RELATED PARTY TRANSACTIONS AND AMOUNTS OWING

9 Months Ended

Sep. 30, 2013

Related Party Transactions And Amounts Owing

NOTE 6 - RELATED PARTY TRANSACTIONS AND AMOUNTS OWING

a) Loans payable to related party - Cronin – LOC

The amounts due to a related party at September 30, 2013 and December 31, 2012 of $189,512 and $119,139, respectively, represent an unsecured promissory note (“Cronin - LOC”) due to a shareholder and director of the Company. These amounts are unsecured, bear interest at 15% per annum and payable, with accumulated interest, and due December 31, 2011. The Company is still seeking funding to fulfill its financial obligations under this agreement and is in default for non-payment. Without funds to settle this obligation or obtaining consent from the related party to defer payment of the amount owing, the related party has the right to demand payment from the Company. In conjunction with the execution of the Cronin - LOC, the Company issued a Warrant to the shareholder and director for the purchase of 9,000,000 shares of common stock in July 2011.

As disclosed in Form 8-K, dated May 8, 2013, effective May 7, 2013, Charles R. Cronin, Jr. (“Cronin”), a Director of the Company, accepted the Company’s offer to have Cronin deposit funds for professional fees, and for deferral of due dates for specific payments on the TCI Agreement, previously due in 2012. In exchange for the deferral of $1,015,362 to May 26, 2013 and the deposits for the Auditors fees, the Company assumes all of the TCI related debt under the TCI Agreement on a joint and several liability basis with its subsidiary DEDC (See Note 4).

b) Contingent consideration payable to related party

Pursuant to Stock Purchase Agreement between a director of the Company (“the Director”) and DEDC, dated February 25, 2011 and Amendments No. 1, No. 2 and No. 3 to Stock Purchase Agreement, dated December 30, 2011, March 31, 2012 and September 26, 2012, respectively, DEDC acquired all of the outstanding shares, of Transformation Consulting (“TC”). The purchase price for the shares was $2,000,000, payable from the gross revenues of TC, subject to the following contingent reduction or increase of the purchase price. If TC’s gross revenues during the two years following the closing are less than $2,000,000, then the purchase price for the shares shall be reduced to the actual revenue received by TC during the two year period. If TC’s revenues during the same two year period exceed $2,000,000, then the purchase price for the shares shall be increased by one-half of the excess revenues over $2,000,000 (“contingent consideration”).

TC’s revenues are primarily related to revenues received from an entity controlled by the Director (“related entity”) under a January 2010, Management Services and Agency Agreement (“Agency Agreement”). Under the Agency Agreement, TC receives revenues based on billings received from certain of TC’s direct to consumer membership club products that were transferred to the related entity under the Agency Agreement. Pursuant to the Agency Agreement, TC agreed to (1) transfer to the related entity the ownership of certain TC current direct to consumer membership products upon TC receiving a total of $1,000,000 in revenues; (2) introduce the related entity to TC’s existing and potential vendors for use in managing the TC current programs on behalf of TC; and (3) have the related entity act as TC’s sales agent for new product sales. In consideration, TC receives all gross receipts of existing sales, less the related entity’s management fee of 20% of gross sales. Separately, TC and the related entity would each be entitled to 50% of new business sales. After total payments of $2,000,000 to TC from all related revenues under the Agency Agreement, the related entity would no longer be obligated to pay TC any further compensation. 

Pursuant to the contingent consideration of $2,000,000 due to the Director from TC, all revenues generated by TC under the Agency Agreement are disbursed to Director. All cash management services, pertaining to the revenues generated by TC under the Agency Agreement are managed by the Director directly from an escrow account, including deposits of revenues and payment disbursements to the Director. As a result, the Company does not have access to the cash flow from such revenues, which are administered from said escrow account. Contingent consideration is payable based on a payment schedule, as amended, as follows:

- Payment one: the first $900,000 of gross revenues paid on receipt;

- Payment two: the next $84,638, of gross revenues paid at the later of 90 days of receipt or June 30, 2012;

- Payment three: the final $1,015,362 of gross revenues paid at the later of 180 days of receipt or May 26, 2013.

For the three months ended September 30, 2013 and 2012, TC gross revenues totaled $0 and $103,776, respectively. For the nine months ended September30, 2013 and 2012, TC gross revenues totaled $0 and $405,479, respectively.

