764	)		(1,158,079	)

Net loss	$	(1,025,997	)	$	(1,452,872	)

Basic and diluted net loss per share	$	(0.00	)	$	(0.25	)

Weighted average shares outstanding
- basic and diluted		1,528,826,128			5,799,648

See accompanying notes to unaudited consolidated financial statements.

eLAYAWAY, INC. and SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Three Months Ended March 31,

(unaudited)

	2014			2013

Cash flows from operating activities:
Net loss	$	(1,025,997	)	$	(1,452,872	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation		215			323
Amortization of intangibles		108			108
Amortization of debt discounts to interest expense		168,936			32,768
Amortization of debt issue costs to interest expense		-			3,583
Loss on conversion of debt into common stock		775,914			984,611
Loss on issuance of stock		-			60,000
Amortization of stock-based prepaids		-			25,083
Accretion of put premium into interest expense		14,144			80,658
Gain on settlement of debt		(1,000	)		-
Loss on settlement of liabilities		8,500			-
Change in fair value of embedded conversion option liability		-			(6,429	)
Changes in operating assets and liabilities:
Segregated cash for customer deposit		(24,747	)		(47,188	)
Other receivable		-			50,000
Prepaid expenses		-			40,749
Other assets		-			1,083
Accounts payable		2,737			502
Accounts payable to related parties		(18,920	)		(802	)
Accrued expenses		58,337			39,709
Deposits received from customers for layaway sales		18,063			(2,994	)
Net cash used in operating activities		(23,710	)		(191,108	)

Cash flows from financing activities:
Proceeds from loans		25,000			207,085
Net cash provided by financing activities		25,000			207,085

Net increase (decrease) in cash		1,290			15,977

Cash at beginning of period		3,115			22,823

Cash at end of period	$	4,405		$	38,800

Supplemental disclosure of cash flow information:

Cash paid for interest	$	-		$	-

Cash paid for taxes	$	-		$	-

Non-cash investing and financing activities:

Debt discounts for beneficial conversion features values	$	114,501		$	15,689

Conversion of notes into common stock	$	102,715		$	-

Conversion of liabilities into common stock	$	3,420		$	-

Derivative liability for insufficient shares	$	460,497		$	-

Debt discounts for loan fees	$	-		$	2,500

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

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

March 31, 2014

(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 formed on December 26, 2006 as Tedom Capital, Inc. On April 16, 2010, the Company changed its name to eLayaway, Inc.

On March 17, 2010, the Company formed Tedom Acquisition Corp. (“TAC”), a Florida corporation, for the purpose of a reverse triangular merger with eLayaway.com, Inc., a Florida corporation (f/k/a eLayawayCOMMERCE, Inc. and eLayaway, Inc., “eLayaway.com”). On April 12, 2010, eLayaway.com merged with TAC with eLayaway.com as the surviving subsidiary of the Company.

eLayaway.com was a Florida limited liability company that was formed on September 8, 2005 in Florida. On September 1, 2009, the Managing Members of the Florida limited liability company filed with the State of Florida to convert the Company to a corporation. For accounting purposes, the conversion to a corporation was treated as a recapitalization and reflected retroactively for all periods presented in the accompanying consolidated financial statements. On April 19, 2010, eLayaway, Inc. changed its name to eLayawayCOMMERCE, Inc. and subsequently, on March 7, 2012, changed its name to eLayaway.com, Inc.

Prior to the formation of eLayaway.com, the research and development of the eLayaway concept operated under the entity Triadium, LLC. The investors and founders of Triadium, LLC then formed eLayaway, LLC to commercialize the eLayaway business concept. There were no assets or liabilities contributed to eLayaway from Triadium, LLC at the time of formation of eLayaway, LLC.

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. In 2012, this entity was dissolved.

On February 18, 2009, the Company acquired MDIP, LLC (“MDIP”), for nominal consideration, from its three founders, who are also the founders of eLayaway. MDIP held the intellectual property rights related to the electronic payment systems and methods for which a non-provisional patent application was filed on October 17, 2006 for a Letters Patent of the United States and assigned a Utility Patent application Serial No. 11/550,301.

On March 25, 2009, one of the founders of eLayaway assigned the “eLayaway” trademark to the Company for nominal consideration including $6,468 of legal fees paid by the Company in 2006.

On March 29, 2010, the intellectual property was assigned to eLayaway.com and MDIP was dissolved.

On July 28, 2010, Pay4Tix.com, Inc. (“Pay4Tix,” f/k/a eLayawaySPORTS, Inc.), a Florida corporation, was formed as a subsidiary of the Company. This company was administratively dissolved on September 27, 2013.

On November 15, 2011, DivvyTech, Inc. (“DivvyTech”), a Florida corporation, was formed as a subsidiary of the Company. This company was administratively dissolved on September 27, 2013.

On January 20, 2012, PrePayGetaway.com, Inc. (“PrePayGetaway”) and PlanItPay.com, Inc. (“PlanItPay”), both Florida corporations, were formed as subsidiaries of the Company. These companies were administratively dissolved on September 27, 2013.

On January 25, 2012, NuVidaPaymentPlan.com, Inc. (“NuVida”), a Florida corporation, was formed as a subsidiary of the Company. This company was administratively dissolved on September 27, 2013.

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). CSP is a discontinued operation.

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. See Notes 2 and 12.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

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 March 31, 2014 shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending December 31, 2014. 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, 2013 filed on March 31, 2014 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 specializes in various payment processing methods including, but not limited to, layaway. The Company'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. The Company’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, the Company’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.

Reclassification of Balances

The Company reported certain liabilities in its Form 10-K for the period ended December 31, 2013 which were purchased by ASC Recap, LLC pursuant to the Joint Motion for Approval of Settlement Agreement and Stipulation (see Note 5), were reclassified for the period ended December 31, 2013 as reported on the current balance sheet. The reclassification resulted in a decrease in the line items “Notes and convertible notes, net of discounts and premiums” and “Notes, convertible notes, and lines of credit payable to related parties, net of discounts,” to a separate line item, “Purchased liabilities, net.” This reclassification is reflected on the balance sheet and the applicable Notes to Consolidated Financial Statements.

Principles of Consolidation

The consolidated financial statements include the accounts of eLayaway and its wholly-owned subsidiary (as of March 31, 2014), eLayaway.com. 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.

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.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

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:

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 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 March 31, 2014:

	Balance at		Quoted Prices in Active Markets		Significant Other		Significant
	March 31,		for Identical		Observable		Unobservable
	2014		Assets		Inputs		Inputs
			(Level 1)		(Level 2)		(Level 3)

Assets:
Trademarks	$	3,305	$	-	$	-	$	3,305
Total Financial Assets	$	3,305	$	-	$	-	$	3,305

Following is a summary of activity through March 31, 2014 of the fair value of intangible assets valued using Level 3 inputs:

Balance at December 31, 2013	$	3,413
Amortization of intangibles		(108	)
Ending balance at March 31, 2014	$	3,305

	Balance at		Quoted Prices in Active Markets		Significant Other		Significant
	March 31,		for Identical		Observable		Unobservable
	2014		Assets		Inputs		Inputs
			(Level 1)		(Level 2)		(Level 3)

Liabilities:
Derivative Liabilities	$	-	$	-	$	-	$	-
Total Financial Assets	$	-	$	-	$	-	$	-

Following is a summary of activity through March 31, 2014 of the fair value of derivative liabilities valued using Level 3 inputs:

Balance at December 31, 2013	$	53,570
Change in fair value during the period ended March 31, 2014		(53,570)
Ending balance at March 31, 2014	$	-

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(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 March 31, 2014 consist of warrants to purchase 32,619 at March 31, 2014 shares of common stock, employee options to purchase 3,907 shares of common stock and convertible notes convertible into 745,379,048 common shares. Equivalent shares are not utilized when the effect is anti-dilutive (see Note 7).

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 March 31, 2014 and 2013.

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 March 31, 2014 through the date these unaudited consolidated financial statements were issued.

NOTE 2 - 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 operations of $1,025,997 (includes settlements and $775,914 of loss on conversion of notes payable) and used cash in operating activities of $23,710 for the three months ended March 31, 2014. The Company had a working capital deficiency, stockholders’ deficiency and accumulated deficit of continuing operations of $2,659,156, $2,654,841 and $24,181,116, respectively, at March 31, 2014. In addition, the Company was in default on fifteen promissory notes totaling $764,001 at March 31, 2014. 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.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

NOTE 3 – 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 March 31, 2014 and December 31, 2013, consists of the following:

Notes and Convertible Notes, Net of Discounts
Notes and convertible notes,
net of discounts	March 31, 2014									December 31, 2013
								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
Evolution Capital, LLC (1) (2)		-		-			-		-		11,500		-			-		11,500
Hanson Capital, LLC (1) (2)		-		-			-		-		98,500		-			-		98,500
Asher Enterprises, Inc. (2)		-		-			-		-		-		-			27,155		27,155
Asher Enterprises, Inc. (2)		-		-			-		-		39,850		-			38,379		78,229
Asher Enterprises, Inc. (2)		-		-			-		-		32,500		-			23,534		56,034
KAJ Capital, LLC (1) (2)		-		-			-		-		10,000		-			-		10,000
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
Douglas Pinard (1)		20,000		-			-		20,000		20,000		-			-		20,000
Richard St. Cyr (1)		17,000		-			-		17,000		17,000		-			-		17,000
Ventana Capital Partners, Inc. (1)		20,000		-			-		20,000		20,000		-			-		20,000
Thomas Carluccio, Jr. (1) (2)		5,000		-			5,000		10,000		5,000		-			-		5,000
Thomas Carluccio, Jr. (1) (2)		5,000		-			5,000		10,000		5,000		-			-		5,000
Thomas Carluccio, Jr. (1) (2)		5,000		-			5,000		10,000		-		-			-		-
Thomas Carluccio, Jr. (2)		5,000		-			5,000		10,000		-		-			-		-
Thomas Carluccio, Jr. (2)		5,000		(2,500	)		5,000		7,500		-		-			-		-
ASC Capital (2)		84,500		-			-		84,500		-		-			-		-
Total	$	672,500	$	(5,305	)	$	25,000	$	692,195	$	765,350	$	(2,805	)	$	89,068	$	851,613

(1) In default.

(2) Convertible.

NOTE: On the December 31, 2013 footnotes, certain liabilities were reported in this table and as of March 31, 2014, are presented in the table for Purchased Liabilities under the 3(a)(10) as shown below.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

Notes, Convertible Notes, and Lines of Credit Payable to Related Parties, Net of Discounts

	March 31, 2014									December 31, 2013
								Principal,								Principal,
			Unamortized			Put		net of				Unamortized		Put		net of
	Principal		Discount			Premium		Discounts		Principal		Discount		Premium		Discounts
Bruce Harmon (1) (2)	$	14,501	$	-		$	14,501	$	29,002	$	-	$	-	$	-	$	-
Sergio Pinon (1) (2)		5,000		-			5,000		10,000		5,000		-		-		5,000
Sergio Pinon (1) (2)		5,000		-			5,000		10,000		5,000		-		-		5,000
Sergio Pinon (1) (2)		5,000		-			5,000		10,000		-		-		-		-
Sergio Pinon (2)		5,000		-			5,000		10,000		-		-		-		-
Sergio Pinon (2)		5,000		(2,500	)		5,000		7,500		-		-		-		-
Lakeport Business Services, Inc. (1) (2)		5,000		-			5,000		10,000		5,000		-		-		5,000
Lakeport Business Services, Inc. (1) (2)		5,000		-			5,000		10,000		5,000		-		-		5,000
Lakeport Business Services, Inc. (1) (2)		5,000		-			5,000		10,000		-		-		-		-
Lakeport Business Services, Inc. (2)		5,000		-			5,000		10,000		-		-		-		-
Lakeport Business Services, Inc. (2)		5,000		(2,500	)		5,000		7,500		-		-		-		-
Lakeport Business Services, Inc. (1) (2)		45,000		-			45,000		90,000		45,000		-		-		45,000
Lakeport Business Services, Inc. (1) (2)		25,000		(18,750	)		25,000		31,250		-		-		-		-
Total	$	134,501	$	(23,750	)	$	134,501	$	245,252	$	65,000	$	-	$	-	$	65,000

(1) In default.

(2) Convertible.

Purchased Liabilities under 3(a)(10), Net, of Notes and Convertible Notes, Net of Discounts

	March 31, 2014										December 31, 2013
								Principal,									Principal,
				Unamortized		Put		net of					Unamortized		Put		net of
	Principal			Discount		Premium		Discounts			Principal		Discount		Premium		Discounts
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)		75,000			-		-		75,000			75,000		-		-		75,000
Evolution Capital, LLC (1)		22,750			-		-		22,750			22,750		-		-		22,750
Evolution Capital, LLC (1)		20,255			-		-		20,255			20,255		-		-		20,255
Evolution Capital, LLC (1)		36,580			-		-		36,580			36,580		-		-		36,580
Evolution Capital, LLC (1)		12,990			-		-		12,990			12,990		-		-		12,990
Lakeport Business Services, Inc. - Line of Credit (1) (2) (3)		200,615			-		-		200,615			200,615		-		-		200,615
Bruce Harmon (1) (3)		157,260			-		-		157,260			157,260		-		-		157,260
Bruce Harmon (1) (3)		10,000			-		-		10,000			10,000		-		-		10,000
Bruce Harmon (1) (3)		52,010			-		-		52,010			52,010		-		-		52,010
Bruce Harmon (1) (3)		15,000			-		-		15,000			15,000		-		-		15,000
Bruce Harmon (1) (3)		15,000			-		-		15,000			15,000		-		-		15,000
Bruce Harmon (1) (3)		10,138			-		-		10,138			10,138		-		-		10,138
Lakeport Business Services, Inc. (1) (3)		47,235			-		-		47,235			47,235		-		-		47,235
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
Susan Jones (1)		58,333			-		-		58,333			58,333		-		-		58,333
Total Purchased Liabilities	$	1,087,949		$	-	$	-	$	1,087,949		$	1,087,949	$	-	$	-	$	1,087,949
Less: Legal Liability to Purchase Notes		(383,556	)		-		-		(383,556	)		-		-		-		-
Total Purchased Liabilities, Net	$	704,393		$	-	$	-	$	704,393		$	1,087,949	$	-	$	-	$	1,087,949

(1) In default.

(2) Convertible.

(3) Related party.

NOTE: The above notes were recorded in the separate tables (shown above), reflective of non-related parties and related parties, as noted. The Legal Liability to Purchase Notes are proceeds that will be paid to the above parties as of March 31, 2014, but have yet to be paid to the parties.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

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 500 warrants in 2010 and, 125, 125, 125, 375, and 500 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 $12.00 to $26.00. 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 $20.00, whichever is greater. On January 10, 2011, the conversion rate was, based on the formula, set at $20.00. 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 5). On August 30, 2013, a judgment was awarded to Dr. Salie in the amount of $64,055, plus interest on the principal balances from January 25, 2013 until full payment, and legal fees for the plaintiff.

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 $20.00 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 7,500 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 5). On August 30, 2013, a judgment was awarded to Dr. Salie in the amount of $501,641, plus interest on the principal balances from January 25, 2013 until full payment, and legal fees for the plaintiff.

On December 27, 2010, the Company executed a Revolving Credit Agreement ("LOC") with Lakeport in the amount of $100,000. The agreement expires on September 30, 2012 and bears interest at the rate of 12% which accrues until maturity. As of December 31, 2012 and December 31, 2012, the balance was $200,615 and $213,095, respectively. On October 26, 2011, $25,000 of this balance was converted into Series E preferred stock. This LOC contained a contingent conversion provision whereby the conversion price will be determined at an undetermined future date and at that time the LOC will become convertible. On June 7, 2012, a conversion price of $0.015 was established which was the current trading price of the Company’s stock. On October 5, 2012, the conversion price was modified to be the lesser of $0.015 or the five day VWAP. Additionally, the credit line was increased to $300,000. The modification of the LOC qualified as a debt extinguishment for accounting purposes. However, the conversion price equals the fair value of common stock at June 7, 2012, therefore the Company did not record any discount related to beneficial conversion feature. This note is in default. On October 5, 2012, the Company agreed, due to the LOC being in default, with Lakeport to amend the conversion feature to be the lesser of $0.015 or the five day VWAP. On December 20, 2013, ASC Recap was issued 39,000,000 shares of common stock in exchange for its partial purchase of $12,480 of the LOC (see Notes 7). As of December 31, 2013, the balance is $200,615.

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 $18.00 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 278 shares of restricted common stock in lieu of the fees. The shares were issued using the closing price of the previous day of $18.00. The convertible note contains an embedded derivative to be bifurcated from the note and reported as a liability at fair value (see Note 7). On August 27, 2012, Evolution converted $25,000 of this note into 16,234 shares of common stock at the discounted rate of $1.54 whereas the closing price on the previous day was $2.20. 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 938,287 shares of common stock (see Note 7) at a conversion rate of $0.01. A loss of $88,829 was recognized. On February 25, 2014, $1,800 of principal was converted into 25,714,290 shares of common stock (see Note 7) at a loss on conversion of $13,629. On February 26, 2014, $9,000 of principal was converted into 56,250,000 shares of common stock (see Note 7) at a loss on conversion of $7,875. On March 17, 2014, $9,000 of principal was converted into 56,250,000 shares of common stock (see Note 7) at a loss on conversion of $69,750. On March 26, 2014, $7,900 of principal was converted into 56,428,570 shares of common stock (see Note 7) at a loss on conversion of $54,171. As of March 31, 2014, this note is in default and has a balance of $11,500.

On December 12, 2011, the Company entered into a six month convertible note with Equity Trust Company Custodian FBO Curt Hansen beneficiary DCD Ann Hansen IRA (“Hansen”), in the amount of $100,000. The interest, which accrues, is at a rate of 12% per annum. The conversion feature is the lesser of $0.07 or 70% of the closing price prior to conversion. There was a $10,000 fee to a third party for legal expenses and related expenses for the closing of the note which was recorded as debt issue cost to be amortized over the debt term. Evolution was issued 111,112 shares of restricted common stock in lieu of the fees. The shares were issued using the closing price of the previous day of $0.07. The convertible note contains an embedded derivative to be bifurcated from the note and reported as a liability at fair value (see Note 7). This note is in default. On October 4, 2013, Hansen converted $1,500 into 1,004,689 shares of common stock based on a conversion price of $0.00149. A loss on conversion of $1,098 was recorded.

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. On March 28, 2013, KAJ converted $15,000 of the note into 535,715 shares of common stock (see Note 7) at a 30% discount, $0.028, at a loss on conversion of $92,143. The convertible note contains an embedded derivative to be bifurcated from the note and reported as a liability at fair value (see Note 7). This note is in default as of December 31, 2013. On March 6, 2014, KAJ sold the remaining principal balance of $10,000 and accrued interest of $8,200 to Southridge for $18,200 which converted the entire balance into 185,750,000 shares of common stock (see Note 7).

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

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. 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 4, 2012, the Company entered into a note with Lakeport in the amount of $47,235. The note matured on October 1, 2012 and accrues interest at the rate of 12% per annum. This note is in default.

On September 28, 2012, the Company entered into a note with Kline in the amount of $55,000. The note matured on October 10, 2012 and accrues interest at the rate of 12% per annum. This note is in default.

On September 28, 2012, the Company entered into a note with TOL in the amount of $55,000. The note matured on October 10, 2012 and accrues interest at the rate of 12% per annum. This note is in default.

On September 30, 2012, the Company entered into a note with Susan Jones, a former officer of the Company. The Company had accrued compensation of $58,333 which was converted into a note payable. The note matured on October 15, 2012 and accrued interest at the rate of 2% per annum. This note is in default.