Through September 30, 2013, payments, net of refunds, made to Director totaled $0. At September 30, 2013 and December 31, 2012, contingent consideration payable to Director is $1,015,362 and $1,015,362, respectively, as follows:

	As of September30, 2013		As of December 31, 2012
Contingent consideration due	$	2,000,000	$	2,000,000
Less payments, net of refunds, to Director		984,938		984,938
	$	1,015,362	$	1,015,362

c) Assignment and Assumption Agreement and Right of First Refusal and Option Agreement – IWSI PS Plan

On June 1, 2012, the Company, through its wholly owned subsidiary, DEDC, entered into an assignment and assumption agreement (“Assignment Agreement”) with IWSI PS Plan, an entity controlled by Charles R. Cronin, Jr., a shareholder and director of the Company, and C.C. Crawford Retreading Company, Inc. (“CTR”), pursuant to which DEDC assigned its rights to acquire CTR to IWSI PS Plan (“IWSI PS”). On March 20, 2012, DEDC had entered into a stock purchase agreement with CTR in which DEDC agreed to acquire 100% of the issued and outstanding common shares of CTR. See Note 8. Commitments and Contractual Obligations – Stock Purchase Agreement - C.C. Crawford Retreading Company, Inc., for discussion.

On October 2, 2012, the DEDC executed a Right of First Refusal and Option Agreement (“Right of First Refusal”) with IWSI PS Plan for both an option to purchase and right of first refusal to purchase CTR.

The option to purchase granted to the DEDC extends for one year from the date of execution, and provides for certain terms and conditions as follows:

1.	An option exercise price equal to $1,032,500, the original purchase price paid by IWSI PS (the “Option Purchase Price”) with the following adjustments;
2.	A quarterly option payment of $15,000 (the “Option Payment”) , payable every 90 days during the Term of this Agreement;
3.	An amount equal to any increased accounts receivable over the Term and amount equal to five percent (5%) per month of the original purchase price paid by IWSI PS;
4.	All amounts expensed by CTR to advance the business, including tire pyrolysis, the amounts paid the Officers as employment bonuses, the closing costs on the original acquisition, and an amount equal to any increase in IWSI PS shareholder equity, less any amounts CTR received from the prior sale of any assets;
5.	Amount equal to decrease in accounts payable, a monthly fee of $10,000, accrued monthly, for each month of use of the facility by DEAC and/or its affiliates.

After 180 days from the date of execution of the Assignment Agreement, if IWSI PS receives a bona fide offer or enters into a purchase agreement with a Third Party Offeree to purchase CTR and DEDC fails to execute the Right of First Refusal, then the Right of First Refusal is terminated. Further, the Right of First Refusal and Option Agreement is terminated if DEDC, or its affiliates, does not raise a minimum of $2,000,000 through paid in capital of debentures by March 31, 2013.

DEDC or its affiliates failed to raise the minimum of $2,000,000 as of March 31, 2013, and accordingly, the Right of First Refusal and Option agreement terminated March 31, 2013.

d) Non-Binding Letter of Intent – Terpen Kraftig LLC

On October 10, 2012, the Company, through its wholly owned subsidiary, Dynamic Energy IP Corporation (“DEIP”), executed a Non-Binding Letter of Intent (LOI) with Terpen Kraftig LLC (TK), a company managed by t wo of the Company’s Directors, Charles R. Cronin, Jr. and Dr. Earl Beaver, contemplating a definitive agreement within 45 days from said letter of intent under which TK would assign to DEIP the exclusive, worldwide license and right in and to Licensor’s catalyst(s), reactor and fractionator technology relating to the recovery of high valued organics from the processing of waste tires (the “Licensed Technology”).

The LOI sets forth terms for a future definitive agreement that anticipates that the term of the license and assignment to Licensor of the Licensed Technology shall be the greater of (a) twenty-five (25) years, or (b) twenty (20) years from the issuance of the Licensed IP patent(s), whichever is greater, and that compensation payable to TK from the Company and DEIP would consist of:

1. A non-refundable deposit in the amount of $100,000 to secure the exclusivity of the term sheet, payable within 30 days and prior to preparation and execution of the Definitive Agreement, which shall, upon execution of the Definitive Agreement, be allocated towards to costs associated with the purchase of the equipment required to construct a prototype unit (the “Prototype”) of the Licensed Technology.

2. A payment to Licensor in the amount of Four Hundred Thousand and No/100 Dollars (USD$400,000), on or before December 31, 2012, for the purchase of the equipment required to construct a pilot plant with input of a minimum of 50/gallons per day (the “Pilot Plant”). If Licensee fails to fund the Pilot Plant on or before December 31, 2012, the Licensor shall have the right cancel and rescind the licensing rights of the Licensed IP granted to Licensee under the Definitive Agreement.

3. A minimum royalty cash payment of Thirty-Five Thousand and No/100 Dollars (USD $35,000) per month, from the date of execution of the Definitive Agreement forward over the term of the license, until and except when the royalty stream exceeds $35,000 per month (the “Minimum Licensing Fee”).

The LOI contains customary warranties and representations and confidentiality provisions, including specific terms which are considered trade secrets, and are therefore not being released.