On September 30, 2012, the Company entered into a note with Harmon, an officer of the Company. As part of an agreement whereas Harmon provided his personal guarantee to a liability of the Company, the Company purchased back 2,060,276 shares of Series E preferred stock (see Note 7) for the original conversion value of $157,260 and converted the liability into a note which matures on October 15, 2012 and accrues interest at the rate of 2% per annum. The Company recognized compensation expense of $150,461 in this transaction as the shares were valued at $6,799. This note is in default.

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 414,871 shares of common stock (see Note 7) at a 50% discount, $0.05, at a loss on conversion of $62,231. The balance as of March 31, 2014 is $0.

On October 23, 2012, the Company entered into a note with Kline for $75,000. The note has an interest rate of 12% and matured on October 31, 2012. This note is in default.

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 483,334 shares of common stock (see Note 7) at a conversion rate of $0.012. A loss of $52,703 was recognized. On October 9, 2013, Asher converted $1,000 into 1,000,000 shares of common stock (see Note 7) at a conversion rate of $0.001. A loss of $1,400 was recognized. On October 28, 2013, Asher converted $2,300 into 4,791,667 shares of common stock (see Note 7) at a conversion rate of $.00048. A loss of $2,492 was recognized. On October 30, 2013, Asher converted $2,300 into 4,791,667 shares of common stock (see Note 7) at a conversion rate of $0.00048. A loss of $2,013 was recognized. On November 8, 2013, Asher converted $1,695 into 4,842,857 shares of common stock (see Note 7) at a conversion rate of $0.00035. A loss of $1,695 was recognized. On November 13, 2013, Asher converted $3,150 into 10,862,069 shares of common stock (see Note 7) at a conversion rate of $0.00029. A loss of $4,453 was recognized. On November 18, 2013, Asher converted $2,925 into 10,833,333 shares of common stock (see Note 7) at a conversion rate of $0.00027. A loss of $5,742 was recognized. On November 20, 2013, Asher converted $2,925 into 10,833,333 shares of common stock (see Note 7) at a conversion rate of $0.00027. A loss of $3,575 was recognized. On November 18, 2013, Asher converted $2,925 into 10,833,333 shares of common stock (see Note 7) at a conversion rate of $0.00027. A loss of $20,908 was recognized. On November 18, 2013, Asher converted $2,925 into 10,833,333 shares of common stock (see Note 7) at a conversion rate of $0.00027. A loss of $20,908 was recognized. On December 2, 2013, Asher converted $8,060 into 21,783,784 shares of common stock (see Note 7) at a conversion rate of $0.00037. A loss of $7,189 was recognized. As of December 31, 2013, the note has a principal balance of $650.

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 160,834 shares of common stock at a 50% discount, $0.12, at a loss on conversion of $12,867 on the conversion. On December 11, 2012, Southridge converted $19,325 of the note into 161,042 shares of common stock at a 50% discount, $0.12, at a loss on conversion of $12,883 on the conversion. On January 3, 2013, Southridge converted $11,375 of the note into 94,792 shares of common stock (see Note 7) at a 50% discount, $0.12. 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 18,959 shares of common stock (see Note 7) at a loss of $3,792. The note was fully converted as of March 31, 2014.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

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 75,568 shares of common stock at a 50% discount, $0.12, 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 131,756 shares of common stock (see Note 7) at a 50% discount, $0.05, at a loss on conversion of $19,763. The balance as of March 31, 2014 is $0.

On February 11, 2013, under the reset clause of the note, Mauriello was issued an additional 71,392 shares of common stock (see Note 7) at a loss of $14,278. As of March 31, 2014, the note was fully converted.

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 189,584 shares of common stock (see Note 7) at a 50% discount, $1.20. 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 25,917 shares of common stock (see Note 7) at a loss of $5,183. On February 20, 2013, Southridge converted $20,255 of the principal into 405,042 shares of common stock (see Note 7) at a 50% discount, $0.05. 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 101,275 shares of common stock (see Note 7) at a loss of $60,753. On February 27, 2013, Southridge converted $12,150 of the principal into 303,750 shares of common stock (see Note 7) at a 50% discount, $0.40. A loss on conversion of $48,600 was recognized. On March 12, 2013, Southridge converted $24,430 of the principal into 610,750 shares of common stock (see Note 7) at a 50% discount, $0.40. 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 203,584 shares of common stock (see Note 7) at a loss of $40,717. On March 18, 2013, Southridge converted $12,990 of the principal into 433,000 shares of common stock (see Note 7) at a 50% discount, $0.03. A loss on conversion of $73,610 was recognized. On March 22, 2013, Southridge converted $19,100 of the principal into 636,667 shares of common stock (see Note 7) at a 50% discount, $0.03. A loss on conversion of $108,233 was recognized. On April 1, 2013, Southridge converted $13,010 of the principal into 650,500 shares of common stock (see Note 7) at a 50% discount, $0.02. 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 318,334 shares of common stock (see Note 7) at a loss of $63,667. On April 10, 2013, Southridge converted $9,440 of the principal into 944,000 shares of common stock (see Note 7) at a 50% discount, $0.01. 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 7) at a 50% discount, $0.01. A loss on conversion of $105,688 was recognized. On April 22, 2013, Southridge converted $9,975 of the principal into 997,500 shares of common stock (see Note 7) at a 50% discount, $0.01. A loss on conversion of $94,763 was recognized. As of March 31, 2014, 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 405,042 shares of common stock (see Note 7) at a 50% discount, $0.05. A loss on conversion of $66,608 was recognized. As of March 31, 2014, 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 47,192 shares of common stock at a 50% discount, $0.12, 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 152,466 shares of common stock (see Note 7) at a 50% discount, $0.10, 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 89,003 shares of common stock (see Note 7) at a 50% discount, $0.05, at a loss on conversion of $13,350. As of March 31, 2014, 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 89,144 shares of common stock (see Note 7) at a 50% discount, $0.114, 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 101,795 shares of common stock (see Note 7) at a 50% discount, $0.106, at a loss on conversion of $9,508. On January 18, 2013, WHC converted $10,700 of the note into 107,000 shares of common stock (see Note 7) at a 50% discount, $0.05, at a loss on conversion of $10,700. On February 5, 2013, WHC converted $3,673 of the note into 55,098 shares of common stock (see Note 7) at a 50% discount, $0.0666, at a loss on conversion of $7,346. As of March 31, 2014, 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 January 2, 2014, Asher converted $5,000 of principal into 21,739,130 shares of common stock (see Note 7) at loss of conversion of $3,696. On January 10, 2014, Asher converted $5,640 of principal into 47,000,000 shares of common stock (see Note 7) at loss of conversion of $8,460. On January 16, 2014, Asher converted $6,210 of principal into 51,750,000 shares of common stock (see Note 7) at loss of conversion of $9,315. On January 22, 2014, Asher converted $5,175 of principal into 51,750,000 shares of common stock (see Note 7) at loss of conversion of $10,350. On January 28, 2014, Asher converted $5,000 of principal into 21,739,130 shares of common stock (see Note 7) at loss of conversion of $10,350. On January 30, 2014, Asher converted $5,000 of principal into 21,739,130 shares of common stock (see Note 7) at loss of conversion of $10,350. On February 7, 2014, Asher converted $5,000 of principal into 21,739,130 shares of common stock (see Note 7) at loss of conversion of $2,070. On February 11, 2014, Asher converted $5,000 of principal into 21,739,130 shares of common stock (see Note 7) at loss of conversion of $7,245. On February 14, 2014, Asher converted $5,000 of principal and $2,120 of accrued interest into 21,739,130 shares of common stock (see Note 7) at loss of conversion of $2,257.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

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 7) at a 50% discount, $0.09. A loss on conversion of $34,344 was recognized. On February 5, 2013, Southridge converted $7,650 of the note into 127,500 shares of common stock (see Note 7) at a 50% discount, $0.06. A loss on conversion of $17,850 was recognized. On February 6, 2013, Southridge converted $5,750 of the note into 115,000 shares of common stock (see Note 7) at a 50% discount, $0.05. A loss on conversion of $17,250 was recognized. On March 5, 2013, Southridge converted $20,375 of the note into 509,375 shares of common stock (see Note 7) at a 50% discount, $0.04. A loss on conversion of $81,500 was recognized. On May 4, 2013, Southridge converted $8,525 of the note into 852,500 shares of common stock (see Note 7) at a 50% discount, $0.01. A loss on conversion of $80,988 was recognized. The principal balance of the note as of March 31, 2014 was $0.

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 matured 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 20, 2014, Asher converted $9,100 into 113,750,000 shares of common stock at a conversion price of $0.00008 (see Note 7). A loss on conversion of $13,650 will be recognized. On February 24, 2014, Asher converted $13,700 into 114,166,667 shares of common stock at a conversion price of $0.00012 (see Note 7). A loss on conversion of $9,133 will be recognized. On February 27, 2014, Asher converted $9,700 of principal and accrued interest of $1,300 into 91,666,667 shares of common stock at a conversion price of $0.00012 (see Note 7). A loss on conversion of $16,500 was recognized.

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 213,210 shares of common stock (see Note 7) at a 50% discount, $0.07, 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 484,209 shares of common stock (see Note 7) at a 50% discount, $0.028, at a loss of $41,642. As of March 31, 2014, 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.

On November 14, 2013, the Company entered into a consulting agreement with Lakeport for one year to provide accounting and administrative services including the preparation of SEC filings. The agreement provides for compensation, in the form of a convertible note, in the amount of $5,000 per month. A note will be prepared on the first day of each month for that month’s service. For November 2013, the note was dated November 14, 2013. Each note bears interest of 12% per annum and has a term of two months. Each note is convertible at the lesser of the closing price of the common stock at the day prior to the note less 50% or at the average of the lowest three trading prices for the common stock during the period sixty days prior to conversion. On November 14, 2013, the Company issued a note for $5,000.

On November 14, 2013, the Company entered into a consulting agreement with Thomas Carluccio, Jr. for one year to marketing, operations and administrative services. The agreement provides for compensation, in the form of a convertible note, in the amount of $5,000 per month. A note will be prepared on the first day of each month for that month’s service. For November 2013, the note was dated November 14, 2013. The note bears interest of 12% per annum and each note will have a term of two months. The notes are convertible at the lesser of the closing price of the common stock at the day prior to the note less 50% or at the average of the lowest three trading prices for the common stock during the period sixty days prior to conversion. On November 14, 2013, the Company issued a note to Thomas Carluccio, Jr. for $5,000.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

On November 14, 2013, the Company entered into an addendum to Sergio Pinon’s employment agreement for a one year period to provide management, operations, marketing and administrative services in lieu of employee compensation as previously agreed to in the employment agreement. Mr. Pinon has received common stock of the Company for a majority of 2013 while serving as chief executive officer, interim chief financial officer, and director. The addendum provides for compensation, in the form of a convertible note, in the amount of $5,000 per month. A note will be prepared on the first day of each month for that month’s service. For November 2013, the note was be dated November 14, 2013.

Each note will bear interest of 12% per annum and each note will have a term of two months. Each note is convertible at the lesser of the closing price of the common stock at the day prior to the note less 50% or at the average of the lowest three trading prices for the common stock during the period sixty days prior to conversion. On November 14, 2013, the Company issued a note for $5,000. See Notes 6.

On December 1, 2013, the Company issued its monthly note to Lakeport for $5,000 under the same contractual terms. See disclosure on November 14, 2013 and Note 6.

On December 1, 2013, the Company issued its monthly note to Thomas Carluccio, Jr. for $5,000 under the same contractual terms. See disclosure on November 14, 2013.

On December 1, 2013, the Company issued its monthly note to Sergio Pinon for $5,000 under the same contractual terms. See disclosure on November 14, 2013 and Note 6.

On December 17, 2013, the Company entered into a note with Lakeport for $45,000. The note will bear interest of 12% per annum and each note will have a term of two months. The notes are convertible at the lesser of the closing price of the common stock at the day prior to the note less 50% or at the average of the lowest three trading prices for the common stock during the period of the inception of the note until conversion.

On November 14, 2013, the Company entered into a consulting agreement with Lakeport for one year to provide various services. The agreement provides for compensation, in the form of a convertible note, in the amount of $5,000 per month. On January 1, 2014, February 1, 2014, March 1, 2014 and April 1, 2014, the Company issued four notes, each for $5,000. See Note 7 and 9.

On November 14, 2013, the Company entered into a consulting agreement with Thomas Carluccio, Jr. for one year to provide various services. The agreement provides for compensation, in the form of a convertible note, in the amount of $5,000 per month. On January 1, 2014, February 1, 2014, March 1, 2014 and April 1, 2014, the Company issued four notes, each for $5,000. See Note 7 and 9.

On November 14, 2013, the Company entered into an addendum to the employment agreement with Sergio Pinon for one year to provide various services including serving as chief executive officer, interim chief financial officer and director. The agreement provides for compensation, in the form of a convertible note, in the amount of $5,000 per month. On January 1, 2014, February 1, 2014, March 1, 2014 and April 1, 2014, the Company issued four notes, each for $5,000. See Notes 6 and 9.

On January 1, 2014, the Company issued its monthly note to Lakeport for $5,000 under the same contractual terms. See disclosure on November 14, 2013 and Note 6.

On January 1, 2014, the Company issued its monthly note to Thomas Carluccio, Jr. for $5,000 under the same contractual terms. See disclosure on November 14, 2013.

On January 1, 2014, the Company issued its monthly note to Sergio Pinon for $5,000 under the same contractual terms. See disclosure on November 14, 2013 and Note 6.

On January 2, 2014, Asher converted $5,000 of the note dated December 21, 2012, into 21,739,130 shares of common stock (see Note 7) at a discounted conversion rate of $0.00023.

On January 2, 2014, the Company cancelled the 12,756,800 shares of common stock issued to Bruce Harmon on October 16, 2013 and issued a convertible promissory note (see Note 7). The note bears interest at 12% per annum and has a maturity date of March 2, 2014. The note is convertible at the lesser of the closing price of the common stock at the day prior to the note less 50% or at the average of the lowest three trading prices for the common stock during the period of the inception of the note until conversion.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

On January 10, 2014, Asher converted $5,640 of the note dated December 21, 2012, into 47,000,000 shares of common stock (see Note 7) at a discounted conversion rate of $0.00012.

On January 22, 2014, Asher converted $5,175 of the note dated December 21, 2012, into 51,750,000 shares of common stock (see Note 7) at a discounted conversion rate of $0.0001.

On January 28, 2014, Asher converted $5,175 of the note dated December 21, 2012, into 51,750,000 shares of common stock (see Note 7) at a discounted conversion rate of $0.0001.

On January 28, 2014, the Company issued ASC 76,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 7). The shares were valued at $15,200 based on a per share price of $0.0002.

On January 30, 2014, Asher converted $5,175 of the note dated December 21, 2012, into 51,750,000 shares of common stock (see Note 7) at a discounted conversion rate of $0.0001.

On February 1, 2014, the Company issued its monthly note to Lakeport for $5,000 under the same contractual terms. See disclosure on November 14, 2013 and Note 6.

On February 1, 2014, the Company issued its monthly note to Thomas Carluccio, Jr. for $5,000 under the same contractual terms. See disclosure on November 14, 2013.

On February 1, 2014, the Company issued its monthly note to Sergio Pinon for $5,000 under the same contractual terms. See disclosure on November 14, 2013 and Note 6.

On February 5, 2014, the Company issued ASC 93,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 7). The shares were valued at $9,300 based on a per share price of $0.0001.

On February 7, 2014, Asher converted $3,105 of the note dated December 21, 2012, into 51,750,000 shares of common stock (see Note 7) at a discounted conversion rate of $0.00006.

On February 11, 2014, Asher converted $3,105 of the note dated December 21, 2012, into 51,750,000 shares of common stock (see Note 7) at a discounted conversion rate of $0.00006.

On February 13, 2014, the Company issued ASC 113,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 7). The shares were valued at $33,900 based on a per share price of $0.0003.

On February 14, 2014, Asher converted $1,265 of principal and $2,120 of accrued interest of the note dated December 21, 2012, into 56,416,667 shares of common stock (see Note 7) at a discounted conversion rate of $0.00006.

On February 20, 2014, Asher converted $9,100 of the note dated January 31, 2013, into 113,750,000 shares of common stock (see Note 7) at a discounted conversion rate of $0.00008.

On February 24, 2014, Asher converted $13,700 of the note dated January 31, 2013, into 114,166,667 shares of common stock (see Note 7) at a discounted conversion rate of $0.00012.

On February 24, 2014, the Company issued ASC 141,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 7). The shares were valued at $42,300 based on a per share price of $0.0003.

On February 26, 2014, Buko-Evolution converted $9,000 of the note dated October 26, 2011, into 56,250,000 shares of common stock (see Note 7) at a discounted conversion rate of $0.00016.

On February 27, 2014, Asher converted $9,700 of principal and $1,300 of accrued interest of the note dated January 31, 2013, into 91,666,667 shares of common stock (see Note 7) at a discounted conversion rate of $0.00012.

On March 1, 2014, the Company issued its monthly note to Lakeport for $5,000 under the same contractual terms. See disclosure on November 14, 2013 and Note 6.

On March 1, 2014, the Company issued its monthly note to Thomas Carluccio, Jr. for $5,000 under the same contractual terms. See disclosure on November 14, 2013.

On March 1, 2014, the Company issued its monthly note to Sergio Pinon for $5,000 under the same contractual terms. See disclosure on November 14, 2013 and Note 6.

On March 4, 2014, the Company issued ASC 178,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 7). The shares were valued at $35,600 based on a per share price of $0.0002.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

On March 6, 2014, KAJ sold the remaining principal balance of $10,000 and accrued interest of $8,200 to Southridge for $18,200 (see Note 7).

On March 17, 2014, Buko-Evolution converted $9,000 of the note dated October 26, 2011, into 56,250,000 shares of common stock (see Note 7) at a discounted conversion rate of $0.00016.

On March 12, 2014, the Company issued ASC 195,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 7). The shares were valued at $78,000 based on a per share price of $0.0004.

On March 17, 2014, Southridge converted $18,575 of the note acquired on March 6, 2014 into 185,750,000 shares of common stock.

On March 20, 2014, the Company issued ASC 239,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 7). The shares were valued at $191,200 based on a per share price of $0.0008.

On March 24, 2014, the Company entered into a convertible note with Southridge for $20,000. The note matures on February 28, 2015 and bears interest of 10% per annum. The conversion rate is the lesser of $0.002 or a 50% discount from the lowest closing bid price in the 30 trading days prior to the day of conversion.

On March 27, 2014, ASC purchased the Hansen note (see Note 7) dated December 12, 2011.

NOTE 4 – 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 March 31, 2014 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			March 31, 2014			December 31, 2013
Volatility		251% - 257	%		251	%		251	%
Expected Term	0.17 - 0.5 years			0.08 - 0.46 years			0.08 – 0.46 years
Risk Free Interest Rate		0.33	%		0.315	%		0.315	%

The following reflects the initial fair value on the note inception date and changes in fair value through March 31, 2014:

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 year ended December 31, 2013 – (gain) loss		(10,715	)
Embedded conversion option derivative liability fair value on December 31, 2013		53,570
Change in fair value for the period ended March 31, 2014 – (gain) loss		(53,570	)
Embedded conversion option derivative liability fair value on March 31, 2014	$	-

NOTE 5 – 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. The Company firmly believes that its actions were justified and defendable. No indication has been that litigation is threatened or pending.