The Company is still seeking funding and is in default on this agreement due to non-payment. Without funds to secure the exclusivity of the term sheet or obtain consent from TK to defer payment of the amount required, there is no formal agreement between TK and the Company at this time. The Definite Agreement is still being negotiated.

 e) Transactions in Normal Course of Operations with Related Parties

Related party transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

(i)

Consulting Agreement- Key Services, Inc . – The Company incurred expenses for consulting services for development and construction of the Company’s energy campus project, provided by a company related through common shareholdings (“Consultant”) through June 2012. In July 2012, the consulting services agreement was amended whereby the Consultant agreed to terminate its monthly fee of $20,000 beginning July 1, 2012 and the accounts payable was settled in full. For the nine months ended September 30, 2013 and 2012, the Company paid consulting services expense of $0 and $120,000, respectively, to Consultant. At September 30, 2013 and December 31, 2012, the Company has no amounts owing to Consultant. See Note 8, Commitments and Contractual Obligations, for discussion.

(ii)

Consulting Agreement – NBN Enterprises, Inc. (“NBN”) – The Company incurred expenses for strategic business and legal services provided by a company related through common shareholdings for the three months ended September 30, 2013 and 2012, in the amount of $7,000 and $10,500, respectively. For the nine months ended September 30, 2013 and 2012, expenses totaled $17,500 and $21,000, respectively. At September30, 2013 and 2012, the Company has an accounts payable balance of $28,000 and $7,000, respectively, to this related party. See Note 8, Commitments and Contractual Obligations, for discussion. This agreement expired as of May ___, 2013.

(iii)

Consulting Agreement - TMDS, LLC – On July 9, 2011, as amended December 30, 2011, Company executed a consulting agreement with TMDS, LLC (“TMDS”), an entity controlled by a director and shareholder of the Company. Under the consulting agreement, TMDS will locate and assist in the Company’s development and construction of energy campus projects to be undertaken by the Company in the future. The consulting agreement is non-exclusive and runs for a period of five years. As consideration, the Company has agreed to pay compensation to TMDS in the form of one or more Warrants for the purchase of 1,000,000 shares of restricted common stock of the Company (“Shares”) every 90 days, exercisable at $0.0001 per share, with an exercise term of five (5) years from the date of each issuance. In addition, TMDS is entitled to additional fees, including but not limited to, joint venture, partnership, consulting, developer, contractor and/or project management fees, to be negotiated separately, and agreed to in writing on a project-by-project basis. During the three months ended September30, 2013 and 2012, the Company recorded the issuance of one Warrant for 1,000,000 shares of common stock, valued at $20,000 and $160,000, respectively, to TMDS under this agreement. During the nine months ended September30, 2013 and 2012, the Company recorded the issuance of one Warrant for 2,000,000 shares of common stock, valued at $70,000 and $230,000, respectively, to TMDS under this agreement. As of September30, 2013 and December 31, 2012, the Company is obligated to issue seven Warrants totaling 10,000,000 shares of common stock and nine Warrants totaling 10,000,000 shares of common stocks, respectively, to TDMS under this agreement. See Note 7, Capital Stock – Common Stock Warrants, for discussion.

(iv)

Industry Consulting and Nondisclosure Agreement - Practical Sustainability - On May 25, 2012, Dynamic Energy Development Company, LLC (“DEDC”), a wholly owned subsidiary of Dynamic Energy Alliance Corporation, modified a prior agreement, Industry Consulting and Nondisclosure Agreement (“ICNA”), with Practical Sustainability, LLC (“PS”), an entity controlled by Dr. Earl Beaver, a director of the Company, dated November 19, 2010, whereby services and compensation were amended to reflect PS’s role that was effective March 1, 2011. Changes under the amended agreement include:

-	Nature of Services: Development of Life Cycle Analysis Models, Research of Government Information on Technology for Tire Pyrolysis Oil, Analysis of various tire pyrolysis operations, evaluation of the marketability of tire pyrolysis oil and carbon black produced by vendors of tire pyrolysis processes, participation in the development of the roll-out plan for tire pyrolysis plants, participation on the analysis of vended solutions of the manufacturing of tire pyrolysis plants. Analysis of fuels produced by third party propriety processed that reportedly produce gasoline, diesel, jet fuel and other similar fuels for the use in combustion engines. Provide and manage a central laboratory for DEDC or its parent.
-	Compensation: The Company or DEDC shall pay to PS a flat fee of $5,000 per month. Compensation has been paid through January 2012.
On January 17, 2013, the ICNA agreement was further amended to terminate the agreement effective February 1, 2012. Under this amendment, DEDC and PS have agreed that all work under the ICNA agreement has been performed for those services through January 2012, and there are no obligations due PS as of September 30, 2013 and December 31, 2012.

f) Cash contributed by related parties   During the nine months ended September 30, 2013, the related parties contributed $100,007 to the Company for the operating expenses. The transaction was recorded as an increase to the additional paid in capital.