In October 2012, Douglas Pinard, a former owner of CSP, 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.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

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 D. 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. The Company has not responded to that lawsuit. 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 August 30, 2013, a judgment was awarded to Dr. Salie for $565,696, collectively for all plaintiffs, additional interest from January 25, 2013 on the principal balances until full payment is received, and legal fees for the plaintiff.

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 approximately $1,481,830 of Company debt and subsequently converting the debt to common stock of the Company pursuant to Section 3(a)(10) of the Securities Act of 1933, which allows the exchange of claims, securities, or property for stock when the arrangement is approved for fairness by a court proceeding. The Company has agreed to these terms as the acquisition of these debts and subsequent conversion would alleviate a significant portion of the Company’s liabilities. A fairness hearing was held on May 14, 2013 and the arrangement 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.

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 6 – RELATED PARTIES

Bruce Harmon, former CFO and Chairman of the Company, is a note holder of the Company (see Note 3). Line of credit and notes payable of $616,759 and $562,258 was due to our former CFO’s company and himself personally at March 31, 2014 and December 31, 2013, respectively, for advances to the Company. At March 31, 2014 and December 31, 2013, the Company had accrued interest of $34,195 and $18,475, respectively.

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 former CFO, respectively, were each granted 250,000 shares of restricted common stock. See Note 7.

On March 6, 2013, the Board of Directors approved the compensation for 2013 for Vincent & Rees, P.C. (“Vincent & Rees”), legal counsel for the Company, thereby granting Vincent & Rees 250,000 shares of restricted common stock. Mr. Rees was a director of the Company. See Note 7.

On April 8, 2013, Harmon converted 29,063 shares of Series E preferred stock and 49,242 shares of Series F preferred stock, collectively on a 1:1 basis, into 78,305 shares of common stock (see Note 7).

April 8, 2013, Harmon converted accounts payable of $9,301 into 155,025 shares of common stock at a conversion rate of $0.06. See Note 7.

On April 8, 2013, Pinon converted 251,006 shares of Series E preferred stock on a 1:1 basis into 1,256 shares of common stock. See Note 7.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

On April 25, 2013, 1,150,000 shares of S-8 common stock were issued to Pinon and Harmon (575,000 and 575,000 shares, respectively), in lieu of payroll for April and May 2013 (see Note 7).

On May 22, 2013, 2,199,772 shares of S-8 common stock were issued to Pinon and Harmon (1,099,886 and 1,099,886 shares, respectively), in lieu of payroll for June and July 2013. Harmon had his 1,099,886 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 were issued on August 15, 2013.

On September 12, 2013, the Company issued 10,000,000 shares of common stock to Sergio Pinon, the Company’s CEO and director, as compensation for his services in lieu of payroll (see Note 7). The shares were recorded at an expense of $55,000.

On November 14, 2013, the Company entered into an addendum to the employment agreement with Sergio Pinon for one year to provide various services including serving as chief executive officer, interim chief financial officer and director. The agreement provides for compensation, in the form of a convertible note, in the amount of $5,000 per month. The Company issued notes on November 14, 2013, December 1, 2013, January 1, 2014, February 1, 2014, March 1, 2014 and April 1, 2014, each for $5,000. See Notes 3 and 9.

On November 14, 2013, the Company entered into a consulting agreement with Bruce Harmon for one year to provide various services. The agreement provides for compensation, in the form of a convertible note, in the amount of $5,000 per month. The Company issued notes on November 14, 2013, December 1, 2013, January 1, 2014, February 1, 2014, March 1, 2014 and April 1, 2014, each for $5,000. See Notes 3 and 9.

NOTE 7 – 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 $2,000.00 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.

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 $10,000 per share for the preceding 20 trading days, (ii) the Company earns $100 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.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

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 5,953 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 $5.04 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 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 5,000 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 5,000 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 $0.12 per share closing price of the common stock on the date of this transaction or $600.

On April 8, 2013, Harmon converted 29,063 shares of Series E preferred stock and 49,242 shares of Series F preferred stock, collectively on a 1:1 basis, into 78,305 shares of common stock.

On April 8, 2013, Sergio Pinon (“Pinon”) converted 1,256 shares of Series E preferred stock on a 1:1 basis into 1,256 shares of common stock.

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 $0.66 or 30,304 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 10,302 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.

On August 13, 2013, as related to the reverse split approved by FINRA on August 12, 2013, the outstanding shares of preferred stock were effected by a reverse split of 1:200.

On February 28, 2014, the Company’s Board of Directors approved the filing of a Certificate of Designation of the Preferences and Rights of Series H 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 H 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 submitted for filing with the Delaware Department of State on April 8, 2014. The Certificate of Designation created 10 shares of Series H Preferred Stock. Each holder of Series H 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 H Preferred Stock is convertible into. Each share of Series H Preferred Stock is convertible, at the option of the holder of the Series H Preferred Stock, into one share of the Company’s common stock. Shares of the Series H 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 H Preferred Stock will be entitled to five billion (5,000,000,000) 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 H 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 H Preferred Stock). Due to the Enhanced Voting Rights, following the issuance of shares of Series H Preferred Stock, the holders of the Series H Preferred Stock may be able to exercise voting control over the Company. In such case, the holders of the Series H 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 H 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 H Preferred Stock will have a dilutive effect on the distributions available to the holders of the Company’s common stock. See Note 9.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

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 August 12, 2013, the Company received notification from FINRA that the reverse stock split of our common stock at a ratio of 1:200 had been approved. The corporate action took effect at the open of business on August 13, 2013.

On January 3, 2013, 89,144 shares were issued to WHC which were recorded as issuable as of December 31, 2012 (see Note 3).

On January 3, 2013, due to a reset clause in the note acquired on November 8, 2012 (see Note 3), Southridge was issued an additional 94,792 shares of common stock.

On January 3, 2013, Southridge converted $11,375 of the note dated November 8, 2012, into 94,792 shares of common stock (see Note 3) at a 50% discount, $0.12. A loss on conversion will be recognized.

On January 3, 2013, Southridge converted $22,750 of the note dated November 30, 2012, into 189,584 shares of common stock (see Note 3) at a 50% discount, $0.12. A loss on conversion will be recognized. Due to the deficiency of available shares to be issued at the time, the Company issued 60,000 shares on January 10, 2013 and the remaining 12,984 on January 24, 2013.

On January 8, 2013, due to a reset clause in the note acquired on September 26, 2012 (see Note 3), Star City was issued an additional 18,771 shares of common stock.

On January 9, 2013, due to a reset clause in the note acquired on November 8, 2012 (see Note 3), Southridge was issued an additional 18,959 shares of common stock.

On January 11, 2013, 101,790 shares of common stock were issued to WHC for a conversion of a note payable in December 2012 (see Note 3) 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 107,000 shares of common stock (see Note 3) at a 50% discount, $0.05.

On January 23, 2013, Marina converted $15,000 of principal and $246.58 of accrued interest of the note dated December 5, 2012, into 152,466 shares of common stock (see Note 3) at a 50% discount, $0.05.

On January 24, 2013, 71,392 shares of common stock were issued to Mauriello in regards to a conversion of a note payable on December 13, 2012 (see Note 3) 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 312,223 shares of common stock (see Note 3) at a 50% discount, $0.09.

On January 28, 2013, due to a reset clause in the note acquired on September 26, 2012 (see Note 3), Star City was issued an additional 18,771 shares of common stock.

On January 28, 2013, due to a reset clause in the note acquired on November 30, 2012 (see Note 3), Southridge was issued an additional 25,917 shares of common stock.

On February 4, 2013, due to a reset clause in the note acquired on January 2, 2013 (see Note 3), Southridge was issued an additional 89,207 shares of common stock.

On February 5, 2013, Southridge converted $7,650 of the note dated December 28, 2012, into 127,500 shares of common stock (see Note 3) at a 50% discount, $0.06.

On February 5, 2013, WHC converted $3,673 of the note dated December 13, 2012, into 55,098 shares of common stock (see Note 3) at a 50% discount, $0.0334.

On February 6, 2013, Southridge converted $5,750 of the note dated December 28, 2012, into 115,000 shares of common stock (see Note 3) at a 50% discount, $0.05.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

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 131,756 shares of common stock (see Note 3) at a 50% discount, $0.05.

On February 11, 2013, due to a reset clause in the note acquired on November 20, 2012 (see Note 3), Mauriello was issued an additional 71,392 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 53,954 shares of common stock (see Note 3) at a 50% discount, $0.05.

On February 11, 2013, Southridge converted $14,400 of the note dated December 4, 2012, into 405,042 shares of common stock (see Note 3) at a 50% discount, $0.05.

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 414,871 shares of common stock (see Note 3) at a 50% discount, $0.05.

On February 20, 2013, Southridge converted $20,255 of the note dated November 30, 2012, into 405,100 shares of common stock (see Note 3) at a 50% discount, $0.05.

On February 26, 2013, Momoma Capital converted the $14,925 into 213,210 shares of common stock at a discount of 30%, $0.07 (see Note 3).

On February 27, 2013, due to a reset clause in the note acquired on November 30, 2012 (see Note 3), Southridge was issued an additional 101,275 shares of common stock.

On February 27, 2013, Southridge converted $12,150 of the note dated November 30, 2012, into 303,750 shares of common stock (see Note 3) at a 50% discount, $0.04.

On March 5, 2013, Southridge converted $20,375 of the note dated December 28, 2012, into 509,375 shares of common stock (see Note 3) at a 50% discount, $0.04.

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 250,000 shares of restricted common stock. The issuance was valued at $30,000 each for Mr. Pinon and Mr. Harmon. See Note 6.

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 250,000 shares of restricted common stock. The issuance was valued at $30,000. Mr. Rees was a director of the Company.

On March 12, 2013, Southridge converted $24,430 of the note dated November 30, 2012, into 610,750 shares of common stock (see Note 3) at a 50% discount, $0.04.

On March 18, 2013, due to a reset clause in the note acquired on November 30, 2012 (see Note 3), Southridge was issued an additional 203,584 shares of common stock.

On March 18, 2013, Southridge converted $12,990 of the note dated November 30, 2012, into 433,000 shares of common stock (see Note 3) at a 50% discount, $0.03.

On March 22, 2013, Southridge converted $19,100 of the note dated November 30, 2012, into 636,667 shares of common stock (see Note 3) at a 50% discount, $0.03.

On March 28, 2013, KAJ converted $15,000 of the note dated January 30, 2012, into 535,715 shares of common stock (see Note 3) at a 30% discount, $0.028.

On April 1, 2013, Southridge converted $13,010 of the note dated November 30, 2012, into 650,500 shares of common stock (see Note 3) at a 50% discount, $0.02.

On April 1, 2013, due to a reset clause in the note acquired on November 30, 2012 (see Note 3), Southridge was issued an additional 318,334 shares of common stock.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

On April 3, 2013, Momoma Capital converted $11,900 of principal and $1,658 of accrued interest of the note dated February 26, 2013, into 484,209 shares of common stock (see Note 3) at a 50% discount, $0.028.

On April 4, 2013, Susan Jones was issued 10,000 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 4,047 shares of common stock.

April 8, 2013, Harmon converted accounts payable of $9,301 into 155,025 shares of common stock at a conversion rate of $0.06. See Note 6.

On April 8, 2013, Pinon converted 251,006 shares of Series E preferred stock on a 1:1 basis into 1,256 shares of common stock. See Note 6.

On April 10, 2013, Southridge converted $9,440 of the note dated November 30, 2012, into 944,000 shares of common stock (see Note 3) at a 50% discount, $0.01.

On April 15, 2013, Southridge converted $11,125 of the note dated November 30, 2012, into 1,112,500 shares of common stock (see Note 3) at a 50% discount, $0.01.

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.

On April 19, 2013, the Company approved the 2013 Stock Option Plan which authorized 4,750,000 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 997,500 shares of common stock (see Note 3) at a 50% discount, $0.01.

On April 25, 2013, 1,533,709 shares of S-8 common stock were issued to Pinon (see Note 6), Harmon (see Note 6), Thomas Carluccio, Jr. (“Carluccio”), and Melissa Valido (“Valido”) (575,000, 575,000, 217,375 and 166,334 shares, respectively), in lieu of payroll for April and May 2013. The issuances were recorded at a cost of $20,000, $20,000, $7,500, and $5,000, respectively.

On May 4, 2013, Southridge converted $8,525 of the note dated December 28, 2012, into 852,500 shares of common stock (see Note 3) at a 50% discount, $0.01.

On May 1, 2013, Asher converted $5,800 of the note dated October 24, 2012, into 483,334 shares of common stock (see Note 3) at a 42% discount, $0.012.

On May 17, 2013, Buko-Evolution, LLC converted $10,000 of the note dated October 26, 2011, into 938,287 shares of common stock (see Note 3) at a 50% discount, $0.01.

On May 22, 2013, 3,119,292 shares of S-8 common stock were issued to Pinon (see Note 6), Harmon (see Note 6), Carluccio, and Valido (1,099,886, 1,099,886, 511,447, and 408,074 shares, respectively), in lieu of payroll for June and July 2013. Harmon had his 1,099,886 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 were issued on August 15, 2013.

On September 12, 2013, the Company issued 10,000,000 shares of common stock to Sergio Pinon, the Company’s CEO and director, as compensation for his services in lieu of payroll (see Note 6). The shares were recorded at an expense of $55,000.

On September 12, 2013, the Company issued 6,000,000 shares of common stock to Thomas Carluccio, Jr. as compensation for his services in lieu of payroll. The shares were recorded at an expense of $33,000.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

On September 12, 2013, the Company issued 4,000,000 shares of common stock to Melissa Valido as compensation for his services in lieu of payroll. The shares were recorded at an expense of $22,000.

On September 15, 2013, Southridge converted $1,885 of principal and $314 of accrued interest of the note dated December 4, 2012, into 2,199,091 shares of common stock (see Note 3) at a 50% discount, $0.001.

On September 25, 2013, Southridge converted $1,855 of principal and $92 of accrued interest of the note dated December 4, 2012, into 2,212,450 shares of common stock (see Note 3) at a 50% discount, $0.0009.

On October 3, 2013, Southridge converted $1,585 of principal and $52 of accrued interest of the note dated December 4, 2012, into 2,406,639 shares of common stock (see Note 3).

On October 4, 2013, Hansen converted $1,500 of the note dated December 12, 2011, into 1,004,689 shares of common stock (see Note 3) at a discounted conversion price of $0.00149.

On October 9, 2013, Asher converted $1,000 of the note dated October 24, 2012, into 1,000,000 shares of common stock (see Note 3) at a discounted conversion price of $0.001.

On October 11, 2013, Southridge converted $1,563 of principal and $73 of accrued interest of the note dated December 4, 2012, into 2,405,268 shares of common stock (see Note 3).

On October 15, 2013, the Company issued 50,000,000 shares of common stock to Sergio Pinon, the Company’s CEO and director, as compensation for his services in lieu of payroll. The shares were valued at $50,000. See Note 6.

On October 15, 2013, the Company issued 25,000,000 shares of common stock to Bruce Harmon, a consultant to the Company, as compensation for his services. The shares were valued at $25,000.

On October 16, 2013, the Company issued 12,756,800 shares of common stock to Bruce Harmon in regards to his investment in the Company for the payment of $14,501 for a credit card liability of the Company. The shares were issued at a discount of 25% based on the restriction.

On October 18, 2013, Southridge converted $6,530 of principal and $53 of accrued interest of the note dated December 4, 2012, into 13,714,282 shares of common stock (see Note 3).

On October 25, 2013, Southridge converted $3,805 of principal and $38 of accrued interest of the note dated December 4, 2012, into 13,724,384 shares of common stock (see Note 3).

On October 28, 2013, Asher converted $2,300 of the note dated October 24, 2012, into 4,791,667 shares of common stock (see Note 3) at a discounted conversion price of $0.00048.

On October 31, 2013, the Company entered into a settlement with Dr. Jason Cohen in regards to his guaranteed value associated with his purchase in 2011 of a convertible note and simultaneous conversion into common stock. The guarantee was for $25,000. As Dr. Cohen had not realized the agreed upon value, the Company and Dr. Cohen agreed to release the guarantee with the issuance of an additional 25,000,000 shares of common stock to Dr. Cohen. The shares issued were valued at $25,000.

On November 1, 2013, Southridge converted $3,265 of principal and $29 of accrued interest of the note dated December 4, 2012, into 13,725,295 shares of common stock (see Note 3) at a 50% discount, $0.00024.

On November 8, 2013, Asher converted $1,695 of the note dated October 24, 2012, into 4,842,857 shares of common stock (see Note 3) at a discounted conversion price of $0.00035.

On November 12, 2013, Southridge converted $2,710 of principal and $34 of accrued interest of the note dated December 4, 2012, into 13,719,376 shares of common stock (see Note 3) at a 50% discount, $0.0002.

On November 13, 2013, Asher converted $3,150 of the note dated October 24, 2012, into 10,862,069 shares of common stock (see Note 3) at a discounted conversion price of $0.00029.

On November 18, 2013, Asher converted $2,925 of the note dated October 24, 2012, into 10,833,333 shares of common stock (see Note 3) at a discounted conversion price of $0.00027.

On November 20, 2013, Southridge converted $2,180 of principal and $18 of accrued interest of the note dated December 4, 2012, into 13,734,430 shares of common stock (see Note 3) at a 50% discount, $0.00016.

On November 20, 2013, the Company ordered the issuance of 115,155,000 shares of common stock to Harmon for the conversion of $69,093 of accrued interest for various notes payable to Harmon and Lakeport, a company solely owned by Harmon. This conversion was approved by the board of directors on September 15, 2013 for interest through that date. The order was not processed until November 20, 2013.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

On November 20, 2013, Asher converted $2,925 of the note dated October 24, 2012, into 10,833,333 shares of common stock (see Note 3) at a discounted conversion price of $0.00027.

On November 22, 2013, Southridge converted $2,192 of principal and $3 of accrued interest of the note dated December 4, 2012, into 13,718,399 shares of common stock (see Note 3) at a 50% discount, $0.00016.

On November 25, 2013, Southridge converted $2,285 of principal and $2 of accrued interest of the note dated December 4, 2012, into 14,295,336 shares of common stock (see Note 3) at a 50% discount, $0.00016.

On November 25, 2013, Asher converted $2,925 of the note dated October 24, 2012, into 10,833,333 shares of common stock (see Note 3) at a discounted conversion price of $0.00027.

On December 2, 2013, Asher converted $8,060 of the note dated October 24, 2012, into 21,783,784 shares of common stock (see Note 3) at a discounted conversion price of $0.00037.

On December 5, 2013, Asher converted $3,150 of the note dated October 24, 2012, into 9,000,000 shares of common stock (see Note 3) at a discounted conversion price of $0.00035.

On December 6, 2013, the Company issued ASC 30,000,000 under the settlement terms of the 3(a)(10) (see Note 5). The shares were valued at $15,000 based on the per share price of $0.0005.

On December 10, 2013, Buko-Evolution converted $3,500 of the note dated October 26, 2011, into 10,606,060 shares of common stock (see Note 3) at a discounted conversion price of $0.0004.

On December 16, 2013, Asher converted $5,000 of the note dated December 21, 2012, into 21,739,130 shares of common stock (see Note 3) at a discounted conversion price of $0.00023.

On December 19, 2013, Asher converted $5,000 of the note dated December 21, 2012, into 21,739,130 shares of common stock (see Note 3) at a discounted conversion price of $0.00023.

On December 20, 2013, the Company issued ASC 39,000,000 under the settlement terms of the 3(a)(10) (see Note 5). The shares were valued at $15,600 based on a per share price of $0.0004.

On January 2, 2014, the Company cancelled the 12,756,800 shares of common stock issued to Bruce Harmon on October 16, 2013 and issued a convertible promissory note (see Note 3).

On January 2, 2014, Asher converted $5,000 of the note dated December 21, 2012, into 21,739,130 shares of common stock (see Note 3) at a discounted conversion rate of $0.00023.

On January 10, 2014, Asher converted $5,640 of the note dated December 21, 2012, into 47,000,000 shares of common stock (see Note 3) at a discounted conversion rate of $0.00012.

On January 16, 2014, Asher converted $6,210 of the note dated December 21, 2012, into 51,750,000 shares of common stock (see Note 3) at a discounted conversion rate of $0.00012.

On January 22, 2014, Asher converted $5,175 of the note dated December 21, 2012, into 51,750,000 shares of common stock (see Note 3) at a discounted conversion rate of $0.0001.

On January 28, 2014, Asher converted $5,175 of the note dated December 21, 2012, into 51,750,000 shares of common stock (see Note 3) at a discounted conversion rate of $0.0001.

On January 28, 2014, the Company issued ASC 76,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 5). The shares were valued at $15,200 based on a per share price of $0.0002.

On January 30, 2014, Asher converted $5,175 of the note dated December 21, 2012, into 51,750,000 shares of common stock (see Note 3) at a discounted conversion rate of $0.0001.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

On February 5, 2014, the Company issued ASC 93,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 5). The shares were valued at $9,300 based on a per share price of $0.0001.

On February 7, 2014, Asher converted $3,105 of the note dated December 21, 2012, into 51,750,000 shares of common stock (see Note 3) at a discounted conversion rate of $0.00006.

On February 11, 2014, Asher converted $3,105 of the note dated December 21, 2012, into 51,750,000 shares of common stock (see Note 3) at a discounted conversion rate of $0.00006.

On February 13, 2014, the Company issued ASC 113,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 5). The shares were valued at $33,900 based on a per share price of $0.0003.

On February 14, 2014, Asher converted $1,265 of principal and $2,120 of accrued interest of the note dated December 21, 2012, into 56,416,667 shares of common stock (see Note 3) at a discounted conversion rate of $0.00006.

On February 20, 2014, Asher converted $9,100 of the note dated January 31, 2013, into 113,750,000 shares of common stock (see Note 3) at a discounted conversion rate of $0.00008.

On February 24, 2014, Asher converted $13,700 of the note dated January 31, 2013, into 114,166,667 shares of common stock (see Note 3) at a discounted conversion rate of $0.00012.

On February 24, 2014, the Company issued ASC 141,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 5). The shares were valued at $42,300 based on a per share price of $0.0003.

On February 26, 2014, Buko-Evolution converted $9,000 of the note dated October 26, 2011, into 56,250,000 shares of common stock (see Note 3) at a discounted conversion rate of $0.00016.

On February 27, 2014, Asher converted $9,700 of principal and $1,300 of accrued interest of the note dated January 31, 2013, into 91,666,667 shares of common stock (see Note 3) at a discounted conversion rate of $0.00012.

On March 4, 2014, the Company issued ASC 178,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 5). The shares were valued at $35,600 based on a per share price of $0.0002.

On March 6, 2014, KAJ sold the remaining principal balance of $10,000 and accrued interest of $8,200 to Southridge for $18,200 (see Note 3).

On March 7, 2014, Buko-Evolution converted $9,000 of the note dated October 26, 2011, into 56,250,000 shares of common stock (see Note 3) at a discounted conversion rate of $0.00016.

On March 12, 2014, the Company issued ASC 195,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 5). The shares were valued at $78,000 based on a per share price of $0.0004.

On March 17, 2014, Southridge converted $18,575 of the note acquired on March 6, 2014 into 185,750,000 shares of common stock (see Note 3).

On March 17, 2014, Buko-Evolution converted $9,000 of the note dated October 26, 2011, into 56,250,000 shares of common stock (see Note 3) at a discounted conversion rate of $0.00016. The shares remain unissued as of March 31, 2014.

On March 20, 2014, the Company issued ASC 239,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 5). The shares were valued at $191,200 based on a per share price of $0.0008.

On March 26, 2014, Buko-Evolution converted $7,900 of the note dated October 26, 2011, into 56,428,570 shares of common stock (see Note 3) at a discounted conversion rate.

On March 28, 2014, the Company issued ASC 278,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 5). The shares were valued at $222,400 based on a per share price of $0.0008.

On March 31, 2014, ASC converted $5,500 of principal and $375 of related legal fees of the note dated March 27, 2014, as acquired from Hansen (see Note 3), into 117,500,000 shares of common stock.

Derivative liability for insufficient shares

The Company has determined that as of March 31, 2014, the combination of outstanding shares of common stock, with the inclusion of options for common stock, warrants for common stock, and convertible promissory notes, there is a deficiency in the required amount of available stock. The Company, if all of the above were recognized, could cause the Company to have to repurchase its own stock on the open market causing the Company to have a derivative liability of $460,497 as of March 31, 2014.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

Stock Warrants

The Company has granted warrants to non-employee individuals and entities. Warrant activity for non-employees for the three months ended March 31, 2014 is as follows:

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

Outstanding at December 31, 2013		31,526	$	24.00
Granted		0
Reclassification		0

Outstanding and exercisable at March 31, 2014		31,526	$	24.00		2.60	$	-

Weighted Average Grant Date Fair Value			$	4.00

The Company has granted warrants to employees. Warrant activity for employees the year ended March 31, 2014 is as follows:

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

Outstanding at December 31, 2013		1,092	$	50.00

Forfeited		0
Reclassification		0	$

Outstanding at March 31, 2014		1,092	$	50.00		1.13	$	-

Exercisable at March 31, 2014		1,092	$	50.00

Weighted Average Grant Date Fair Value			$	16.00

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

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 March 31, 2014 is as follows:

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

Outstanding at December 31, 2013		6,815	$	23.80
Granted		0
Forfeited		0

Outstanding at March 31, 2014		6,815	$	23.80		6.72	$	-

Exercisable at March 31, 2014		3,907	$	16.00

Weighted Average Grant Date Fair Value			$	6.00

NOTE 8 – 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 March 31, 2014. There have been no losses in these accounts through March 31, 2014.

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 9 – SUBSEQUENT EVENTS

On April 1, 2014, the Company issued its monthly note to Lakeport for $5,000 under the same contractual terms. See disclosure on November 14, 2013 and Note 6.

On April 1, 2014, the Company issued its monthly note to Thomas Carluccio, Jr. for $5,000 under the same contractual terms. See disclosure on November 14, 2013.

On April 1, 2014, the Company issued its monthly note to Sergio Pinon for $5,000 under the same contractual terms. See disclosure on November 14, 2013 and Note 6.

eLAYAWAY, INC. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014

(unaudited)

On April 1, 2014, ASC converted $4,300 of principal and $275 of related legal fees of the note dated March 27, 2014, as acquired from Hansen (see Note 3), into 91,500,000 shares of common stock.

On April 4, 2014, ASC converted $5,610 of principal and $275 of related legal fees of the note dated March 27, 2014, as acquired from Hansen (see Note 3), into 117,700,000 shares of common stock.

On April 7, 2014, ASC converted $1,550 of principal, $2,693 of accrued interest, and $275 of related legal fees of the note dated March 27, 2014, as acquired from Hansen (see Note 3), into 90,352,055 shares of common stock. A loss on conversion will be recorded.

On April 7, 2014, the Company entered into a convertible note with Southridge for $20,000. The note bears interest at 10% per annum and matures on March 31, 2015. The conversion rate is the lesser of $0.002 or a 50% discount from the lowest closing bid price in the thirty trading days prior to conversion. The Company received $18,500 as $1,500 was retained as legal fees.

On April 8, 2014, the Company entered into a convertible note with Harmon for $60,000. The note bears interest at 12% per annum and matures on May 8, 2014. The conversion rate is the lower of the closing price less 50% on the day prior to conversion or the average of the three lowest closing prices of the sixty days prior to conversion.

On April 16, 2014, ASC converted $1,465 of principal, $1,894 of accrued interest, and $275 of related legal fees of the note dated March 27, 2014, as acquired from Hansen (see Note 3), into 72,674,000 shares of common stock. A loss on conversion will be recorded.

On April 23, 2014, ASC converted $1,850 of principal, $8,167 of accrued interest, and $275 of related legal fees of the note dated March 27, 2014, as acquired from Hansen (see Note 3), into 205,831,600 shares of common stock. A loss on conversion will be recorded.

On April 25, 2014, the Company issued ASC 339,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 5). The shares were valued at $101,700 based on a per share price of $0.0003.

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.

Results of Continuing Operations

Three months ended March 31, 2014 compared to the three months ended March 31, 2013

Revenue. For the three months ended March 31, 2014, our revenue was $19,441, compared to $67,613 for the same period in 2013, representing a decrease of 71.2%.

Direct Costs. For the three months ended March 31, 2014, our direct costs were $4,989, compared to $11,295 for the same period in 2013.

Selling, General and Administrative Expenses. For the three months ended March 31, 2014, selling, general and administrative expenses were $78,685 compared to $351,111 for the same period in 2013, a decrease of 77.6%. 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 $1,025,997 for the three months ended March 31, 2014 compared to $1,452,872 for the same period in 2013 for continuing operations, a decrease of 29.4%.

Liquidity and Capital Resources

General. At March 31, 2014, we had cash and cash equivalents of $4,405. 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 operating activities used of cash in operations of $23,710 for the three months ended March 31, 2014, and we used cash in operations of $191,108 during the same period in 2013. The principal elements of cash flow from operations for the three months ended March 31, 2014 included a net loss of $1,025,997, offset primarily by loss on conversion of debt into common stock, $775,914.

Cash used in investing activities was $0 for the three months ended March 31, 2014, compared to $0 during the comparable period in 2013.

Cash provided by our financing activities was $25,000 for the three months ended March 31, 2014, compared to cash generated of $207,085 during the comparable period in 2013. This increase was primarily attributed to a concentrated effort of capital procurement in 2014 compared to 2013.

As of March 31, 2014, current liabilities exceeded current assets by 43.7 times. Current assets increased from $25,736 at December 31, 2013 to $51,773 at March 31, 2014 whereas current liabilities decreased from $2,625,256 at December 31, 2013 to $2,710,929 at March 31, 2014.

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 $19,441 and net losses of $1,025,997 ($775,914 represents losses on conversion of debt into common stock) for the three months ended March 31, 2014 compared to sales from operations of $67,613 and net losses from operations of $1,452,872 ($126,218 represents stock-based compensation and settlements) for the three months ended March 31, 2014. The Company had a working capital deficiency, stockholders’ deficiency, and accumulated deficit for continuing operations of $2,659,156, $2,654,841 and $24,181,116, respectively, at March 31, 2014, and used cash in operations of $23,710 in the three months ended March 31, 2014. 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. The Chief Executive Officer and Chief Financial Officer have determined that the Company continues to have the following deficiencies which represent a material weakness:

1.	The Company has appointed an independent director on April 1, 2011 who additionally is serving as the chairman of the Audit Committee. The Company intends to appoint additional independent directors;
2.	Lack of in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;
3.	Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;
4.	Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.

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 March 15, 2014, 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:

In 2008, a former employee who served as the CEO of the Company and was an original founder of the Company was terminated for alleged wrongdoings. The Company alleges that this individual illegally deposited investor funds into company bank accounts not authorized by the board of directors and wrote unauthorized checks, combined for approximately $371,000. Subsequently, this individual allegedly withdrew the deposited funds and deposited them into accounts not controlled by the Company. The Board of Directors, upon knowledge of this activity, removed this individual from the Company. The Company has turned this matter over to the Florida Department of Law Enforcement. In 2010, the Company determined that it does not believe that these funds are recoverable.

In March 2011, Thomas R. Park, a former employee who served as the CFO of the Company from 2007 to 2008, contacted the Company demanding that the Company issue additional stock of the Company to pay him additional ownership in the Company as a commission for investments made by third parties in the Company during this timeframe. On April 25, 2011, Mr. Park filed a suit, Thomas R. Park v eLayawayCOMMERCE, Inc., et al , in the Circuit Court for the Second Judicial Circuit in and for Leon County, Florida, Civil Division. The Company’s position is that the claim is without merit as a matter of law. The demand by the former officer is material and potentially detrimental in the Company’s efforts to procure additional funding. The Company, prior to the lawsuit being filed, had issued what it believes to be a fair settlement offer, even though the Company firmly believed that the former officer had no legitimate grounds to substantiate his claims, and the former officer has responded with a counter-offer which is deemed to not be feasible as it was unreasonable. The Company settled the lawsuit in June 2011 with the issuance of 600,000 warrants for common stock. The Company maintains that the claims were without merit but opted to settle to avoid legal costs.

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. The Company firmly believes that its actions were justified and defendable. The Company does not believe that litigation in this matter is pending.

In October 2012, Douglas Pinard, a former owner of CSP (see Note 2), resigned from the Company. Certain monies were due to Mr. Pinard related to accrued payroll and notes payable. Mr. Pinard threatened litigation, and 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 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. To the Company’s knowledge, no further actions has 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 D. 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 notes payable with claims of approximately $565,000 in principal and accrued interest. 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 August 30, 2013, a judgment was awarded to Dr. Salie for $565,696, collectively for all plaintiffs, additional interest on the principal balances from January 25, 2013 until full payment, and legal fees for the plaintiffs.

On October 31, 2013, the Company entered into a settlement with Dr. Jason Cohen in regards to the guaranteed value associated with his purchase in 2011 of a convertible note and simultaneous conversion into common stock. The guarantee was for $25,000. As Dr. Cohen had not realized the agreed upon value, the Company and Dr. Cohen agreed to release the guarantee with the issuance of an additional 25,000,000 shares of common stock to Dr. Cohen which was subsequently issued to Dr. Cohen.

There are no other proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

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

On January 2, 2014, Asher converted $5,000 of the note dated December 21, 2012, into 21,739,130 shares of common stock.

On January 10, 2014, Asher converted $5,640 of the note dated December 21, 2012, into 47,000,000 shares of common stock.

On January 16, 2014, Asher converted $6,210 of the note dated December 21, 2012, into 51,750,000 shares of common stock.

On January 22, 2014, Asher converted $5,175 of the note dated December 21, 2012, into 51,750,000 shares of common stock.

On January 28, 2014, Asher converted $5,175 of the note dated December 21, 2012, into 51,750,000 shares of common stock.

On January 28, 2014, the Company issued ASC 76,000,000 shares of common stock under the settlement terms of the 3(a)(10).

On January 30, 2014, Asher converted $5,175 of the note dated December 21, 2012, into 51,750,000 shares of common stock.

On February 5, 2014, the Company issued ASC 93,000,000 shares of common stock under the settlement terms of the 3(a)(10).

On February 7, 2014, Asher converted $3,105 of the note dated December 21, 2012, into 51,750,000 shares of common stock.

On February 11, 2014, Asher converted $3,105 of the note dated December 21, 2012, into 51,750,000 shares of common stock.

On February 13, 2014, the Company issued ASC 113,000,000 shares of common stock under the settlement terms of the 3(a)(10).

On February 14, 2014, Asher converted $1,265 of principal and $2,120 of accrued interest of the note dated December 21, 2012, into 56,416,667 shares of common stock.

On February 20, 2014, Asher converted $9,100 of the note dated January 31, 2013, into 113,750,000 shares of common stock.

On February 24, 2014, Asher converted $13,700 of the note dated January 31, 2013, into 114,166,667 shares of common stock.

On February 24, 2014, the Company issued ASC 141,000,000 shares of common stock under the settlement terms of the 3(a)(10).

On February 26, 2014, Buko-Evolution converted $9,000 of the note dated October 26, 2011, into 56,250,000 shares of common stock.

On February 27, 2014, Asher converted $9,700 of principal and $1,300 of accrued interest of the note dated January 31, 2013, into 91,666,667 shares of common stock.

On March 4, 2014, the Company issued ASC 178,000,000 shares of common stock under the settlement terms of the 3(a)(10).

On March 7, 2014, Buko-Evolution converted $9,000 of the note dated October 26, 2011, into 56,250,000 shares of common stock.

On March 12, 2014, the Company issued ASC 195,000,000 shares of common stock under the settlement terms of the 3(a)(10).

On March 17, 2014, Southridge converted $18,575 of the note acquired on March 6, 2014 into 185,750,000 shares of common stock.

On March 17, 2014, Buko-Evolution converted $9,000 of the note dated October 26, 2011, into 56,250,000 shares of common stock.

On March 20, 2014, the Company issued ASC 239,000,000 shares of common stock under the settlement terms of the 3(a)(10).

On March 26, 2014, Buko-Evolution converted $7,900 of the note dated October 26, 2011, into 56,428,570 shares of common stock.

On March 28, 2014, the Company issued ASC 278,000,000 shares of common stock under the settlement terms of the 3(a)(10).

On March 31, 2014, ASC converted $5,500 of principal and $375 of related legal fees of the note dated March 27, 2014, as acquired from Hansen (see Note 3), into 117,500,000 shares of common stock.

On April 25, 2014, the Company issued ASC 339,000,000 shares of common stock under the settlement terms of the 3(a)(10) (see Note 5).

The securities issued to ASC on and before March 28, 2014, were issued pursuant to Section 3(a)(10) of the Securities Act of 1933, which allows the exchange of claims, securities, or property for stock when the arrangement is approved for fairness by a court proceeding, and the remaining securities were originally 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 March 31, 2014.

	Principal
Notes and convertible notes, net of discounts
Gary Kline	$	56,000
Robert Salie - Line of Credit		400,000
Salie Family Limited Partnership		50,000
Douglas Pinard		20,000
Richard St. Cyr		17,000
Ventana Capital Partners, Inc.		20,000
Thomas Carluccio, Jr.		5,000
Thomas Carluccio, Jr.		5,000
Thomas Carluccio, Jr.		5,000

Notes, convertible notes, and lines of credit payable to related parties, net of discounts
Bruce Harmon		5,000
Bruce Harmon		5,000
Bruce Harmon		5,000
Sergio Pinon		5,000
Sergio Pinon		5,000
Sergio Pinon		5,000
Lakeport Business Services, Inc.		45,000
Lakeport Business Services, Inc.		25,000
Total	$	678,000

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 (3)		Bylaws

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

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

3.5 (4)		Certificate of Designation of the Preferences and Rights of Series G Preferred Stock

3.5 (5)		Certificate of Designation of the Preferences and Rights of Series H Preferred Stock

31.1 (5)		Certification of Principal Executive Officer and Principal Accounting 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 (5)		Certification of Principal Executive Officer and Principal Accounting 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 (5)		XBRL Instance Document**

101.SCH (5)		XBRL Taxonomy Extension Schema Document**

101.CAL (5)		XBRL Taxonomy Extension Calculation Linkbase Document **

101.DEF (5)		XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB (5)		XBRL Taxonomy Extension Label Linkbase Document**

101.PRE (5)		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, 2011 and is incorporated herein by reference.

(3) Incorporated by reference from the Company’s Registration Statement on Form SB-2 (File No. 333-148516) filed with the Securities and Exchange Commission on January 8, 2008.

(4) Previously filed with the Form 10-K for the period ended December 31, 2013 and is incorporated herein by reference.

(5) 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: April 29, 2014	By:	/s/ Sergio A. Pinon
		Sergio A. Pinon
		Chief Executive Officer and interim Chief Financial Officer

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Constraining
Legalese
Litigous
Readability	8th grade Good

eLayaway Inactive 10-Q2014 Q1 Quarterly report

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